Reflexivity and Equilibria

Journal of Economic Methodology (Forthcoming)

15 Pages Posted: 13 Sep 2013

See all articles by Francesco Guala

Francesco Guala

Università degli Studi di Milano - Department of Economics, Management and Quantitative Methods

Date Written: September 13, 2013

Abstract

The failure of models based on rational expectations to explain the “boom and bust” of financial markets does not support Soros’ critique of mainstream economics or his call for a theoretical revolution. Contrary to what Soros says, standard rational choice theory has the conceptual resources to analyse reflexivity. The dynamic of feedback loops for example can be described by simple models based on multiple equilibria and informational cascades. The problem is that agents and theorists sometimes lack the information required to identify equilibria and tipping points.

Keywords: reflexivity, equilibria, informational cascades

JEL Classification: B41, C70

Suggested Citation

Guala, Francesco, Reflexivity and Equilibria (September 13, 2013). Journal of Economic Methodology (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2325266 or http://dx.doi.org/10.2139/ssrn.2325266

Francesco Guala (Contact Author)

Università degli Studi di Milano - Department of Economics, Management and Quantitative Methods ( email )

via Conservatorio 7
Milano, 20122
Italy

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