Good post, thank you for it. Linking this will save me a lot of time when commenting...
However I think that the banking case is not a good application. When one bank fails, it makes much more likely that other banks will fail immediately after. So it is perfectly plausible that two banks are weak for unrelated reasons, and that when one fails this pushes the other under as well.
The second one does not even have to be that weak. The twentieth could be perfectly healthy and still fail in the panic (it’s a full blown financial crisis at this point!)
Yup, you can always have a domino-effect hypothesis of course (if it matches the timeline of events), rather than positing some general antecedent cause in common to all the failures.
Good post, thank you for it. Linking this will save me a lot of time when commenting...
However I think that the banking case is not a good application. When one bank fails, it makes much more likely that other banks will fail immediately after. So it is perfectly plausible that two banks are weak for unrelated reasons, and that when one fails this pushes the other under as well.
The second one does not even have to be that weak. The twentieth could be perfectly healthy and still fail in the panic (it’s a full blown financial crisis at this point!)
Yup, you can always have a domino-effect hypothesis of course (if it matches the timeline of events), rather than positing some general antecedent cause in common to all the failures.