[Question] Is there a subfield of economics devoted to “fragility vs resilience”?

[steve6320]

The modern economy is highly complex, and we depend on this highly complex system for our survival. However, it is often brittle, with chokepoints and single points of failure. But the concept of fragility vs resilience seems under-discussed in economics, at least from my perspective outside the field.

Economic resilience is relevant to many risks that EA is concerned with. ALLFED’s work on feeding humanity through a disaster is perhaps the best example of this. An improvement in the general resilience of the economy would advance ALLFED’s mission, as well as other key industries in the event of pandemic, nuclear war, and other calamities.

Today’s economic system may promote fragility in a few ways, for example:

• Efficient but brittle businesses can offer lower prices. A business that builds buffers into its operation for greater resilience will have higher costs, and be driven to bankruptcy.

• Economies of scale and network effects favor the formation of dominant businesses or platforms that become single points of failure. (If Amazon Web Services goes down, how many businesses go down with it? Or what if the whole internet goes down?)

• The more complex a supply chain, the more things can go wrong. It is sometimes pointed out that the fact that Manhattan is supplied with food every day is a miracle of the modern economy. But turning it around, this might also be considered terrifying—what is the backup if, say, all the computer systems managing this process fail?

Is there a subfield of economics considering factors like this, and how policy choices, management practices, cultural factors, etc. can encourage resilience? I can imagine there might be related work scattered across disciplines, but I’m not aware of any work focused on the general concept of economic resilience.

The closest I’ve found is:

• “economic resilience” in a relatively narrow financial sense

• complex systems science seems to have many relevant concepts, but is more general and not focused on economics

As an example of potentially interesting research, COVID-19 has brought to light that the medical equipment supply chain is brittle, depending on few suppliers for key products and unable to ramp up production enough when needed. Meanwhile, in wealthy countries the food industry has performed very well, with only minor disruptions observable at the supermarket. Comparing the structure of these two industries may be informative.

[SamiM]

By the way, there also the Adam Rose definition of economic resilience:

Source

In general, static economic resilience refers to the ability or capacity of a system to absorb or cushion against damage or loss… A more general definition that incorporates dynamic considerations, including stability, is the ability of a system to recover from a severe shock. We distinguish two types of resilience:

(1) inherent – ability under normal circumstances (e.g. the ability to substitute other inputs for those curtailed by an external shock, or the ability of markets to reallocate resources in response to price signals); and

(2) adaptive – ability in crisis situations due to ingenuity or extra effort (e.g. increasing input substitution possibilities in individual business operations, or strengthening the market by providing information to match suppliers without customers to customers without suppliers).

There is some research on state fragility. When the government can’t monopolize violence, provide public goods, or tax its inhabitants, the country becomes vulnerable to all sorts of things from increased conflict to food shortages. The best resource I found on this is the “new climate for peace” website. Which has a suggested reading based on theme. There are four themes all related to climate change and conflict. [Natural] disasters, Urban risks, Migration, and Food security.

All of this ties back to the fact that the poor are more vulnerable to Climate change. And the multiple correlations between it and conflict, urbanization, etc.

More on this:

These videos by Miguel, Blattman, CSIS, WB, Brookings were useful.

Hsiang and Miguel have excellent papers on the topic.

Here are the abstracts some interesting papers.

Social and economic impacts of climate pdf

For centuries, thinkers have considered whether and how climatic conditions—such as temperature, rainfall, and violent storms—influence the nature of societies and the performance of economies. A multidisciplinary renaissance of quantitative empirical research is illuminating important linkages in the coupled climate-human system. We highlight key methodological innovations and results describing effects of climate on health, economics, conflict, migration, and demographics. Because of persistent “adaptation gaps,”current climate conditions continue to play a substantial role in shaping modern society, and future climate changes will likely have additional impact. For example, we compute that temperature depresses current U.S. maize yields by ~48%, warming since 1980 elevated conflict risk in Africa by ~11%, and future warming may slow global economic growth rates by ~0.28 percentage points per year. In general, we estimate that the economic and social burden of current climates tends to be comparable in magnitude to the additional projected impact caused by future anthropogenic climate changes. Overall, findings from this literature point to climate as an important influence on the historical evolution of the global economy, they should inform how we respond to modern climatic conditions, and they can guide how we predict the consequences of future climate changes.

