Andrew Haldane gave that memorable speech about the dog and the Frisbee – it covers the topic almost exhaustively. But the financial sector is not just complex. Dozens of crises over the past few decades were followed by quick policy responses, only to then be followed by some other sort of crisis.
This experience has clearly documented that banks and other components of the financial sector are complex and adaptive systems – they are alive and kicking, so to speak. Just like living organisms, they respond to changes in the environment such as macroeconomic variables or new regulation by behaving differently. In economic terms, incentives respond to a change in circumstances.