should be used as possible, in the European Union this is known with the clunky title of subsidiarity, and the US is set up in a similar way.  Ideally, the Federal government would do to the localities what the US did with Europe after WWII: tell them that they will get a whole bunch of money (in our case, to move toward sustainability), as long as they can all get together and figure out how to spend the money (in our case, among localities of a certain area).  So, say in the infrastructure case, various municipalities could get together and say, "We will create a stable market for [subways, wind turbines, solar panels]", and the Feds would give them money.  That way, each level of government does what it does best.

I kayak Puget Sound.  There is a lot of shoreline near the megatropolis.  Beach cabins were torn down.  Now low waterfront has million dollar new investment mansions, many thousands of them, many unoccupied.  These well built surplus castles and properties are destined to go underwater.  It is sobering to think how much shoreland there is in the world.

First, "picking winners" and whether the government can do this or not and "regulation" and whether the government should do this or not are separate questions.  So I don't understand a lot of the celebration of markets some people are in engaged in.  

Second, whether the market or government does a good or bad job depends on accountability structures.  With respect to the government, voting power is more decentralized and distributed than stock ownership.   As a result, the government should be associated with somewhat more accountability, even though elected officials can be bought off.

Third, if ownership were more distributed, then corporations might better serve environmental concerns, particularly if owners were potential victims of environmental "externalities," e.g. pollution.  Ownership and not markets might be the problem, but markets themselves have not solved the global warming problem.

Fourth, if the government or markets fail, we need to explore how they can succeed better.  Social scientists rarely ask such questions, because then they would have to worry about how organizations are designed, alternatives in design, and this kind of stuff is rarely taught well if at all.  Our politicians and many academics know nothing about it.

In any case, I agree with Rynn.

I just watched a TV program on globalization.  It points out that the US and Europe gain economically from imports from countries like India where the "free market" pollutes the water supply and also by using cheap energy sources that don't reflect the global costs of pollution.  

When we say "markets work fine" is this what we mean?

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness"
-- Declaration of Independence, July 4, 1776

There is a basic problem in the contemporary discussions of rights.  A basic principle in democracy has been taken over by technocratic policy think, namely the concept of "emissions rights."  This legal innovation has begun to concept the most basic ideas of American society namely the right to "life, liberty, and the pursuit of happiness."  This idea of the right to life from the U.S. Declaration of Independence includes the right to maintain one's life which is being violated by polluters.  

When polluters are given the "right to pollute" they are potentially violating the "right to life."  Thus, emissions "rights" have are not exclusively a question of markets, but a question of politics as well.  Citizens in Western Europe and increasingly the developing world recognize that the U.S. uses far more energy than its share of the world population and also disproportionately contributes to global warming and other environmental ills.  Therefore, treating the right to emissions and market solutions as some kind of "internal" U.S. debate misses the larger problem which is whether the "right to pollute" that is traded within the U.S. violates the rights not only of U.S. citizens, but citizens elsewhere.

This does not mean that government is always more efficient or productive than markets.  The Soviet case, however, pointed to the limits of a centralized state which we also have in the Pentagon as Jon Rynn and others have noted.  Rather, independently of the efficiency of markets, if companies are more efficient or productive by violating my or your rights to life free from health reducing pollution, then efficiencies are irrelevant.

The increasingly technocratic education that some get in policy schools, economics departments, and engineering  programs probably explains why some people can go on about "rights" and assume that it only refers to the "right" to pollute.

Note: Try re-reading or reading the Declaration of Independence.