Wednesday, July 15, 2009

Planning fallacy

The planning fallacy is the tendency to underestimate task-completion times. Real-life examples in public policy may include the construction of the Sydney Opera House and the Big Dig, both of which ran many years past their planned schedule. Some have attempted to explain the planning fallacy in terms of impression management theory.

In one study, students were asked to estimate the completion times for their senior theses. The average estimate was days. Only about of the students were able to complete their thesis in the amount of time they predicted, and the average actual completion time was days.

One explanation may account for the mental discounting of off-project risks. People formulating the plan may eliminate factors they perceive to lie outside the specifics of the project. Additionally, they may discount multiple improbable high-impact risks because each one is so unlikely to happen.

Planners also tend not to plan projects to a detail level that allows estimation of individual tasks, like placing one brick in one wall; this enhances optimism bias and prohibits use of actual metrics, like timing the placing of an average brick and multiplying by the number of bricks.

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