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Also, there has actually been research showing that depressed people have more accurate assessments of themselves than "normal" people. Apparently, to maintain a normal level of happiness requires a certain amount of (unconscious?) self-deception, probably through exactly the same mechanisms as Schelling describes (though unconscious). So to answer Schelling's question - yes, you would be happier.
Taylor, Shelley E. Positive Illusions: Creative Self-Deception and the Healthy Mind.
New York: Basic Books, 1989.
Taylor, S.E. and Brown, J.D. "Illusion and Well-Being: A Social Psychological
Perspective on Mental health," Psychological Bulletin, 1988, 103.
RAMACHANDRAN, V. 1997. The evolutionary biology of self-deception, laughter,
dreaming and
Alloy, L.B. and Abramson, L.Y. "Judgment of Contingency in Depressed and
Nondepressed Students: Sadder but Wiser?" Journal of Experimental Psychology, 1979,
108: 441-485.
Or the literature that seems to show that optimistic or even overly optimistic attitudes towards one's chances at succeeding at something, or recovering from a disease, or something like that, actually increase the chances. Maybe not up to the level of optimism one feels, but there one would be better off not being a perfectly accurate assessor of chances. In fact there's some psychological literature that seems to indicate that when people are asked by psychologists what other people in their social circle think of them, and then the psychologists check with these other people about what they actually do think, that the people who have more accurate views of what other people think of them are less happy, less successful in life, cope less well with various things, than the people who have rosier views of what people think of them than is actually the case. Now, here's another case where one may be better off believing what's not strictly true. Parents raising children might think: "Well, do I want my child to have a disposition to believe exactly what's true about other people's opinions of him or her? Or to have, not an out-of-touch-with-reality view, but a more optimistic than is actual view, a rosier view, of what people think of them, so that their life will go smoother, more easily, and so on?"
For the most part, it is only a myth that the bad stuff motivates us. More often it paralyzes and discourages us. And may upon examination not even be "bad," if we widen horizons and re-mix philosophical assumptions. It is possible to do this authentically and quickly with a few cognitive algorithms.
The most learned of those who've looked into the practical side of this may be Martin Seligman, recently president of the APA. For example, a questionnaire in The Optimistic Child degeneralizes bad experiences, globalizes successes. There is a balance that keeps a person prudently recognizing where improvement is possible (and fun!), while turning down the volume on fear and pessimism and de-motivation.
Brain science has begun to clarify the routes of the mechanism I've described. I suspect conundrums in this area reside in the theory, not the practice, and in arguments over abstract definitions and criteria that are so far only subjectively discernable.
Ethical concerns arise, of course, if "feeling better" mechanisms are activated outside the free choice of the subject himself. This will be a temptation to parents, teachers, employers, all down the continuum of control.