And last but not least, good governance requires a fair legal framework and impartial enforcement of this legal system that protects property and individual rights and constitutes a strong base for prudent policy-making. The rules need to be preset, predictable and applied equally regardless of whether the parties in dispute are domestic or foreign, individuals or state. Enforcement of rules in speedy and impartial manner would create a self-fulfilling environment, where adhering to contracts voluntarily becomes the norm and there is little need to formally recourse to the legal system. How can we match governance practices with the current financial turbulence? It is too early to make a judgment about the institutional failures that have led to current financial turbulence, but we have a few clues on what went wrong. Lack of transparency and accountability is at the top of the list. In retrospect there were some important gaps in the U.S. regulatory structure that caused poor underwriting and some fraudulent practices in the sub-prime mortgage sector. Parties in the originate to-distribute chain did not have incentives to generate and provide information on the quality of assets. We can add poor investor duediligence practices and poor performance of credit rating agencies to that list. Public disclosures required of financial institutions were not enough to shed light to the risks  2  BIS Review 38/2008  associated with their on- and off-balance sheet exposures. Public authorities were way behind in assessing and regulating the complex financial instruments created by financial engineers.

In transportation systems, ABMs have been used for traffic management, taxi dispatch, traffic signal control 6  and combined rail and road transport planning. Long before the age of Uber, ABMs were being used to 4 5 6  For example, Pelechano, Allbeck, and Badler (2007). For example, Rauh, Schenk and Schrödl (2012). For the review see Chen and Cheng (2010) 15  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  15  7  maximise the efficiency of taxi pick-ups. They have been used as a means of undertaking air traffic control on a decentralised basis, including by the US Federal Aviation Authority. As well as increasing the efficiency of routing, this decentralised approach can improve aircraft safety by serving as a backstop when communication with a central air traffic controller is lost. 8  A more recent application of the same technology is autonomous vehicles, such as driverless cars. As with aircraft, these too need to solve a complex co-ordination problem, taking account not just of the environment but the behaviour of other agents. As with aircraft, these models can be used to demonstrate the scope for both efficiency savings (it is estimated each autonomous vehicle can replicate the performance of 11 conventional ones) and safety improvements (it is estimated an autonomous vehicle network might reduce road accidents by over 90%). 9  Figure 8: Air traffic and transport control  Figure 9: Electricity grids  Source: United States Air Force (public domain). Military air traffic controllers in a control tower (image available here).