On the normative relevance of systemic risk

The social world is permeated by risk exposure, and especially systemic risk, that is, risk we cannot really hedge against or protect ourselves from. Systemic risk is determined by the basic structure of a social system and affects the kind of choices we are able to make in our lives. We argue that when systemic risk is 'too low' society becomes stagnant as it does not allow for pro-cesses of creative destruction that, according to a long tradition of economic thinking, are at the core of what allows for growth, and thus progress. In the same way, when levels of systemic risk are too low, the range of option risks that individuals can decide to bear is itself too low and thus hampers their self-respect. At the same time, we will argue that when levels of systemic risk are too high, society runs the risk of marginalizing the potential contributions to innovation and growth of a large part of its members, for when there is too much systemic risk, too much of one's life is uncertain, and thus investing in one's future becomes less important. Excessive levels of systemic risk entail a lesser ability to pursue one's conception of the good.