On this perfect day when everything is ripening and not only the grapes are becoming brown, a ray of sunshine has fallen on my life: I looked behind me, I looked before me, never have I seen so many and such good things together.

Unrealistic optimism or optimism bias—the tendency for individuals to overestimate the chance of favorable outcomes occurring and underestimate the chance of bad —has been found to be one of the most pervasive human traits across many domains. For instance, research has shown that individuals tend to underestimate the likelihood of developing a drinking problem or getting divorced and to overestimate their future earnings and how long they are going to live. Our established tendency toward unrealistic optimism poses an evolutionary puzzle as normative models of human judgment, like expected utility theory, suggest unbiased assessments of probabilities are advantageous. Like any other judgmental bias, optimism bias distorts the decision-making process, leading to systematic decision errors, increased rash and risky behavior and a failure to take precautionary measures. […]

There are reasons for expecting that the optimism bias may be associated with cognitive ability. Supportive empirical evidence for this framework comes from the experimental literature on cognitive ability and judgmental biases. For instance, intelligence has been found to lower one’s susceptibility to hindsight bias, overconfidence, framing, and the sunk cost fallacy. […]

we used an unbalanced panel of 36,312 respondents […]

The findings we present provide evidence that forecasting accuracy is linked to cognitive ability. Specifically, we find that higher cognitive ability is associated with a higher incidence of realism and pessimism in beliefs and a lower incidence of unrealistic optimism.

Taken together, our results lead us to conclude that the rash and risky behaviors associated with excessive optimism may be a side product of the true driver, low cognitive ability.

{ Personality and Social Psychology Bulletin | Continue reading }