Economists Reach Consensus (or Not)


From around the econoblogosphere (sorry for that ugly coinage), semi-consensus about consensus:

Eric Posner at Volokh:

Do economists oppose the bailout bill? No! You might think otherwise from various incautious commentaries, including the economist's letter written a while back. (The letter said "go slow"; it didn't say "do nothing.") And it is true that most economists don't like the original Paulson plan, and also don't like the plan passed by the Senate. But the view that we are currently in a serious financial crisis—the worst since the Great Depression—is, as far as I can tell, unanimous. …The idea that governments should address financial crises by injecting liquidity in the system is not some new-fangled idea dreamed up by socialists, but conventional wisdom, proved again and again by experience, going back many decades. The problem is that every economist has his own theory about the proper solution.

Alex Tabarrok at Marginal Revolution:

The consensus among economists is now clear, the best strategy for dealing with the financial crisis is to recapitalize the banks that need recapitalization.  Paul Krugman, John Cochrane, Luigi Zingales, Douglas Diamond, Raghuram Rajan and many others all advocate some form of recapitalization as do Tyler Cowen and myself.  Krugman would prefer a recapitalization in the form of nationalization….The consensus policy of economists would put most of the burden of adjustment on politically powerful holders of equity and bonds.

There is also a consensus among economists that the bailout bill is not the right policy.  None of the above economists, for example, is enthusiastic about the bailout.  

Lynne Kiesling at Knowledge Problem:

Fast recapitalization, removing the signaling penalty by having the government require banks to stop giving dividends in the short run … those are the kind of policies that economists have been discussing, fleshing out, and encouraging over the past two weeks. Of course, the challenge to those proposals is that the parties who end up paying are precisely those firms and industries that are politically powerful.