The Robustness of Economic Activity to Destructive Events

Abstract

While the efficiency of economic arrangements is the primary focus of economic research, we may ask whether the efficiency improvements that have been experienced in the developed economies have been accompanied by increased vulnerability of output to catastrophic events. In order to address this question usefully, we need some implementable measures of vulnerability of output to disruptive events or large shocks. This study attempts to provide some rudimentary measures of this potential increased vulnerability in economic systems. To do so we draw on concepts from information theory, robust system design and, indirectly, robust statistics to define a measure of the robustness of production, and apply the measure to some cases of interest.

Keywords: Entropy, redundancy, robust design