Ryan Avent is on the case. This is really embarrassing.
Brookings Institution senior fellows--especially Co-Directors of Economic Studies--really need to have read Grossman and Stiglitz (1980), "On the Impossibility of Informationally-Efficient Markets," American Economic Review 70:3 (June), pp. 393-408 http://www.jstor.org/stable/1805228. That Ted Gayer has not says something really bad.
Ted Gayer:
The EPA Tackles Greenhouse Gas - Brookings Institution: But Krugman oversells the affordability claim by linking to a widely cited report by McKinsey & Company. The main point of the McKinsey study is provided in their Exhibit B, which illustrates a rather peculiar finding that there are a significant number of pollution abatement options that can be achieved at “negative cost.” This finding violates the basic principles of economics. If firms (or consumers) could reduce emissions at negative cost, then they would do so. To say otherwise is to say that they are willingly or ignorantly passing up profits...
That McKinsey and Company exists and that businesses regularly pay it money to identify $100 bills lying on their sidewalks strongly suggests that any half-competent economist should not immediately dismiss its analytical conclusions.
Some quality control, please.
