...mother would be so proud!
Nick Rowe took issue with the post of mine that Brad cites, but I'm not entirely to give ground on this - and I think I make my point more clearly here.
The point is this - if you want to answer the question "can the market fix itself or must we fix the market?" you have to answer one single question: "can the problem be arbitraged?"
The market at its most basic level is an institution that arbitrages allocation decisions. If the problem you are dealing with can be arbitraged there's a damn good chance the market can fix it.
If it can't be arbitraged, you might want to consider other liberal institutions - like perhaps liberal democracies with monetary and fiscal authorities. Keynesian economics demonstrates that underemployment equilibria can emerge that cannot be arbitraged.