Although it is certainly true that some traffic jams and market crashes are triggered by a particular outside event (for example, a road accident or the announcement of a particular company going bankrupt), more often than not there is no obvious reason either for their appearance or disappearance. In particular, they are not being engineered or controlled by some mysterious “invisible hand” operating in the background. So what makes them appear and disappear of their own accord? We’ve all had the experience of driving happily along an apparently clear highway, only to suddenly find ourselves in a traffic jam for no apparent reason. And then, just as mysteriously, the jam disappears. We drive on, looking for an obvious cause for the jam such as an accident – but there is none. The same happens in financial markets, where it is actually quite rare that the cause of a given market crash can be assigned to a particular event or set of events. Indeed, for every financial expert who says that the cause of a given crash was X, you can find one who says it was Y.
