Small enough to fail: a systems approach to financial systems reform

The “Credit Scrunch” of 2007 was a systemic failure. Interactions between elements of the system (banks, rating agencies, regulators, governments, financial instruments, etc.) mattered more than the specific behaviour of a particular actor. If you believe the crisis was an apocalypse or foreshadows an apocalypse, then you should be considering fundamental reform. You want to redesign, and design principles would be handy. What might they be?

Systems theory, touching on if not encompassing chaos theory and complexity theory, gives us a rich background to some simple design parameters, namely input process output, governance, monitoring, feed back and feed forward. Systems...