Thirty Years of Hurt, Never Stopped Me Dreaming
Speech given by
Andrew G Haldane, Chief Economist and Member of the Monetary Policy Committee
Institute for Government
30 June 2021
The views (more so than ever!) are not necessarily those of the Bank of England or
Monetary Policy Committee. I would like to thank Andrew Bailey, Nick Butt, Shiv Chowla and
Mette Nielsen for comments, Jack Meaning, Sandra Mills and Sarah Saunders for help in preparing
the text and hundreds of Bank colleagues over several decades for their support.
1
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THIRTY YEARS OF HURT, NEVER STOPPED ME DREAMING
At the end of September I leave the Bank of England, 32 years almost to the day since I joined. Most would
say that is a decent stint, but in Bank terms it is just really getting started. My personal assistant, the brilliant
years. The Bank's company secretary, John Footman,
Sandra Mills, has just completed 44 is just about to
clock 52 years. I never was a completer-finisher.
It has not, of course, been 30 years of hurt.1 I have loved almost all of my time at the Bank. I promised
myself one thing when I joined - that I would only stay as long as it was interesting. It has been interesting
for 32 years. Events made it so. And it remains no less interesting now. I tell the Bank's new entrants I can
promise them only one thing: they will be telling their families and friends about this moment in history and,
uniquely, they can write its next chapter. As a public servant, this is as good as it gets.
Any lengthy career in public policy will inevitably be punctuated by crisis. In my case, crises have provided
not just the punctuation marks, but most of the words, sentences and paragraphs too. In public policy, crises
are the ultimate learning experience. They are also the moments when the Overton window of opportunity is
widest and the opportunity for change greatest. Crises are moments of challenge and opportunity in equal
measure. I am very fortunate to have experienced plenty of both.
My time of the Bank has been evenly split between its twin statutory functions, monetary and financial
stability. These functions, embedded in the Bank's Royal Charter in 1694, remain its statutory centrepiece
today. (The Bank's third objective, fighting the French, has by contrast tended
to be downplayed.) Over the
intervening 327 years, both monetary and financial stability have had their fair share of challenges and
opportunities. These have perhaps come thicker and faster over the past 27 years than the preceding 300.
I want to offer a few retrospective thoughts on the evolution of monetary and financial stability over the past
30 years before turning to central bank communications, a crucial ingredient of both. Bank of England policy
frameworks and practices have undergone an astonishing transformation over that period. I do not think it is
an exaggeration to say there has been a revolution in how the Bank goes about securing monetary and
financial stability and how it communicates about both. The catalyst for this revolution has been crisis.
Having discussed this historical evolution-cum-revolution, I discuss some of the key issues facing central
This is the "dreaming" bit
banks today. - looking around corners to judge not only what is coming but how to
reshape it, seeking out the biggest issues not just of today but tomorrow. It is the Wayne Gretsky approach
1
For those who don't follow football, the title of this speech is a line from the England football team song "Three Lions"
released ahead
of the 1996 European Championship tournament, 30 years after England's last international triumph at the World Cup in
1966.
2
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to public policy - skating to where the puck is going, not where it is.2 That can be unconventional and
sometimes misunderstood. But it is, for me, the essence of effective policymaking.
Imagining a different future is not sufficient for policy success. It is the imagined made real that matters. The
Bank is blessed with having the capacity to both think and do, both brain and hands. When former Governor
Cobbold said "the Bank is a bank and not a study group" he was wrong. The Bank is both.
And the magic
happens when the two are combined, the brains and hands co-ordinated. Nothing illustrates this better than
the revolution in the UK's monetary and financial stability frameworks during my tenure.
Monetary policy
I joined the Economics Division of the Bank in 1989, following the well-trodden path from Sunderland council
the UK's monetary policy framework. My first task fell a
estate to Threadneedle Street. I hoped to redesign
("externals") component of the asset
fraction short of those ambitions. It was to forecast the non-resident
counterparts to M4 (a measure of the money supply). Like the Schleswig-Holstein problem, only three
people understood the external counterparts to M4. One was dead, the other mad and the third was not me.
The external counterparts of M4 are as close to a random walk as any time-series on the planet. That
makes forecasting them a mug's game. I was that mug. Almost as thankless was the six-monthly
forecasting exercise we undertook at the time. This involved every economist forecasting a component of
the National Accounts in microscopic detail. My job was to forecast the Interest, Profits and Dividends
component of the UK current account, another lofty task, another random walk, another game of mugs.
