Wednesday, 22 July 2015

Monday, 29 June 2015

The psychology of bank runs

The announcement today that Greek banks will be closed at least until the referendum on Sunday was apparently prompted by the decision of the European Central Bank (ECB) to end the financial support that has allowed the banks to function despite people withdrawing their money for months. The behaviour of the public in withdrawing their money has been described as a ‘bank run’ and, in some places, a mass panic. Based on our research and the wider literature on so-called ‘panics’ in crowds, three simple points can be made about the current Greek bank run.

1. It is misleading to describe the behaviour of people withdrawing their money as ‘mass panic’. In ordinary conversation, the term ‘panic’ is used to talk about, and to do, different things (such as blaming, excusing and so on); but one consistent association is that of the abandonment of social rules through undue haste. Yet the crowds depicted queuing at Greek ATMs, like those observed by sociologists studying bank runs, have been cooperative and orderly. Another association of the term ‘panic’ is extreme or sudden emotion. But, as is often the case in bank runs, the people queuing were also relatively calm. This suggests that emotion is not the defining issue in bank runs at all.

2. Participating in a bank run, particularly when it’s already begun, is often a reasonable course of action for the individuals concerned. Another implication of the term ‘panic’ is that such behaviour is self-defeating and irrational. In his study of the Home State Savings Bank Run in Cincinnati in 1985, Johnson pointed out that, when everybody else is taking their money out, the real risk is not to oneself but rather being last in the queue and the money runs out. All the individual withdrawals may lead to the collapse of the bank, and so have damaging consequences for the wider collective (including those who have yet to take their money out); yet appeals for people to be patient or to trust the bank would only be heeded where they perceive others (including those other banks and businesses withdrawing funds) to be patient and trusting.

3. Reassurances and other communicative acts may inadvertently create and sustain a bank run. In their study of the 2007 Northern Rock bank run, Gillespie and Cornish note that when the Bank of England gave Northern Rock an emergency loan, this was widely seen as a signal of the bank’s imminent demise. The BBC reported that ‘Treasury Select Committee chairman John McFall urged Northern Rock customers not to panic’. Yet, in a situation where trust was diminishing, such reassurances are likely to have backfire effects – which was precisely the case for Northern Rock.

A last point is that one reason that bank runs are described as panics is because the run is apparently based on a false belief or rumour. From the outside, and with access to all the relevant information, the commentator might be able to judge that the rumours were false – for example that the bank is not really in trouble (yet) and that there is no need (yet) to withdraw funds. But in the current context, when bankers and their allies in government have repeatedly lied and have constructed complex arrangements for their own profits around a series of financial fictions, who’s to say that the rumour among the public about the trustworthiness of the bank is an unreasonable belief? Who should people trust?

Arabic version:

Greek version:

Wednesday, 20 May 2015

Letter from Santiago: Disaster central

I am currently in Santiago, Chile, meeting with colleagues at the Pontificia Universidad Católica de Chile to discuss disaster research. Chile is an obvious place for such research, since it regularly suffers from a variety of natural disasters. In the last year there have been two volcano eruptions, an earthquake, flooding and landslides as well as a massive fire at Valparaíso which destroyed over two thousand homes.

I’ve been hearing about research which is investigating why it is that, in disasters, as well as many useful contributions people also donate a lot of things that survivors do not need. Some examples mentioned included a belt buckle, make-up, flags, and a wedding dress. Sorting through the donations to identify the useful contributions can be a lot of work for someone, and my colleagues’ research aims to help understand how to make the best of the inevitable and welcome desire to help that is associated with emergencies and disasters so it can contribute to more effective disaster recovery.

While this Chilean research focuses on help given by people outside the disaster, my own work has focusesd on the behaviour of survivors themselves. Here are the key points, in a blogpost-sized summary.

One of the features of crowd behaviour in mass emergencies that warranted explanation was the way that people who were strangers only minutes before could display forms of social support and mutual aid normally associated with groups where there was a history of solidarity - as took place for example among survivors of the July 7th 2005 London bombings. People took risks to help others. They delayed their exit to tie tourniquets. They went out of their way to share bottles of water and provide a word of comfort.

While not universal, the finding of solidarity among survivors of emergencies is relatively common. Existing psychological explanations for social behaviour in disasters - pre-existing social networks (or so-called ‘social capital’) or family ties - did not apply in many cases. Our analysis suggested that the shift in behaviour towards solidarity was due to a psychological shift based on the changing social context. An emergency or disaster can create a sense of common fate - a situation where people were now grouped together instead of positioned as individuals. In Gestalt terms, the ‘figure and ground’ shifts from ‘me in relation to other individuals’ to ‘us in relation to the emergency/threat’. In such events, survivors often describe a new sense of ‘we-ness’, which in our language is a shared social identity. Sharing a social identity means that the boundaries of concern become more inclusive. People give support to others because the ‘others’ are now ‘us’.

This analysis offers an alternative to previously-dominant understandings of crowd behaviour in emergencies as irrational ‘mass panic’. Instead, it promotes the idea of spontaneous self-organization in crowds of survivors, who act as the ‘fourth emergency service’ in the absence of professional responders – as has been seen in events as diverse as the World Trade Centre evacuation, the Hillsborough disaster and Hurricane Katrina . Our current research, on solidarity at the 2010 Chile earthquake and on the informal orderliness that maintained crowd safety at an outdoor music event that was almost a disaster, add to this analysis some details of the underlying process. They each show that shared social identity leads not only to the motivation to help strangers in emergencies but also to expectations that others (strangers) will be supportive of group members. These expectations of support in turn are the basis of collective efficacy and coordinated action for the group.

Our account also has some implications for professional emergency responders. If through shared social identity people in crowds have the psychological capacity to support each other and thereby contribute to their own coping and survival, then approaches which treat crowds as ‘problems to be managed’ and attempts to coerce, control the crowd or withhold information are worse than useless. As we have argued, such exclusive ‘command and control’ approaches risk creating anxiety and disempowerment. Instead, professional responders and those working in crowd safety need to build upon the crowd’s capacities by giving the crowd the information people need to act and organize effectively.

In suggesting that crowd psychology is the basis of collective resilience, this account also offers a potent critique of individualism. While the dominant discourse presents individualism as the highest form of rationality, our research turns this around by showing that very often it is through understanding oneself as part of the crowd that safety is enhanced. Examples of doors being blocked in emergency evacuations suggest that it is acting as an individual in a collective setting risks turning an emergency into a disaster.