Sunday, October 7, 2012

Self-fulfilling prophecy in real time

Prof. James Hamilton of UCSD has published a nice piece on why Californians are experiencing high gas prices over the past week. NBC San Diego has reported:
"many rushed to fill up their tanks Friday night for fear of prices soaring again over the weekend."
The social scientist Robert Merton coined the term self-fulfilling prophecy, which is that people believing something to be true makes the event to become true, even if the event had not originally happened in the first place. This link has a good explanation on SFP. Quoted from the link:
SFP is a particular type of dynamic process. It is not the truism that people’s perceptions depend on their prior beliefs. Nor is it the truism that beliefs, even false ones, have real consequences. To count as SFP, a belief must have consequences of a peculiar kind: consequences that make reality conform to the initial belief. Moreover, I argue that there is an additional defining criterion. The actors within the process—or at least some of them—fail to understand how their own belief has helped to construct that reality; because their belief is eventually validated, they assume that it had been true at the outset.
People believing crude oil prices heading higher causes crude oil prices to become higher. 

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