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The Principle of the Malevolent Hiding Hand; or, the Planning Fallacy Writ Large

Bent Flyvbjerg and Cass R. Sunstein, 2016, "The Principle of the Malevolent Hiding Hand; or, the Planning Fallacy Writ Large," Social Research, vol. 83, no. 4, Winter, pp. 979-1004.

24 Pages Posted: 2 Sep 2015 Last revised: 28 Mar 2017

Bent Flyvbjerg

University of Oxford - Said Business School

Cass R. Sunstein

Harvard Law School; Harvard University - Harvard Kennedy School (HKS)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2015

Abstract

We identify and document a new principle of economic behavior: the principle of the Malevolent Hiding Hand. In a famous discussion, Albert Hirschman celebrated the Hiding Hand, which he saw as a benevolent mechanism by which unrealistically optimistic planners embark on unexpectedly challenging plans, only to be rescued by human ingenuity, which they could not anticipate, but which ultimately led to success, principally in the form of unexpectedly high net benefits. Studying eleven projects, Hirschman suggested that the Hiding Hand is a general phenomenon. But the Benevolent Hiding Hand has an evil twin, the Malevolent Hiding Hand, which blinds excessively optimistic planners not only to unexpectedly high costs but also to unexpectedly low net benefits. Studying a much larger sample than Hirschman did, we find that the Malevolent Hiding Hand is common and that the phenomenon that Hirschman identified is rare. This sobering finding suggests that Hirschman’s phenomenon is a special case; it attests to the pervasiveness of the planning fallacy, writ very large. One implication involves the continuing need to de-bias decisions and decision support tools like cost-benefit analysis; another is that accountability for decision makers, planners, and forecasters is required for such de-biasing to be effective and lasting.

Keywords: Behavioral economics, benevolent hiding hand, malevolent hiding hand, planning fallacy, cost-benefit analysis, Albert O. Hirschman

Suggested Citation

Flyvbjerg, Bent and Sunstein, Cass R., The Principle of the Malevolent Hiding Hand; or, the Planning Fallacy Writ Large (September 1, 2015). Bent Flyvbjerg and Cass R. Sunstein, 2016, "The Principle of the Malevolent Hiding Hand; or, the Planning Fallacy Writ Large," Social Research, vol. 83, no. 4, Winter, pp. 979-1004.. Available at SSRN: https://ssrn.com/abstract=2654423

Bent Flyvbjerg (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Cass R. Sunstein

Harvard Law School ( email )

1575 Massachusetts Ave
Areeda Hall 225
Cambridge, MA 02138
United States
617-496-2291 (Phone)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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