Paul Krugman:
"The standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough."
Hodak Value:
"Whenever I see such nonsense, I have to keep reminding myself that the trade theories for which Krugman won his Nobel Prize were explanatory and predictive. Krugman did not win a prize for mechanism design; he could not have predicted E-bay.
The idea of people bidding for stuff they can’t really see from people that they’ve never met is fraught with asymmetrical information. Honest sellers could not hope to compete with liars selling competitive products. Honest bidders could not hope to compete with fraudulent bids that may not be honored. Such a market, failing as it does the test of a 'standard competitive market model' could never exist.
Except that it does.
E-bay exists because they managed to attach a credibility mechanism to their bidding process. This mechanism rewards people for neither understating nor overstating the qualities of the items they have put up for bid. It encourages honest bidding."
As posted at Carpe Diem
Read this gem found in the comments:
"One wonders if Krugman can predict the time of day let alone anything else...
'Daniel Okrent, one time editor of the New York Times wrote the following back in May of '05: "Op-Ed columnist Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults'..."
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