Climate and Conflict pdf

We review the emerging literature on climate and conflict. We consider multiple types of human conflict, including both interpersonal conflict, such as assault and murder, and intergroup conflict, including riots and civil war. We discuss key methodological issues in estimating causal relationships and largely focus on natural experiments that exploit variation in climate over time. Using a hierarchical meta-analysis that allows us to both estimate the mean effect and quantify the degree of variability across 55 studies, we find that deviations from moderate temperatures and precipitation patterns systematically increase conflict risk. Contemporaneous temperature has the largest average impact, with each 1σ increase in temperature increasing interpersonal conflict by 2.4% and intergroup conflict by 11.3%. We conclude by highlighting research priorities, including a better understanding of the mechanisms linking climate to conflict, societies’ ability to adapt to climatic changes, and the likely impacts of future global warming.

GROWING, SHRINKING, AND LONG RUN ECONOMIC PERFORMANCE: HISTORICAL PERSPECTIVES ON ECONOMIC DEVELOPMENT pdf

Using annual data from the thirteenth century to the present, we show that improved long run economic performance has occurred primarily through a decline in the rate and frequency of shrinking, rather than through an increase in the rate of growing. Indeed, as economic performance has improved over time, the short run rate of growing has typically declined rather than increased. Most analysis of the process of economic development has hitherto focused on increasing the rate of growing. Here, we focus on understanding the forces making for a reduction in the rate of shrinking, drawing a distinction between proximate and ultimate factors. The main proximate factors considered are (1) structural change (2) technological change (3) demographic change and (4) the changing incidence of warfare. We conclude with a consideration of institutional change as the key ultimate factor behind the reduction in shrinking.

Temperature extremes, global warming, and armed conflict: new insights from high resolution data source

This paper contributes to the debate whether climate change and global warming cause conflicts by providing novel evidence about the role of extreme temperature events for armed conflict based on high frequency high-resolution data for the entire continent of Africa. The analysis of monthly data for 4826 grid cells of 0.75 latitude longitude over the period 1997–2015 documents a positive effect of the occurrence of temperature extremes on conflict incidence. These effects are larger the more severe the extremes in terms of duration, and are larger in highly densely populated regions, in regions with lower agricultural productivity, and in regions with more pronounced land degradation. The results also point towards heterogeneity of the effect with respect to the type of violence and the crucial role of population dynamics. Considering the consequences of increases in the frequency of extreme events in a long-differences analysis delivers evidence for a positive effect on conflict.

Global non-linear effect of temperature on economic production pdf

...We show that overall economic productivity is non-linear in temperature for all countries, with productivity peaking at an annual average temperature of 13 °C and declining strongly at higher temperatures. The relationship is globally generalizable, unchanged since 1960, and apparent for agricultural and non-agricultural activity in both rich and poor countries. These results provide the first evidence that economic activity in all regions is coupled to the global climate and establish a new empirical foundation for modelling economic loss in response to climate change, with important implications. If future adaptation mimics past adaptation, unmitigated warming is expected to reshape the global economy by reducing average global incomes roughly 23% by 2100 and widening global income inequality, relative to scenarios without climate change. In contrast to prior estimates, expected global losses are approximately linear in global mean temperature, with median losses many times larger than leading models indicate.

More resources here (beware duplicates, sorry)

Also, business continuity planning can be relevant if you change corporations to states, but I’m not familiar with the literature therefore less certain. From Wikipedia:

“[it] is the process of creating systems of prevention and recovery to deal with potential threats to a company. In addition to prevention, the goal is to enable ongoing operations before and during execution of disaster recovery

An organization’s resistance to failure is “the ability … to withstand changes in its environment and still function”. Often called resilience, it is a capability that enables organizations to either endure environmental changes without having to permanently adapt, or the organization is forced to adapt a new way of working that better suits the new environmental conditions.”

I bet urban design and climate change adaptation literature have something valuable to say about the topic.

EDIT: I added this later

[MichaelA🔸]

Nice collection of links and abstracts!

Minor point: I think you accidentally cut one of the abstracts off slightly early. Where it says “Considering the consequences of increases in the frequency”, it should say “Considering the consequences of increases in the frequency of extreme events in a long-differences analysis delivers evidence for a positive effect on conflict.”

[SamiM]

Oh, thanks, fixed it. Good catch. :)

[Ben]

CSER does research on civilisational collapse, and one of their researchers, Luke Kemp, has an article on the topic here. I’d love to see more work in this space—collapse and recovery seems like an important cause area.

[gavintaylor]

Although not really a field, Nassim Taleb’s book Antifragile springs to mind—I haven’t read this myself but have seen it referenced in several discussion on economic fragility, so it might at least be a starting point to work with.