That is because these shocks are very likely to fall on peripheral nodes unconnected with, and hence unlikely to cascade through, the system as a whole. But these  2  BIS central bankers’ speeches  systems are also vulnerable to targeted attack on the core nodes – the “super-spreaders” – whose hyper-connectivity risks generating a systemic cascade (Albert, Jeong and Barabasi (2000)). Another typical feature of complex systems is that they tend to organise themselves as a hierarchy, with a well-defined structure of systems and sub-systems (Simon (1962, 1976)). Herbert Simon believed hierarchical structures of a particular type were likely to dominate, namely ones which were “decomposable”. By this he meant organisational structures which could be partitioned such that the resilience of the system as a whole was not reliant on any one sub-element. 1 For evolutionary reasons of survival of the fittest, Simon posited that decomposable networks were more resilient and hence more likely to proliferate as a species (Simon (1962)). 2 While Simon’s evolutionary theory may be a reasonable long-run description of some realworld complex systems – natural and biological – it may be less good as a description of the evolution of socio-economic systems. The efficiency of many of these networks relies on their hyper-connectivity. There are, in the language of economics, significantly increasing returns to scale and scope in a network industry. These returns increase with network connectivity (Goldin and Mariathason (2014)). Think of the benefits of global supply chains and global interbank networks for trade and financial risk-sharing.

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