"This year 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."What kind of principle of economics is this that tells us what policy should be?
It is obviously untrue that any such consensus existed. Corporations for which their owners have limited liability could not be founded without a selective government intervention in the economy. Any legal protection for Intellectual Property, such as any non-zero period for copyrights and patents, is a selective government intervention. The existence of the Federal Reserve is a selective government intervention. Furthermore, economists have had no consensus for decades on claims that monetary policy is ineffective or that the monetary authorities should conform to the Cassels/Friedman rule of growing the money supply at a constant rate. Bankruptcy law, including its recent tweaking against the interests of debtors, is a selective government intervention. Hart and Zingales demonstrate, with the balderdash in their first paragraph, that they have not given a serious moment's thought to the theory of the firm, industrial organization, or macroeconomics.
What has been demonstrated is, in general, orthodox economists are willing to serve as lackeys to the malefactors of great wealth. (I could pick many more examples.) What effect on elite opinion does this willingness of supposed academic experts to teach nonsense in the news organs of the affluent have, do you think?