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Superconnected, Complex and Ultrafast: Governance of Hyperfunctionality in Financial Markets
In: Complexity, governance & networks, Band 3, Heft 2, S. 12
ISSN: 2214-3009
Increased trading with financial instruments, new actors and novel technologies are changing the nature of financial markets making trade faster, more information dense and more globalized than ever. These changes in financial markets are not incremental and linear, but transformative with the emergence of a new "machine-ecology" with intricate system behavior and new forms of systemic financial risks. We argue that the nature of these changes pose fundamentally new challenges to governance as they require policy-makers to respond to system properties characterized by not only complex causality, but also extreme connectivity (i.e. global), ultra-speed (i.e. micro-seconds) and "hyperfunctionality". Governance can fail at the system level if a subsystem performs its function to such an extreme; this could jeopardize the efficiency of the system as a whole. We elaborate in what ways governance scholars can approach these issues, and explore the types of strategies policy-makers around the world use to address these new financial risks. We conclude by pointing out what we perceive as critical research fronts in this domain.
Global Governance Dimensions of Globally Networked Risks: The State of the Art in Social Science Research
In: Risk, hazards & crisis in public policy, Band 8, Heft 1, S. 4-27
ISSN: 1944-4079
Global risks are now increasingly being perceived as networked, and likely to result in large‐scale, propagating failures and crises that transgress national boundaries and societal sectors. These so called "globally networked risks" pose fundamental challenges to global governance institutions. A growing literature explores the nature of these globally networked or "systemic" risks. While this research has taught us much about the anatomy of these risks, it has consistently failed to integrate insights from the wider social sciences. This is problematic since the prescriptions that result from these efforts flow from naїve assumptions about the way real‐world state and non‐state actors behave in the international arena. This leaves serious gaps in our understanding of whether networked environmental risks at all can be governed. The following essay brings together decades of research by different disciplines in the social sciences, and identifies five multi‐disciplinary key insights that can inform global approaches to governing these. These insights include the influence of international institutions; the dynamics and effect of international norms and legal mechanisms; the need for international institutions to cope with transboundary and cross‐sectoral crises; the role of innovation as a strategy to handle unpredictable global risks; and the necessity to address legitimacy issues.