The Calculus of Cataclysm: How Economies Absorb, Adapt, and Evolve

Series: The Calculus of Cataclysm: How Economies Absorb, Adapt, and Evolve Series HomeThe Myth of the Rational Actor: When Micro-Foundations Meet a Messy WorldThe Engines of Re-Creation: Technology, Logistics, and the Birth of New WorldsThe Architect's Hand: How Policy Designs Markets and Directs DevelopmentThe Fault Lines of Prosperity: How Shock Reveals Hidden VulnerabilityModeling the Cascade: System Dynamics and the Unfinished Project of Economic Resilience In 1944, as Allied bombers leveled German cities, a quiet revolution in economic thought was being finalized in a study at Princeton. The economist Oskar Morgenstern, collaborating with the mathematician John von Neumann, published Theory of Games and Economic Behavior. Their work sought to formalize the logic of strategic decision-making—the very calculus of consumers and firms described in microeconomic textbooks. Yet, outside their ivory tower, the world was demonstrating a brutal truth: the elegant equations of utility (U) and profit (π) were being overwhelmed by forces no individual could calculate. Rationing boards overrode consumer choice; entire industries were commandeered by the state, rendering profit maximization irrelevant; investment principles were subordinate to survival. The war revealed a fundamental gap: the rational micro-foundations of economics, while logically coherent, form a fragile scaffold when the structure of the economy itself is being violently reshaped. ...

Series: The Calculus of Cataclysm: How Economies Absorb, Adapt, and Evolve Series HomeThe Myth of the Rational Actor: When Micro-Foundations Meet a Messy WorldThe Engines of Re-Creation: Technology, Logistics, and the Birth of New WorldsThe Architect's Hand: How Policy Designs Markets and Directs DevelopmentThe Fault Lines of Prosperity: How Shock Reveals Hidden VulnerabilityModeling the Cascade: System Dynamics and the Unfinished Project of Economic Resilience In the winter of 1956, the Ideal-X, a converted World War II tanker, sailed from Newark to Houston carrying 58 uniform metal boxes. It was the maiden voyage of the modern shipping container. The dockworkers’ unions, whose entire culture and power were built around the slow, skilled, and labor-intensive process of break-bulk loading, immediately recognized the threat. Their resistance was not irrational; it was a rational defense of a world about to be erased. They fought to protect detailed “manning clauses” in their contracts, a last stand against a geometry—the box—that would not just change shipping, but collapse economic geography itself. The container’s triumph was not merely a logistical improvement; it was a spatial revolution that demolished old cost structures and created entirely new ones, demonstrating how a single innovation can act as a battering ram against the status quo. ...

Series: The Calculus of Cataclysm: How Economies Absorb, Adapt, and Evolve Series HomeThe Myth of the Rational Actor: When Micro-Foundations Meet a Messy WorldThe Engines of Re-Creation: Technology, Logistics, and the Birth of New WorldsThe Architect's Hand: How Policy Designs Markets and Directs DevelopmentThe Fault Lines of Prosperity: How Shock Reveals Hidden VulnerabilityModeling the Cascade: System Dynamics and the Unfinished Project of Economic Resilience In the 1980s, as the electronics revolution gathered pace, France faced a strategic dilemma. The dominant Anglo-American trend was toward neoliberal deregulation and a retreat of the state. Yet, French technocrats believed in the power of directed development. Their solution was a dual-track innovation policy: lavish “Grands Programmes” of direct subsidies for national champions in aerospace, nuclear, and high-speed rail, alongside the creation of the Crédit d’impôt recherche (CIR), a broad-based tax credit to stimulate R&D across the entire private sector. This was not an inconsistency, but a sophisticated portfolio approach. The state was acting as a venture capitalist for the nation, making big, concentrated bets on select “moon shots” while also seeding a thousand smaller experiments through a market-friendly tax instrument. ...

Series: The Calculus of Cataclysm: How Economies Absorb, Adapt, and Evolve Series HomeThe Myth of the Rational Actor: When Micro-Foundations Meet a Messy WorldThe Engines of Re-Creation: Technology, Logistics, and the Birth of New WorldsThe Architect's Hand: How Policy Designs Markets and Directs DevelopmentThe Fault Lines of Prosperity: How Shock Reveals Hidden VulnerabilityModeling the Cascade: System Dynamics and the Unfinished Project of Economic Resilience When Hurricane Katrina made landfall in New Orleans on August 29, 2005, it delivered a hydrometeorological shock of catastrophic force. But the resulting economic and human disaster was not distributed evenly by the wind or water. The tragedy laid bare a pre-existing human geography of vulnerability. Those with cars, credit, and networks outside the city evacuated. Those without—disproportionately the poor, the elderly, and Black residents—were left behind. The analysis is stark: the magnitude of economic loss depended not on the storm’s physics alone, but on the economic and social resources people possessed before the disaster. Katrina was not a natural disaster; it was a social and economic disaster triggered by nature, proving that vulnerability is not a condition of fate, but a product of structure. ...

Series: The Calculus of Cataclysm: How Economies Absorb, Adapt, and Evolve Series HomeThe Myth of the Rational Actor: When Micro-Foundations Meet a Messy WorldThe Engines of Re-Creation: Technology, Logistics, and the Birth of New WorldsThe Architect's Hand: How Policy Designs Markets and Directs DevelopmentThe Fault Lines of Prosperity: How Shock Reveals Hidden VulnerabilityModeling the Cascade: System Dynamics and the Unfinished Project of Economic Resilience In the 1950s, at the Massachusetts Institute of Technology, an engineer named Jay Forrester grew frustrated. The linear, equilibrium-focused models used in business and economics seemed ill-equipped to handle the feedback loops, time delays, and non-linearities he saw in real industrial systems. In response, he pioneered System Dynamics (SD), a modeling approach that explicitly maps how stocks (like population, capital, or pollution) accumulate and how flows between them are governed by feedback. One of his first applications was a model of a supply chain, revealing how small fluctuations in retail demand could cause wild, amplified swings in factory orders—a phenomenon later known as the “bullwhip effect.” Forrester had created a tool to simulate cascades. ...