May 25, 2011
Optimistic Areas Economically Stronger?

Does optimism increase economic growth?

Coral Gables, Fla. May 25, 2011 Economic recessions are weaker, expansions are stronger, and economic recovery is faster in U.S. states where people are more optimistic says a new study from the University of Miami School of Business Administration. Further, the effects are stronger in states where people are older, less educated and less socially connected.

"Previous studies have shown that economic conditions affect mood people would expect this, it's more obvious," said Alok Kumar, the Gabelli Asset Management Professor of Finance at the University of Miami School of Business and one of the study's researchers. "Our study is unique in that it shows, for the first time, that mood and optimism can directly affect overall economic activity."

Sunny weather triggers serotonin which brightens mood and boosts optimism. Cloudy weather has the opposite efect via melatonin release.

Weather: Average temperature and cloud cover. Sunny weather triggers the release of serotonin in the brain that causes people to be more alert and cheerful. The opposite is true for bad weather because it releases melatonin that makes people feel tired and down.

So should Seattle companies install very bright artificial lighting? Also, if more people took anti-depressants would the economy grow faster?

One needs optimism to try to start or expand a business. Is irrational optimism necessary for progress?

The above report seems like further evidence you should Always Look On The Bright Side of Life . Another upbeat ditty: Galaxy Song.

Share |      Randall Parker, 2011 May 25 11:21 PM  Brain Economics

PacRim Jim said at May 26, 2011 2:27 AM:

Confusion of cause and effect?

Chris T said at May 26, 2011 9:44 AM:

Confusion of cause and effect?

More likely a positive feedback loop.

Beth said at May 26, 2011 1:27 PM:

If this is so, how do they explain the booming economic expansion of North Dakota - a very chilly climate with a lot more darkness than Florida!

Michael B. said at May 26, 2011 3:17 PM:

Higher than average or higher than deserved optimism's only effect is to create a bubble. It improves things for a while until the bubble bursts. Technology, residential housing, and residential mortgages are good examples. I've heard some counter theories that say that the bubbles are actually caused by government intervention and/or monopolistic action such as by the federal reserve and that the extra optimism is caused by the bubble, not the other way around.

PacRim Jim said at May 26, 2011 3:28 PM:

Beth, that's easy. Petroleum.
(By Jove, you make me feel intelligent, Beth.)

Shiny Happy said at May 26, 2011 3:47 PM:

I'm optimistic about the pessimism the future holds.

Beth said at May 26, 2011 4:15 PM:

PacRim Jim - Yes, I am aware of the oil being extracted in North Dakota - my point was that the study did not appear to include such obvious things as resources being exploited (as they should be). Please don't feel intelligent on my account. You wish.

Brock said at May 27, 2011 11:18 AM:

If I were living in a growing State I'd be optimistic too.

Matt Metcalf said at May 27, 2011 12:12 PM:

Actually, from an economic standpoint this makes pretty good sense. Optimistic people are more likely to become entrepreneurs than pessimistic people. Also, I would imagine that optimistic angel investors are more likely to fund local start-ups than pessimists.

As for North Dakota, I'm reasonably sure that the research is talking about trends and tendencies, and not something that is an utter absolute with no regard to other economic factors such as natural resources. Although I suspect that if I lived in North Dakota and worked in the oil industry (or pretty much any other industry) I'd be pretty optimistic right now.

Breckmann said at May 27, 2011 4:25 PM:

Modern university graduates have a tenuous grip on the concepts of evidence and causation. Particularly those who went to J school and work as journalists.

willis said at May 27, 2011 5:10 PM:

I don't think the article said or implied anything other than econcomic cycles are impacted by the general outlook of a people in a given area. Oil in North Dakota doesn't know whether its extractors are optimistic or not; on the other hand, its price is set by consumption elsewhere. The more optimistic states, such as Texas, are consuming more oil, thus sustaining or driving increased prices that boom the economy in North Dakota. On the other hand, Texas is not so much a nanny state, thus allowing optimistic tendencies to more readily influence its economic trends. Other the other hand communist-wannabe states, such as California, continue to sink into the abyss despite even more expolitable resources than North Dakota.

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