George Soros’ Speech on the Future of Europe

I shall take a holistic approach to the future of Europe. I have developed a conceptual framework, which has guided me in my decisions throughout my adult life. The framework is much broader than the financial markets; it deals with the relationship between thinking and reality. What makes that relationship so complicated is that the thoughts and actions of participants are part of the reality they have to think about. Their thinking serves a dual function: on the one hand they try to understand the world in which they live – that is the cognitive function; on the other, they want to influence the events in which they participate – that is the manipulative function. The two functions interfere with each other – I call the interference reflexivity. The cornerstone of my conceptual framework is the human uncertainty principle, which is based on the twin pillars of fallibility and reflexivity.

The human uncertainty principle has far reaching implications for scientific method. It applies only to social phenomena and thereby it separates the social sciences from the natural sciences. Economic theory has sought to imitate the natural sciences, particularly Newtonian physics. Consequently my conceptual framework is in direct conflict with mainstream economic theory.

The differences are especially pronounced in dealing with financial problems in general and the euro crisis in particular. Mainstream economics has pursued timelessly and universally valid laws whose validity can be tested by reference to the facts. I contend that the facts produced by social processes do not constitute a reliable criterion for judging the validity of theories because of the human uncertainty principle. I do not deny the possibility of establishing universally and timelessly valid laws – the human uncertainty principle is one of them – but I consider such laws too vague and general to be of much use in producing specific predictions and explanations.

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