Reflexivity & the Fall of the Efficient Market Hypothesis

Soros – “The Efficient Market Hypothesis has failed…”

In the aftermath of the 2008 Global Financial Crisis, in an interview with CNN Business, George Soros calmly said: “basically the efficient market hypothesis has failed. We must recognize that it has failed and economists need to find a new understanding of financial markets.”

The interviewer, momentarily at a loss for words, pushed Soros on this point, defending the Efficient Market Hypothesis.

Soros calmly responded: “this is what science is, it’s trial and error. There has been an error…. But unfortunately, we don’t have a properly developed alternative, and that’s what we’re looking for.”

The interviewer, pushing further, “well it begs the question, will you know when you’ve found it?”

Soros smiled, “well, w