ABSTRACT
It is not really necessary to discuss Soros’s theory of reflexivity in detail here since the argument is clearly presented in his essay. But it does seem useful to note a few features of his argument in order to contrast it with the interpretations of reflexivity discussed above. The first aspect of Soros’s approach is its Popperian heritage. As Soros explains, he was Karl Popper’s student and Popper’s philosophical views formed the backdrop for his thinking about scientific knowledge throughout his life. In the domain of natural science, Soros generally followed his teacher, but he deviated from Popper on the methodology of economics and other social sciences. That deviation is based on the relevance of reflexivity to social life and properly recognizing that fact prevents ‘the social sciences from parading with borrowed feathers’ (Soros, 2013, p. 320). Popper thought that his philosophy of natural science applied equally well to social sciences such as economics,4 but Soros disagrees. Since economics involves reflexivity, it requires a different approach than the ‘slavish imitation of natural science’ (Soros, 2013, p. 320). The second point is that Soros has used his theory to explicitly critique mainstream economic practice (at least the practice of the last quarter of the twentieth century: rational expectations, new classical macroeconomics, and the efficient markets hypothesis). His point is not only that reflexivity matters, but that mainstream economic theory does not account for it and thus has serious problems. Third, Soros put his theory of reflexivity to work in his own trading strategy and it was quite successful (i.e., his theory of reflexivity was not falsified). Popper always argued that defenders of a particular scientific theory should stick the theory’s neck out by making bold empirical conjectures and exposing them to severe empirical tests. Putting one’s personal wealth and professional reputation on the line by employing a reflexivity-based trading strategy seems to be an excellent example of sticking a theory of reflexivity’s neck out.
