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Maor (2012). Policy overreaction

Bibliographic details:

Maor, M. (2012). Policy overreaction. Journal of Public Policy, 32(3), 231-259.


The literature on policy success and failure does not capture policies that may be too  successful,  as  well  as  ‘‘too  much’’  and/or  ‘‘too  soon’’  patterns  of  policy. To bridge this gap, this conceptual article relies on one of the most robust findings in  the  psychology  of  judgement,  namely  that  many  people  are  overconfident, prone  to  place  too  much  faith  in  their  intuitions.  Based on this premise, the analytical framework advanced here revolves around two key dimensions of policy overreaction: (i) the effects of positive and negative events, and (ii) the effects of overestimation and accurate estimation of information.  Based on these dimensions, the article identifies and illustrates four distinct modes of policy overreaction that reflect differences in the nature of implemented policy. It argues that the policy tools menu utilized in each mode of policy overreaction is dominated by unique mechanisms for changing or coordinating behavior, which, once established, produce excessive – objective and/or perceived – social costs.