Final answer:
The theory in question is dramaturgy, coined by Erving Goffman, which argues that social interaction is akin to a theatrical performance involving impression management, linking closely to Charles Cooley's concept of the looking-glass self and extends to the idea of self-fulfilling prophecies in educational contexts.
Step-by-step explanation:
The theory that suggests we make assumptions about people based on external clues, expectations, and behaviors is known as dramaturgy, established by sociologist Erving Goffman. In this theory, Goffman likened social interaction to a theatrical performance where individuals use impression management to present themselves in a certain light, hoping to be perceived as they desire. This ties into the concept of the looking-glass self by Charles Cooley, which suggests that our self-image is shaped by how we believe others perceive us. In the context of education, the idea of a self-fulfilling prophecy is important, where a stereotype held by a teacher can influence a student's performance, as researched by Rosenthal and Jacobson.
In contrast to businesses and individuals having rational expectations—a notion that assumes a perfect synthesis of information and prediction of future events—the alternative is adaptive expectations. Here, people and firms look at past experiences and gradually adapt their beliefs and behaviors as circumstances change, though not instantly or perfectly.