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.