  We identify and document a new principle of economic behavior: the principle
of the Malevolent Hiding Hand. In a famous discussion, Albert Hirschman
celebrated the Hiding Hand, which he saw as a benevolent mechanism by which
unrealistically optimistic planners embark on unexpectedly challenging plans,
only to be rescued by human ingenuity, which they could not anticipate, but
which ultimately led to success, principally in the form of unexpectedly high
net benefits. Studying eleven projects, Hirschman suggested that the Hiding
Hand is a general phenomenon. But the Benevolent Hiding Hand has an evil twin,
the Malevolent Hiding Hand, which blinds excessively optimistic planners not
only to unexpectedly high costs but also to unexpectedly low net benefits.
Studying a much larger sample than Hirschman did, we find that the Malevolent
Hiding Hand is common and that the phenomenon that Hirschman identified is
rare. This sobering finding suggests that Hirschman's phenomenon is a special
case; it attests to the pervasiveness of the planning fallacy, writ very large.
One implication involves the continuing need for unbiased cost-benefit analyses
and other economic decision support tools; another is that such tools might
sometimes prove unreliable.
