Reflexivity includes both a subjective process of self-consciousness inquiry and the study of social behavior with reference to theories about social relationships. In a social theory context, 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 anthropology, reflexivity has come to have two distinct meanings, one that refers to the researcher’s awareness of an analytic focus on his or her relationship to the field of study, and the other that attends to the ways that cultural practices involve consciousness and commentary on themselves. For her, human reflexivity is a mediating mechanism between structural properties, or the individual’s social context, and action, or the individual’s ultimate concerns. Reflexive activity, according to Archer, increasingly takes the place of habitual action in late modernity since routine forms prove ineffective in dealing with the complexity of modern life trajectories.
This volume reviews key debates concerning reflexivity in theory, methods, and practice. It mounts a defence of reflexivity against new materialist and post-qualitative critiques and the pressures exerted on scholars from the neoliberal marketized university system which privileges fast academia at the expense of slow, reflective scholarship. While defending reflexivity, this book also those identifies issues which plague mainstream sociological operationalizations of a positivistic form of reflexivity. Thus for example an anthropologist living in an isolated village may affect the village and the behaviour of its citizens that he or she is studying.
In The Conduct of Inquiry in International Relations, Patrick Thaddeus Jackson identified reflexivity of one of the four main methodologies into which contemporary International Relations research can be divided, alongside neopositivism, critical realism, and analyticism. In 2009, Soros funded the launch of the Institute for New Economic Thinking with the hope that it would develop reflexivity further. The Institute works with several types of heterodox economics, particularly the post-Keynesian branch. Reflexivity has emerged as both an issue and a solution in modern approaches to the problem of structure and agency, for example in the work of Anthony Giddens in his structuration theory and Pierre Bourdieu in his genetic structuralism. Eventually things stabilize at a more rational level, following fundamental theory. Suddenly, all those healthy dynamics reverse; lenders don’t want to pour money into a shrinking industry, so the cost of borrowed capital goes up.
In researching cultural practices, reflexivity plays an important role, but because of its complexity and subtlety, it often goes under-investigated or involves highly specialised analyses. Unlike mainstream economists, Soros is less concerned with equilibrium conditions. Rather, he seeks to identify the positive (self-reinforcing) and negative (self-correcting) feedback loops that fallibility and reflexivity can produce. To Soros, competitive equilibrium in economic theory is “an extreme case of negative feedback” and self-correction.
Giddens, for example, noted that constitutive reflexivity is possible in any social system, and that this presents a distinct methodological problem for the social sciences. Giddens accentuated this theme with his notion of «reflexive modernity» — the argument that, over time, society is becoming increasingly more self-aware, reflective, and hence reflexive. In both cases, these two organizations have effectively reduced their cost of capital to zero due to high stock prices. As a result, both companies have drastically improved their financial positions by raising money from the market with almost no cost whatsoever.
Within anthropology, Gregory Bateson developed ideas about meta-messages as part of communication, while Clifford Geertz’s studies of ritual events such as the Balinese cock-fight point to their role as foci for public reflection on the social order. Studies of play and tricksters further expanded ideas about reflexive cultural practices. Reflexivity has been most intensively explored in studies of performance, public events, rituals, and linguistic forms but can be seen any time acts, things, or people are held up and commented upon or otherwise set apart for consideration.
Within economics, reflexivity refers to the self-reinforcing effect of market sentiment, whereby rising prices attract buyers whose actions drive prices higher still until the process becomes unsustainable. The same process can operate in reverse leading to a catastrophic collapse in prices. 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.
George Soros’s theory of reflexivity and the methodology of economic science
Improving market sentiment can dramatically improve a company’s prospects. But, on the other hand, deteriorating market sentiment can make it harder for a company to raise capital and attract talent. In the financial markets, we can see reflexivity in progress every single day. The distorted views of individual market participants can lead to different outcomes for securities that do not represent the underlying company’s fundamentals. Soros describes, for example, how “freely floating exchange rates tend to move in large, multi-year waves”.
