Why do the economists in the following scenario disagree? Suppose that an economist from a university in Montreal argues that a government bailout of severely distressed financial firms is unnecessary...

Why do the economists in the following scenario disagree?

Suppose that an economist from a university in Montreal argues that a government bailout of severely distressed financial firms is unnecessary because free markets will properly price assets, while another economists from a school of industrial relations argues that without a bailout distressed financial firms, the economy will experience a deep recession.

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There are many different philosophical positions underlying economic thought and it is far from uncommon for economists to disagree.

On the one hand, there are pure free market economists who think that, in the long run, minimal amounts of government interference in markets will lead to greater growth. The short term pain of a firm failing is balanced by the long term benefit of making the economy more efficient, as firms with low productivity or other problems die off and are replaced by more productive or efficient firms. Although pioneered by Adam Smith, this approach is now often linked to a sort of social and economic Darwinism which sees natural selection as a force for good. Additionally, bailouts are sometimes described as a "moral hazard" because...

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