Where the words come from
The definition of market failure — The Green Book (2026), HM Treasury, GOV.UK, Open Government Licence v3.0. https://www.gov.uk/government/publications/the-green-book-appraisal-and-evaluation-in-central-government/the-green-book-2026. Changes: "A market failure is" to "Market failure is".
Government failure as intervention that itself results in an inefficient allocation of resources — The MHCLG Appraisal Guide, GOV.UK, Open Government Licence v3.0. https://www.gov.uk/government/publications/the-mhclg-appraisal-guide/the-mhclg-appraisal-guide. Changes: recast from "an existing 'government failure' that itself has resulted in an inefficient allocation of resources" as a definition, with the polluting-subsidy example from footnote 5.
Securitised mortgages sold on with little scrutiny of borrowers, and a well-run bank expecting some loans to go unpaid — Principles of Economics 2e, OpenStax, licensed CC BY 4.0. https://openstax.org/books/principles-economics-2e/pages/27-3-the-role-of-banks. Changes: the securitisation account condensed into one example; "subprime" and "NINJA" dropped; the collapse note's point that the loss falls on the owners and the bank can be closed or sold draws on 28.2; the line on when a collapse becomes market failure is ours.
Runs spreading from bank to bank, limited reserves, and firms unable to obtain financing in the 2008-2009 crisis — Principles of Economics 2e, OpenStax, licensed CC BY 4.0. https://openstax.org/books/principles-economics-2e/pages/28-2-bank-regulation. Changes: condensed; the externality card's definition applies the section's account of runs to the idea of costs on third parties, which is our framing; the credit-freeze example draws on 17.3; the recap is our summary.
Moral hazard as increases in risky behaviour resulting from efforts to make that behaviour safer, applied to deposit insurance and bank regulation — Principles of Economics 2e, OpenStax, licensed CC BY 4.0. https://openstax.org/books/principles-economics-2e/pages/28-critical-thinking-questions. Changes: the question's definition of moral hazard recast as a statement, with deposit insurance and bank rescues as the efforts; the rescue example is ours.
Asset bubbles and leverage cycles: US house prices rising at almost double their usual rate from 2003 to 2005, and banks' assets falling in value when prices fell — Principles of Economics 2e, OpenStax, licensed CC BY 4.0. https://openstax.org/books/principles-economics-2e/pages/28-5-pitfalls-for-monetary-policy and https://openstax.org/books/principles-economics-2e/pages/29-key-concepts-and-summary. Changes: condensed; "almost double" the 6 per cent average given as "almost twice their long-run rate"; the bubble definition is our condensation of prices rising at unsustainable rates, with the role of expected rises adapted from chapter 29's point on currency speculation (Key Concepts and Summary), where speculation "can create a self-fulfilling prophecy, at least for a time".
Moral hazard as riskier behaviour with insurance than without it — Principles of Economics 2e, OpenStax, licensed CC BY 4.0. https://openstax.org/books/principles-economics-2e/pages/16-2-insurance-and-imperfect-information. Changes: the distinction between risk hidden before a deal and risk taken after protection is our framing, applied to banks; the mortgage-bundle and rescue cases are ours.
LIBOR as a benchmark of the average cost to banks of unsecured borrowing, set from banks' submissions, and attempts to manipulate it, directly or through collusion, to benefit trading positions — The Wheatley Review of LIBOR: final report, HM Treasury, September 2012, GOV.UK, Open Government Licence. https://www.gov.uk/government/publications/the-wheatley-review and https://assets.publishing.service.gov.uk/media/5a7b3fe2e5274a319e77e076/wheatley_review_libor_finalreport_280912.pdf. Changes: paragraphs 1.1 and 2.49 condensed; the market rigging definition is our recasting of "deliberately and dishonestly attempt to manipulate LIBOR, either directly or through collusion with others" for "direct or indirect advantage".
Questions, options, diagrams and feedback are our own. Figures credited to a source above are that source's; every other figure is invented to show the method.