Whenever someone says that all policy problems can be solved by markets, they appeal to something they call "basic economic principles." If one goes to the open course page for the intermediate micro course offered at MIT, one finds the following topics on the syllabus: Consumer Theory 2 Choice, Preferences, Utility 3 Demand, Revealed Preferences, [...]
I think they get it right: One potential weakness of a hybrid system involves moral hazard: If private investors believe the government will bail them out if things go badly, they will take inappropriate risks. Such concerns were illustrated by the recent experience with the two government-sponsored mortgage finance agencies, Fannie Mae and Freddie Mac. [...]