The Process of Self-Discovery: Learned Helplessness, Self-Efficacy, and Endogenous Overoptimism∗

I study the origin of people’s beliefs about their own abilities, emphasizing the feedback loop between beliefs, effort, and outcomes. Consistent with the modern understanding of depression, I show that agents who are either more pessimistic about their own talent or less sure of their own talent are more prone to low-effort traps. I also show that a principal (such as a parent or manager) does not want an agent (such as a child or employee) to hold beliefs about his own talent that match the principal’s beliefs; instead, the principal would like to make the agent overoptimistic and overly uncertain. These results are consistent with empirical findings from the psychology literature about the origin and evolution of children’s beliefs, about the importance of self-efficacy beliefs for performance, and about the prevalence of overconfidence.