At the end of this exhaustive process, the forecasts were sent around the Bank, as well as to HM Treasury.
recycling wasn't an option at the
There, I have it on good authority, they quickly became landfill (as time).
Like the UK's entry at Eurovision, the Bank economists' contribution was spirited but ultimately pointless.
The Bank's analytical brain
did not connect to any hands. John Kenneth Galbraith said that economics was
the time, that was the Bank's view too.
extremely useful as a form of employment for economists. At
The Bank's forecasting process was a fitting metaphor for the UK's monetary policy experience at that point.
From the early 1970s onwards, many monetary policy frameworks had been tried. All of them had ended up
in the wheelie bin. In the late 1980s, the UK had no clearly defined nominal anchor for monetary policy at all.
The best predictor of interest rate movements was not GDP or inflation. It was whether Mrs Thatcher (the
then-Prime Minister) had recently suffered a bad by-election result. Policy played second fiddle to politics.
2
For those who don't follow ice hockey, Wayne Gretsky is a famous Canadian former ice hockey player. I promised myself never
to
use an ice hockey metaphor during Mark Carney's tenure.
3
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At the point I joined, the search for another new nominal anchor for the UK was well underway. One of my
early tasks was to become an expert on the European Exchange Rate Mechanism (ERM), a framework that
was seen as offering a route to monetary redemption for the UK, effectively by outsourcing monetary policy
to Germany's Bundesbank. Within a year, the UK had joined the ERM. And two years later
-
Black Wednesday, 16 September 1992 - it was forcibly, and ingloriously, ejected.
That day is etched on my memory. I had the incredible good fortune to be sitting on the Bank's foreign
exchange dealing desk that day, watching agog as we lost around £20 billion in foreign exchange reserves
- -
defending the pound at the time, real money despite announcing interest rate rises of 5 percentage
points in a single day. How the world has changed. Currently, financial markets expect UK interest rates to
rise by an average 5 basis points each six months for the next 10 years.
The UK's exit from the ERM led to a new nominal anchor being
needed. And almost immediately, one was
adopted - an inflation target. It had one obvious merit: it was the only monetary framework not to have
already been tried in the UK. But the track record of inflation-targeting was close to non-existent. At the
point the new target was announced, expectations for UK inflation were high (over 5%) and expectations for
sterling following sterling's ERM exit, and the expected
the framework lasting were low. The collapse in
sharp rise in inflation, meant the wheelie bin beckoned for inflation-targeting.
In the event, inflation failed to pick up as much as expected after the ERM debacle. And, behind the scenes
at the Bank, the machinery of monetary policy was changing. Data, analysis and models suddenly became
more central to judgements on inflation and the appropriate monetary stance. Accompanying this,
the Bank's judgements.
economics and economists began playing a more central role in formulating
Although decisions on interest rates still resided with politicians, the Bank now had a better-informed voice.
That voice became louder as a result of two great leaps forward in monetary policy transparency: the
publication by the Bank, from 1993 onwards, of a quarterly Inflation Report; and the publication of monthly
-
minutes of the meetings between the Chancellor and Governor at which monetary policy was decided the
"Ken and Eddie Show". Both put the Bank's analysis and judgements on the economy and monetary policy
in the public domain, for the first time ever.
This did not give the Bank a vote on monetary policy, but did give it a public voice. That voice became
increasingly influential in shaping external debate on policy through the 1990s, constraining somewhat the
Chancellor's hand. It also re-shaped the Bank's own processes, which became more rigorous and
resource-intensive. Transparency plus a clear target imposed discipline on the Bank as well as the
Chancellor. Whereas before Bank forecasts went into the bin, now they went into the quarterly
Inflation Report.
4
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During this time, I was lucky enough to work on the issue I had joined the Bank to pursue design of the
UK's monetary framework, inflation-targeting. Having been introduced in haste, there were a wide range of
design issues to be researched and agreed. To that end, the Bank hosted an international conference of
central banks in 1995, the fruits of which became the first (and my first) book on inflation-targeting.3 Despite
being the first of its kind, the book was not an instant best-seller. Nor was it subsequently.
With hindsight, most of the important scaffolding of inflation-targeting, its design and processes, was erected
As much as what followed, this was when the UK's new monetary policy
in the early-to-mid-1990s.
