Ethics and Economics
The New York Times recently reported that the American Economics Association (AEA) will be studying a proposal to adopt a code of ethical standards during its upcoming meetings, set to take place in a few days in Denver. This code of ethical standards could notably address situations where there could be a possible conflict of interest, such as when economists make policy recommendations which could affect directly firms or entities with which they are associated.
As the article in the NYT said, the movie The Inside Job probably had an effect in prompting the debate. One can think of several uncomfortable moments in the movie, such as the clip where Frederic Mishkin talks about his research on the stability of the Icelandic financial system (a clip to which he later responded, stating that the movie treatment was misleading), uncomfortable for some economists involved, at any rate. In this clip, for example, Mishkin admits that he never mentioned anywhere in the report that it had been commissioned by the Icelandic Chamber of Commerce.
Beyond the movie, however, recent research by Gerald Epstein and Jessica Carrick-Hagenbarth shows that many prominent economists who where important protagonists in the recent debates on financial reforms did not disclose their affiliations. They argue that the practice is widespread in the economist profession, leading them to recommend a code of ethics which would require the disclosure of public and private affiliations “in appropriate contexts”. This was followed up by a petition, which was sent to the president of the AEA. In the petition, they specifically recommend a code of ethics modelled on that of the American Sociological Association, which requires notably that:
Sociologists disclose relevant sources of financial support and relevant personal or professional relationships that
may have the appearance or potential for a conflict of interest to an employer or client, to the sponsors of their
professional work, or in public speeches and writing.
A couple of months ago – before the petition was launched – Nancy Folbre had also made the case for a code of ethics, mentioning both The Inside Job and the research by Gerald Epstein and Jessica Carrick-Hagenbarth, but also older cases of dubious behaviour. My favourite example remains that of Andrei Shleifer, at the time advising the Russian government in its transition to capitalism, who alledgedly made money by using his position as economic advisor to take advantageous positions on Russian markets. Preaching by example was he?
We’ll see how things turn out at the AEA meetings, but regardless, might it be a good idea to initiate a similar campaign, or at least a discussion, north of the border?
The AEA convention is now finished, some discussion occurred… and the only agreement seems to be that “standards of practice and ethical challenges” should be re-examined, as the NPR reports. What this means in practice, well…
Also, somebody pointed out to me recently that the National Association of Forensic Economics does have a code of ethics… though there as well, it seems that compliance is an issue.