---
title: The Economics of Optimism
description: Victor Perton on the economics of optimism, for the International Association for Peace and Economic Development
---

[Centre for Optimism](https://www.centreforoptimism.com/blog)

# [The Economics of Optimism](https://www.centreforoptimism.com/blog/economicsofoptimism)

 Written by [Victor Perton](https://www.centreforoptimism.com/blog/author/victor-perton) | Sep 26, 2026, 2:59:31 AM

 Victor Perton's Speech for the International Association for Peace and Economic Development Forum, 26 September 2026

When people can see credible possibilities for a better future and believe their actions matter, they invest, create, employ, learn, cooperate and take prudent risks to make that future real.

Optimists build prosperity, strengthen wellbeing, sustain democracy and make peace more possible. That is the economics of optimism.

Yet many countries face a growing gap between personal optimism and national pessimism. Closing that gap requires us to understand the stories and systems that shape our expectations, while recognising the power we have to shape what comes next.

**Acknowledgments**

Thank you, John, and thank you, Gordon, for beginning this important conversation.

Gordon Anderson’s Integral Economy asks how economic institutions can better serve society and human flourishing. I share his belief that public policy should help people feel an ever greater stake in their society, economy and governing structures. Trusted institutions and broad ownership help create the foundations for opportunity.

The word “integral” also has a special resonance for me. My late mother was a teacher of integral yoga, so I grew up with the idea that the dimensions of human and spiritual life belong together, and that we flourish when we see the whole person.

That instinct to see the whole person also has deep roots in economics. More than a century ago, Alfred Marshall described economics as “a study of mankind in the ordinary business of life”.

Nobel Laureate Amartya Sen asked us to look beyond income and resources to people’s capabilities: the real freedom and opportunity they have to live lives they have reason to value.

I find that a compelling way to think about economics. It takes us beyond simply managing scarcity towards human possibility: expanding freedom, opportunity and people’s capacity to flourish.

And I would add one more vital human dimension: our belief in the future. Optimism.

Because opportunity matters most when people can see it, believe they can act upon it and have the freedom and power to do so.

**The Power of National Optimism**

Economist Dr Anand Kulkarni, strategist Robert Masters AM and I have been asking a simple question: what if optimism contributes not only to individual resilience and wellbeing, but to national prosperity?

We are developing[*The** Optimism Economy: A National Framework for Economic Optimism*](https://www.centreforoptimism.com/blog/optimismeconomypodcast?hsLang=en)around a simple proposition. Optimism matters to productivity, innovation and sustainable growth.

When businesspeople can see worthwhile opportunities ahead, they are more willing to invest, undertake research and development, employ people, experiment and innovate. When people believe their own actions can improve their future, they are more willing to learn, work, create, participate and take prudent risks.

Seen this way, optimism is a hedge against uncertainty. It does not remove risk. It does not guarantee success. It gives us the confidence to act before certainty arrives.

And that matters because investment, enterprise and innovation always involve stepping into the unknown. Someone has to invest before the return is certain, employ before the demand is guaranteed, experiment before the answer is known, and create something before anyone can be sure it will work.

We also distinguish between consumer optimism, which can encourage people to spend, and producer optimism, the forward-looking belief that worthwhile opportunities exist and are worth pursuing.

That takes us to a larger idea. Economic optimism may itself be a strategic asset.

Governments and businesses cannot manufacture optimism, and nor should they try. But they can help create the conditions in which realistic optimism flourishes: opportunity, trustworthy institutions, investment, freedom to act, and credible pathways through which people can turn possibility into progress.

The essential question is whether people can see a better future and believe they have some power to help create it.

Economists and social scientists have long studied confidence, expectations, optimism and pessimism. What interests me is how those insights might come together in a broader economics of optimism centred on human possibility, freedom and our power to shape our lives.

So, what happens when optimism shapes what people believe is possible, whether they think their actions matter, and whether they act?

Optimism is a belief that good things will happen and that things will work out in the end.

Yesterday, speaking to the development economics network Tangible Ireland, I explored the relationship between optimism and wellbeing. My proposition was that it runs both ways: optimism can strengthen wellbeing, while wellbeing can give us further reason to believe in what lies ahead.

