ABSTRACT
In my previously cited paper, I proved the stability of the preceding system in the case of simple linear and nonlinear functional forms for the three relations. Here, I show that the reflexive process is stable – i.e. that its booms turn into corresponding busts – even in the case of general functional forms (Appendix A). I should add that everything said here in terms of asset prices could equally well apply to other variables such as rates of profit, so that the general system can also be the basis for a reflexive theory of business cycles, gravitation of market prices around classical ‘natural’ prices, etc. Finally, it is important to keep in mind that any posited functional forms would be valid only as long as the underlying social structure is maintained. There are times in which all roads lead to Tahrir Square and all bets are off. This too is inherent in Soros’ general notion of social reflexivity.
