FDR Done Did Good
AIG, Bonuses, and "I Told You So"

Robert Waldmann on Market Failure, Fiscal Policy, and Unemployment

Hoisted from Comments:

Robert Waldmann: Meanwhile, Over at the Economist...: "Mr Zingales points out that economists usually require evidence of market failure before recommending that governments step in" -- Patrick Lane. So Zingales as interpreted by Lane considers the increase in the unemployment rate not to be "evidence of market failure," nor does Zingales/Lane consider a decline of GNP to be evidence of market failure. This is a very strong claim -- not that there is no proof of market failure but that there is no evidence.

I would have a guess as to what someone might mean if someone claimed that the facts aren't evidence of market failure... [that] we should conclude that markets have failed only when there is a good model of market failure in which everyone behaves optimally and there is no possible model in which markets don't fail which more or less fits the facts under discussion.... [S]ince we aren't focusing on other data, it doesn't matter that the equilibrium model is inconsistent with many facts which aren't under discussion...