8. The concepts of optimism bias and planning fallacy have been adopted by academic researchers and practitioners outside the field of social psychology. Notably Bent Flyvberg applied the concept to transport infrastructure planning, measuring the uplift in actual costs compared to the original estimates.112
9. Flyvberg argues that optimism bias has four causes:
- Technical causes, including imperfect information, scope changes and poor management, leading to inadequacies in business cases;
- Psychological causes arising from the decision making processes of project promoters and forecasters;
- Economic causes arising from rational incentives to get the project approved to create work; and
- Political-institutional causes, particularly the question of whether cost forecasts are biased to serve the interests of project promoters in getting projects funded and started.113
10. Flyvberg thus highlights that underestimations in forecasts can be either real technical errors, or purposeful deceptions. The latter benefit the forecasters or their clients and stakeholders.
11. Flyvberg uses Kahneman's work to argue that planning fallacy stems from actors taking an "inside view" to a task or project-estimating its costs and time by looking at the constituents of the plan. He argues that they should instead take an "outside view"-looking at the results of similar projects. Flyvberg recommends that public policy makers rely less on forecasters' plans and more on comparisons with other similar projects. He calls such comparisons "reference class forecasting".
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112 Underestimating Costs in Public Works Projects: Error or Lie, Bent Flyvberg, Mette Skamris Holm and Søren Buhl, Journal of the American Planning Association (Vol 68 No 3 Summer 2002). http://flyvbjerg.plan.aau.dk/JAPAASPUBLISHED.pdf
113 The British Department for Transport, Procedures for Dealing with Optimism Bias in Transport Planning, Guidance Document, Bent Flyvberg in association with COWI, June 2004, commissioned and used by the Department for Transport.