Soros has wryly described his home as a Jewish antisemitic home. Tivadar had also been a prisoner of war during and after World War I until he escaped from Russia and rejoined his family in Budapest. In Hungarian, soros means "next in line," or "designated successor"; in Esperanto it means "will soar. Soros later described this time to writer Michael Lewis : "The Jewish Council asked the little kids to hand out the deportation notices. I was told to go to the Jewish Council.
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Updated Oct 1, What Is Reflexivity? The theory of reflexivity has its roots in sociology, but in the world of economics and finance, its primary proponent is George Soros. Soros believes that reflexivity disproves much of mainstream economic theory and should become a major focus of economic research, and even makes grandiose claims that it "gives rise to a new morality as well as a new epistemology. Soros believes that reflexivity contradicts most of mainstream economic theory.
The process is self-reinforcing and tends toward disequilibrium , causing prices to become increasingly detached from reality. Soros views the global financial crisis as an illustration of the theory. In his view, rising home prices induced banks to increase their home mortgage lending and, in turn, increased lending helped drive up home prices. Without a check on rising prices, this resulted in a price bubble, which eventually collapsed, resulting in the financial crisis and Great Recession.
In mainstream economic theory, equilibrium prices are implied by the real economic fundamentals that determine supply and demand.
Changes in economic fundamentals, such as consumer preferences and real resource scarcity, will induce market participants to bid prices up or down based on their more or less rational expectations of what economic fundamentals imply about future prices.
This process includes both positive and negative feedback between prices and expectations regarding economic fundamentals, which balance each other out at a new equilibrium price. In the absence of major obstacles to communicating information regarding economic fundamentals and engaging in transactions at mutually agreed prices, this price process will tend to keep the market moving quickly and efficiently toward equilibrium.
Soros believes that reflexivity challenges the idea of economic equilibrium because it means prices might deviate from the equilibrium values by a significant amount persistently over time. Once a change in economic fundamentals occurs, these positive feedback loops cause prices to under- or overshoot the new equilibrium.
In some way, the normal negative feedback between prices and expectations regarding economic fundamentals, which would counterbalance these positive feedback loops, fails. Eventually, the trend reverses once market participants recognize that prices have become detached from reality and revise their expectations though Soros does not recognize this as negative feedback.
As evidence for his theory, Soros points to the boom-bust cycle and various episodes of price bubbles followed by price crashes, when it is widely believed that prices deviate strongly from the equilibrium values implied by economic fundamentals. He often makes reference to the use of leverage and the availability of credit in initiating the process, and the role of floating currency exchange rates in these episodes. Compare Accounts.
Overview[ edit ] In social theory , reflexivity may occur when theories in a discipline should apply equally to the discipline itself; for example, in the case that the theories of knowledge construction in the field of sociology of scientific knowledge should apply equally to knowledge construction by sociology of scientific knowledge practitioners, or when the subject matter of a discipline should apply equally to the individual practitioners of that discipline e. More broadly, reflexivity is considered to occur when the observations of observers in the social system affect the very situations they are observing, or when theory being formulated is disseminated to and affects the behaviour of the individuals or systems the theory is meant to be objectively modelling. Thus, for example, an anthropologist living in an isolated village may affect the village and the behaviour of its citizens under study. The observations are not independent of the participation of the observer. Reflexivity is, therefore, a methodological issue in the social sciences analogous to the observer effect. Within that part of recent sociology of science that has been called the strong programme , reflexivity is suggested as a methodological norm or principle, meaning that a full theoretical account of the social construction of, say, scientific, religious or ethical knowledge systems, should itself be explainable by the same principles and methods as used for accounting for these other knowledge systems.
Soros believes these perceptions control price trends, domestic government regulation and foreign markets. He is also arguably one of the greatest financial investors working today. In his well-regarded book, The Alchemy of Finance, Soros utilizes his management of the Venezuelan based Quantum Fund to demonstrate and test his own market theories, and offers unique international economic solutions to world-wide financial crises. He also states that investment trades are usually based on biased behaviors or perceptions.
George Soros’ Theory of Reflexivity
Updated Oct 1, What Is Reflexivity? The theory of reflexivity has its roots in sociology, but in the world of economics and finance, its primary proponent is George Soros. Soros believes that reflexivity disproves much of mainstream economic theory and should become a major focus of economic research, and even makes grandiose claims that it "gives rise to a new morality as well as a new epistemology. Soros believes that reflexivity contradicts most of mainstream economic theory. The process is self-reinforcing and tends toward disequilibrium , causing prices to become increasingly detached from reality.
Reflexivity (social theory)