In a few weeks, Economists will gather in Denver at the annual meeting of the American Economics Association (AEA) in a ritualized search for truth, jobs, fame and even romance. Economists have never been held in the highest regard but, recently, they have come under increased scrutiny and some scorn for their failure to predict the financial crisis or to shape an adequate response to the worst economic crisis since the Great Depression.
Still, Economists can take heart. There is something fairly simple they can do at their annual meeting to enhance the credibility and status of the economics profession: adopt a code of ethics to reduce economists’ conflicts of interest. Indeed, I am among some economists who are proposing that the AEA do just that.
We are urging the AEA to adopt a code of ethics that specifically addresses potential conflicts of interest that can arise between economists’ roles as economic experts and as paid consultants, principles or agents for private firms. This issue has recently taken on new force as a result of the recent financial crisis that has raised questions concerning some academic financial economists’ potentially conflicting roles that may have created perverse incentives for them to miss the run-up to the crisis, and to develop regulatory proposals inadequate to the task of preventing a re-run. For example, Jessica Carrick-Hagenbarth and I found in our study of 19 private financial economists that 13, or almost 70% of the economists had some type of private financial affiliation. Yet, in only 4 cases did the economists reveal their private financial affiliations when testifying or writing op-eds concerning regulation of financial markets.
Economics is unusual among the professions in that it lacks a code of conduct, according to Economist George DeMartino. The American Sociological Association, the American Anthropology Association, the American Psychological Association and the American Statistical Association have either codes or guidelines for ethics. These codes and guidelines vary in several ways with some demanding that professional members reveal potential conflicts with others insisting that they avoid the conflict to begin with.
The American Sociological Association, for example requires in its Code of Ethics, that “Sociologists maintain the highest degree of integrity in their professional work and avoid conflicts of interest and the appearance of conflict” (p. 7). With respect to transparency, the sociologists’ code states requires 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” (p. 7). The American Psychological Association declares that psychologists should avoid a professional role that could impair their objectivity to carrying out their duties as psychologists. The American Statistical Association demands that statisticians should not only disclose all conflicts of interest but they should also resolve them.
There are several objections that have been raised to a proposal to increase transparency of potential conflicts facing economists. First, some argue that academic economists are already working under a conflict of interest policy as put forth by their respective universities. But these policies relate to economists’ obligations to the university, not to the public or the government.
Second, some economists have suggested that by listing their main paid positions on their CVs and bios they have already disclosed their roles in the event of a conflict of interest. This is not enough. It is time consuming to find these affiliations on CV’s and bios and it is not likely that many people will spend the time tracking this information down, even assuming it is publicly available, which it might not be.
In our view, all general media pieces, speeches and testimonies the economist should reveal all affiliations that potentially lead to conflicts of interest. Using the language of the American Sociological Association’s code of ethics as a starting point, this code should require economists to reveal their private affiliations in any appearance for the media or the government when there is a conflict of interest or the appearance of a conflict of interest. For example, if an economist were to write an op-ed s/he should describe him/herself not only as a professor but also as an owner, board member, or a consultant if that is relevant to the topic of the piece. These roles should also be reported when testifying in government positions or being interviewed by the media.
This proposal to address transparency could be a first step toward a discussion of a broader norm that would limit possible conflicts as stated in the codes of other professional organizations.
If you are a member of the American Economics Association and would like to sign on to such a proposal, please send a message to Jessica Carrick-Hagenbarth and we will send it to you.
If you work for the media, ask the economists you interview if they have other, relevant affiliations that might create a conflict of interest. If you are student, you can ask your professors if they have conflicts of interest that might affect their policy proposals.
While passing this proposal might not spread a lot of holiday cheer to the Economists as they gather in Denver, it might help them get out of the dog house with the American people.