Decision Science in the Navy Budget

Abstract

This study aims to identify systematic behavioral biases in the POM process and accordingly propose correctional approaches intended to improve the POM quality. The analysis framework is deeply rooted in behavioral economics, which deviates from mainstream rational economics and incorporates psychological and social influences into explanations of human behavior. We find that various cognitive biases, such as confirmation bias, anchoring effect, overconfidence bias, endowment effect, prospect theory, and herding behavior, pose a significant challenge to the Navy's ability to allocate resources efficiently and align them with strategic objectives. To enhance the integrity of the POM process and mitigate the negative impact of cognitive biases, a multifaceted approach is necessary. The recommendations we proposed encompass training and education, decision support tools, diverse decision-making teams, independent reviews and oversight, clear evaluation criteria, continuous monitoring, and strategic clarity.