Professional Economic Ethics: Why Heterodox Economists Should Care

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This paper is the written version of a verbal presentation to the 2011 conference of the Association for Heterodox Economics, held at Nottingham Trent University, 6‐9 July 2011. It presents the case for the ethical scrutiny of the economics profession, and some of the issues surrounding this issue, following the publication of ‘The Economist’s Oath’ (DeMartino, 2011, OUP) and the release of Charles Ferguson’s outstanding film Inside Job.

For 125 years since the AEA was founded, the economics profession in the US and beyond has consistently and successfully sought influence over public policy — influence that it believed that it deserved as a consequence of its expertise. Today, economics is certainly among the most important of professions in terms of its impact on the world. But in all that time the profession has never attended to the ethical burdens associated with influence over others. In the US in particular the profession has been dismissive of the idea that it faces ethical duties that require any serious attention. I’m aware of no other profession that has been so cavalier regarding its responsibilities.

The profession’s dismissiveness with respect to its ethical challenges is, I argue, ethically indictable. When a profession seeks influence over others, it necessarily takes on ethical obligations — whether it recognizes them or not. The profession should have established a tradition of careful inquiry into its ethical obligations 125 years ago, and these obligations should have been a central concern of the profession ever since. Curiously, this idea has met as much skepticism on the left, from heterodox economists, as from the mainstream. This paper sets out a broad enquiry into the case for ethics in economics, and the way this case might be pursued, with the aim of provoking wider discussion.

Posted for comments on 6 Sep 2012, 10:45 am.

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  • Gary Mongiovi says:

    Economic Thought Referee Report
    November 2012

    Title: Professional Economic Ethics: Why Heterodox Economists Should Care

    In this note on “Professional Economic Ethics,” George DeMartino summarizes and elaborates the message of his 2011 book, The Economist’s Oath. The essay provides a concise overview of a vitally important issue that, until recently, has received scant attention from economists. DeMartino’s book, by a stroke of good fortune, arrived on the heels of Charles Ferguson’s award-winning documentary Inside Job, which drew attention to economists’ complicity in the economic dysfunctions of the past decade. The film makes a persuasive case that the ethical failures of economists—financial conflicts of interest, outright scientific dishonesty, and intellectual laziness on a scale that borders on criminal negligence—were contributing factors in the financial meltdowns of 2007−08 and the subsequent global economic crisis.
    DeMartino’s essay is a nicely argued introduction to the topic of professional ethics in our discipline. I am in broad agreement with its main points, and so will merely offer some general observations that occurred to me as I read the paper. While I would be extremely interested to know what Professor DeMartino thinks about the points I raise, the paper is publishable more or less as it stands. The following reflections fall under the heading of “food for thought” and may be left aside for consideration in future work if Professor DeMartino thinks that the best way to proceed.

    1. Perhaps it is overstating the case to say that economists have been “utterly dismissive of the idea that [their profession] faces ethical duties that require serious attention.” They have not given much thought to the matter, sad to say, but that is probably because until Inside Job rubbed their noses in the mess some of their colleagues had made, the issue simply wasn’t on the radar screens of most economists. One might suppose, in this age of the consultant and “gotcha! journalism”, that we’d all be sensitive to the potential for conflicts of interest in our professional lives; but as Inside Job demonstrates with depressing clarity, economists are highly adept at convincing themselves that their financial interests do not compromise their scientific integrity. This is both paradoxical and ironic in view of the considerable weight economists assign to pecuniary incentives as predictors of behavior.

    2. No doubt economists-behaving-badly incidents have been occurring since the 17th century. Yet ethical misconduct has only now become a matter of concern to economists, and I cannot help but wonder whether this reflects a sharp rise in ethically questionable conduct by economists over the past few decades. Exposés like Inside Job gain traction only when there’s something to expose. The onset of neoliberalism in the late 1970s is a useful demarcation point: few pre-1980 episodes of professional misconduct by economists come readily to mind; after 1980, though, notable examples are easier to find (Ferguson found plenty). What has changed? I would be interested to know DeMartino’s thoughts on this “why now?” question.

