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Incorporating Cyber Resilience into Computable General Equilibrium Models

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Part of the Advances in Spatial Science book series (ADVSPATIAL)

Abstract

Most countries are becoming increasingly dependent on cyber inputs for business, government, and private pursuits. Disruptions of the cyber system can therefore have extensive economic consequences. Resilience is a major way to reduce consequences such as business interruption after the disaster strikes by promoting business continuity and recovery. One approach to analyzing and measuring its effectiveness is to incorporate resilience into economic consequence analysis models of various types, such as Computable General Equilibrium (CGE) models. These models have several attractive properties that make them especially valuable, including being based on behavioral responses of individual producers and consumers, having a role for prices and markets, having the ` to trace economic interdependence, and being based on a non-linear structure that can reflect flexibility of various components. Cyber resilience is a case of economic resilience, pertaining to preventing: (1) supply-side reduction of cyber product and service disruptions to direct and indirect down-stream customers, which also reduces disruptions to the cyber sectors’ own direct and indirect up-stream suppliers; and (2) demand-side reduction by customers of their losses from cyber disruptions, which also reduces further upstream and downstream losses. We summarize established and new methodological advances in explicitly incorporating cyber resilience into CGE models. Several types of resilience are inherent, or already naturally included, in CGE models in relation to their core focus (e.g., substitution of inputs in relation to the input scarcity and the allocative mechanism of price signals). Other types of resilience are adaptive in terms of ad hoc reactions after the disaster strikes (e.g., business relocation and lining up new suppliers from within or outside the affected area). Our framework for incorporating various cyber resilience tactics into CGE models is based on economic production theory in relation to decisions regarding inputs and outputs. We explain the methodological refinements needed and provide real world examples of cyber resilience tactics.

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Notes

  1. 1.

    Working overtime hours would be an adaptive response if improvised after the disaster strikes, while incorporating overtime work as a disaster response into a business continuity plan would be an example of enhanced inherent resilience capacity.

  2. 2.

    Resilience is sometimes conflated or confused with related terms such as vulnerability and sustainability. The reader is referred to Rose (2017) for a more detailed discussion.

  3. 3.

    More detail on specific resilience tactics in the cyber domain, such as satellite phones and Cells on Wheels (COWs), are discussed in Rose and Miller (2019).

  4. 4.

    Note that many resilience tactics are not constants, but either increase or decrease in their potency over time. For example, Draconian conservation, such as asking employees to work without air-conditioning or heat, are likely to run into opposition after a short time, and inventories will run out. On the other hand, substitution possibilities and technological change capabilities typically increase over time.

  5. 5.

    We acknowledge the possibility that a disaster may also reduce substitution possibilities. This can be accounted for by reducing substitution elasticities using the same algorithm. In addition, there is time dimension to this reduction and to adaptive input substitution resilience. Time allows producers to overcome the stress and to innovate.

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Rose, A. (2019). Incorporating Cyber Resilience into Computable General Equilibrium Models. In: Okuyama, Y., Rose, A. (eds) Advances in Spatial and Economic Modeling of Disaster Impacts. Advances in Spatial Science. Springer, Cham. https://doi.org/10.1007/978-3-030-16237-5_5

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