The Bank's analytical brain was being rewired to connect with its
framework was forged for good.
operational arms. And the outside world was beginning to take notice. Medium-term inflation expectations in
the UK began to edge down, as policy credibility grew.
As the
Bank's voice on monetary policy grew louder, so too did debate on taking the next step - granting the
Bank formal independence for the setting of monetary policy, vote as well as voice. In 1995, on reflection
Japan conference called "Independence and
rather presumptuously, I wrote a paper for a Bank of
Accountability", making the case for Bank independence and greater degrees of accountability. It was
Bank's
written with the Chief Economist at the time, Mervyn King.4 I often wonder what Mervyn did next.
In 1997, as its first act, the incoming Labour Government took the momentous step of granting the Bank
operational independence for monetary policy. At a stroke, politics was taken out of policy. The Bank's brain
and hands were now fully and durably connected in statute. UK inflation expectations ratcheted down by a
further 50 basis points on announcement, as credibility stepped-up.5 The Monetary Policy Committee (MPC)
was soon formed and met for the first time in June 1997.
Internally, a new machine and procedures were developed to service and support the MPC. The centrepiece
of this support was a meeting called "Pre-MPC". This was a full day of briefing presentations by Bank staff to
the MPC. It is, and remains, the closest you will ever get to economic theatre at the Bank of England. Bank
Staff sit on one side of the amphitheatre armed with Powerpoint presentations, the MPC sit on the other
armed with tricky questions.
As luck would have it, I gave the first-ever pre-MPC presentation at the first-ever pre-MPC. The room was
-
rammed with banks of screens, crowds of people and clouds of cigarette smoke three of the MPC were
smokers, including the Chair Eddie George. I was a bag of nerves. Eddie gave me the nod, I pressed the
button on my PC to start the presentation - and all the screens went blank and an ear-piecing noise let out
around the room, the type of which instantly causes teeth to grind.
3
Haldane (1995).
4
Briault, Haldane and King (1997).
5
King (2002).
5
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With my bag of nerves now full to overflowing, I peered through the fug of Rothmans to see Eddie staring
back at me. Both eyebrows were raised. This was bad news. In central bank circles at the time, the double
eyebrows was career-defining for all of the wrong reasons. Most of my subsequent 25-years has been
managing that decline as gracefully as possible.
Fifteen year later, I returned to pre-MPC on the other side of the table. There was now no cigarette smoke,
but otherwise the format of structured presentations remained the same. Indeed, most of the main MPC
processes remain much the same as at inception. That, I would say, is a sign of success. While MPC
procedures have evolved for the better, and the standard of presentations I now receive is far-higher than
those I used to give, the foundations of the MPC have remained essentially unmoved.
It is no coincidence that durability in monetary policy processes has been accompanied by improved
macro-economic outcomes. Since 1992, inflation has averaged 2% - exactly in line with target (to one
decimal place) and 6 percentage points lower than in the preceding 25 years. The volatility of output has
Contrary to everyone's expectations,
fallen by around half over the same period.6 inflation-targeting has
lasted and delivered a twin-win, with greater stability on both the nominal and real sides of the economy.7
Given the UK's previously chequered monetary history, this truly is a transformation.
Of course, there is a question about how much of this improved performance reflects good luck rather than
good monetary management. In the years running up to the Global Financial Crisis, a period known as the
Great Moderation, these explanations were difficult to disentangle.8 Shocks to the economy were modest
and unthreatening over this period, at least relative to earlier episodes. Governor Mervyn King called this the
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NICE era Non Inflationary Continuous Expansion.9
But the macro-economic period since 2007 has been naughty, not NICE. The past 15 years have presented
as many macro-economic challenges as any in recent history: first the collapse of the global economy
associated with the Global Financial Crisis; then its localised after-shock, the Euro-area crisis; then the
run-up to, and aftermath of, the Brexit referendum; and most recently, of course, the Covid crisis. We have
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gone from a NICE era to a VILE one Volatile Inflation Limited Expansion.
Yet despite those challenges, UK inflation expectations have remained anchored to the 2% inflation target.
In the 1970s, 1980s and 1990s, volatility in near-term inflation and output was mirrored in medium-term
inflation expectations, as credibility swung with the wind. Inflation-targeting has broken decisively that link.
That nominal anchoring, courtesy of inflation-targeting, has in turn eliminated one crucial source of past
macro-economic instability in the UK.
