Strategic misrepresentation

Strategic misrepresentation

Strategic misrepresentation is the planned, systematic distortion or misstatement of fact—lying—in response to incentives in the budget process. Examples of strategic misrepresentation in budgeting illustrate that it is a contingent strategy responsive to a system of rewards in a highly competitive game where resource constraints are present. Not all budget advocacy requires or involves misrepresentation, nor is all budgetary strategy intended to misrepresent. Strategic misrepresentation is a predictable response to the incentive structure of the budgetary game (see also principal-agent problem); it is used because it works under some circumstances. It is used both by budget advocates and controllers and at times by both sides of the left-right political spectrum.

Jones and Euske (1991) identified thirteen budget-process factors that appear to stimulate strategic misrepresentation in budgeting and provide examples to demonstrate under which conditions the budget-process factors result in strategic misrepresentation. The study concludes that no amount of moral handwringing over the evils of strategic misrepresentation is likely to lessen the practice. Rather, the system of incentives that propels strategic misrepresentation requires analysis and reform if the behavior is to be discouraged.

Flyvbjerg et al. (2002) found that strategic misrepresentation explains widespread cost overrun in public works projects. Flyvbjerg (2008) described how strategic misrepresentation may be reduced by improved incentive alignment and reference class forecasting.

ee also

*Budget crisis
*Budget surplus
*Budget theory
*Cost-benefit analysis
*Cost overrun
*Cost underestimation
*Benefit shortfall
*Optimism bias
*Reference class forecasting
*Rent seeking


* [ Flyvbjerg, Bent, Mette K. Skamris Holm, and Søren L. Buhl, 2002, "Underestimating Costs in Public Works Projects: Error or Lie?" "Journal of the American Planning Association", vol. 68, no. 3, pp. 279-295.]
* [ Bent Flyvbjerg, 2008, "Curbing Optimism Bias and Strategic Misrepresentation in Planning: Reference Class Forecasting in Practice." "European Planning Studies", vol. 16, no. 1, pp. 3-21.]
* [ Jones, L.R. and K.J. Euske, 1991, "Strategic Misrepresentation in Budgeting," "Journal of Public Administration Research and Theory", vol. 1, no. 4, pp. 437-460.]

Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Cost overrun — A cost overrun, also known as a cost increase or budget overrun, is an unexpected cost incurred in excess of a budgeted amount due to an under estimation of the actual cost during budgeting. Cost overrun should be distinguished from cost… …   Wikipedia

  • Cost — This article is about the economic concept. For the scientific organization, see COST. For uses of The Cost , see The Cost (disambiguation). Expenditure redirects here. For personal consumption expenditure, see Consumption (economics). In… …   Wikipedia

  • Public works — (or internal improvements historically in the United States)[1][2][3] are a broad category of projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community. They include… …   Wikipedia

  • Lie — For other uses, see Lie (disambiguation) A lie (also called prevarication, falsehood) is a type of deception in the form of an untruthful statement, especially with the intention to deceive others. To lie is to state something with disregard to… …   Wikipedia

  • Business plan — Corporate finance …   Wikipedia

  • Risk — takers redirects here. For the Canadian television program, see Risk Takers. For other uses, see Risk (disambiguation). Risk is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable… …   Wikipedia

  • Cost underestimation — is defined as the act of assessing the cost of a future venture lower than what actual cost turned out to be once the venture was implemented. Cost underestimation causes cost overrun. The main causes of cost underestimation are optimism bias and …   Wikipedia

  • Optimism bias — is the demonstrated systematic tendency for people to be overly optimistic about the outcome of planned actions. This includes over estimating the likelihood of positive events and under estimating the likelihood of negative events. Along with… …   Wikipedia

  • Benefit shortfall — A benefit shortfall results from the actual benefits of a venture being lower than the projected, or estimated, benefits of that venture.[1] If, for instance, a company is launching a new product or service and projected sales are 40 million… …   Wikipedia

  • Business ethics — For the episode from the American television series The Office, see Business Ethics (The Office). Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.