There was a book published in 1909 by Norman Angell entitled The Great Illusion (Full text). It argued that war between industrialized nations was, if not impossible, but completely futile as there was nothing for a victorious power to gain from it. Property confiscated wouldn't cover the cost of war. Occupation is hugely expensive and very unlikely to have the desired effects. The book was really quite popular.

In the book he went farther to argue that arms races were inherently destabilizing and that the way to peace was lined with international law and a hypothetical world court.

A new edition came out in 1932 restating the case and adding the theme that large alliances made it hugely more expensive to fight and greatly reduced the likelihood of anyone coming out well. Mr. Angell was awarded the Nobel Peace Prize in 1933.

Angell's argument was that war was futile, but a number of people took it to mean that major wars were impossible due to the close relations in trade and royalty between European powers. The Kaiser and the Czar were both grandsons of Queen Victoria, after all. That the industry of the nations weren't sustainable without continued trade cinched the argument for some. The history of Europe, with only a handful of major wars (but a ton of border skirmishes in fracture zones) since those surrounding Napoleon. There was a period of unprecedented peace in the run up to the First World War, and those wars that did happen (like the Franco-Prussian War) were swift and decisive with one side winning convincingly.

Think of it like an Earthquake. Tension had been building for a century, but there was a ton of thing keeping it from breaking out. It wasn't that the tension had been relieved, just that it wasn't sufficient to overcome those forces that kept it in line. To those who live in major cities on fault lines can be perfectly justified in thinking that there will be no Earthquake today or tomorrow, but they would be very wrong to assume that there would never be another Earthquake ever again. There was nothing magical about the Archduke, any number of other provocations before or after would have done the trick, in fact there had been several things that could have set the war off a couple of years early a dispute over the status of Morocco between Germany and France in 1905 and again in 1911, a brief war between Italy and the Ottoman Empire in 1911, constant provocations in the Balkans, and all the might-haves that would have occurred if Serbia hadn't picked a fight with Austria-Hungary.

The optimism about World War One ended when the mobilizations. Started, once called up there was no way to stand down, to do so would be suicide as forces couldn't be called up again in the event the other guy didn't stand down. In World War Two a number of Germans felt that they could just walk away with Poland and that France and England would settle, then once they beat France that England would face facts and give up. It wasn't until the war with the Soviets that it became clear that it was an existential threat to the German People. But, given that we created international law, courts, and a reasonably successful international arbitrator in the United Nations... I'm not so sure that it actually ended. We are in a remarkably peaceful time in history. The world sees far fewer wars, with far fewer casualties, than before. Individual battles in the French Revolution had more casualties than nine years of war in Iraq. War between Norway and Denmark or France and Germany is largely unthinkable, because they stand nothing to gain and don't have large lobbies pushing for conflict. In a sense peace optimism proved right... a century later...

With regards to the period before the Second World War... the pro-peace movement was in fact extremely strong during this time period to the point that many arms limitations treaties and agreements were put into place. For instance the Washington Naval Treaty limited battleship construction, to the point that the Royal Navy would end up having only two battleships at the start of the Second World War that weren't First World War veterans. The Kellog-Briand Pact even tried to explicitly outlaw war.

And this was in fact the big reason why the Nazis were so reviled and immediately cast as the villain when they took power - they essentially broke the arms limitation treaties and once again re-ignited the arms race. Much has been made about how "pacifists" foolishly allowed Hitler to build up his forces, but in reality the British had been re-arming under Chamberlain within a year of the Nazis and Churchill was only able to fight World War 2 because the supposedly pacifist Chamberlain had built him the world's strongest air force. It was the French who were somewhat more tardy with rearmament - by some accounts they started only in 1936 due to election concerns - but really this idea that peace is only maintained through strength of arms is a militarist illusion.

Peace was in fact maintained when everyone agreed and stuck to arms limitation treaties. And when someone broke the said treaties most of the world pretty much rallied against them.

It depends on what point in time you're looking at (or from). Comparing 1912 and 1937, I'd say there's a big difference. Despite tensions, few foresaw general war two years before Sarajevo. The crises of 1905, 1908 and 1911 weren't too dissimilar to past scares except in their duration: in 1878 and 1885 it was Britain vs Russia, in 1895 it was Britain vs the US, in 1898 Britain vs France. The last big conflict had been between Russia and Japan, and they were now on the same side. The Balkan Wars changed a lot, opening south-eastern Europe to a new round of great-power rivalry. I think it's in late 1912 that the real worries set in.

Fast forward to the late summer of 1937, though, and it's already getting a lot harder to be an optimist.

But in the late 1920s things would have looked very different. The "spirit of Locarno" was at its zenith, Germany has entered the League of Nations, reparations were being scaled down, economies was booming and the obscure Nazi party was trounced in the 1928 elections. As late as 1932 peace, disarmament and co-operation were on the agenda.

When did that end? Perhaps 1936 with the Rhineland remilitarised, Ethiopia subjugated, Spain in flames and Italy cosying up to Germany. But there'd already been signs in the previous years, from the Austrian putsch and the collapse of collective security to German rearmament and the Ethiopian invasion.

So much depends on the moment of observation. But I'd say that optimism was better-founded and survived longer in the years before 1914 than a quarter-century later.