6
Based on data to the end of 2019.
7
Haldane (2020).
8
See Stock and Watson (2003) and Bernanke (2004).
9
King (2003).
6
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And so to the present day. While the essentials of inflation-targeting are as strong as ever, the regime is
being tested as never before. The Covid crisis has seen interest rates fall to their effective lower bound
(ELB) and Quantitative Easing (QE) restarted on a scale that may yet match the decade-long period after the
Global Financial Crisis. By the end of this year, the Bank will hold close to £1 trillion of nominal Government
assets, around half of their total and 40% of GDP. Other central banks find themselves in a similar spot.
Truth be told, this is for me an uncomfortable spot. It is uncomfortable for two distinct but related reasons.
The first, nearer-term, is discomfort at whether continuing monetary stimulus is consistent with central banks
hitting their inflation targets on a sustainable basis. A second, more medium-term, discomfort is whether the
monetary policy strategies being pursued by central banks are at risk of time-inconsistency, fiscal dominance
and an erosion of central bank independence.
The restrictions imposed as a result of the Covid crisis caused an extra-ordinarily large and sharp contraction
in activity, almost without precedent. As these restrictions are lifted, we would expect an equally large and
sharp recovery. That bounce-back is now well underway in the UK. Indeed, current data suggest it is
occurring faster and sooner than expected, with the economy already within statistical spitting distance of its
pre-Covid level. This rapid bounce-back has been quasi-automatic, as restrictions have eased, businesses
have reopened and people have returned to working, shopping and socialising.
But this reflex response is not the only macro-economic force at work. Two further large and powerful
sources of economic energy are also fuelling growth, one public, one private. The public source is the
extra-ordinary degree of additional stimulus that has been provided to the UK and global economies by
monetary and fiscal policy. In the UK, the quantum of additional QE and fiscal easing both presently stand at
around 15-20% of GDP, adding significant further momentum to an already rapidly bouncing-back economy.
The private source of economic energy comes courtesy of the large pool of involuntary savings amassed as
a result of restrictions on spending. For UK households these amount to over £200 billion and for UK
companies around £100 billion. Leakages from this saving lake are already fuelling spending on goods and
assets. And lower than expected unemployment is encouraging more of these savings to be spent in a
virtuous cycle. The size and depth of this saving lake means it could finance demand at scale for some
period to come.
With public and private financial fuel being injected into a macro-economic engine already running hot, the
result could well be macro-economic overheating. When resurgent, and probably persistent, demand bumps
up against slowly-emerging, and possibly static, supply, the laws of economic gravity mean the prices of
goods, services and assets tend to rise, at first in a localised and seemingly temporary fashion, but
increasingly in a generalised and persistent fashion.
7
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This we are now seeing, with price surges across a widening array of goods, services and asset markets. At
present, this is showing itself as pockets of excess demand. But as aggregate excess demand emerges in
the second half of the year, I would expect inflation to rise, significantly and persistently. There are already
some signs of this risk being priced in financial markets. Longer-term financial market measures of UK
inflation expectations have picked up to stand around 30 basis points above levels over the past decade.
There is no evidence so far of inflation expectations, in the UK or elsewhere, becoming durably or
-
significantly de-anchored from target for example, among households or businesses. But it is early days.
Overall, inflation expectations and monetary policy credibility feel more fragile at present than at any time
since inflation-targeting was introduced in 1992. Why do I say that?
By the end of this year, I expect UK inflation to be nearer 4% than 3%. This increases the chances of a high
inflation narrative becoming the dominant one, a central expectation rather than a risk. If that happened,
inflation expectations at all maturities would shift upwards, not only in financial markets but among
households and businesses too. We would experience a Minsky Moment for monetary policy, a taper
tantrum without the taper.10 This would leave monetary policy needing to play catch-up to re-anchor inflation
expectations through materially larger and/or faster interest rate rises than are currently expected.
Even if this scenario is a risk rather than a central view, it is a risk that is rising fast and which is best
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managed ex-ante rather than responded to ex-post. If this risk were to be realised, everyone would lose
central banks with missed mandates needing to execute an economic hand-brake turn, businesses and
households facing a higher cost of borrowing and living, and governments facing rising debt-servicing costs.
As in the past, avoiding that inflation surprise is one of the central tasks of central banks.
