LAUSR

Abstract The 2008 financial crisis illustrated the potential for the failure of a single industry to threaten the functioning of the entire economy. By reconstructing the ecological approach to systemic risk, this paper argues that there are two key factors that enable this oversized risk. The first is the level of risk across the system, which is shown to be intensified in systems that exhibit interconnectedness, complexity, mismatches between knowledge and activity, and low redundancy. The second is the extent to which the system serves as a widespread necessary condition, that is a universal intermediary, for other social practices. This paper shows how these factors apply to pre-crisis finance and, how they apply to the contemporary networked digital economy, with potentially devastating economic and social consequences.