Essay · Section A13 October 2026

What people expect, they help bring about.

In September an onion in an Indian market cost more than twice what it cost a year earlier. Retail inflation rose to 5.54%, its fourth month above the Reserve Bank’s target of 4%. The cause is not mysterious: a weak monsoon, old stocks running out before the new crop. And yet the Monetary Policy Committee is now weighing a rise in interest rates in December, though no interest rate has ever grown an onion. Why act at all? Because the real danger is not today’s onion but tomorrow’s belief. If shopkeepers, workers and restaurant owners come to expect high prices, they will set high prices, and the expectation will have made itself true. This essay argues that what people expect, they help bring about; that this gives credibility the value of a public asset; and that expectations, for all their power, cannot be a substitute for deeds.

The idea is old in sociology. In 1928 William and Dorothy Thomas wrote a sentence that students still learn as the Thomas theorem: “If men define situations as real, they are real in their consequences.” Twenty years later Robert Merton gave it a name, the self-fulfilling prophecy, and an example everyone understands. A sound bank hears a rumour that it is failing. Depositors rush to withdraw. No bank keeps all its deposits in cash, so the rush itself breaks the bank. The rumour was false when it began and true when it ended. Nobody lied; each depositor acted sensibly on what he expected others to do.

Economics took longer to take this seriously, and this week it gave the idea its highest honour. On 12 October the Economics Nobel went to Robert Hall and Michael Woodford for building models of the whole economy out of how households and firms actually decide. Hall showed that a family’s spending depends almost as much on what it expects to earn as on what it earns today. Woodford showed that firms set prices looking ahead, so what they expect of future interest rates shapes inflation now. In a 2005 lecture he put it bluntly: “not only do expectations about policy matter, but, at least under current conditions, very little else matters.”

Once seen, the pattern is everywhere. September’s figures show it at work: the ‘restaurants and cafés’ index, which rose 2.73% in February, rose 9.39% in September as cooking gas grew dearer. Once menus and fares are reprinted, a food shock becomes general inflation, and core inflation has already edged up from 4.1% to 4.3%. Currencies behave the same way. When everyone expects the rupee to fall, buying dollars early is rational for each importer, and together they push the rupee down; that is why the RBI this month set a reserve requirement on large forex contracts. Classrooms show it too. In 1968 Robert Rosenthal and Lenore Jacobson reported that pupils whom teachers were led to see as ‘bloomers’ made larger gains. Later research found the effect smaller than first claimed, but few teachers doubt that a child who is expected to fail has one more burden to carry.

If expectations are causes, then whoever can steady them holds a quiet kind of power. This is the logic of India’s inflation target. Since 2016 the RBI Act has asked the Centre, in consultation with the RBI, to fix a target every five years; it is 4% within a band of 2 to 6%, renewed this March for 2026 to 2031. A number written into law is a promise. If people believe it, a bad onion season stays a bad onion season: workers do not demand, and shopkeepers do not charge, as though high prices were permanent. A central bank that has kept its word can sometimes calm a market with a sentence. One that has not must use far heavier tools to achieve the same result, and the poor pay for the difference in lost jobs and dearer loans.

The same is true beyond economics. A government whose schemes arrive when announced finds that citizens plan around them; one whose promises lapse teaches citizens to discount every announcement. A law that raises hopes and then cannot survive in court leaves behind more bitterness than if it had never been passed; Karnataka’s 2022 Act raising its quotas to 56%, struck down by the High Court this week for breaching the 50% ceiling, is a reminder that a promise must fit the Constitution before it can be kept. Credibility is built slowly, by keeping small promises when breaking them would be easy, and it is spent quickly.

There is a serious counter-argument. Expectations are not magic. No belief brought rain to a dry field, and no amount of confident talk will put onions in a market before the harvest. If the supply shock is real, the honest answer is storage, transport and imports, not speeches. Worse, the language of ‘managing expectations’ can become an excuse for managing the news: for dressing up bad numbers, silencing critics and mistaking optimism for policy. And it assumes a public that plans ahead. Hall’s own critics note that families living hand to mouth cannot spend on tomorrow’s income; they live on today’s. Rural inflation, at 6.08%, is well above the urban 4.88%, and no forward guidance softens that for a landless labourer.

Each of these objections is right, and none defeats the thesis; they set its limits. Expectations shape outcomes only within what the physical world allows, which is why the slow work of warehouses and cold chains matters as much as the interest rate. Expectations are steadied by truth, not by spin: a central bank that hides bad news loses the very credibility that gave its words weight. And because the poor cannot wait for beliefs to settle, credibility must be backed by direct help, such as food buffers and transfers, when shocks fall on those with the least room to absorb them. The lesson is not ‘talk instead of act’, but ‘act in a way that people can believe, and say plainly what you will do’.

What people expect, they help bring about. A rumour can sink a bank, a low expectation can hold back a child, and a belief that prices will keep rising can make them rise. But the same force works in the other direction. A promise kept year after year becomes a foundation on which millions of people quietly plan their lives. This year’s Nobel honours economists who showed that the future is partly made of what we believe about it. The task for institutions is to deserve that belief: to say little that they cannot do, and to do what they have said.