Review of The Structure of Scientific Revolutions
During my mid-life crisis, I was a student of Ian Hacking, author of the introductory essay to The Structure of Scientific Revolutions Structure. Frighteningly smart. Obey his instruction.
The book’s author, Thomas Kuhn, described himself as a historian of science with a philosophical bent. Both he and George Soros, the famous investor and philanthropist, were students of Karl Popper, most influential for his insistence that a good theory will result in empirical predictions that are “falsifiable.” Once falsified, a theory is no longer useful.
Soros built his investment success on the design of hypotheses (as distinct from conviction about value) that markets could falsify, which made him change his hypothesis and investment position.
Kuhn was most interested in the sociological and psychological framework created by scientific communities as they went about the business of establishing experiments to verify their hypotheses.
He ruffled feathers when he published his book in 1962. Normal academic (“publish or perish”) scientists were offended by Kuhn’s description of their activities.
They weren’t too pleased, for instance, with his description of the focus on academic research “as a strenuous and devoted attempt to force nature into the conceptual boxes supplied by professional education,” which regularly “suppresses fundamental novelties because they are necessarily subversive of its basic commitments.”
He also exposed the “paraphernalia of specialization,” which supported the enterprise of “fact-gathering, puzzle solving and mopping-up.”
“On most occasions any particular field of specialization offers nothing else to do, a fact that makes it no less fascinating to the proper sort of addict,” he wrote.
Quite a turn of phrase!
The Structure of Scientific Revolutions is included on Time Magazine’s All-Time Best 100 Non-Fiction Books because it situated “normal science” as a vital cog, but not the driving element, in the process of scientific advancement.
Kuhn insisted that progress is a historical process of “extended episodes with a regularly recurrent structure.”
Normal science occasionally develops anomalies (differences from expectations defined by the governing paradigm). When sufficient weight of anomaly has accumulated, the paradigm will be in crisis.
Crisis leads to revolution as new theories are fitted to the new data and gradually a new paradigm emerges. Within that new paradigm, normal science can begin again to fact-gather, puzzle solve and mop up.
The Structure of Scientific Revolutions, developed in the study of physics, has now been adopted as the model for progress through revolutions in all sciences.
This may be fascinating, but what is the relevance to investors?
Maybe markets should be thought of as historical processes, rather than instantaneously efficient reflectors of all the best analysis and information. If this were so, would it be useful to understand the dominant paradigms that brought us to the current position, and possibly more important, if there were anomalies eating away at that consensus?
More pointedly, is it conceivable that there is a “Central Banker Paradigm,” one that has solidified in the seven years since quantitative easing was initiated – one that is now forcing global economies into the “conceptual boxes supplied by professional education?”
Would the observation that each successive burst of QE has a lessening impact constitute an anomaly?
That’d be quite a different way of thinking.