A Proposal for Integrating Theories of Complexity for Better Understanding Global Systemic Risks

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  • Armin Haas
  • Manfred Laubichler
  • Joffa Applegate
  • Gesine Steudle
  • Carlo C. Jaeger
The global financial crisis of 2008 has shown that the present financial system involves global systemic risks. The dimension of these risks is hard to grasp with the conceptual tools that have been developed to tackle conventional risks like fire or car accidents. While modern societies know quite well how to deal with conventional risks, we have not yet been equally successful at dealing with global systemic risks. For managing this kind of risks, one needs to understand critical features of specific global systems where many human agents interact in ever changing complex networks. Here we apply two specific dimensions of complexity theory for dealing with global systemic risk in an integrated fashion: normal accidents and extended evolution. Both of them have successfully been applied to the analysis of systemic risks. As a paradigmatic example of global systemic risks, we focus on the global financial crisis that began in 2008, and suggest that the future evolution of the financial system could either see a further increase in complexity, or a reversal to a less complex system. We explore and contrast the implications of normal accident theory and extended evolution perspectives and suggest a four-point research strategy informed by complexity theory for better understanding global systemic risks in financial systems.
Original languageEnglish
JournalRisk Analysis
Issue number9
Pages (from-to)1945-1951
Number of pages7
Publication statusPublished - 01.09.2022

Bibliographical note

The authors would like to acknowledge crucial support by the Berlin-Brandenburg Academy of Sciences and Humanities. The present publication is an outcome of the Academy's initiative “Systemic Risks as Prototypes of Dynamic Structure Generation,” launched by Klaus Lukas and Ortwin Renn, and skillfully administered by Ute Tintemann. This initiative conducted four workshops in the years 2017–2019; we thank the workshop participants for inspiring and fruitful comments and discussions. We also want to thank Ortwin Renn and Pia Schweizer for their steady support as editors of this special issue. Moreover, we want to thank Perry Mehrling, Steffen Murau, Joe Rini, Eckehard Häberle, Shade Shutters, and the members of the systemic risk research group of IASS for their intellectual inspiration, support, and enlightening discussions. We want to thank two anonymous reviewers and express our professional gratitude for their careful reviews. Together, these reviews helped us to streamline our article and sharpen its focus and its line of argument. The responsibility for errors stays, of course, with the authors.

Publisher Copyright:
© 2020 The Authors. Risk Analysis published by Wiley Periodicals LLC on behalf of Society for Risk Analysis.

    Research areas

  • Transdisciplinary studies - extended evolution, Global financial crisis, global systemic risks, key currency, normal accidents