Wednesday, March 31, 2010

When Does 'Optimism Bias' Become a Lie?

Optimism bias, always looking on the bright side of life, is normally a good thing. It keeps us all going when things get tough.
However, too much of it and a person is self-delusional and in a 'la la' land where everything that said needs thorough fact checking (I met one such person on Tuesday night, not a pleasant experience).

This affects institutions too.

The reason why the small Institute for Fiscal Studies's economic forecasts and comments are more revered than the the mighty HM Treasury is because the latter is prone to chronic, politically induced, optimism bias. The former produces evidence-based policy while the latter changes the evidence to back the policy. We will know when trust in politics has been restored because it will be when HM Treasury figures are treated with even half the weight of the IFS.

1 comment:

  1. Thank you Richard, a very good post.

    As it happens, I too met such a person last night!

    The truth usually catches up eventually.

    This is why George Osborne is right to want the Office for Budgetary Responsibility, in his words, "to keep the chancellor honest".

    While I am always sceptical of quangos that have power over policy, a body dedicated to scrutiny is not the same thing.