Financial Times has the article Soros: General Theory of Reflexivity. This is a key insight to which I refer occasionally. I have finally decided that it is time to record a link to the explanation here in my blog so that I can find it easily when I want to explain it to others. Here is a small excerpt that captures a hint of what the article explains.
But I had to abandon my reservations and recognize a dichotomy between the natural and social sciences because the social sciences encounter a second difficulty from which the natural sciences are exempt.
And that is that social theories are reflexive. Heisenberg’s discovery of the uncertainty principle did not alter the behavior of quantum particles one iota, but social theories, whether Marxism, market fundamentalism or the theory of reflexivity, can affect the subject matter to which it refers. Scientific method is supposed to be devoted to the pursuit of truth. Heisenberg’s uncertainty principle does not interfere with that postulate but the reflexivity of social theories does. Why should social science confine itself to passively studying social phenomena when it can be used to actively change the state of affairs? As I remarked in The Alchemy of Finance, the alchemists made a mistake in trying to change the nature of base metals by incantation. Instead, they should have focused their attention on the financial markets where they could have succeeded.
April 20, 2018
YouTube has the video George Soros Lecture Series: General Theory of Reflexivity.
Open Society Foundations chairman and founder George Soros shares his latest thinking on economics and politics in a five-part lecture series recorded at Central European University, October 26-30, 2009. The lectures are the culmination of a lifetime of practical and philosophical reflection.
Soros discusses his general theory of reflexivity and its application to financial markets, providing insights into the recent financial crisis. The third and fourth lectures examine the concept of open society, which has guided Soros’s global philanthropy, as well as the potential for conflict between capitalism and open society. The closing lecture focuses on the way ahead, examining the increasingly important economic and political role that China will play in the future.
I will look into posting the other parts of this lecture series.