The Daily Omnivore

The Thomas theorem is a theory of sociology which was formulated in 1928 by W. I. Thomas (1863–1947): ‘If men define situations as real, they are real in their consequences.’ In other words, the interpretation of a situation causes the action. This interpretation is not objective. Actions are affected by subjective perceptions of situations. Whether there even is an objectively correct interpretation is not important for the purposes of helping guide individuals’ behavior. In 1923, Thomas stated more precisely that any definition of a situation will influence the present. Not only that, but—after a series of definitions in which an individual is involved—such a definition also ‘gradually [influences] a whole life-policy and the personality of the individual himself.’ Consequently, Thomas stressed societal problems such as intimacy, family, or education as fundamental to the role of the situation when detecting a social world ‘in which subjective impressions can be projected on to life and thereby become real to projectors.’

The 1973 oil crisis resulted in the so-called ‘toilet paper panic.’ The rumor of an expected shortage of toilet paper—resulting from a decline in the importation of oil—caused people to stockpile supplies of toilet paper and this caused a shortage. This shortage, seeming to validate the rumor, is also an example of a self-fulfilling prophecy. The Beauty Contest Theory, developed by John Maynard Keynes, justifies why the price of a share of stock does not necessarily develop according to rational expectations. He acts on the assumption that many investors make their decisions not according to their own computations of an asset’s worth but by predicting the conclusions of other market participants.