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Replies to post #44894 on GOLDBUGS AMEX Goldbugs Index (GOLD)
What Is Reflexivity?
Reflexivity in economics is the theory that a feedback loop exists in which investors' perceptions affect economic fundamentals, which in turn changes investor perception. 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."
Key Takeaways
Reflexivity is a theory that positive feedback loops between expectations and economic fundamentals can cause price trends that substantially and persistently deviate from equilibrium prices.
Reflexivity’s primary proponent is George Soros, who credits it with much of his success as an investor.
Soros believes that reflexivity contradicts most of mainstream economic theory.
