"The second option conforms with the Research Methods 101 rule-of-thumb “always assume independence.” Until proven otherwise, we should assume people have no ability to self-assess their performance"
It's not that at all. The assumption should be that everyone is equally good (or bad) at assessing their performance. Not that they have no ability but that the means between groups is the same vs. not the same. That the ability to assess themselves is independent of performance.
This confused me at first too. The issue is that "X" is your performance, and "Y" is your perceived performance.
Say that everyone is equally okay at assessing themselves, and get within 0.1 of their actual performance (rated from 0 to 1). Then X and Y are going to be very correlated, as X - 0.1 < Y < X + 0.1. But X-Y will look like a random plot, since Y is randomly sampled around X.
The only case where X and Y wouldn't correlate at all is if people have no ability to assess their performance (IE, Y isn't sampled around X, but is instead sampled from a fixed range).
It's not that at all. The assumption should be that everyone is equally good (or bad) at assessing their performance. Not that they have no ability but that the means between groups is the same vs. not the same. That the ability to assess themselves is independent of performance.