The Economics of Economists' Ethics

[BridgeTheGap]

If they read their own research, economists might disclose conflicts of interest more often.

When the American Economic Association kicks off its annual meeting tomorrow (actually, yesterday) in Denver, the normally staid convention will be tinged with controversy: On the agenda is whether economists should adopt a code of ethical standards. The proposal comes after the housing crisis, the credit crunch, the financial crisis, the recession, the collapse of several European economies, and the overhaul of U.S. banking regulation dealt their respective blows to the prestige of the profession. More to the point, it comes after a long series of notable economists offered opinions or wrote papers pertaining to those events without disclosing major conflicts of interest.

Charles Ferguson, in his documentary Inside Job, tells the tale. Former Federal Reserve Board member Frederic Mishkin, for instance, took $124,000 from the Icelandic Chamber of Commerce "to write a paper praising its regulatory and banking systems, two years before the Icelandic banks' Ponzi scheme collapsed." Others have taken aim at White House economist Larry Summers (who earned millions with hedge fund D.E. Shaw) and his probable replacement Gene Sperling (who earned nearly $1 million from Goldman Sachs in 2008). The longer the résumé, the more prominent the economist, the more likely the opportunity for conflicts.

Now, economists are lining up on either side of the debate. Some argue that the AEA—not a licensing organization—does not have the stature to dictate ethical codes.* Conversely, 300 economists yesterday issued a public letter arguing that economics should have done so a long time ago. "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," the letter says.

http://www.slate.com/id/2279937/

[xchrom]

1. the Obvious phone is ringing -- i do wish some one would pick it up. nt

[pscot]

2. Cui bono

Disclosure would be the obvious place to start.