Newsflash: bank runs can actually happen in market economies and when they do, they do real economic damage. Yup! Economists proved this to their satisfaction in the ‘80s. Not the 1880s, but the 1980s. That was the moment when three intellectual pioneers found a way of fitting banks and bank failures into a workhorse economic model and specified a channel by which the failure of banks raised the cost of credit intermediation. And that matters because, “as we all know”, intermediating between savers and borrowers is what banks do.