“Starlings. That’s the answer”, a distinguished retired surgeon told me whilst speaking about his anxiety about the gyrations of the Stock Exchange, and the effect on his pension.

“I know” I replied, “and the precise answer is seven”.

The man I was speaking to is definitely not mad, and I don’t think that I am either.

What we were both searching for was some explanation of why financial markets behave as they do.

In normal times this does not have much effect on the vast majority of people whether in East Lancashire or across the globe. The share price of the company they work for, or in which their pension is in part invested may go up or down a bit, but life goes on.

However as we’ve just seen in the very serious economic circumstances we are experiencing now, and which I wrote about two weeks ago, if the value of a company measured by its share price plunges suddenly, and it’s a big bank, then catastrophe could be just round the corner.

So how markets behave, and why, does matter beyond the academics and the practitioners.

So why do I say starlings? Let me explain.

Before sundown, in many cities, you can see huge flocks of starlings performing astonishing and rather beautiful movements in the sky – and often darting and wheeling to avoid a predator like a falcon.

How do they do it?

We now know a little better.

Statisticians have just published an intriguing paper based on observations of starling flocks in Rome.

They conclude that each starling interacts with a fixed number of its neighbours in flight, and the number is usually seven.

What starlings in a flock need to know is not what they as an individual starling want to do, but to work out what every other starling is going to do. If they don’t, they could end up dead – attacked by a predator.

In markets like Stock Exchanges the people who do best are those who best anticipate the behaviour of others – and often very quickly.

Where there is, however, a direct connection between starlings and markets is that both involve the behaviour of crowds.

Ever since I first went years ago to football match I’ve been intrigued how crowds can develop a personality of their own which appears to transcend the individuals within it.

There is now a good deal of evidence crowds may be rather better judges than individuals.

New York journalist James Surowiecki published an acclaimed book four years ago entitled The Wisdom of Crowds in which he asserted that market judgements can be much faster, more reliable, and less subject to political forces than the deliberations of experts.

Right now, with governments across the western world having effectively to part-nationalise banks, there are bigger questions than for decades about how far markets can deliver by themselves both prosperity and the better welfare of the people.

Those who believed that markets should be the master have been shown to be wrong. They have to be the servant, and governments have to be ready to intervene when they go wrong – as they have.

As Gordon Brown said in his party conference speech a few weeks ago, it is at serious times like this that society needs government to step in and to do what it can to protect its citizens: not walk away.

But there may indeed be a common factor which links starlings, markets, football crowds and parliaments: that of communication predicted by psychology.