These near-term inflation concerns also have a bearing on the medium-term risks facing central banks. After
the Global Financial Crisis, central banks went in large and fast with QE, I believe rightly, to support the
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economy. They then withdrew that stimulus slowly, if at all, to protect the fragile recovery again, I believe
including the Bank's,
rightly. As a result of these actions, central banks' balance sheets, inflated quickly and
never subsequently deflated.
When the Covid crisis struck, central banks again went in large and fast to protect a collapsing economy, I
believe rightly. Balance sheets ratcheted higher. On current expectations, central bank balance sheets are
unlikely to deflate any faster than after the Global Financial Crisis. But this time that policy script feels
stretched. The pace of recovery is significantly faster now than then, bouncing rather than edging back.
More fundamentally, a slow exit risks putting central bank balance sheets on an unsustainable footing.
10
Minsky (1986).
8
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Entering fast and large, and exiting slow and small, puts a ratchet into central bank balance sheets.11 With
large or frequent enough future shocks, this strategy is not time-consistent: either the stock of Government
assets to buy is exhausted or, more likely before that, debt-serving concerns begin to contaminate
perceptions of the future monetary stance. The latter is what academics call fiscal dominance.12 An
asymmetric QE response function nudges us towards that fiscal danger zone and adds to concerns about
the erosion of monetary policy independence. Or that, at least, is the risk.
It is these two points, taken together, that lead me to believe that this is the most dangerous moment
inflation-targeting has so far faced. The answer is not to change the regime itself. Indeed, I can think of few
poorer times to do so. In my view it does, however, call for immediate thought, and action, on unwinding the
Bank's
QE currently being provided, given the state of the economy and central banks' balance sheets. The
on-going review into the process and sequencing of QE unwind is a welcome opportunity to do so.
A dependency culture around cheap money has emerged over the past decade. Only a minority of those
with mortgages have ever experienced a rise in borrowing costs. Fewer still have significant inflation in their
lived experience. Easy money is always an easier decision than tight money. But an asymmetric monetary
policy reaction function is a recipe for a Minsky mistake. Having followed the right script on the way in,
central banks now need to follow a different script on the way out to avoid putting 30 years of progress at
risk.
Financial Stability
The Bank has been bedevilled by bouts of financial instability since its inception. After I joined, these
continued with the failures of BCCI and Barings. Each met with a ratchet response - more regulation, more
regulators. At root, what these failures illustrated was a structural flaw in policy: the Bank was being asked
to look in two directions at once, as both regulator of, and promoter of, the City. Both are useful roles. But
giving one institution both roles invites failure when, as inevitably happens, the wrong balance is struck.
Looked at now, firm failures in the 1980s and 1990s, and the cluster of small banks in the 1970s, were not
close to being financial crises of the scale and severity we would recognise today. Certainly, none of them
were systemic in their impact, either for the financial system as a whole or the wider economy. Contagion
was short-lived and limited. And few losses of job or GDP resulted. The Bank was left with egg on its face,
but neither the City nor the economy were scrambled.
That was probably as much by good luck as design. At the time, the macro-monetary and financial stability
arms of the Bank rarely crossed or co-ordinated. The monetary policy side dealt with the economy, at a
a bird's
macro level. The financial stability side dealt with financial firms, at a micro level. One had eye view,
11
Bailey (2020).
12
See King and Plosser (1985), and Leeper (1991).
9
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the other a worm's eye view. bird and the worm rarely socialised. The Bank's
But the macro-economic brain
was largely detached from its micro-supervisory hands.
You needed only to visit the Bank's restaurant building in the early 1990s to
spot this difference. On the
ground floor was both a wine bar and a pub. If you visited the pub on a Friday you would spot the
economists, probably in knitwear. If you visited the wine bar you would see the bank supervisors, probably
in tweed. Beer and wine do not mix and nor did the beer and wine-drinkers. It was probably just as well
there were no systemic crises at the time requiring these two tribes to co-ordinate their analysis and actions.
The bank failures of the 1980s and 1990s contributed to the decision to strip the Bank of responsibility for
supervising financial firms, soon after monetary policy independence. The two decisions were linked.
Separation, it was said, avoided reputational contamination of monetary policy from financial firm failure.
This, however, came at one obvious cost: it severed, institutionally, any link between the micro and macro,
the brain and the hands. This would come back to haunt, not just the Bank but the world, a decade later.
