As a result of the recent financial crisis, there has been significant public debate on the role of the financial sector in bringing about the ""Great Depression."" More generally, there has been debate about whether the current industry structure has enhanced social welfare or served a...

We present an economic model of systemic risk and show that each financial institution's contribution to systemic risk can be measured as its systemic expected shortfall (SES), i.e., its propensity to be undercapitalized when the system as a whole is undercapitalized. SES increases in the...