Planning Fallacy

Definition

The planning fallacy refers to a specific form of optimistic bias wherein people underestimate the time that it will take to complete an upcoming task even though they are fully aware that similar tasks have taken longer in the past. An intriguing aspect of this phenomenon is that people simultaneously hold both optimistic beliefs (concerning the specific future task) as well as more realistic beliefs (concerning relevant past experiences). When it comes to planning the future, people can know the past and yet be doomed to repeat it.

[Page 672]The tendency to underestimate task completion times has important practical implications. Governments, businesses, and individuals all spend a considerable amount of time, money, and effort trying to forecast how long projects will take to complete. In daily life, accurate predictions allow individuals to plan effectively and coordinate their schedules with those of friends, family members, and coworkers. Unrealistic completion estimates can have serious economic, personal, and social costs and thus merit research attention.

Evidence and Causes

The most direct evidence for the planning fallacy comes from studies in which people predict how long an upcoming project will take to complete, report completion times for similar projects in the past, and subsequently carry out the project. For example, university students reported that they typically completed their writing assignments about a day before the due date, but predicted that they would complete their current summer essay more than a week before it was due. They tended to finish the essay, as usual, about a day before the deadline. The tendency to underestimate completion times has been observed for a wide variety of activities ranging from daily household chores to large-scale industrial projects.

Why would people repeatedly underestimate how long their tasks will take to complete? According to cognitive explanations, the bias results from the kinds of information that people consider. When generating a task-completion prediction, people's natural inclination is to plan out the specific steps that they will take to successfully complete the project. The problem with this approach is that events don't usually unfold exactly as planned. Given the vast number of potential impediments, there is a great likelihood that people will encounter unexpected problems, delays, and interruptions. When people focus narrowly on a plan for successful task completion, they neglect other sources of information—such as past completion times, competing priorities, and factors that may delay their progress—that could lead to more realistic predictions.

This cognitive explanation has been supported by studies in which individuals describe their thoughts while predicting when they will finish an upcoming project. Most descriptions focus on specific future plans whereas very few descriptions mention relevant past experiences or potential problems. In addition, experimental studies have shown that people who are instructed to develop a detailed future plan for a task make more optimistic predictions than those who are not. These findings imply that people's unrealistic predictions are caused, at least in part, by their tendency to focus narrowly on a plan for successful task completion.

Motivation can also play a role, by guiding the cognitive approach that people take. For example, strong desires to finish tasks early may increase people's focus on future plans and decrease their focus on past experiences, resulting in highly optimistic predictions. The interplay between motivation and cognition was illustrated in a field study. Taxpayers who expected an income tax refund, and were thus strongly motivated to file their tax return early, estimated they would file their return about 10 days earlier on average than did taxpayers who did not expect a refund. In fact, the two groups did not differ in when they filed their returns, which was much later than either group had predicted. Incentives for early task completion appear to increase people's attention to future plans and reduce attention to relevant past experiences—the very pattern of cognitive processes that fuels the planning fallacy.

...