Economists have abandoned principle

Back in December last year Oliver Hart and Luigi Zingales had an article in the Wall Street Journal in which they make this statement. They write,

This year [2008] will be remembered not just for one of the worst financial crises in American history, but also as the moment when economists abandoned their principles. There used to be a consensus that selective intervention in the economy was bad. In the last 12 months this belief has been shattered.

Practically every day the government launches a massively expensive new initiative to solve the problems that the last day's initiative did not. It is hard to discern any principles behind these actions. The lack of a coherent strategy has increased uncertainty and undermined the public’s perception of the government’s competence and trustworthiness.

Peter Klein at Organizations and Markets (a blog well worth reading) says

Now, Hart and Zingales imply, but don't demonstrate, that these selective interventions are supported by the majority of economists. I think most economists oppose them, but I don’t have systematic evidence either. Still, their point is well taken. To the extent that the lay public associates the moves by Bernanke, Paulson, etc. as representing some kind of professional consensus, the reputation of economics as a scientific discipline will be forever destroyed.

Indeed. I think many economists are far from happy with the Bernanke/Paulson type response to the financial crisis but most non-economists don't realise this fact. Some of us still hold to our principles and thus are still of the view that selective intervention in the economy is bad.

As for the Hart-Zingales counter-idea that governments "should intervene only when there is a clearly identified market failure", I don't mind this since I think that such a condition is basically impossible to meet.