Reflexivity

tags: [ economics , finance , src:article ]

src: FT, article

Core Idea:

• fallibility: “in situations that have thinking participants, the participants’ view of the world is always partial and distorted”
• reflexivity: “these distorted views can influence the situation to which they relate because false views lead to inappropriate actions”

Reflexivity:

• thinking participants:
  • cognitive function: understanding the world (world -> mind)
  • manipulative function: affecting the world (mind -> world)
• knowledge = true statements
• “if there is interference from the manipulative function, the facts no longer serve as an independent criterion by which the truth of a statement can be judged”
  • e.g. “This is a revolutionary moment.” That statement is reflexive, and its truth value depends on the impact it makes.11 I mean, I get what he’s trying to do, but I think he’s delving too deeply into epistemology for no good reason. It’s not about the veracity of a statement, but about the power of words to be self-fulfilling (i.e. have consequences down the road)

In the real world, the participants’ thinking finds expression not only in statements but also, of course, in various forms of action and behavior. That makes reflexivity a very broad phenomenon that typically takes the form of feedback loops. The participants’ views influence the course of events, and the course of events influences the participants’ views. The influence is continuous and circular; that is what turns it into a feedback loop.

Feedback loops:

• can be either positive or negative
• negative: brings view and situation closer together, positive: further apart22 is this right? at the very least that’s not how I thought about it.
• negative = self-correcting (and leads to equilibrium)
• positive = self-reinforcing
  • cannot go on forever, because the view would be too far from reality