The Park Ranger, Stability, and Resilience
By Arnold Kling
The relevant insight in Holling’s work is that resilience and stability as goals for an ecosystem are frequently at odds with each other. In many ecosystems, “the very fact of low stability seems to produce high resilience”. Conversely, “the goal of producing a maximum sustained yield may result in a more stable system of reduced resilience”. Minsky’s hypothesis is thus better described as “stability breeds loss of resilience”, not “stability breeds instability”.
Ashwin refers to C. S. Holling, who distinguishes stability from resilience. A system can be stable with respect to small disturbances but lack resilience relative to large shocks.
The park ranger, in my ongoing metaphor, allows the rain forest to suffer from small disturbances in order to preserve its resilience. The museum curator creates a rain forest that is more stable with respect to small disturbances but less resilient to large shocks.
That may be part of what I am getting at with the metaphor, but it is not necessarily the main point. The curators could indeed reduce the resilience of the system by trying to stabilize it, and this may very well be a good way to describe the impact of financial regulation. However, I think that curators can do harm in more ways than than just reducing the resilience of a system. Their actions can have unintended and unforeseen consequences because they do not understand the system as well as they believe that they understand it.