Realistic optimism


by Rob Horning

5 April 2007


Americans seem to regard optimism as a sign of strength of character, an quasi-spiritual eagerness to take what life throws at you, to make lemonade from lemons, to take the kind of risks that yield great discoveries, etc. There is also a tendency to conflate optimism with cheerfulness, even though optimism in a business context often has more to do with rapacious greed and hubris than fellow feeling. Optimism is usually what’s necessary to fuel utopian schemes, speculative bubbles and risky, destabilizing gambles. Optimism often supplies the gullibility that allows people to overlook such codicils as “Past performance is no guarantee of future success” and “Actual results may differ” and “Caveat emptor”. Since it is sanctioned as a laudable value, optimism is consumable as an experiential good, it’s an end in itself that’s facilitated by assuming risk.

It seems to me that optimism, at a personal level, tends to be a luxury that most people can’t afford. From the BPS Research Digest, here’s some substantiation for that view: Researchers have found that people tend to ignore the complications involved with taking on debt because they sunnily assume they will pay it back before any of those problems kick in.

Given their high interest rates, why do so many people continue to borrow money on credit cards? According to Sha Yang and colleagues, part of the answer has to do with people being unrealistically optimistic about paying off their balance each month…. “We show that unrealistic optimism may be one of the psychological explanations underlying why some consumers prefer credit cards with features that are not in their best interest, which has long been a puzzle for both researchers and credit card marketers”, the researchers said, adding that public policy may be needed to protect such people.

I don’t know that we need the state to mandate pessimism (I’d lose my competitive advantage). This would be the same kind of paternalism that would intervene to prevent people from wasting money on lottery tickets and depriving them of the pleasurable fantasy that they might win—this may make the cost of tickets money well spent, as far as they are concerned, regardless of whether they ever win or understand their real chances. But it seems a contradiction in terms to talk of realistic optimism; isn’t optimism by definition unrealistic? To point out that those in debt are “optimistic” is almost tautological. Optimism can perhaps be defined as chronic shortsightedness, though the same could be said of extreme pessimism, I suppose. But pessimism seems less like shortsightedness and more a matter of taking in and processing too much of reality, as when pot-induced hypersensitivity becomes raging paranoia. And isn’t the “reality principle” a matter of tempering expectations and acknowledging inevitable shortcomings and failures? Reality is defined in terms of the way it thwarts optimism; if we dispense with that yardstick, then we perhaps are in Baudrillard’s hyperreal, where skepticism is impossible because there is nothing in which it can be grounded.


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