If banks anticipate government will come to the rescue should the credit market go badly awry, they may make loans that would otherwise be imprudent, e.g. subprime loans with little prospect of repayment.
In an industry with highly sequential innovation, it may be better for society to scrap patents altogether than try to tighten them.
Much theoretical work, of course, focuses on existing economic institutions. The theorist wants to explain or forecast the economic or social outcomes that these institutions generate.
I think I have met nearly all the Laureates in Economics. Among the few I haven't met, I suppose I'd most like to meet Ronald Coase because of his legendary power to persuade his colleagues of the validity of the Coase Theorem.
I don't want to make public statements about issues that I have not studied in detail.
Because mechanism designers do not generally know which outcomes are optimal in advance, they have to proceed more indirectly than simply prescribing outcomes by fiat; in particular, the mechanisms designed must generate the information needed as they are executed.