Systemic risk is emergent and irreducible to the sum of individual risks

Evidence

But most of all, what we couldn’t see coming was something that the instruction sheet said was irrelevant, a form of risk that wasn’t reducible to the sum of individual risks: systemic risk. Systemic risk is ever present as a residual: it’s the risk you cannot diversify away. But it is also emergent from within and amplified by the interlinking of individual agents’ decisions in a way that is not predictable from knowledge of those individual decisions. Systemic risk, the risk that cannot be foreseen, the bullet in the chamber of the gun, is what the different elements discussed here combined to produce. Systemic risk blew the efficient market down. — Mark Blyth, Austerity, 134

Categorization

• DEFINE: Precise definition of systemic risk — not diversifiable, emergent from interlinked decisions. This is the load-bearing concept for the whole austerity argument.
• XREF: Directly connects to Mattei’s foundational austerity work and the broader anti-neoliberal critique — this is the causal/technical core of why 2008 refutes the efficient-market instruction sheet. — connects to: Algorithmic risk prediction individualizes insurance and erodes social solidarity — Aris Komporozos-Athanasiou, Speculative Communities: Living with…, 421; Disembedding mechanisms remove control from individuals and create collective risk — Anthony Giddens, The Consequences of Modernity, 310; Individually rational risk-shifting trades become immoral and systemic-risk threats if widely practiced. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 199 (+3 more)

Broader Connections

• Individually rational risk-shifting trades become immoral and systemic-risk threats if widely practiced. #exemplifies (0.80) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 199
• Algorithmic risk prediction individualizes insurance and erodes social solidarity #expands (0.75) — Aris Komporozos-Athanasiou, Speculative Communities, 421
• Disembedding mechanisms remove control from individuals and create collective risk #complicates (0.75) — Anthony Giddens, The Consequences of Modernity, 310
• Financialization treats risk as probabilisable, displacing close knowledge of the object valued #expands (0.72) — Ève Chiapello, Financialisation of Valuation, 35