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The Fallacy of Beneficial Ignorance: A Test of Hirschman’s Hiding Hand

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  • Flyvbjerg, Bent

Abstract

Albert O. Hirschman’s principle of the Hiding Hand stands stronger and more celebrated today than ever. The principle states that ignorance is good in planning, because if decision makers knew the real costs and difficulties of projects, few ventures would ever get started. The paper presents the first systematic test of the principle of the Hiding Hand, including a test of whether Hirschman’s theory may be replicated with more and better data. This was found not to be the case. First, statistical tests reject the principle of the Hiding Hand at an overwhelmingly high level of significance (p<0.0001). In reality, the exact opposite happens of what the principle states: instead of project success being secured by “creative error” and “beneficial ignorance”—where higher-than-estimated costs are outweighed by even higher-than-estimated benefits—the average project is in fact undermined by a double whammy of substantial cost overruns compounded by substantial benefit shortfalls. Second, Hirschman was found to have made the error of sampling on the dependent variable, undermining the validity of his findings. Third, Hirschman’s sample of projects, on which he built his principle, is too small to support his wide conclusions. Fourth, Hirschman misrepresented his findings and misled his readers. In sum, the data do not support Hirschman’s proposition that ignorance is good in planning. Ignorance is bad, if by bad we mean that ignorance leads to starting projects that should not have been started. Finally, the data also do not support an interpretation of Hirschman as an early behavioral economist, as proposed by Sunstein. Hirschman was a victim, not a student, of bias.

Suggested Citation

  • Flyvbjerg, Bent, 2016. "The Fallacy of Beneficial Ignorance: A Test of Hirschman’s Hiding Hand," World Development, Elsevier, vol. 84(C), pages 176-189.
  • Handle: RePEc:eee:wdevel:v:84:y:2016:i:c:p:176-189
    DOI: 10.1016/j.worlddev.2016.03.012
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    Citations

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    Cited by:

    1. Ika, Lavagnon A., 2018. "Beneficial or Detrimental Ignorance: The Straw Man Fallacy of Flyvbjerg’s Test of Hirschman’s Hiding Hand," World Development, Elsevier, vol. 103(C), pages 369-382.
    2. Bent Flyvbjerg & Alexander Budzier, 2019. "Report for the Commission of Inquiry Respecting the Muskrat Falls Project," Papers 1901.03698, arXiv.org.
    3. Alexander Budzier & Bent Flyvbjerg & Andi Garavaglia & Andreas Leed, 2019. "Quantitative Cost and Schedule Risk Analysis of Nuclear Waste Storage," Papers 1901.11123, arXiv.org.
    4. Flyvbjerg, Bent & Ansar, Atif & Budzier, Alexander & Buhl, Søren & Cantarelli, Chantal & Garbuio, Massimo & Glenting, Carsten & Holm, Mette Skamris & Lovallo, Dan & Molin, Eric & Rønnest, Arne & Stewa, 2019. "On de-bunking “Fake News” in the post-truth era: How to reduce statistical error in research," Transportation Research Part A: Policy and Practice, Elsevier, vol. 126(C), pages 409-411.
    5. Flyvbjerg, Bent, 2018. "Planning Fallacy or Hiding Hand: Which is the Better Explanation?," World Development, Elsevier, vol. 103(C), pages 383-386.
    6. Moschouli, Eleni & Soecipto, Raden Murwantara & Vanelslander, Thierry, 2019. "Cost performance of transport infrastructure projects before and after the global financial crisis (GFC): Are differences observed in the conditions of project performance?," Research in Transportation Economics, Elsevier, vol. 75(C), pages 21-35.
    7. Love, Peter E.D. & Ika, Lavagnon A. & Ahiaga-Dagbui, Dominic D., 2019. "On de-bunking ‘fake news’ in a post truth era: Why does the Planning Fallacy explanation for cost overruns fall short?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 126(C), pages 397-408.
    8. Bent Flyvbjerg & Allison Stewart & Alexander Budzier, 2016. "The Oxford Olympics Study 2016: Cost and Cost Overrun at the Games," Papers 1607.04484, arXiv.org.
    9. Bent Flyvbjerg & Alexander Budzier, 2018. "Report for the Edinburgh Tram Inquiry," Papers 1805.12106, arXiv.org.
    10. Flyvbjerg, Bent & Ansar, Atif & Budzier, Alexander & Buhl, Søren & Cantarelli, Chantal & Garbuio, Massimo & Glenting, Carsten & Holm, Mette Skamris & Lovallo, Dan & Lunn, Daniel & Molin, Eric & Rønnes, 2018. "Five things you should know about cost overrun," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 174-190.
    11. Room, Graham, 2018. "The Hiding Hand: A Rejoinder to Flyvbjerg on Hirschman," World Development, Elsevier, vol. 103(C), pages 366-368.
    12. Love, Peter E.D. & Sing, Michael C.P. & Ika, Lavagnon A. & Newton, Sidney, 2019. "The cost performance of transportation projects: The fallacy of the Planning Fallacy account," Transportation Research Part A: Policy and Practice, Elsevier, vol. 122(C), pages 1-20.
    13. Lepenies, Philipp H., 2018. "Statistical Tests as a Hindrance to Understanding," World Development, Elsevier, vol. 103(C), pages 360-365.
    14. Carole Turley Voulgaris, 2020. "Trust in forecasts? Correlates with ridership forecast accuracy for fixed-guideway transit projects," Transportation, Springer, vol. 47(5), pages 2439-2477, October.

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