One of the puzzles of the sluggish global economy today is why companies aren’t investing more. They certainly seem to have good reasons to: corporate coffers are full, interest rates are low, and a slack economy inevitably offers bargains. Yet many companies seem to be holding back.

A number of factors are doubtless involved, ranging from market volatility to fears of a double-dip recession to uncertainty about economic policy. One factor that might go unnoticed, however, is the surprisingly strong role of decision biases in the investment decision-making process—a role that revealed itself in a recent McKinsey Global Survey. Most executives, the survey found, believe that their companies are too stingy, especially for investments expensed immediately through the income statement and not capitalized over the longer term...