John Cochrane offers a calm, even-tempered, but brutal dissection of some recent comments by Bloomberg.com columnist Noah Smith. You can read it for that--it's fun--but if that doesn't interest you, scroll down a bit for a detailed refutation of the claim that markets have big trouble providing health insurance because of the "market failures" of incomplete markets, uncertainty, adverse selection, and moral hazard. It features these two fine lines:
(Remember, the free market case is not that markets are perfect. It is the long and sorry experience that governments are worse.)
Adverse selection due to fundamental information asymmetry in an unregulated market is, as far as I can tell, a cocktail-party market failure.