segunda-feira, 8 de novembro de 2010

Economics and Decision-Making

"Reference Class-Forecasting" is a model created by Daniel Kanehman, 2002 Nobel prize awardee for studies on Behavioral Economics.

Like the concepts learned in Economic Module, Kanehman's methodology help public administrators make better decisions by providing tools to correct false predictions generated by overoptimism.

To come up with a down-to-earth forecast, one has to go through five steps.

First, identify a similar example and then compare similarities and differences of every variable.

Second, organize the outcomes of this example - reference - by distributing extremes, median, and clusters.

Third, make predictions of your venture - this is the time when overoptimism usually takes over - and place them in the reference outcome distribution.

Fourth, create a forecast scale for various events.

Fifth, place your prediction in the scale created and adjust irrationality in order to work based on and towards realistic objectives.

More about this decision-making process methodolgy at:
http://hbswk.hbs.edu/archive/3630.html

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