You can never go wrong with sticks and porter

With all the good-old fashioned panic outside the banks and in the City, one of the strangest topics of debate is whether or not the people who were queueing outside Northern Rock branches to withdraw their money were acting rationally.

A silly question. The only possible answer is, of course it isn't rational: the only way a British bank could possibly collapse is if everyone started panicking and taking out their dosh at the same time, which is what people have been doing.

The question is, is this sort of crazy, irrational behaviour understandable? Again, of course it is. Humanity is hardly noteworthy for a consistent adherence to rationality, after all. If people feel their life savings are at risk – especially if everyone else is doing the one thing that will put them at risk – it's hard to say otherwise. (This Graun blog and these Times pieces pretty much says the same if you prefer a serious slant to it). This behaviour is even more understandable when you realise that no one, really, understands finance and economics. Certainly not me; not most journalists; not the government, which is flapping like an especially camp pigeon when a sparrowhawk hoves into view; not even the people who are paid to write about these things (though I do know they are less confused about it than me).

Even the loveable scamps in the City who try to scrape together enough for a new Ferrari by gambling with everyone else's pension money don't seem to know what's going on. In fact, they seem even more prone to herd instinct and panic than anyone else. "Ohmygod, like, the banks have lent sooooo much money to people who can't afford it. And now the banks are, like, totally, fucked and have nooo money and everyone else is selling. We'd better do what everyone else is doing" sparks a grin-and-bear-it market. Later they notice how crazy it is and soon: "Ha, ha. Where are your market forces now? The government won't let the banks go bust and all those idiots who sold have pushed the share price down far too low and now everyone's buying. Let's do what everyone else is doing," sparks a bullshit market.

Still, I did try to do the rational thing in the face of this possible economic meltdown and my experiences might help illuminate the dangers and difficulties of doing so. When I realised that the government would guarantee all savings at Northern Rock, the reassuring news that lower-income taxpayers would, if needed, be forced to bail out in full people who had invested a million or more in a private concern, I knew that the only smart thing to do was get some of that and invest in one of the bank's higher interest things.

Of course, I needed to raise the cash to do so. So I liquidated one of my offshore concerns. (I do hope the pygmies at the plantation will find another source of income, but I did keep telling them that they should learn how the markets operated, that free trade was their best hope for the future and that hardened souls like they should be able to exploit the panic of today's cosseted Wall Street types. I may as well have saved my breath).

Anyway, down to the nearest branch sauntered I, briefcase of ready cash handcuffed to my wrist. And what did I find? A bunch of ignorant peons, in a line stretching round the block. That's what. Worse, they seemed to be taking their money out of the only 100% state-backed bank in the country and trying to hide it under the mattress in whichever god foresaken hovel they had been able to afford after selling their first born to a lifetime of servitude in Northern Rock's call centre.

I tried to tell them that I was going to invest money which would make theirs safer. I tried reasoning with them in the reassuring manner of Jimmy Stewart in It's A Wonderful Life (although I might have misremembered his spiel and I now wonder if he did, in fact, tell the worried customers they were full of shit before threatening to hit an old lady with collected works of Milton Friedman.) I even told them that they should listen to their superiors in the government who told us there was nothing to worry about. Didn't make any difference.

Nor did the bank help matters. If Northern Rock was serious about reviving its fortunes, they would have ushered me to the front to the queue. Maybe given me a spot of lunch, with champagne poured by the more attractive female members of staff, and possibly allowed me to puff away on a cigar while the manager polished my shoes, before gratefully accepting my money. As it was, I walked away in disgust and left them to it.

Late today I learned that the panic has subsided and people are now queueing to put their money back where it was, despite the fact the bank's liquidity position – the thing that sparked the whole crisis – is the same.

For a science that depends on judging how people will react in a particular set of circumstances, economists have a real problem with our predisposition towards crazy behaviour. It does tend to make predictions something of a guessing game. I believe there have even been attempts to get round this difficulty with theories about how our first instinct is the right one or the crowd is often right. However, I'm guessing these weren't devised by African-Americans who faced a capital charge in Alabama in the 50s or anyone who has been reporting on, or investigating, the Madeleine McCann thing.

I think I'll invest my money in a big bar of gold, a shotgun, a cellar of fine wines and a troupe of Colombian dancing girls. It's the smart thing to do – we might even call it understandable – in the face of such understandable irrationality.