Wednesday, January 5, 2011

Economist Ethics

The New York Times reports on the effort by some economists to get the American Economic Association to adopt a 'code of ethics' whereby members would be required to disclose any potential conflict of interest.

Here is an excerpt of the Times story:

When the Stanford business professor Darrell Duffie co-wrote a book on how to overhaul Wall Street regulations, he did not mention that he sits on the board of Moody’s, the credit rating agency.

As a commentator on the economy, Laura D’Andrea Tyson, a former adviser to President Bill Clinton who teaches in the business school at the University of California, Berkeley, does not usually say that she is a director of Morgan Stanley.

And the faculty Web page of Richard H. Clarida, a Columbia professor who was a Treasury official under President George W. Bush, omits that he is an executive vice president at Pimco, the giant bond fund manager.

Academic economists, particularly those active in policy debates in Washington and Wall Street, are facing greater scrutiny of their outside activities these days. Faced with a run of criticism, including a popular movie, leaders of the American Economic Association, the world’s largest professional society for economists, founded in 1885, are considering a step that most other professions took a long time ago — adopting a code of ethical standards.

The proposal, which has not been announced to the public or to the association’s 17,000 members, is partly a response to “Inside Job,” a documentary film released in October that excoriates leading academic economists for their ties to Wall Street as consultants, advisers or corporate directors.

Universities and medical schools have tightened disclosure requirements and conflicts of interest policies for scientists, engineers and doctors in recent years, and the main professional associations for political scientists, sociologists and psychologists have all adopted ethical codes.

During the American Economic Association’s annual meeting, in Denver next week, its executive committee will take up a proposal to “consider the association’s role regarding ethical standards for economists,” according to an internal committee agenda obtained by The New York Times.

Note that, by and large, such conflicts of interest only affect economists at the most prestigious, high-profile institutions whose brand name is appealing to the firms that employ them.  Thus, you can be pretty sure that your humble economists who slave away at Oregon's public universities are pretty conflict free (even if we wish we weren't).

But this is a very good idea.  The idea that you can replicate work seems to me an ivory tower cover.  Our pedigree and position is supposed to serve as a signal of authority on the subjects we study.  Thus our opinions are given more weight than lay persons' opinions.  We have a deep responsibility to behave in an unbiased and ethical way, especially when serving in public roles.  However, I find that in general most economists are like most scientists in being hesitant to give personal opinion, preferring instead to talk about evidence and research.  As with any subject, when a so-called academic economist starts making broad and overly simplified pronouncements you should be skeptical and ask questions.

This is what I dislike most about the modern media: because most academics are thoughtful and nuanced, the media have no time for them.  They don't do well in a 90 second segment on TV or radio.  Even the most respected outlets like OPB and their 'Think Out Loud' show often disappoints by getting advocates on both sides of an issue and no one to talk about the evidence.  It is a shame and a waste.  To give an example, the recent show that highlighted the study on the relatively poor performance of the Portland metro areas job market featured the paid consultant whose firm wrote the study and a spokesperson from a group that sponsored it.   Listeners learned nothing about how meaningful the numbers were, what they really signified and what, if any, policy (or lack thereof) could correct this or should have corrected this.  

As a side note, I am off to Denver (my old home) for the AEA meetings on Thursday.  I'll mostly be involved in an instructor search but I'll try and blog about anything particularly interesting.


Dann Cutter said...

So my fundamental comment here is: Both the COB Finance, and the CLA Economics program need a 'required' course dedicated to ETHICS of business and finance.

Instructors I talk with state that they incorporate it in their curriculum, but they then skip the ethics chapters in the book in our short quarter schedules, and give lip service at most to the ethic issues and ideas which come up day to day in the fields.

I have my Finance, and will finish my Econ degree next year at OSU and at no time will I have taken an ethics course, nor been given any specific ethics instruction, in my major's fields of study.

Jeff Alworth said...

What's shocking is that there is no code of ethics. How on earth can that be?

Your complaint about nuance, a side issue, could be expanded to every area of interest. Experts are almost always brought on board to provide a pretty specific role in a news story. The problem is that we mainly rely on broadcast media now, which has very short segments. Long-form journalism is dying, yet it's only in that format where serious ideas are explored in depth.

None of which shields economists from the scorn for their failure to address conflicts of interest. And hey, don't you get free beer?

ericfruits said...

Two of the three economists singled out by name are not members of the AEA. The AEA does not confer any special benefits. Anyone can join: Even my cat could be a member for only $70 a year. And what happens if you violate this proposed code of ethics? It's not like you'd lose your license to be an economist. Heck, a lot of folks who call themselves economists don't even have a degree in economics and don't know the difference between OLS and IS-LM. That's the real ethical scandal.

Patrick Emerson said...


It is a good point, but even though open to anyone with $60, membership does confer a type of status. I think it would be the removal of membership for ethics violations that would actually carry some weight.