But it is estimated to stand at anything up to $ billion in 2003 prices. Across Asia, growth rates were reduced by SARS by between 1 and 4 percentage points. Yet in the final reckoning, morbidity and mortality rates were, by epidemiological standards, modest. Only around 8000 people were infected and fewer than 1000 died. On 15 September 2008, Lehman Brothers filed for Chapter 11 bankruptcy in a New York courtroom in the United States. Panic ensued. Uncertainty about its causes and contagious consequences brought many financial markets and institutions to a standstill. The market for Credit Default Swaps (CDS) froze, as Lehman was believed to be counterparty to around $ trillion of CDS contracts. Media and modern communications fed this frenzy and transmitted it across markets. Banks hoarded liquidity for fear of lending to infected banks, causing gridlock in term money markets, spreads on lower-rated companies’ bonds spiked and there was an effective boycott of the remaining large US investment banks. Professor Paul Krugman, Nobel prize winner in economics, commented: “Letting Lehman fail basically brought the entire world capital market down.” The macroeconomic impact of Lehman Brothers’ failure will never be known with any certainty. IMF forecasts of global growth for 2009 have been revised down by over 5 percentage points since Lehman’s failure. Yet in the final reckoning, the direct losses from Lehman’s failure seem likely to be relatively modest. Net payouts on Lehman’s CDS contracts amounted to only around $ billion. These similarities are striking. An external event strikes.

There are perhaps two clear lessons from this experience. First, the importance of targeting high-risk, high-infection individuals – the “super-spreaders”. This principle has an impeccable epidemiological pedigree. 30 For randomly distributed networks, targeted treatment has no value. But for networks exhibiting long tails – which is most of them, certainly including finance – targeted vaccination programmes offer a much more effective means of curtailing epidemics. Not for nothing is epidemiology the origin of the 80/20 principle. 31 For a number of diseases, including SARS and measles, the distribution of infection rates suggest 20% of the population is responsible for 80% of the spread. Similar patterns have been found in the transmission of HIV/AIDS, foot and mouth and computer viruses on the internet. In each of these cases, the right response has been shown to be targeted vaccination of the superspreaders. The second lesson concerns the importance of a system-wide approach to the management of network problems. The Australian HIV/AIDS programme was system-wide, tackling both the causes and consequences of the disease and its spread. Fisheries management provides a second revealing case study. Concerns about the collapse of fisheries came to a head during the 1970s and 1980s, leading to the imposition of fishing quotas for various species. The effect of quotas was, at best, mixed. 29  Bowtell (2005, 2007). 30  May and Anderson (1991). 31  May and Anderson (op.cit. ), May (2005). 14  BIS Review 53/2009  Recently, there has been a growing recognition of what went wrong.