SELF-CONFIDENCE AND PERSONAL MOTIVATION*ROLANDBE´NABOU ANDJEANTIROLEWe analyze the value placed by rational agents on self-condence, and thestrategies employed in its pursuit. Condence in one’s abilities generally en-hances motivation, making it a valuable asset for individuals with impe rfectwillpower. This demand f or self-serving beliefs (which can also arise from hedonicor signaling motives) must be weighed against the risks of overcondence. On thesupply side, we develop a model of self-deception through endogenous memorythat reconciles the motivated and rational features of human cognition. Theresulting intrapersonal game of strategic communication typically leads to mul-tiple equilibria. While “positive thinking” can improve welfare, it can also beself-defeating (and nonetheless pursued).Believe what is in the line of your needs, for only by such belief is the needfullled . . . Have faith that you can successfully make it, and your feet arenerved to its accomplishment [William James, Principles of Psychology].I have done this, says my memory. I cannot have done that, says my pride,remaining inexorable. Finally—memory yields [Friedrich Nietzsche, BeyondGood and Evil].I had during many years followed the Gol den Rule, namely, that whenever apublished fact, a new observation or thought came across me, which wa sopposed to my general results, to make a memorandum of it without fail andat once; for I had found by experience that such (contrary and thus unwel-come) facts and thoughts were far more apt to escape from memory thanfavorable ones [Charles Darwin in The Life of Charles Darwin, by FrancisDarwin].INTRODUCTIONThe maintenance and enhancement of self-esteem has al-ways been ide ntied as a fundamental human impulse. Philoso-phers, writers, educators, and of course psychologists all haveemphasized the crucial role played by self-image in motivation,affect, and social interactions. The aim of this paper is to bring* This paper was previously titled “Self-Condence: Intrapersonal Strategies[1999].” For helpful comments and di scussion we are grateful to Dilip Abreu,Olivier Blanchard, Isabelle Brocas, Edward Glaeser, Daniel Gilbert, Ian Jewitt,David Laibson, George Loewenstein, Andrew Postlewaite, Marek Pycia, MatthewRabin, Julio Rotemberg, and three anonymous referees. We also thank confer-ence and seminar participants at the University of Chicago, Columbia Uni-versity, Cornell University, the Massachusetts In stitute of Technology, theNational Bureau of Economic Research, Northwestern University, New YorkUniversity, the Oxford Young Economists’ Conference at Oxford University, theUniversity of Pennsylvania, Princeton University, Stanford University, and YaleUniversity. Be´nabou gratefully acknowledges nancial support from the NationalScience Foundation (SES-0096431).© 2002 by the President and Fellows of Harvard College and the Massachusetts Institute ofTechnology.The Quarterly Journal of Economics, August 2002871these concerns into the realm of economic analysis, and show thatthis has important implications for how agents process informa-tion and make decisions. Conversely, the to ols of economic mod-eling can help shed light on a number of apparently irrationalbehaviors documented by psychologists.Indeed, both the demand and the supply sides of self-con-dence appear at odds with economists’ view of human behaviorand c ognition. Why should people prefer ro sy views of themselvesto accurate ones, or want to impart such beliefs to their children?From car accidents, failed dot.com rms, and day trading to thespace shuttle disaster and lost wars, the costs of overcondenceare plain for all to see. Even gr anting that some “positive illu-sions” could be desirable, is it even possible for a rational, Bayes-ian individual to deceive himself into holding them? Finally, thewelfare consequences of so-called self-serving beliefs are far fromclear: while “thinking positive” is often viewed as a good thing,self-deception is not, even though the former is only a particularform of the latter.To analyze these issues, we develop a sim ple formal frame-work that unies a number of th emes from the psychology liter-ature, and b rings to light some of their economic implications. Werst consider the demand side of self-condence, and identify inSection I three main reasons why people may prefer optimisticself-views to accurate o nes: a consumption value, a signalingvalue, and a motivation value. First, people may just deriveutility from thinking well of themselves, and conversely nd apoor self-image painful. Second, believing—rightly or wrongly—that one possesses certain qualities may make it easier to con-vince others of it. Finally, condence in his abilities and efcacycan help the indi vidual u ndertake more ambitious goals andpersist in the face of adversity. While we shall mostly focus onthis last explanation, all three should be seen as complementary,and for many purposes work equally well with the supply side ofour model (self-deception).The main reason why we emphasize the motivation theory isits substantially broader explanatory power. Indeed, it yields anendogenous value of self-condence that responds to the situa-tions and incentives which the individual faces, in a way that canaccount for both “can-do” optimism and “defensive” pessimism. Italso readily extends to economic and social interactions (altruisticor not), explaining why people generally prefer self-condent872 QUARTERLY JOURNAL OF ECONOMICSpartners to self-doubting ones, and invest both time and effort insupporting the latter’s morale.The rst premise of the motivation theory is that people haveimperfect knowledge of their own abilities, or more generally ofthe eventual costs and payoffs of their actions.1The second one isthat ability and effort interact in determining performance; inmost instances they are complements, so thata higher self-con-dence enhances the motivation to act.As demonstrated by theopening quote from James [1890], this complementarity has longbeen familiar in psychology.2It is also consistent with the stan-dard observation that morale plays a key role in difcult endeav-ors; conversely, when people expect to fail, they fail quite effec-tively, and failure leads to failure more readily for individualscharacterized with low self-esteem [Salancik 1977].The fact that higher self-condence enhances the