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Douglas_Knight comments on The Second Best - Less Wrong
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"Generic" is in the statement of the Greenwald-Stiglitz theorem, as quoted by Wei-Dai. It means, roughly, probability 1. The theorem does not say that information asymmetry leads to Pareto inefficiency, only that it does unless there is a numerical coincidence.
I thought you were saying that the GS theorem becomes false if you weaken the hypothesis to allow other kinds of violations. But your examples seemed to also strengthen the conclusion from generic efficiency to efficiency for all parameter values. If you strengthen the conclusion without weakening the hypothesis, it's already false.
Sorry about the deletion. I thought I'd got in quick enough. Clearly not!
I was saying that as far as I knew, the quotation misrepresented the scope of the GS theorem, which did not make claims about other types of violations. You are right that my offsetting externalities counter-example did not rely on this though.
The counter-example I had always been given as evidence that a non-perfectly competitive economy could theoretically achieve Pareto efficiency was that of a perfectly informed, benevolent central planner. However, I readily confess that this does seem something of a cheat. In any event, whether it's technically correct or not, the point is practically irrelevant, and probably not worth wasting any more time on.
I apologise for the diversion.