06 January 2011

A Code of Ethics for Economists

This week the American Economic Association is discussing putting forward a code of ethics, including guidelines for managing conflicts of interest. The motivation is apparently the backlash against the profession resulting from the movie Inside Job (above and a teacher's guide is here in PDF). The movie profiles a number of academic economists who advocated for deregulation of the financial industry while at the same time working for that industry in lucrative positions as consultants, directors or in other roles. Such relationships are rarely disclosed in published papers or in congressional testimony.

The NY Times reports of a letter from 300 academic economists calling for such a code of ethics (see also this paper in PDF). It reads in part:
As the economics profession serves a prominent role in economic policy, the public’s confidence in the integrity of the profession will, in part, depend on how the issue of potential conflicts of interest is addressed. We believe that the AEA, as the main professional organization of the economics profession, should take the lead on creating and adopting a code of ethics to address this issue.

More specifically we propose that the AEA adopt a code modeled on that of the American Sociological Association. This code could state that: “Economists should maintain the highest degree of integrity in their professional work and avoid conflicts of interest and the appearance of conflict. Moreover, economists should disclose relevant sources of financial support and relevant personal or professional relationships that may have the appearance or potential for a conflict of interest in public speeches and writing, as well as in academic publications.”
George DeMartino, a professor at the University of Denver and author of the forthcoming book, "The Economist’s Oath: On the Need for and Content of Professional Economic Ethics" (Oxford University Press, 2011), explains at The Economist Free Exchange blog that change is needed:
Over the past two years prominent economists have begun to ask, in full public view, whether and to what degree the economics profession contributed to the current financial crisis. Then a few months back Charles Ferguson’s film “Inside Job” was released. It revealed stunning failures by influential economists to disclose their professional entanglements when giving testimony and writing about or advising on financial regulatory reform. Since then, the business press has begun to press the AEA leadership for action on conflicts of interest in economic practice. And just last week, a petition circulated by UMass economists Jerry Epstein and Jessica Carrick-Hagenbarth and now signed by over 300 economists is calling on the AEA Executive Committee to formulate a code of conduct that addresses this issue.

All this is to the good, and long overdue. Not because economists are typically crooks or shills for outside interests, though there are some of those just as in every other profession. But because most economists are trying to do good work in a field where they enjoy extraordinary influence, their interventions generally harm some while benefitting others, and things can go very wrong in unpredictable ways. And so while it is important that the AEA and other economic associations take steps to address conflicts of interest among their members—and while publications like the Economist should as a matter of course begin to demand full disclosure from those economists who appear in its pages and on its blogs—economists and non-economists alike should press for something much more ambitious. We need a new field of inquiry into the many ethical issues that arise in the context of economic practice, including the risk of causing harm; the role conflict that arises when an economist serves an institution with an agenda that conflicts with the public good; the virtues that are required of the ethical economist; and so forth. And perhaps most difficult of all for a profession that has worked so hard to achieve influence, we need to consider our obligation to convey to our students and to the public not just the capacities but also the limitations of economics, and of economists.
The self-organization by the economics community to better oversee its role in policy making is indeed overdue.  Perhaps other academic fields seeking to have wide public influence but lacking any such guidelines (such as) will follow suit.