Had that Georgie Soros in the back of my cab the other day

This geezer hails us in Seething Lane, steps off the kerb all abrupt like. He goes, “take me to the reflexive centre of finance”.

I answers ‘im, “I’ll take you where you like mate, you’re the guv’nor”, so I starts the meter and off we goes with a sharp left and then a cracking U-turn that holds up all the traffic – ‘cos you can’t do a right onto Byward Street from Trinity Square since they put that bleedin’ pedestrian refuge in the way. "

I asks him, “’ere, what’s all this reflexive centre stuff anyway?”

He says, “well, it’s like this. A company has a certain amount of assets and the current and future value of these assets gives its price. These are the fundamentals.

“These fundamentals can, however, be influenced by certain people (traders, fund managers, commentators). These certain people can increase or decrease the perceived future value of the company. When these people are doing this the market is being reflexive. Oh look, there’s Singer & Friedlander where I used to work.”

I looks at him, in my mirror, and says ‘I am reflexive?”

“Yep, you’re reflexive when you go out of your way to change something that may appear unchangeable, or fundamental to others. People are participants, not just observers.”

“Wot? Wot yer mean? Look at that prat doing a U-ie right in the middle of the traffic.”

And he says, “bear with me, I’m more used to explaining this in financial markets … but let’s give this a whirl …

“What if a series of events happened that reduced the number of people travelling on public transport? For example, strikes, terrorist attacks, smelly sewers … OK? So instead of taking the tube or the bus people wanted to take more taxis? As the demand grew, so would your fare income. With me so far?

“And what if your brother was Bob Crowe, your cousin was the East London Al Qaeda terrorist cell leader and your brother in law managed the central London sewers for Thames Water… So you’d all be conspiring to get more people to use taxis. And everyone would follow the trend. Do you get me now?”

And I went, “don’t be crazy, that would never happen. You’re crazy, is that what you get up to? Are you a terrorist, you’d better get out here mate, don’t bloody care if you took down the Bank of England in 1992, GET OUT!”

And he says, “hold your horses! This is an example, remember what we were doing? This is what has been happening in financial services for some time. In certain conditions the efficient market hypothesis no longer holds, leading to disequilibrium rather than equilibrium. Let me give you some more common examples, that you might recognize:

1. traders talk up a stock to sell it
2. banks talk down a stock to buy it cheaply
3. companies use their over-valued stock as collateral to buy an otherwise unassailable competitor, so that
4. that unassailable competitor’s market competitiveness is destroyed by the over-valued company, and then
5. the destruction of that company’s market competitiveness leads to a reduction in sales, which then leads to redundancies, a fall in house prices ….

Recognise any of these? Enron? WorldCom? HBOS may be suffering from a dose of this, who knows?”

And I goes, “some of that rings a bell. Sorry guv, did you say the Centre of Reflexive Finance? Can’t find it – they’ve changed all the one-ways round here … so I’m dropping you off at the College of Reflexology on Betterton Street instead, same sort of thing innit?

"Anyway you're not too far from the LSE where you used to study - and where that Anthony Giddens put out some remarkably similar ideas more than thirty years ago. I think you'll find that he called the two-tiered, interpretive and dialectical relationship between social scientific knowledge and human practices the double hermeneutic, if you look at his New Rules of Sociological Method (1976). Are you saying that Giddens' work is now becoming mainstream? That’ll be £54 please – you see the price of diesel’s killing us.”