Today, I want to take that question beyond the individual. What happens when optimism shapes behaviour across economies and societies?

The Economics of Optimism has something important to say about that.

**The Economists’ Case for Optimism**

Economists have long understood that what we expect of tomorrow changes what we do today.

John Maynard Keynes gave us one of the most memorable formulations. Economies do not move by calculation alone. They also depend on “animal spirits”: the willingness to act before every risk is resolved and every outcome guaranteed.

That is not abstract. People start businesses, hire staff, invest in new products, retrain and build homes without knowing exactly how things will turn out. Small business runs on optimism. So do investment, learning, creativity and prudent risk-taking.

George Akerlof and Robert Shiller took the argument further. Confidence rises and falls. Stories spread. Expectations move through an economy. Shiller’s work on narrative economics shows that the stories we tell about what lies ahead can influence whether we spend, save, invest, innovate or hold back.

In 2024, Danielle Kent and colleagues examined 42 mainly OECD countries over two decades. They found evidence that economic optimism supports innovation and economic performance, with producer optimism especially important for productivity.

That finding gave us a useful term: the Optimism Effect.

The idea is simple but consequential. Optimism is not merely about how people feel. An optimistic economic environment can influence what people actually do: whether they invest, innovate, start businesses, employ people, experiment and pursue opportunity.

Earlier this year, Richard Phillips published a paper with the wonderfully familiar title The Economics of Optimism. His framework treats optimism as an economic variable that can shape behaviour under uncertainty, strengthen people’s sense that their actions matter, and influence innovation, mobility and entrepreneurship. At the societal level, he argues that shared narratives can coordinate expectations and contribute to economic dynamism.

That is strikingly close to the propositions Anand, Robert and I are exploring in the Optimism Economy.

Optimism awakens curiosity.

If we believe worthwhile possibilities lie ahead, we are more likely to ask: What if? Why not? What might we discover?

My friend John Hagel calls this the “[passion of the explorer](https://www.johnhagel.com/a-deep-dive-into-the-passion-of-the-explorer/)”: the curiosity and drive to venture into unknown territory, experiment, learn and create new knowledge. For John, curiosity, imagination and creativity are capabilities we need to cultivate if we are to discover new possibilities.

Investment and innovation do not begin with certainty. They begin with someone curious enough to explore what does not yet exist.

In an optimistic economy, people do more than invest in familiar opportunities. They explore. They experiment. They discover possibilities that might otherwise never be tested.

For me, that is the economics of optimism: seeing possibility amid uncertainty, having the freedom and confidence to act, taking prudent risks and finding opportunities that might otherwise remain hidden.

And this takes us beyond economics. It is also about whether people feel they can make a difference: whether their actions matter, whether they can see a path towards something better, and whether they have the freedom to pursue it.

But here a striking tension appears.

People can remain optimistic about their own lives and what lies ahead for them, while losing confidence in the direction of their country.

That is what I call the optimism gap.

**The Optimism Gap: National Pessimism and the Task of Rebuilding Credible Optimism\*\***

Across some of the world’s most prosperous and capable democracies, national pessimism has become remarkably deep.

Australia has long had a reputation for producing relentless optimists: practical, irreverent Australians who expect things will work out, the Crocodile Dundees who could take New York. In the spirit of Leonard Cohen’s great line: “First we take Manhattan, then we take Berlin.”

Yet something has changed. The 2026 Lowy Institute Poll found that 59 per cent of Australians were pessimistic about Australia’s economic performance over the next five years, the highest level recorded in the history of the poll. Scanlon’s social cohesion research also found that optimism about Australia’s future fell by 12 percentage points between 2021 and 2025.

These measures are not optimism itself, but they point to a striking change in national expectations: Australians who may remain optimistic about their own lives are increasingly doubtful that their country is moving towards a better future.

This is not only an Australian story. Singapore’s President, Tharman Shanmugaratnam, has warned for years about a drift towards pessimism in advanced societies: a loss of collective optimism, the belief that together we can make progress, overcome challenges and find new solutions.

