“Policy in Practice” corrects the misconception that diagno-sis and treatment of “market failure” is straightforward. Thissection looks at challenges facing economists and policymak-ers trying to use the theory of market failure. The example Iuse is housing finance policy during the run-up to the finan-cial crisis of 2008. The policy process was overwhelmed bythe complexity of the specialization that emerged in housingfinance. Moreover, the basic thrust of policy was determinedby interest-group influence. The lesson is that a very large gapexists between the economic theory of public goods and thepractical execution of policy.

So the economy is about work: organizing it, doing it, and dividing up andmaking use of its final output. And in our work, one way or another, we alwayswork (directly or indirectly) with other people.The link between the economy and society goes two ways. The economy is afundamentally social arena. But society as a whole depends strongly on the stateof the economy. Politics, culture, religion, and international affairs are all deeplyinfluenced by the progress of the economy. Governments are re-elected or turfedfrom office depending on the state of the economy. Family life is organized aroundthe demands of work (both inside and outside the home). Being able to comfortablysupport oneself and one’s family is a central determinant of happiness.