Planning Fallacy

The planning fallacy is the tendency to underestimate task-completion times. People formulating the plan may eliminate factors they perceive to lie outside the specifics of the project.

Planners tend to focus on the project and underestimate time for sickness, vacation, meetings, and other "overhead" tasks. 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.

Lovallo and Kahneman (2003) have expanded the original definition of the planning fallacy from being the tendency to underestimate task-completion times to being the tendency to underestimate the time, costs, and risks of future actions and at the same time overestimate the benefits of the same actions. According to this definition, the planning fallacy results in not only time overruns, but also cost overruns and benefit shortfalls.

Students are encouraged to add examples of this type of fallacy.

Bibliography
1. Planning fallacy. (2009, December 2). In Wikipedia, the free encyclopedia. Retrieved December 19, 2009 from http://en.wikipedia.org/wiki/Planning_fallacy
2. Lovallo, Dan and Daniel Kahneman (2003). Delusions of success: how optimism undermines executives' decisions," Harvard Business Review, July Issue, 56-63.
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