http://www.businessinsider.com/george-soros-speech-goes-viral-2012-6
THIS SPEECH CAUSED SUCH A RUCKUS THAT IT WAS TAKEN DOWN FROM HIS WEBSITE….
One of our favorite China bloggers, the pseudonymous Also Sprach Analyst called it “The best thing ever written on the euro crisis.” The bottom line is that the speech is getting praised and passed around and going viral in a way that most speeches about the Eurozone don’t.So you have to ask: Why is this speech going nuts?
Well there’s a lot in it for people to like. He gives a nice roundhouse kick to the Germans, which is usually pretty popular. And he says that the Eurozone has 3 months to fix the crisis, which provides a perfect hook for headline-writers.
But what’s special about the speech is his characterization of the Euro as being itself being a “bubble.”
Now the word “bubble” gets abused a lot. Every little boom is called a bubble these days. And things that have nothing to do with market valuations (like the big pile of student loan debt being taken on) get called bubbles improperly.
But Soros is onto something here.
Read more: http://www.businessinsider.com/george-soros-speech-goes-viral-2012-6#ixzz1wuaY3gt2
Trento, Italy
Ever since the Crash of 2008 there has been a widespread recognition, both among economists and the general public, that economic theory has failed. But there is no consensus on the causes and the extent of that failure.
I believe that the failure is more profound than generally recognized. It goes back to the foundations of economic theory. Economics tried to model itself on Newtonian physics. It sought to establish universally and timelessly valid laws governing reality. But economics is a social science and there is a fundamental difference between the natural and social sciences. Social phenomena have thinking participants who base their decisions on imperfect knowledge. That is what economic theory has tried to ignore.
Scientific method needs an independent criterion, by which the truth or validity of its theories can be judged. Natural phenomena constitute such a criterion; social phenomena do not. That is because natural phenomena consist of facts that unfold independently of any statements that relate to them. The facts then serve as objective evidence by which the validity of scientific theories can be judged. That has enabled natural science to produce amazing results.
Social events, by contrast, have thinking participants who have a will of their own. They are not detached observers but engaged decision makers whose decisions greatly influence the course of events. Therefore the events do not constitute an independent criterion by which participants can decide whether their views are valid. In the absence of an independent criterion people have to base their decisions not on knowledge but on an inherently biased and to greater or lesser extent distorted interpretation of reality. Their lack of perfect knowledge or fallibility introduces an element of indeterminacy into the course of events that is absent when the events relate to the behavior of inanimate objects. The resulting uncertainty hinders the social sciences in producing laws similar to Newton’s physics.
Economics, which became the most influential of the social sciences, sought to remove this handicap by taking an axiomatic approach similar to Euclid’s geometry. But Euclid’s axioms closely resembled reality while the theory of rational expectations and the efficient market hypothesis became far removed from it. Up to a point the axiomatic approach worked. For instance, the theory of perfect competition postulated perfect knowledge. But the postulate worked only as long as it was applied to the exchange of physical goods. When it came to production, as distinct from exchange, or to the use of money and credit, the postulate became untenable because the participants’ decisions involved the future and the future cannot be known until it has actually occurred.
