The New Approaches to Economic Challenges (NAEC) Initiative, established to distill the lessons from the Global Financial Crisis has suggested that a new crisis could emerge suddenly, from many different sources, and with potentially harmful effects. OECD Member and Partner countries are confronting multiple challenges that can only be addressed through effective analytical, governance and policy approaches. This Conference discussed these approaches to better understand and respond to the interconnections between financial, economic, environmental and societal systems. While policymakers generally focus on how to harden components of these systems affected by specific threats, such approaches do not often address cascading effects. Notably, this includes systemic risks, which result from the threat that individual failures, accidents, or disruptions present to a system through the process of contagion.
Systemic threats are a particular challenge to governments due to their stochastic and relatively low frequency nature. This leads to the likelihood of systemic or cascading effects that are difficult to model and analyse with traditional tools of economic analysis. Such cascades, if not mitigated or checked, have the capability of triggering systematic degradation or collapse from which it is difficult or impossible to fully recover. When they emerge, systemic threats have the potential to completely and irreversibly disrupt the original configuration of a given system – replacing it with something altogether new, albeit significantly degraded.
This conference explored the latest scientific findings and policies on the extent to which stressed and strained complex systems could be placed on a sounder footing through strengthened buffers, safeguards and systemic resilience. Discussion centred on new approaches to economic theory and policy, new tools and techniques to understand systems and strategies to address systemic threats. A variety of new approaches to environmental, social and economic issues were explored. The debates were enriched by the contributions of experts from a range of disciplines, including economics, political science, engineering, physics, and biology.