His call to action is powerful: “Creating bases for optimism has to be our central task everywhere in the world.”

That makes me wonder whether one of the biggest public policy challenges of our time is the growing pessimism of the West, and whether one of our central tasks is to rebuild credible bases for optimism.

The global research and polling company Ipsos gives us another striking picture. Its right direction or wrong track question does not measure optimism directly, but it tells us whether people believe their country is moving towards something better.

n June 2026, 59 per cent of Australians said their country was on the wrong track. In Sweden it was 63 per cent. In Great Britain, 78 per cent. And in France, an extraordinary 90 per cent of those polled believed the country was heading in the wrong direction.

Yet here is the paradox. National pessimism can coexist with personal optimism. Around two thirds of Australians and Swedes still believed 2026 would be a better year for them personally.

That is what I call the optimism gap: people can believe good things will happen in their own lives while losing confidence that their country is moving towards a better future.

And look across to Asia. In the same Ipsos research, 69 per cent of urban Indians and 79 per cent of Singaporeans said their country was heading in the right direction.

Why do people in some societies see momentum, possibility and a better future, while citizens of some of the world’s richest, freest and most capable countries increasingly doubt their own direction?

There will be many answers. But one place we should look is the environment in which our expectations are formed: the stories, signals and systems we encounter every day.

**The information Environment**

Throughout human history, people have faced danger, uncertainty and disruption. Our brains evolved to pay attention to threats. That instinct helped keep our ancestors alive.

But it works differently in a world of twenty-four-hour news, smartphones and social media.

People today face real pressures: housing costs, inflation, war, technological disruption and profound long term challenges. Some situations really are crises. They demand urgency and action.

But increasingly, the language of news and public debate turns almost every challenge into a crisis.

We hear of the polycrisis, where multiple crises collide and reinforce one another, and the metacrisis, a deeper crisis in our capacity to understand and respond to them. Then come the cost of living crisis, the housing crisis, the climate crisis, the energy crisis, the health crisis, the education crisis, the productivity crisis and the crisis of democracy. Watch the evening news across much of the developed world and you can encounter dozens of crises and emergencies before bedtime.

Long-term challenges are framed as crises too, as though a problem built over twenty years should be capable of being solved by an intelligent government next week. A price rises, an interest rate moves, a service comes under pressure, and another crisis is declared.

Crisis is a useful word when it distinguishes an emergency. If everything becomes a crisis, the word begins to distinguish nothing.

Hans Rosling, the Swedish physician, statistician and global health educator, spent much of his life challenging distorted views of the world. In \*Factfulness\*, he called this the “overdramatic worldview”. His point was not that serious problems should be ignored, but that we should see them accurately.

Rosling described our negativity instinct. Bad events are dramatic and visible. Gradual improvement is quieter. As he put it: “When things are getting better we often don’t hear about them.”

A war begins and it is news. A company closes and cameras arrive. A system fails and we hear immediately. Progress rarely generates the same headline.

Things can be bad and getting better at the same time. Rosling warned that if we see only what is dramatic, immediate and negative, we acquire a distorted picture of the world, one he described as “stressful and misleading”.

That matters economically as well as psychologically.

If people are constantly told that almost everything is in crisis, some become fearful, angry or disheartened. Some begin to believe decline is inevitable and that little they do will make a difference.

That is not economically neutral.

An economy needs people willing to invest before returns are certain, create before success is guaranteed, learn new skills, employ someone, start a business, experiment and cooperate across differences.

A society that constantly tells people the future is closing down risks discouraging the curiosity, confidence, and prudent risk-taking that opens it up.

If everything is a crisis, we begin to expect permanent emergency. We lose perspective about what is improving and what is worsening. We underestimate our capacity to adapt, invent and solve problems, while creating impossible expectations of governments and institutions.

Uncertainty is not an aberration. It is part of life, enterprise and progress.

The question is how we meet it: with fear, anger and resignation, or with optimism, curiosity, imagination, initiative and confidence in our capacity to shape what comes next.

That is why optimistic leadership matters in uncertain times.

