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Reflexivity, path dependence, and disequilibrium dynamics

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  • Anwar Shaikh

Abstract

George Soros's theory of reflectivity focuses on the interactions between expected, actual, and fundamental values of variables. The fundamental values are affected by the historically contingent paths of the other two variables so that the equilibrating process is turbulent, path dependent (nonergodic), and may give rise to extended disequilibrium boom-bust phases. Such patterns are consistent with classical and Keynesian ideas of equilibration, but they invalidate notions such as rational expectations and the efficient market. The purpose of this paper is to lay out Soros's theory and show that it can be formalized in a simple and general manner with testable propositions.

Suggested Citation

  • Anwar Shaikh, 2010. "Reflexivity, path dependence, and disequilibrium dynamics," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 33(1), pages 3-16, October.
    • Handle: RePEc:mes:postke:v:33:y:2010:i:1:p:3-16
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    References listed on IDEAS

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    1. Pierre Garrouste & Stavros Ioannides (ed.), 2001. "Evolution and Path Dependence in Economic Ideas," Books, Edward Elgar Publishing, number 1790.
    2. Paul Davidson, 1991. "Is Probability Theory Relevant for Uncertainty? A Post Keynesian Perspective," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 129-143, Winter.
    3. Anwar M. Shaikh, 1995. "The Stock Market and the Corporate Sector: Profit-Based Approach," Economics Working Paper Archive wp_146, Levy Economics Institute.
    4. Mueller,Dennis C., 2009. "Profits in the Long Run," Cambridge Books, Cambridge University Press, number 9780521101592.
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    Cited by:

    1. Citera, Emanuele & Sau, Lino, 2019. "Complexity, Conventions and Instability: the role of monetary policy," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201924, University of Turin.
    2. K. Vela Velupillai, 2013. "HUMBUGS and other Exotica -- Celebrating Anwar Shaikh," ASSRU Discussion Papers 1307, ASSRU - Algorithmic Social Science Research Unit.
    3. Sabiou M. Inoua, 2020. "News-Driven Expectations and Volatility Clustering," JRFM, MDPI, vol. 13(1), pages 1-14, January.
    4. Sabiou Inoua, 2023. "News-driven Expectations and Volatility Clustering," Papers 2309.04876, arXiv.org.
    5. Anwar Shaikh, 2013. "On the role of reflexivity in economic analysis," Journal of Economic Methodology, Taylor & Francis Journals, vol. 20(4), pages 439-445, December.

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