Why artificial optimism?

Politeness and privacy are, in fact, largely about maintaining impressions (especially positive impressions) through coordinating against the revelation of truth.

I think this is not fully correct. I think a significant fraction of politeness norms (and professionalism norms) come from trying to provide a simple, reliable API for two parties to engage in transactions with, in a way that limits downside risk.

If I hire a plumber, I really don't want to have long philosophical discussion with my plumber, and I also don't really want them to provide commentary on my interior decoration while they are doing the plumbing. I mostly just want them to fix my plumbing, which requires me to describe my current plumbing problems, for them to ask clarifying questions, then for them to perform some units of work, and then for me to give them some money.

A lot of the constraints we put on professional interactions are I think not because we want to maintain impressions, but because we have to drastically simplify the interface of permissible speech acts to a small subset to make the interaction predictable and manageable.

I do also separately think that a significant fraction of politeness norms are about maintaining impressions, but it felt important to highlight this alternative explanation, which I think explains a lot of the same data.

Optimism bias is well-known. Here are some examples.

Some of these things are not like the others. Namely:

People often think their project has an unrealistically high chance of succeeding. Why?

People often avoid looking at horrible things clearly. Why?

These things do seem like examples of optimism bias.

It’s conventional to answer the question “How are you doing?” with “well”, regardless of how you’re actually doing. Why?

People often believe that it’s inherently good to be happy, rather than thinking that their happiness level should track the actual state of affairs (and thus be a useful tool for emotional processing and communication). Why?

…

People often want to suppress criticism but less often want to suppress praise; in general, they hold criticism to a higher standard than praise. Why?

But these things do not at all seem like examples of optimism bias. They seem like examples of very different phenomena. (And three distinct phenomena, I would say, rather than three examples of just one thing that’s different from optimism bias.)

By the way, in case anyone doesn’t feel like clicking through to the Wikipedia link in the OP, here’s the given definition of optimism bias:

Optimism bias is a cognitive bias that causes someone to believe that they themselves are less likely to experience a negative event. It is also known as unrealistic optimism or comparative optimism.

Po­lite­ness and pri­vacy are, in fact, largely about main­tain­ing im­pres­sions (es­pe­cially pos­i­tive im­pres­sions) through co­or­di­nat­ing against the rev­e­la­tion of truth.

People don't always agree with each other about what's good and bad. Knowingly allowing someone to get away with something bad makes you bad. Coordinating against the revelation of truth allows us to get something productive done together instead of spending all our time fighting.

While reading this I kind of forgot you were talking about multiple agents and was thinking instead about subagents a la a multi-agent theory of mind. In this sense optimism can come up from the inside as parts of the mind claim higher confidence predictions and win out over lower confidence predictions, gradually replacing lower, perhaps accurate, confidence perceptions, beliefs, etc. with higher, perhaps inaccurate, ones. Then when you ask to know something about the world, you just get back the high confidence answers, have too much confidence yourself, and have to struggle to stay humble. The modern depression pandemic withstanding, this would seem to offer a possible explanation about why humans are generally over confident rather than under confident (or at least I think it's true that humans are more over than under confident, but I could be mistaken about this, but I except I am right given virtue training historically almost always included "humility" but rarely something like "confidence").

This model raises an important question (with implications for the real world): if you're a detective in the kingdom of the gullible king who is at least somewhat aware of the reality of the situation and the distortonary dynamics, and you want to fix the situation (or at least reduce harm), what are your options?

I suspect that is not the first question to ask. In the spirit of Inadequate Equilibria, a better initial question would be, "Can you take advantage of the apparent irrationality of the situation?", and "What fraction of the population would have to cooperate to change things for the better?" and if there is no clear answer to either, then the situation is not as irrational as it seems, and the artificial optimism is, in fact, the best policy under the circumstances.

If the king is too gullible, the vassals have an economic incentive to abuse this through the various methods you described. This eventually leads to a permanent distortion of the truth. If an economic crisis hits the country, his lack of truthful information would prevent him to solve it. The crises would exacerbate, which, at some point, would propel the population to rebel and topple him. As a replacement, a less gullible king would be put into power. This looks like a control loop to me -- one that gets rid of too gullible kings.

So, my strategy as detective would be to wait until the situation gets worse and stage a coup.

I want to argue that a healthy dose of artificial optimism can be useful (by the way, isn't all optimism artificial? Otherwise, we would call it realism). This can be on a personal level: If you expect to have a good day, you are more likely to do things that will make your day good. Or, in your scenario, if a vassal whose region isn't going great starts to praise it and gets more resources this way, he can invest them into rebuilding it (although I question the policy of assigning more resources to those regions that are faring well anyway).

As a side note, this reminds me of the Great Leap Forward under Mao, which caused millions of death by starvation. The main reason was deceitful reporting: as the information about crops needed to be collected at the central authority and it had to go through multiple levels (farmers themselves, districts, cities, counties, states) and at each level, the representatives exaggerated the numbers slightly, this added up and eventually led the top party officials to believe that everything was going great when millions were dying. (Of course, this is a hierarchical structure of vassals, but it's still artificial optimism)

How do we know it's a problem? In a world where we can't make perfect (or even very good) point-predictions, and on most topics don't have the ability to formalize a model of probability space, what is the proper level of optimism (picking more pleasant examples for the inevitable availability heuristic we will experience)? Your important question at the end seems like the right one to be asking: how can a realist improve the situation?

And it starts with defining "improve". For a lot of cases, optimism is the only way to actually start any ambitious project - the realist option is to maintain the status quo, which is not clearly better than taking a risk of failure.

I often wonder if optimism bias is a cultural reaction to other biases, like loss aversion and the drive to conformity. If so, we'll need to address those at the same time, or we're moving AWAY from truth by removing only one side of the bias equilibrium.

People often believe that it's inherently good to be happy, rather than thinking that their happiness level should track the actual state of affairs (and thus be a useful tool for emotional processing and communication). Why?

Isn't your happiness level one of the most important parts of the "actual state of affairs"? How would you measure the value of the actual state of affairs other than according to how it affects your (or others') happiness?

It seems to me that it is inherently good to be happy. All else equal, being happier is better.

That said, I agree that it's good to pay a cost in temporarily lower happiness (e.g. for emotional processing, etc) to achiever more happiness later. If that's all you mean -- that the optimal strategy allows for temporary unhappiness, and it's unwise to try to force yourself or others to be happy in all moments -- then I don't disagree.