On AIG, you might wish to read James Kwak. You should definitely read James Hamilton.

But more shocking yet, at least if we measure these things in dollars and cents, is the amount of taxpayer funds that have gone to compensate AIG’s counterparties for bets those counterparties never should have been allowed to make.

From the indispensable Mark Thoma comes a pointer to Jonathan Boymal who refers to a post by Andrew Leigh on the attribution error in economic outcomes. He uses actual research to document what I argued in this essay.