Abstract

We argue that the Soros account of reflexivity does not provide a clear-cut distinction between a social science such as economics and the physical sciences. It is pointed out that the participants who attempt to learn from refutations of conjectures in the Soros world are likely to be haunted by the Duhem–Quine problem of conjointness of hypotheses and unfocused refutation. On a more constructive note, we argue that models of inductive learning, in which participants form conjectures on the basis of strictly limited information sets, can capture the basic thrust of the Soros position. The conjectures are in motion, as the participants attempt to avoid those that are systematically wrong, and there is something vague and uncertain about what can be learned from experience and refutations. The only notion of market efficiency in this world is one contingent on the strictly limited and varied information sets in play. Finally we present a mathematical model and numerical simulations that help justify the causal relationship between reflexivity and far-from-equilibrium dynamics postulated by Soros