Interdependence: good, bad, or indifferent?

Interdependence is an observable fact of social and economic life. However, while the term is used frequently, it is sometimes conflated with related terms like dependence, and scholars debate whether interdependence should be increased or decreased, for example, between trading nations. From an Austrian perspective, interdependence is a central characteristic of economics, enabling such phenomena as the division of labor. In this paper, we use multiple theoretical lenses, particularly drawing on insights from Austrian economics, to clarify and contextualize what is meant by interdependence. We first seek to establish a precise understanding of what it means for two agents to be interdependent, and then identify in what circumstances interdependence can be a desirable or undesirable system trait. We find that interdependence itself is a neutral concept, neither inherently good or bad. While interdependence is a trait of some successful systems, it can also introduce vulnerabilities. More specifically, depending on the nature of the goal attainment between interdependent agents, interdependence can either enable cooperation and mutual benefit, or it can result in misaligned incentives and promote the propagation of disruptions. A richer understanding of interdependence will be of benefit to economists and social scientists engaged in both descriptive and proscriptive research endeavors.