After the separation of the Bank from the Financial Services Authority (FSA), the new financial services
regulator, the Bank found itself with too little international resource. This was unfortunate because the Asian
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financial crisis was raging. Two new international divisions were set up to plug this gap one on the
monetary policy side headed by Andrew Bailey (another whose progress I have lost track of), the other on
the financial stability side headed by me.
I moved to set up the new division on Monday 10 August 1998. The following Monday, Russia defaulted on
its debts and devalued the rouble, triggering another emerging market-cum-global crisis. The next day I
briefed Eddie George on the Russian crisis. Eddie spoke Russian, had worked in Russia and had an astute
working knowledge of the Russian economy. I was in week two. I wasn't long into my briefing before
eyebrows were raised.
The next few years brought crises aplenty as they spread contagiously through emerging markets. Spotting
these crises, their unique dynamics, the way markets turn, the blend of politics and economics, is part
instinct, part science. The emerging market crises at the time enabled me to cut my teeth on understanding
financial crises. Yet at that time, financial crises were a phenomenon felt to be confined to emerging
markets. Advanced economies, it was thought, knew better. This, too, would come back to haunt us.
Resolving emerging market crises was one thing, redesigning the international financial system to forestall
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them quite another. Working alongside HM Treasury colleagues (including Sir Jon Cunliffe another whose
path I have lost track of), an intensive programme of international reform began with the aim of preventing a
10
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emerging market crises. As part of the Bank's contribution, under Eddie and Mervyn's
repetition of these
guidance, I worked with the Bank of Canada to produce a blueprint for international monetary reform.13
This blueprint proved controversial, as it proposed restrictions on the IMF's ability to extend credit to
countries in crisis. That jarred with IMF orthodoxy, including the then-Deputy Managing Director
Stan Fischer, who at the time was proposing the IMF become an international lender of last resort.14 It also
jarred with US orthodoxy. Under Larry Summers and Tim Geithner, the US Treasury had overseen the
emerging market bailouts from Mexico in 1994 onwards.
In 2002, I was asked by Tim Geithner (now at the IMF) to go to Washington to work on international financial
system design, alongside two former US Treasury colleagues, Nouriel Roubini (now better known as
Dr Doom) and Brad Setser. There were no prizes for spotting the odd one out. My time at the IMF gave me
an insight into the fantastic quality of its staff and the political constraints they often operated under. As for
Tim, I often wonder what he went on to do next.
On return to London I produced another book, on the design of the international financial system.15 This too
failed to make the bestsellers' list. In the period since,
fault-lines in the international financial system have
continued, periodically, to cause global tremors. They will continue to do so until the international financial
architecture is strengthened. With hindsight, I think Stan Fischer was right on the need for a
better-resourced IMF, alongside the international equivalent of a resolution authority for nation states. Alas,
it may take another bout of emerging market crises to instigate this change.
Back in London, I was reassigned to lead a Division working on domestic rather than international financial
stability issues. This was something of an anti-climax. The domestic financial system was, by comparison
with the violent seas of emerging markets, a millpond of tranquillity at the time. Moreover, the prevailing
consensus was that this tranquillity was set to last. In response, the Bank slimmed the resources it devoted
to financial stability by around half.
financial system was riding a credit wave as banks' balance sheets and
The timing was unfortunate. The
leverage ballooned. Every major financial crisis in the past has been presaged by credit waves of this type.16
But this time, it was said, was different. Risk had been dispersed and diversified to the four winds, courtesy
of an ever-more interconnected global financial system and ever-more sophisticated financial instruments.17
The Great Moderation in the economy also meant finance faced fewer shocks than in the past.
13
Haldane and Kruger (2001).
14
Fischer (1999).
15
Evanoff et al (2015).
16
Taylor and Schularick (2012).
17
Greenspan (2002).
11
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When it came to assessing risks to the financial system, unlike with monetary policy, there was no
off-the-shelf model. In pursuit of one, I started looking to other disciplines for inspiration. From the
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mid-2000s, I began discussion with a set of scientists physicists, evolutionary biologists, epidemiologists
on the models they used to understand complex, adaptive systems. I was hoping they might provide some
analytical clues when it came to modelling the complex, adaptive world of finance.
I was in luck. There was a well-developed field of complexity science, with applications in most of the natural
sciences and some of the social sciences. Economics and finance was a notable exception. Once I had
retro-fitted these models to the financial system, I