Jul 20 2008
Reflexivity
In sociology, reflexivity is an act of self-reference where examination or action ‘bends back on’, refers to, and affects the entity instigating the action or examination. In brief, reflexivity refers to circular relationships between cause and effect. (Wiki entry)
Is this an answer to the criticism of Structualism? Found this through Soros’ investment theory/observation:
Soros argues that such transitions in the fundamentals of the economy are typically marked by disequilibrium rather than equilibrium, and that the conventional economic theory of the market (the ‘efficient market hypothesis‘) does not apply in these situations. Soros has popularized the concepts of dynamic disequilibrium, static disequilibrium, and near-equilibrium conditions.
Reflexivity is based on three main ideas:
- Reflexivity is best observed under special conditions where investor bias grows and spreads throughout the investment arena. Examples of factors that may give rise to this bias include (a) equity leveraging or (b) the trend-following habits of speculators.
- Reflexivity appears intermittently since it is most likely to be revealed under certain conditions; i.e., the equilibrium process’s character is best considered in terms of probabilities.
- Investors’ observation of and participation in the capital markets may at times influence valuations AND fundamental conditions or outcomes.
The last point can be found in “A Demon of Our Own Design“. The first point may be explained by information asymmetry and/or the game theory.
I am a bit confused: if this is so obvious, how come I have never heard of it before?