Self-Fulfilling Prophecy

A self-fulfilling prophecy occurs when an originally false expectation leads to its own confirmation. One classic example of a self-fulfilling prophecy was bank failures during the Great Depression. Even banks with strong financials sometimes were driven to insolvency by bank runs. Banks make money by taking in deposits and then lending that money to others. If (as happened during the Great Depression) a false rumor starts that the bank is insolvent (incapable of covering its deposits), a panic ensues, and depositors want to withdraw their money all at once before the bank's cash runs out. When the bank cannot cover all the withdrawals, it actually becomes insolvent. Thus, an originally false belief has led to its own fulfillment.

Self-fulfilling prophecies are important to the understanding of ...