Home / Opinion / Are people hardwired to be optimistic about their future well-being?

A new research paper by the Nobel-winning economist Angus Deaton, based on self-reported data from Gallup polls, suggests that people tend to be consistently optimistic about their futures even though this optimism is perpetually frustrated by actual outcomes. “In spite of repeated evidence to the contrary, people consistently but irrationally predict they will be better off five years from now," writes Deaton.

Among the young, expectations for future well-being run far ahead of reported well-being today. The gap diminishes with age, and in rich countries, those above 65 years of age expect their future well-being to be worse than what they are facing today, Deaton’s analysis shows.

Also Read: What do Self-Reports of Wellbeing Say about Life-Cycle Theory and Policy?

Online reviews of products, services or even employers are often very extreme—either full of praise or full of indignation. This is because of selection bias—only people with extreme views are motivated enough to write reviews. One way to overcome this bias is to offer incentives to publish reviews, nudging people with even moderate views to share their experiences, according to a recent National Bureau of Economic Research (NBER) working paper by Ioana Marinescu, assistant professor at the University of Pennsylvania, and co-authors. The researchers conducted experiments on Amazon’s Mechanical Turk platform to find that offering incentives leads to a more balanced distribution of reviews.

Also read: Incentives Can Reduce Bias in Online Reviews

The entry of women into a traditionally male-dominated environment can lead to positive changes in male attitudes towards mixed-gender work and gender roles, according to a new NBER paper authored by Gordon Dahl, professor of economics at the University of California, San Diego, and others. The researchers set up a field experiment with the Norwegian military, where women constitute less than 15% of recruits. During eight weeks of boot camp, female recruits were assigned to some squads but not to others. Recruits were surveyed on various gender-related questions before and after the boot camp. Men in mixed teams were more likely to believe in shared housework and believe that mixed-gender teams performed as well as, if not better than, same-gender teams.

Also read: Does Integration Change Gender Attitudes? The Effect of Randomly Assigning Women to Traditionally Male Teams

Hedging oil price risks through put options allowed Mexico to avoid the fate of other oil-exporting countries when prices tumbled in late 2014, argue Chang Ma of the Johns Hopkins University and Fabian Valencia of the International Monetary Fund in a new research paper. A put option gives the seller the right to sell at a pre-determined price in future even if market prices fall. The authors show that put options significantly reduce the risk of sovereign debt defaults in countries where public finances are largely dependent on oil revenues. This translates into lower borrowing costs for government and hence more budgetary resources and overall welfare for the country.

Also read: Welfare Gains from Market Insurance: The Case of Mexican Oil Price Risk

The rising inflow of foreign investment in India’s private hospitals can lead to concentration of market power, hurting public interest, writes Gulzar Natarajan, a former civil servant in his popular blog, Urbanomics. The changing pattern of ownership in Hyderabad, for instance, has led to a power struggle between the old promoters and new investors in at least some hospitals, with the latter trying to force hospitals to set procedural targets for doctors. Natarajan uses the example of Hyderabad, which has attracted large foreign investors such as Malaysia’s IHH Healthcare Bhd, to argue that tertiary medical costs can spike up significantly when a big foreign hospital chain purchases stakes across several hospitals in the same city. It may only be a matter of time before healthcare policy debates are taken over by a lobby of corporate care providers, their financiers, and insurers, warns Natarajan.

Also read: Corporate healthcare trends in India

Economics Digest runs weekly, and features interesting reads from the world of economics.

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