>So where they were? Also, why government should play entrepreneural role? Was it designed by Constitution or invented on spot for the sake of common good?
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>The government was not an entrepreneur. It acted reluctantly to save a failing financial system, for the good of the general citizenry. In the case of AIG it was able to secure an excellent deal- which would not have occurred had any "entrepreneur" been willing to follow market theory.
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>It seems to me that you slightly overestimate governmental wizdom. Does your model assign some place to the idea that government can harm or just mess up things, instead of helping? How do you know that particular government action will be helpful? It is a very relevant question because so far bailouts didn't cure situation, not even on sentimental level.
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>I'm afraid there is a huge gulf between our respective perceptions of the AIG rescue or the banking guarantees. Others say there would have been a financial Armageddon if not for the government's actions. The result so far may not be perfect, but it is not Armageddon either. Lets not forget that it was short-term corporate greed that led to the current crisis. Theories that rely on government (in)competence aren't particularly relevant in these circumstances.
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>We discuss very specific issue that cannot be judged on the basis that government is inherently wise or that future generations are inherently wiser and so on.
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>My position is that the government saved our bacon. Yours seems to be that this cannot be so because governments cannot be as competent as the market and/or that the market would have managed itself appropriately if government had left it alone. With respect, where are you getting this stuff? The market was failing. AIG tried desperately to find the funding it needed in the market, but failed. Only government was prepared to step in to prevent the "financial Armageddon." That government seems to have got such a good deal says a lot about the market. I'm afraid that a lot of market theories are going to be dismantled as will become evident as the dust settles. You watch.
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> Government has no divine power, but your scheme seemingly gives to it, and when divine power is firmly attached then any situation can be decided quickly: "God (i.e. government) willing".
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>Again, where are you getting this stuff? The FACT is that nobody except government was prepared to intervene to prevent an Armageddon. That does not make them divine, but it should cause re-examination about markets and how they are supposed to behave.

I am sorry but the assumption about "Armageddon" lives entirely in your imagination, i.e. it cannot be proven. It means that the whole idea that government must do it is based on words only. Please, note that I didn't say that government is not as competent as markets. I said that no proof exists that government is better than market in this particular case, while there are many historical examples of totally incompetent governments including very modern times. Should I give you these examples, or you admit it without them? It makes very doubtful that any government is infallible and thus entitled to interfere to economics making everything better.
Also, I notice that you too conveniently cling to AIG situation. I am familiar with the case, and I know that specifically this particular bailout has some attractive features. It surprises me that you use comparatively mild case of government interference to make blanket statements covering practically any case of interference including some already happened. What is your opinion, for example, about GM/Ford bailout already underway? What is your opinion about impending $1T package containing no traces of entrepreneurship that so conveniently could be found in AIG case? It is hard questions and answers that "government" knows better or that "something" must be done are incomplete, at best. For example, one ironic thing. Are you aware of the unfortunate fact that this bailout thing is actually deployed by two governments? Do they both have the same divine power to make miracles? It is quite enough to have just one to fail and the whole thing may unravel. Does it mean that bailout could work only if we accept the idea that "any government" is infallible, i.e. getting power directly from higher authority?