The optimistic leader does not deny difficulty or promise certainty. The leader faces reality, distinguishes a genuine crisis from a long term challenge, tells the truth about what is getting worse and what is getting better, helps people see possibility, reminds them what remains within their power and encourages the next wise step.

But leaders are not the only storytellers shaping our expectations.

Every day, news, social media and recommender systems influence the stories we encounter about ourselves, our societies and what lies ahead. Anger, anxiety and conflict can be powerful sources of engagement. When every setback becomes evidence of decline and every disagreement another crisis, pessimism itself can become a product.

Foreign interference can exploit the same dynamics.

So, the democratic response must put more power in people’s hands. We should not be passive recipients of an algorithmically shaped world. People should have real freedom to choose how information reaches them, what shapes their feeds and whether personalised recommender systems stand between them and the world they see.

But there is a broader task.

We need better storytelling.

Not propaganda. Not the pretence that everything is going well. Fuller stories.

Stories that tell us what is failing and what is working. What is getting worse and what is getting better. What threatens us and what we can do about it. Stories that restore proportion, possibility and the power to act.

It comes back to the central question of the economics of optimism: do people believe they have choices, that their actions matter and that they can help shape the future?

That is where economics, wellbeing, democracy and peace come together.

**Human Possibility, Wellbeing and Peace**

The task is to give people more power over their own future. A country succeeds when people can see possibility, believe progress is possible, act on that belief and share in the gains.

That means real pathways to work, learning, ownership, enterprise and participation. It means trustworthy institutions that solve problems and tell the truth. And it means a public conversation that faces what is difficult while giving people credible reasons for optimism.

Economic renewal, wellbeing and peace belong together. Optimism matters to each of them because it helps us imagine that something better is possible and that our actions can help bring it about. In an age of digital pessimism, one of the most powerful antidotes is something deeply human: meeting, listening and talking with one another.

Last week, at Parliament House in Canberra, I joined a multi-faith, intergenerational and multicultural gathering for peace hosted by the Speaker of the House of Representatives, Milton Dick. People of different backgrounds came together because they believed dialogue, cooperation and respect could help build a better future.

Peace itself requires optimism: the belief that a better future remains possible even when disagreement, grief and fear are real. It is built and protected through dialogue, diplomacy, respect for international law and cooperation, and through people willing to keep working towards that better future.

The same is true in the economy. When people are optimistic about the future, feel they have a stake in it and believe they can help shape it, they are more likely to invest in their communities, respect one another’s dignity and work across differences.

**A Call to Rebuild Optimism**

We can measure a successful economy in many ways: GDP per person, productivity, wages, opportunity, health, wellbeing, security, cohesion and the prospects of the next generation. Each matter. None is sufficient alone.

The deeper test is whether people are better able to live well today and believe they can build a better tomorrow.

So, what do we do?

For governments and institutions, recognise economic optimism as a strategic asset. Give people real pathways to work, learn, own, create, experiment and participate. Give them greater freedom and opportunity to shape their own future.

For business, invest in possibility. Back people, skills, innovation and ideas that can create a better future.

For leaders in every field, tell a fuller story. Face what is difficult, but also tell the stories of what is working, what we are capable of and what remains possible. Give people credible reasons to believe that progress can be made and that what they do matters.

And for each of us, help someone see possibility and act upon it.

That is how we begin to close the optimism gap.

That is how we strengthen economies and communities.

That is how we strengthen wellbeing, democracy and peace.

Robert Masters AM and I put it this way in the Optimism Principle:

“The answer to life’s most pressing questions is optimism.”

Optimism that faces reality.

Optimism that sees possibility.

Optimism that gives us the confidence to act.

Optimism that helps us take the next wise step.

So let us create more credible reasons for optimism in our economies, our institutions, our communities and our conversations.

Let us tell fuller stories about who we are, what we have achieved, what is working and what remains possible.

Let us give people more freedom to shape their future and remind them that what they do matters.

And let us carry that optimism into what we do next.

So, I will leave you with one question:

What will you do later today or tomorrow to help someone see a better future, foster infectious optimism and take the next wise step towards it?

 

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