Soros and Reflexivity
George Soros is the economics equivalent to Stephen Wolfram and physics. Wolfram is a wealthy businessman who discovered a big idea independently of others, that isn’t new or original but that appears to be correct – that the world is based upon algorithmic feedback loops rather than equations. Soros’ equivalent idea is Reflexivity a model of economics based upon feedback loops in an open system – money flows into a system held far from equiibrium which grows, becomes more complex and has periods of turbulence.
Until recently, Soros was considered a maverick, at least academically, proposing that the economy was an open system regulated by events which are provably unpredictable, if deterministic. The alternative and wideley accepted system of economics that people like Greenspan practiced was based on the idea of economics as a closed system which would tend to equilibrium in a free market. It assumed that turbulence was the result of external impediments to smooth free market influences.
When I found out that this was the case, I nearly fell off my chair. It meant that the economy was being run based upon scientific ideas that come from the age of steam engines.
The economy is an open system with a scale free system of interconnected attractors. It means, among other things that the current crisis was a statistically innevitable event and that another
crash crash capable event is just as likely to happen tomorrow (just like having thrown a six in a dice throw does not reduce the chances of throwing a six again). This counterintuitive notion, is the same for earthquakes which were found to follow a pattern which was not the result of the release of built up tension and suggests that the economy is similarly susceptabe to events which are removed from simplistic chains of direct cause and effect.
Understanding these phenomena are crucial to our survival as a species, so we shouldn’t waste time even listening to people who are unaware of them. People like Greenspan or many other practitioners of economics, the dismal pseudo science. Soros, on the other hand, has economics ideas that are at least based on science which is less than 100 years old. Here he is at Davos, where James Bond villains hang out and decide how to run the world.