Since economies are dynamic processes driven by creativity, social norms, and emotions as well as rational calculation, why do economists largely study them using static equilibrium models and narrow rationalistic assumptions? Economic activity is as much a function of imagination and social sentiments as of the rational optimisation of given preferences and goods. Richard Bronk argues that economists can best model and explain these creative and social aspects of markets by using new structuring assumptions and metaphors derived from the poetry (...) and philosophy of the Romantics. By bridging the divide between literature and science, and between Romanticism and narrow forms of Rationalism, economists can access grounding assumptions, models, and research methods suitable for comprehending the creativity and social dimensions of economic activity. This is a guide to how economists and other social scientists can broaden their analytical repertoire to encompass the vital role of sentiments, language, and imagination. (shrink)

This paper analyses Soros' theory of reflexivity by breaking it down into several component concepts that are individually well analysed in existing literature – including performativity, self-reinforcing feedback loops and uncertainty. By focusing on the cognitive myopia implied by analytical monocultures and on the indeterminacy implied by innovation, it helps establish boundaries of applicability for reflexivity models. It argues that Soros largely ignores a key element in the formation of self-reinforcing delusions or market bubbles – the role played in conditions (...) of uncertainty by homogeneous social narratives and shared mental models. This paper also examines how social learning, rhetoric, power, emotional contagion, the discourse of ‘best practice’, ‘and Keynes' beauty contest may lead to such shared narratives and analytical homogeneity in markets. It concludes that market instability results when there is insufficient cognitive diversity or heterogeneity of beliefs among actors to enable them to spot anomalies and novelties. (shrink)