Hiding Hand Principle

Hiding Hand Principle

The Hiding Hand principle, a concept introduced by economist Albert O. Hirschman in his 1967 book, "Development Projects Observed," describes a paradoxical phenomenon in the planning and execution of complex projects, particularly in development.

The core idea is that when people decide to undertake ambitious projects, they tend to systematically underestimate the difficulties, costs, and potential problems they will face. Simultaneously, they systematically overestimate their own capacity and resources to solve unexpected issues that might arise.

Hirschman argued that this initial underestimation—this "Hiding Hand"—can, paradoxically, be beneficial. If project planners and implementers had perfect foresight of all the obstacles and complexities, they might conclude the project is impossible or too daunting and never start. However, because the true scale of the challenge is partially hidden, the project is initiated based on this initial optimism. Once the project is underway, and unforeseen problems inevitably emerge, the commitment and resources already invested create a powerful incentive to find solutions. This necessity then stimulates creativity, learning, and resourcefulness among those involved that might not have been anticipated during the initial planning phase, ultimately allowing the project to succeed despite the initial miscalculations.

The concept was notably brought to a wider audience by Malcolm Gladwell in the New Yorker. Reviewing Jeremy Adelman's book "Worldly Philosopher: The Odyssey of Albert O. Hirschman," Gladwell illustrated the principle by recounting the challenging construction of a railway tunnel through Hoosac Mountain, which, despite proving much harder and costlier than anticipated, was eventually completed with positive results – a prime example of Hirschman's Benevolent Hiding Hand at work.

However, Hirschman's principle has faced significant criticism. Bent Flyvbjerg and Cass Sunstein take issue with it, arguing that there are effectively two types of "Hiding Hands":

1. A Benevolent Hiding Hand, which is the one Hirschman described, where unforeseen difficulties spur creativity and lead to success.
2. A Malevolent Hiding Hand, which obstructs projects with unforeseen problems that cannot be creatively overcome within the project's constraints, leading to delays, cost overruns, and sometimes failure.

In an empirical test of 2,062 projects, Flyvbjerg and Sunstein found that the Malevolent Hiding Hand applied in a significant majority of cases (78%), whereas Hirschman's Benevolent Hiding Hand applied in only 22% of cases, contradicting Hirschman's belief that the benevolent effect "typically" applies. Flyvbjerg and Sunstein also argue that this Malevolent Hiding Hand is essentially the well-known planning fallacy (the tendency to underestimate task completion times and costs) writ large in the context of complex projects.