The Oxford Dictionary of English defines optimism as ‘hopefulness and confidence about the future or the success of something’.
"Perhaps the best documented of all psychological errors is the tendency to be over-optimistic. People tend to exaggerate their own abilities. Like the children of Lake Woebegone, they are all above average. For instance, when asked if they thought they were good drivers, around 80% of people say yes! Ask a room full of students who thinks they will finish in the top 50% of the class, on average around 80% of them will respond in the affirmative — of course at least 30% of them will be disappointed at the end of the course"
Montier (2002)
"Overoptimism, according to which people in identifiable situations believe that the outcomes of events are better for them than for others. Thus, most persons underestimate the probability of being involved in an accident or contracting cancer or AIDS. Similarly, most people overestimate their capabilities. Thus, a large majority of motorists believe that they belong to the top 20 percent of drivers, which is, of course, objectively impossible. The same holds for their own evaluation of their work performance (Meyer 1975). The ipsative possibility set (the one they perceive as constraining their own actions) systematically deviates from the objective possibility set, which distorts behavior (Frey and Heggli 1999). Another case is the premarital expectation that one's own romantic marriage will be happy ever after and will not end up in divorce—an expectation that is quite unrealistic in view of divorce rates that are 50 percent and higher (Frey and Eichenberger 2001)."
Frey and Stutzer (2002)
"There are interesting exceptions. For many traits, women are not optimistic (and even pessimistic; e.g., Maccoby and Jacklin 1974), and clinically depressed patirnts ae not optimistic (e.g., Alloy and Ahrens 1987)."
"In this paper, we argue that the observed optimism in analysts' forecasts is related to the costs and benefits to analysts of issuing optimistic forecasts — when the costs of issuing an optimistic forecast are high relative to the benefits of doing so, optimism will be less apparent or absent."
Espahbodi, Dugar and Tehranian (1991)
[advantages of optimism]
"The main advantages of optimism may be found in increasing persistence and commitment during the phase of action toward a chosen goal, and in improving the ability to tolerate uncontrollable suffering. Taylor (1989) has reviewed the role of irrational hope in promoting the adjustment of some cancer patients, and Seligman (1991) has claimed that an optimistic explanatory style, in which one takes credit for successes but views failures as aberrations, promotes persistence in the face of difficulties in diverse activities, ranging from the sale of insurance to competitive sports. The role of optimism is of particular interest for a treat,ment of conflict. On the one hand, optimistic overconfidence will sometimes encourage athletes to take on competitors that are too strong for them. On the other hand, confidence, short of complacency, is surely an asset once the contest begins. The hope of victory increases effort, commitment, and persistence in the face of difficulty or threat of failure, and thereby raises the chances of success. A characteristic of competitive sports is that the option of abandoning the contest is not normally available to a competitor, even if defeat is certain. Under those circumstances, stubborn perseverance against the odds can only be beneficial. The situation is more complex when leaving the field is a viable option, and continuing the struggle is costly. Under these conditions, it is rarely easy to distinguish justified perseverance from irrational escalation of commitment.
In other situations of conflict, as in sports, optimism and confidence are likely to increase effort, commitment, and persistence in the conduct of the struggle. This is particularly true in conflicts that involve severe attrition. When maximal effort is exerted by both contestents, then it would appear that optimism offers a competitive advantage. In some competitice situations, the advantages of optimism and overconfidence may stem not from the deception of self, but from the deception of the opponent. This is how intimidation works – and successful intimidation accomplishes all that could be obtained by an actual victory, usually at a much lower cost. An animal that is capable of intimidating competitors away from a desirable mate, prey, or territory would have little need for techniques of conflict resolution. It is also recognized in analyses of conflict, from the game of chicken to treatments of pariah [or “outlaw” states, that the appearance of complete confidence often pays off. Because complete confidence may be hard to fake, a tendency to sincere overconfidence could have adaptive advantages (see Frank 1989)."
Kahneman and Tversky
Conflict Resolution: A Cognitive Perspective
page 477 of "Choices, Values, and Frames"
"The finding of consistent over-optimism results from a number of psychological biases, such as the illusion of control and self-attribution bias."
Montier (2002)
"We argue that the general level of optimism/pessimism in society affects the emotions of most financial decision-makers at the same time. This creates biased financial decisions that are correlated across society."
Nofsinger (2003)
"We all tend to be optimistic about the future. On the first day of my MBA class on decision-making at the University of Chicago, every single student expects to get an above-the-median grade, yet half are inevitably disappointed. This optimism will induce me to predict that economics will become more like I want it to be."
Thaler (2000)
"Overoptimism and overconfidence tend to stem from the illusion of control and the illusion of knowledge." (Montier 2007, p. 20)
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