Planning Costs

Economists used to believe that our decisions are made purely using logic. However, they found out that there are psychological tricks that prevent us from making logical decisions.

Planning Fallacy: One study showed how people doing construction believed that it would be done on time and within budget, but when asked about their friend’s similar project, they said it would take longer and cost more than expected. This was due to being unrealistic and overly optimistic about their own project.