John Quiggin says it best...

It being market failure. Quiggin comments on a Milton Friedman piece. Here are his (John's) words in full:

Milton Friedman has a piece in the Hoover Digest, reprinted in The Australian making the point that, even though many fewer people nowadays professes belief in socialism than did so in 1945, the general movement of policy since the end of World War II has been in a socialist direction, that is towards an expansion in the share of GDP allocated to the public sector. He draws a distinction between ‘welfare’ and the traditional socialist belief in public ownership of the means of production, seeing the former growing at the expense of the latter.

From a social-democratic perspective, I’d put things differently. There are large sectors of the economy where competitive markets either can’t be sustained or don’t perform adequately in the absence of government intervention. These include human services like health and education, social insurance against unemployment and old age, production of public goods and information, and a range of infrastructure services. In all these sectors, governments are bound to get involved. Sometimes, the best model is private production with public regulation and funding, and sometimes it is public ownership and production. The result is a mixed economy.

Over time, the parts of the economy where competitive market provision is problematic have grown in relative importance. By contrast, agriculture, the archetypal competitive industry, has declined in relative importance as have mining and manufacturing, areas where governments have usually performed poorly.

The result is that the ideological swing towards neoliberalism has done little more than slow a structural shift towards a larger role for government.

These words should be spread like Gospel. Unlike my own words on the subject, they are both clear and from a professional economist. Two big differences. This short text implies the following:

• The free market is the optimal solution for a lot of problems. But not all.
• Progressives want solutions to work.
  
• Conservatives will often stick to free markets even when they fail.

The best illustrations come from the NY Times. Here is Paul Krugman on Social Security:

Decades of conservative marketing have convinced Americans that government programs always create bloated bureaucracies, while the private sector is always lean and efficient. But when it comes to retirement security, the opposite is true. More than 99 percent of Social Security's revenues go toward benefits, and less than 1 percent for overhead. In Chile's system, management fees are around 20 times as high. And that's a typical number for privatized systems.

And here is David Brooks (from behind the Times' paywall, so no link):

Before we get lost in the policy details, let's be clear about what this Social Security reform debate is really about. It's about the market. People who instinctively trust the markets support the Bush reform ideas, and people who are suspicious oppose them.

I don't think you can get a clearer picture of the divide between reality-based thinkers and ideological idiocy than when you compare Krugman with Brooks.

We (the reality-based community) need to have an easy, short and clear anwer to give people who "trust" ("believe in" is the better term) markets over anything else. That's why I think posts like Quiggin's ought to flood the internets.

The Bush White House is, of course, a lost cause. Even as part of the ideology-based community, it is out on the lunar fringe. It is not even capable of erring consistently. The Bush White House will will not just stick to the market approach even when this fails, the Bush White House will often stick to failures even when there isn't a free market. So let's leave them out of this.