Ld
Sec. 21] THE RISK ELEMENT 297
transmitted to thousands. A great mob of easily led in-
vestors, eagerly searching for “straight tips” which may
bring instant wealth, make their mistake in common, and
when the mistake is disastrous they try, en masse, to escape.
A sudden rush of all the passengers on a ferry-boat to one
side will produce a “list ”’ in the boat’s position, and some-
times cause it to capsize, though the independent move-
ment of the individual passengers will seldom or never
produce disaster. So also the sudden general realiza-
tion of unforeseen danger on the part of the investing
public may submerge the craft of credit and those whom
it has hitherto borne along in safety. In short, a general
crisis bears the relation to individual bankruptcies which
a general conflagration bears to individual fires. The key
to the study of either crises or conflagrations is the exist-
ence, in place of independent hazards, of interdependent
ones. So far as conflagrations are concerned the prin-
ciple of interdependence is distinctly recognized by stu-
dents of fire insurance, and in consequence, each company
strives to keep its own fire risks independent of each
other, by not having too many in the same locality; but
so far as crises are concerned, the principle has not yet been
sufficiently emphasized by students of economic history.
The same principle applies to the phenomenon of a run
on a bank. The opinions of the bank’s solvency are not
formed independently but interdependently. A year or
more ago the newspapers reported that, a policeman and
a crowd of people being collected on the steps of one of
the Wilkes-Barre savings banks to escape the rain, two
Hungarian depositors who were passing jumped to the
conclusion that the bank had been attacked by burglars,
and circulated the disturbing news in the Hungarian
colony, with the result that when the bank opened for busi-
ness many depositors made a run upon jt.o ol a =
We see, then, that where speculation is imitative, it is
dangerous alike to those who engage in it and to the public.
