Somewhere near you is a killer. A killer you’ve never noticed as a killer or even as a real danger to you. This is not an invisible killer, like a virus or bacterium. It is not an obvious killer, like the idiot in the 4x4 roaring down the road outside. It’s plainly visible, a familiar part of everyday life, never given a second’s thought, even though it kills more than 1,000 people in the UK every single year. With road deaths causing fewer than 3,000 deaths a year, this killer is between a third and a half as dangerous as all the road traffic in the UK. And the name of this killer: stairs. Stairs are an example of how civilians don’t understand risk. But according to British journalist and novelist John Lanchester in Whoops - Why Everyone Owes Everyone and No One Can Pay, moneymen don’t understand risk either. The bankers made inaccurate calculations about the mathematics of risk. They thought they had engineered risk out of existence. That mistake destroyed banks, forced others into public ownership, put taxpayers on the hook for hundreds of billions of pounds and brought the world financial system to a juddering, panicky standstill.

Lanchester is not the first expert to point out that we don’t really understand risk. Taleb says it. The Brafman in Sway say it. For the first years of the new millennium, the whole planet zoomed along, doing the equivalent of 70 mph on a clear road on a sunny day. While 9/11 and the global war on terror dominated the headlines, the world was almost doubling in wealth. In 2000 the sum total of all the economic activity on the planet was $36 trillion. By the end of 2006 it was $70 trillion. And then, it was as if the global economy went out one day and decided it was zooming along so well, there’d never be a better moment to put the car into reverse. The result was a colossal wreck.

This book began as a novel set against the background of the financial meltdown, but Lanchester soon stumbled across a story whose byways of mathematics, economics and psychology are both central to the plot yet mysteriously unknown to the public. After the Cold War, capitalism could go wild because Western governments no longer had to worry about competing with communism. It was inevitable, says Lanchester, that the financial sector was in a position to reward itself with a disproportionate piece of the economic pie.

Non-economists, says Lanchester, ridicule the economists’ assumption of rationality as self-evident. This has no effect on economists, but the work of Israeli psychologist-economists Daniel Kahneman and Amos Tversky is having an effect. They challenge the central shibboleth of contemporary academic economics, the assumption of rationally modelled behaviour. Academic economists went wrong because they forgot that our thinking has built-in mistakes. Economists much acknowledge, says Lanchester, that human beings don’t and perhaps can’t make accurate assessments of perceptions and probabilities.