Optimism bias
Optimism bias arises in relation to estimates of costs and benefits and duration of tasks. It must be accounted for explicitly in appraisals, if these are to be realistic. Optimism bias typically results in cost overruns, benefit shortfalls, and delays, when plans are implemented.
The UK government explicitly acknowledges that optimism bias is a problem in planning and budgeting and has developed measures for how to deal with optimism bias in government (HM Treasury 2003). The UK Department for Transport requires project planners to use so-called "optimism bias uplifts" for large transport projects in order to arrive at accurate budgets for planned ventures (Flyvbjerg and Cowi 2004).
In a debate in Harvard Business Review, between Daniel Kahneman, Dan Lovallo, and Bent Flyvbjerg, Flyvbjerg (2003) – while acknowledging the existence of optimism bias – pointed out that what appears to be optimism bias may on closer examination be strategic misrepresentation. Planners may deliberately underestimate costs and overestimate benefits in order to get their projects approved, especially when projects are large and when organizational and political pressures are high. Kahneman and Lovallo (2003) maintained that optimism bias is the main problem.
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Mechanisms
A brain-imaging study found that, when imagining negative future events, signals in the amygdala, an emotion centre of the brain, are weaker than when remembering past negative events. This weakened consideration of possible negative outcomes is one possible mechanism for optimism bias.[4]
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References
- ^ Armor, David A.; Shelley E Taylor. "When Predictions Fail: The Dilemma of Unrealistic Optimism" in Gilovich, Thomas (2002). Heuristics and biases: The psychology of intuitive judgment. Cambridge, UK: Cambridge University Press. ISBN 0-521-79679-2.
- ^ Weinstein, Neil D. (November 1980). "Unrealistic optimism about future life events". Journal of Personality and Social Psychology 39 (5): 806-820. doi:. 1981-28087-001.
- ^ Dunning, David; Chip Heath, Jerry M. Suls (2004). "Flawed Self-Assessment. Implications for Health, Education, and the Workplace". Psychological Science in the Public Interest 5 (3): 69–106.
- ^ Sharot, Tali; Alison M. Riccardi, Candace M. Raio, Elizabeth A. Phelps (2007-10-24). "Neural mechanisms mediating optimism bias". Nature 450: 102-015. doi:.
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Further reading
- Flyvbjerg, Bent, 2003. "Delusions of Success: Comment on Dan Lovallo and Daniel Kahneman." Harvard Business Review, December Issue, pp. 121-122.
- Flyvbjerg, Bent, "From Nobel Prize to Project Management: Getting Risks Right." Project Management Journal, vol. 37, no. 3, August 2006, pp. 5-15.
- Flyvbjerg, Bent and Cowi, Procedures for Dealing with Optimism Bias in Transport Planning: Guidance Document (London: UK Department for Transport, June 2004). 61 pp.
- Flyvbjerg, Bent, Mette K. Skamris Holm, and Søren L. Buhl, "Underestimating Costs in Public Works Projects: Error or Lie?" Journal of the American Planning Association, vol. 68, no. 3, Summer 2002, pp. 279-295.
- HM Treasury, Supplementary Green Book Guidance: Optimism Bias (London: HM Treasury, 2003).
- Kahneman, Daniel and Dan Lovallo, 2003. "Response to Bent Flyvbjerg." Harvard Business Review, December Issue, p. 122.
- Lovallo, Dan and Daniel Kahneman, 2003. "Delusions of Success: How Optimism Undermines Executives' Decisions," Harvard Business Review, July Issue, pp. 56-63.
- Matlin, Margaret W. "Pollyanna Principle" in Pohl, Rüdiger (2004). Cognitive Illusions: a handbook on fallacies and biases in thinking, judgement and memory. Psychology Press. ISBN 978-1-84169-351-4.
- Lev Virine and Michael Trumper. Project Decisions: The Art and Science, Vienna, VA: Management Concepts, 2008. ISBN 978-1567262179
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See also
- List of cognitive biases
- Cost-benefit analysis
- Cost overrun
- Cost underestimation
- Benefit shortfall
- Planning fallacy
- Reference class forecasting
- Rosy retrospection
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