AND THERE'S NEVER BEEN A PEOPLE WITH MORE TO BE OVER-OPTIMISTIC ABOUT:

The Curious Paradox of 'Optimism Bias': Being highly positive can lead to disaster for individuals—but benefit society as a whole (Dan Ariely, 8/26/09, Business Week)

The basic idea is that when people judge their chances of experiencing a good outcome—getting a great job or having a successful marriage, healthy kids, or financial security—they estimate their odds to be higher than average. But when they contemplate the probability that something bad will befall them (a heart attack, a divorce, a parking ticket), they estimate their odds to be lower than those of other people. [...]

It is interesting to ponder the utility of over-optimism. It's not a simple matter, because it can both hurt and help us. Individuals often suffer because of an overly bright outlook. They wind up dead, or poor, or bankrupt because they underestimated the downside of taking a certain path. But society as a whole often benefits from behavior spurred by upbeat outlooks.

It's the inverse of "the paradox of thrift," which holds that saving money (instead of consuming) may be good for an individual but is bad for an economy trying to grow.

Overoptimism works the other way. Imagine a society in which no one would take on the risk of creating startups, developing new medications, or opening new businesses. We know most new enterprises fail in the first few years. Yet they crop up all the time, sometimes jump-starting entirely new sectors. A society in which no one is overly optimistic and no one takes too much risk? Such a culture wouldn't advance much.

Want to know why you should be optimistic? Find someone 85 or older and try telling them how you just lived through a Depression just like the Great one.

Posted by Orrin Judd at August 26, 2009 8:15 AM