Hundreds of Economists Urge Congress Not to Rush on Rescue Plan

Sept. 25 (Bloomberg) -- More than 150 prominent U.S. economists, including three Nobel Prize winners, urged Congress to hold off on passing a $700 billion financial market rescue plan until it can be studied more closely.

In a letter yesterday to congressional leaders, 166 academic economists said they oppose Treasury Secretary Henry Paulson's plan because it's a ``subsidy'' for business, it's ambiguous and it may have adverse market consequences in the long term. They also expressed alarm at the haste of lawmakers and the Bush administration to pass legislation.

``It doesn't seem to me that a lot decisions that we're going to have to live with for a long time have to be made by Friday,'' said Robert Lucas, a University of Chicago economist and 1995 Nobel Prize winner who signed the letter. ``The situation may get urgent, but it's not urgent right now. Right now it's a financial sector problem.''

The economists who signed the letter represent various disciplines, including macroeconomics, microeconomics, behavioral and information economics, and game theory. They also span the political spectrum, from liberal to conservative to libertarian.

Some lawmakers are already citing the letter as reason not to endorse the Paulson plan. Today Senator Richard Shelby, a Republican from Alabama, said he has ``five pages of the leading economists in America that wrote to me and the leadership saying the Paulson plan is a bad plan. It will not solve problems. It will create more problems.''

`How Capitalism Works'

The letter, initially conceived by economists at the University of Chicago, was signed by professors from dozens of American universities and several outside the U.S.

David I. Levine, a professor of economics at University of California-Berkeley, says the current plan being discussed has the wrong structure.