Did Someone Say Market Failure? Comments By Marcus Nunes and Patrick Sullivan

     I did and this immediately brought them out of the wood work. In my post yesterday I noted that there is always a cottage industry for conservatives claiming that there's not such thing as a market failure, and I also noted that Sumner's Market Monetarism has probably been the most impressive such apologist since the start of the Great Recession. I noted that Krugman-had a very rare, and very subtle-strike back at Sumner with these few, innocuous words:

        "One of the remarkable things about the ongoing economic crisis is the endless search for explanations of something that’s actually quite simple — the sluggish pace of recovery. You have a large overhang of private debt; you have a still-depressed housing sector; and you have contractionary fiscal policy. Add to this the well-established fact that recovery tends to be slow after recessions caused not by tight money but by private-sector overreach, and there’s just no mystery that needs explaining."

     http://diaryofarepublicanhater.blogspot.com/2013/08/what-caused-great-recession-if-very-few.html?showComment=1375912969054#c5840032505518238359

     The key was this short sentence:  "Add to this the well-established fact that recovery tends to be slow after recessions caused not by tight money but by private-sector overreach, and there’s just no mystery that needs explaining."

      Marcus Nunes fires back in the comments: "The mistake in the sentence is the first part. The culprit WAS tight money. And that remains true in the "slow recovery"

       Yet, here is the problem I often have with Marcus when he argues with a point I make-he doesn't really back it up. All we have at best is a wash-Krugman says it wasn't tight money, he insists it was. How do we decide between the two? Why should we believe that it wasn't private-sector overreach. 

       Then Patrick Sullivan accuses me of attacking a strong man. According to him no conservative has ever claimed that there's no such thing as a market failure. 

       "No one believes that, certainly not Milton Friedman nor Scott Sumner, nor I. If you think I'm wrong, please find some economist saying anything like what you're claiming."

       "But I can find examples of people like Krugman jumping on examples of what they thought was market failure...only to have to say, 'Never mind.'

      Here Patrick contradicts himself. On the one hand he's claiming that no conservative has ever said market failures are impossible. I guess he forgot the old Money Illusion commentator Major Freedom. Actually, Sumner certainly denies there's such thing as a market failure by implication at least. Marcus just did the same thing here-he denied that market failures happen. If you believe that this crisis and, deep recession and slow recovery were in no  caused via any market failures in the financial, mortgage, and housing sectors then I think it's fair to say you just don't believe market failures are possible. 

      After all, if the worse crisis since the Depression didn't have nay market failures what event possible could? This is why I challenged Patrick to answer this simple question? Did a market failure cause or precipitate the GR or not? Marcus by saying the sole cause was tight money is saying no as does Sumner. 

      You know Sumner doesn't think market failures are possible. He always says either that bubbles are not possible or that they don't matter-he vacillates between these two claims which of course contradict each other.  This is because of his belief in the Efficient Market Hypothesis (EMH). 

      I wonder if Patrick also denies that both Milton Friedman and Robert Lucas claimed that unanticipated monetary changes have no effect.