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The trope is endemic to fantasy literature. Especially middle grade and YA fantasy literature. How many times have we gone through the old song and dance of a single person who is “special,” who feels like an outsider or doesn’t fit in, and turns out to have special powers or is the long-lost heir to the fairy throne or some other trite nonsense that hangs the fate of the world on the decisions of a single hormonal teenager? (Nostalgia Critic’s review of Percy Jackson and the Lightning Thief covers a lot of the issues with this trope of “Wowed Teenagers” quite nicely.)
Now, to be fair, a lot of people do connect with this base character type, and as long as the story does something interesting with it, there’s nothing inherently wrong with the trope. For people just discovering works featuring that character type, it’s something new and unfamiliar to them. For people like me who have read a lot of fantasy and see the same tropes and cliches turn up over and over again without much variation, it can be a little grating. To each there own, of course, and I would prefer to see more variation. But a lot of people, especially those in the middle grade and YA audience, do feel like outcasts and want to be reminded that they to can be something special. It can be inspiring for them and help them discover their own talents.
But there’s a Dark Side to this emphasis on being a special, super-powered Chosen One. It can help reinforce two very unfortunate mental states: Magical Thinking and Delusions of Grandeur.
MAGICAL THINKING

This is something that I think most children engage in before we really start to understand how the world works. It’s the source of bedtime rituals, family traditions, and imaginative play. In many cases, this is a normal part of development, one that we grow out of once we start to understand the reality of cause, effect, randomness, and probability. Some rituals we still indulge in a harmless fashion, but taken too far or rooted too deeply and it can cause problems. I remember waiting for my letter from Hogwarts and having a tiny part of me die inside when I realized that I had no magical powers. I wasn’t satisfied with a pat on the head and being told that everyone is special. I wanted real magic that actually did things. I kept looking for portals in wardrobes, between odd-shaped rocks or trees, and in fairy rings. I persisted in magical thinking a lot longer than may have been healthy. Realizing that there is no magic can be a real let-down for someone who has invested so much of their time, energy, and self-image on it, which could lead someone to continue to stubbornly believe in things that aren’t true or real, despite all evidence to the contrary. This is a psychological state that helps keep untenable positions like conspiracy theories, astrology, and religion alive.
DELUSIONS OF GRANDEUR

This is a little more insidious and harder to uproot. In these fantasy worlds presented in the stories, the only people who are important are the ones with the special powers. A lot of these stories make it easy to either self-insert (if the character is really bland) or to identify with this person, who is usually the protagonist. Again, nothing wrong with identifying with a character. But this can be taken too far, to the point where someone believes they are “Special” with a capital “S.” That they have a grand destiny, a secret identity, or are otherwise just “better” than everyone else. People with narcissistic personalities are especially susceptible, but all people have a selfish streak, and this perception of being a chosen one of some kind, regardless of how silly the idea may seem, can fan the flames of that selfish behavior into something truly damaging. It can cause people not only to overestimate their abilities or refuse to take responsibility, but also to look down on other people as being lesser or just accessories to their own grand story rather than thinking, feeling individuals. The word “sonder“ means “realizing that each random passerby is living a life as complex and vivid as your own.” Most of the time even healthy, stable individuals probably don’t think about this much of the time, only remembering it in passing or in moments of quiet reflection. But I am certain that many people have never (and may never) experience sonder.
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I am not saying that if children or teens read books featuring chosen ones that they will all become narcissistic psychopaths divorced from reality. Nor should books bear the sole blame when we’re talking about how psyches are shaped. There are numerous factors that go into this still-not-well-understood process, so take all of this speculation with a grain of salt. But I still think it is something to bear in mind and try to balance out the super-charged Chosen Ones with still-capable Average Ones.