overconfidence

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The Boston Globe writes about optimism research, and includes the following cautionary nugget about the virtues of moderate optimism.

Economists at Duke found that compared to pessimists, optimists work more hours per week, save more money, are more likely to own stock, and are more likely to say that they’re never going to retire…”The moderate optimists are prudent people,” said David Robinson, who conducted the Duke study. “They pay their credit cards on time. They tell you that they save because saving is a good thing to do. . . . Extreme optimists are just the opposite. They have short planning horizons, they don’t pay their credit cards off on time. As you get extremely optimistic, the good behaviors drop off.”

And this nugget about when optimism is beneficial and harmful.

The importance of positivity can vary by profession. University of Pennsylvania psychologist Martin Seligman, a leading researcher on optimism, has found that pessimistic law students are the most successful. Optimistic sales agents, on the other hand, significantly outsell pessimistic ones.

Are you an optimist? Take this quiz to find out.

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Asked to predict their grade on the first day of Thaler’s decision making class, about 95 percent of Chicago business school students say they will end up above the median grade.

Asked to assess their own children, 90 percent of parents rated their offspring as “above average” in the areas of intelligence, humor, sensitivity, and caring. This according to a study just published in the Journal of Applied Social Psychology.

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Richard Thaler gets the second half of this Yale University Press podcast. The recording lasts about 29 minutes. Thaler’s interview starts at approximately minute 14.

Cass Sunstein was in Washington yesterday where he spoke on a panel about libertarian paternalism at the Cato Institute. Click here to watch (via Real Player) or listen to an mp3 of the one hour and thirty minute event. Sunstein kicks off the discussion with a 20-minute lecture. Terrence Chorvat of George Mason University Law School and Will Wilkinson of Cato Institute then respond. The panel concludes with about 30 minutes of questions.

Sunstein brings up overconfidence studies that find 90 percent of drivers and professors think they are better than the average driver and professor – which we know is mathematically impossible! The only people who don’t exhibit such overconfidence? The clinically depressed.

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