While confirmatory evidence may add credibility to a theory or hypothesis, it cannot prove it true, as it takes only one new observation to contradict everything we know. And even if we are not yet in possession of such information, we cannot say that no such evidence will ever come along. For this reason, we ought to be skeptical of ideologies that promise absolute truth. This one starts off with an analysis of Uber’s cost-cutting memo in May of last year ($), and looks at the knock-on effects of every company tightening its belt a bit. First, it’s a useful mental exercise for avoiding our tendency to instantly dismiss overhyped industries. Yes, AI startups are raising a ton of money, and no, most of them aren’t generating much revenue, and very few are showing good margins right now.
Economist and former columnist of the Financial Times, Anatole Kaletsky, argued that Soros’ concept of reflexivity is useful in understanding China’s economy and how the Chinese government manages it. Neoclassical economics links supply and demand to the individual consumer’s perception of a product’s value rather than the cost of its production. «Animal spirits» is a term used by economist John Maynard Keynes to explain how human emotions can drive financial decision-making in volatile times. Regulators need to do more, Soros believes, to subdue bubbles that the market cannot contain.
They can play with, comment upon, debate, modify, and objectify culture through manipulating many different features in recognised ways. This leads to the metaculture of conventions about managing and reflecting upon culture. Equilibrium is a state in which market supply and demand balance each other.
Fat tails and uncertainty
Soros’s theory of reflexivity runs counter to the concepts of economic equilibrium, rational expectations, and the efficient market hypothesis. 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. In Soros’s opinion, this is because the process of price formation is reflexive and dominated by positive feedback loops between prices and expectations. 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 .
Michel Foucault’s The order of things can be said to touch on the issue of Reflexivity. Foucault examines the history of Western thought since the Renaissance and argues that each historical epoch has an episteme, or «a historical a priori», that structures and organises knowledge. Foucault argues that the concept of man emerged in the early 19th century, what he calls the «Age of Man», with the philosophy of Immanuel Kant. He finishes the book by posing the problem of the age of man and our pursuit of knowledge- where «man is both knowing subject and the object of his own study»; thus, Foucault argues that the social sciences, far from being objective, produce truth in their own mutually exclusive discourses. Giddens accentuated this theme with his notion of «reflexive modernity» – the argument that, over time, society is becoming increasingly more self-aware, reflective, and hence reflexive.
Principle of Reflexivity
In each of these three examples, improving market sentiment has driven a virtuous cycle. As shares in each company have risen in value, more investors have become involved, which has pushed the stock higher, allowing the company to raise capital, helping to strengthen the balance sheet and attracting more investors. Reflexivity presents a problem for science because if a prediction can lead to changes in the system that the prediction is made in relation to, it becomes difficult to assess scientific hypotheses by comparing the predictions they entail with the events that actually occur.
By being reflexive we acknowledge that we cannot be separated from our biographies. For example, towards the end of last year, Tesla announced it would be raising $5 billion through an at-the-market offering of shares. A few years ago, this sort of cash call would have had a substantial negative impact on the stock price, but the market was happy to absorb the extra shares on this occasion. This provided Tesla with a massive cash infusion to fund its growth program. I think it’s unlikely this would have been possible without the backing of the market. Since the nineties, reflexivity has become an explicit concern of constructivist, poststructuralist, feminist, and other critical approaches to International Relations.
It is a reminder that perceptions and beliefs affect reality through behavior. Soros notes, for example, that investors’ beliefs about market efficiency will influence their strategy, which influences market outcomes and their subsequent beliefs in turn. Other examples of reflexivity include parimutuel systems, self-fulfilling prophecies, and bandwagon effects. This theory, that fundamentals are what inform stock prices, makes enough sense that it’s hard to imagine any alternative—but that’s exactly what George Soros did, and it’s how he made his very large pile of money. Meanwhile, over the past six months, AMC has returned to the market several times to raise new money by issuing shares.
But that money can kickstart a feedback loop that makes them more profitable in the future. What’s more, now some of them have started acquiring each other just to grow faster—which gives investors a sense of what a “sophisticated buyer” would pay for that sort of asset, further increasing investor confidence that the assets in question are worth owning. Suppose there’s some sector where companies are chugging along, investing, growing, and borrowing some money to do it. The bandwagon effect is a phenomenon in which people do something primarily because other people are doing it.