Contagion: Epidemiological models and financial crises

Abstract

Since the 1990s, economists have drawn on the epidemiology of emerging infectious diseases to explain the diffusion of shock through an increasingly complex financial system. The successful coordination of public health responses to disease threats, and in particular the epidemiological modelling underpinning infection control, has influenced economists' understanding of the risks posed to the stability of the financial system by 'contagion'. While the exportation of analytic models and frames of reference can be fruitful, reinvigorating the destination domain, such analogizing can have a distorting effect. There are differences between biological and financial systems. Moreover, the migration of highly context-specific epidemiological models may undermine the basis of the analogy. Finally, there may be repercussions for the efficacy of public health in the way that its aims are misconstrued in financial analyses. © The Author 2013.