Let's say someone has an idea that he/she thinks is really good, but in reality it is actually not a very good idea. How can I describe this kind of mentality?
Quixotic might be appropriate in some circumstances. One of its meanings is 'naively idealistic'.
Incorrect, blindly supportive, näively enthusiastic.
If someone continues to support an idea after it has been fully demonstrated as bad, you might consider them to be a mumpsimus (that word would also apply to the idea, as well as the person).
I suggest these terms & phrases. They may help:
2-Side effect or adverse effect
3-Tastes bad, works well
In my experience, folly comes very close to the answer.
"Foolish" or "Fool", "idiotic" is also good. Senseless is another fun term.
"Buying seventeen buckets of frogs is idiotic." "He's an idiot for snowboarding off the roof.", "That's the most foolish idea I've ever seen."
Senseless is ideal if the person making the bad decision has failed to account for most of the variables, and the repercussions won't be particularly severe. "He died senselessly while cleaning a plugged in toaster."