    3. DeMartino notes that economists are apt to be antipathetic towards codes of conduct, and in particular towards the enforcement of such codes through sanctions. This strikes me as of-a-piece with the discipline’s bias against regulation. For most economists, the default position on regulation is skepticism: since competition presumably penalizes bad behavior and sub-par performance, regulation is usually unnecessary and often counterproductive. We should not be surprised if economists apply the same powerfully ingrained (but dodgy) reasoning to their own discipline. I offer the following as Exhibit A:

    Harvard economics department Chairman John Campbell, who was shown in “Inside Job” awkwardly defending the profession, [acknowledged] the need for more disclosure. But he drew a distinction between fields like medicine, where researchers can suppress data that don’t support their or their sponsors’ desired outcomes, and economics, where most research is based on publicly available information. And he rejected the notion that conflicts of interest contributed to the failure to foresee the [global financial] crisis. “The rewards for economists for correctly predicting a crisis or blowing the whistle are enormous,” Mr. Campbell said. (B. Casselman, “Economists Set Rules on Ethics,” Wall Street Journal, January 9, 2012, online edition; emphasis added)

    4. A particularly intriguing aspect of DeMartino’s paper, and one which I hope he will develop in future work, is the idea of intellectual arrogance as an ethical breach. In the paper under review, he might emphasize a bit more than he does that the “epistemic distance between economists and those they purport to serve” is at least partly illusory, given the “epistemic insufficiency” that surrounds economic phenomena. To what extent economists are aware of the epistemic limitations of their pronouncements is an open question. Self-delusion and overconfidence are pervasive human traits, as a quarter-century’s worth of research in behavioral economics has made abundantly clear—yet economists have been slow to apply this lesson to themselves.

    5. Then too there is the question of how ideology impinges upon economists’ perception of what they know. Economists are overconfident and arrogant because they truly believe, first, that what they’re saying must be fundamentally true, and, second, that non-mainstream dissent from conventional wisdom (about, say, comparative advantage or the minimum wage) is a phenomenon closely akin to maintaining that the earth is flat. The derisiveness that economists often exhibit toward non-mainstream modes of analysis is a genuine ethical lapse, for as intellectuals we have a responsibility to give thoughtful consideration to serious ideas that challenge our preconceptions. But ethical culpability is mitigated somewhat—at least for individual economists (at the microeconomic level, as it were)—by the fact that economists are nowadays trained so narrowly that they are ill-equipped to engage in a constructive way with perspectives that fall outside the body of literature and the sorts of models in which they specialized in graduate school. Both economic history and the history of economic thought have been marginalized in the graduate curriculum; and like every other professional field economics has become hyper-specialized over the past three or four decades. I agree with Professor DeMartino that economists have an ethical duty to be pluralistic, and I appreciate that precisely what this means in practical terms is a question that lies outside the scope of his paper: his aim here is to make the point that we must start a conversation on the topic. But the conversation will go nowhere unless we also reexamine how economists are educated, and in particular unless we begin to challenge the lazy logic that equates technical formalism with genuine analytical rigor.
    While total detachment from the cultural scaffolding within which we form our understanding of the world is impossible, we can be mindful that what we think we know is shaped and in some degree constrained by preconceptions that we take for granted. Recognizing this is an essential step towards finding a sensible balance between the confidence that rightly accrues to expertise and the humility that is incumbent on anyone whose pronouncements affect the lives of others.
    I would add that the Italian Marxist philosopher Antonio Gramsci had much to say about the ethical responsibilities of intellectuals. His writings have a bearing on the issues explored in this paper.

    6. At the start of the paper DeMartino mentions the American Economic Society’s Ad Hoc Committee on Ethical Standards in Economics. The committee’s recommendations were adopted by the Executive Committee of the AEA in January 2012 ( minutes/12Jan5ExecMtgMin.pdf). The outcome will be deemed disappointing by those who were hoping that the ad hoc committee might take a serious stab at engaging with the ethical issues that economists confront in their work. The committee instead seems to have confined its deliberations to establishing conflict-of-interest disclosure rules that ought to be followed by authors who submit articles for publication in AEA journals. Whether the committee issued any substantive report with concrete findings about the current state of professional ethics in our discipline is unclear: no link to any such report is readily traceable from the AEA website. Nor is it clear whether the narrow scope of the committee’s work was mandated by the Executive Committee or was determined by the ad hoc committee itself. By the look of things, though, the AEA considers the ethical issues raised by Ferguson’s documentary (which prompted the formation of the ad hoc committee) to be officially and satisfactorily resolved with the adoption of the disclosure rules. Some discussion of this dismal—and I must say embarrassing—evasion of a difficult but necessary task should be incorporated into the final draft of DeMartino’s thoughtful and extremely useful paper.

    Gary Mongiovi
    Economics & Finance Department
    St John’s University
    Jamaica, NEW YORK 11439