Does Optimism Make a Difference?

This is a very relevant question every economic developer should be asking as he or she prepares for the 12 months ahead.

There has actually been some research done on the issue. What did the research find? Optimism clearly influences individuals’ economic decisions. Optimists - defined as those who expect to live more than predicted by statistical evidence - believe the economy will improve in the near future, and act accordingly. They are more likely to be self-employed, to work longer hours, and expect to retire at an older age. Optimists also tend to be “stock-pickers”, although the overall composition of their portfolios does not appear to be biased towards equities.

Source: Report on "Optimism and Economic Choice", a Working Paper by Manju Puri (Fuqua School of Business, Duke University and NBER) David T. Robinson (Fuqua School of Business, Duke University).

My take: Be cautiously optimistic in 2006 and keep close track of how events and developments unfold in the new year. I think we miss a lot and are at times "shocked" by the situation that has materialized before our very eyes. We are not good at seeing things unfold.