Mac OS X 10.7 “Lion” Seems to Have a Broken Python easy_install

One of the first things I needed after upgrading to Mac OS X 10.7 (Lion) was to make some Python scripts work. However easy_install seemed to be broken:

$ easy_install psycopg2
Traceback (most recent call last):
  File "/usr/local/bin/easy_install", line 5, in <module>
    from pkg_resources import load_entry_point
  File "/System/Library/Frameworks/Python.framework/Versions/2.7/Extras/lib/python/pkg_resources.py", line 2607, in <module>
    parse_requirements(requires), Environment()
  File "/System/Library/Frameworks/Python.framework/Versions/2.7/Extras/lib/python/pkg_resources.py", line 565, in resolve
    raise DistributionNotFound(req)  # XXX put more info here
pkg_resources.DistributionNotFound: setuptools==0.6c12dev-r88795