Reflexivity suggests

Reflexivity suggests feedback loop between "cognitive function" (analogy: sensor) and "manipulative function" (analogy: control). However, in social science or in financial market, the "cognitive function" is flawed due to the imperfect knowledge of participants. As the sensor is not reliable, any attempt for the "manipulative function" to form a negative feedback loop relying on rational expectations (such that market reaches equilibrium postulated by economic theory) will not produce reliable control, not to mention that the control is formed collectively but totally uncoordinated. We may end up with a positive feedback loop, when that happens and when it sustains, we have crisis towards the end of an instable system.

2008.11.02, reading of The New Paradigm for Financial Markets