Economists afraid of ethics?

Since the financial crisis, and particularly the hit movie The Inside Job, questions about whether the economics profession needs a code of conduct, or a code of ethics, has been hotly debated.

The Economist and the Wall Street Journal have extensively covered the discussion about professional ethics in the economics profession.  My personal view is that a code of ethics for the profession would go a long way to improving public policy debates, and I find the following by George DeMartino captures my views most closely.

The case for professional economic ethics is simple. Economists affect the lives of others, often substantially—that is the crux of the matter. Not just one person at a time, as is the case in medical practice; and not just a few people who consent to the economists’ influence—say, those who purchase economic consulting services.

No, economists affect the life chances of countless people across the globe, not least through their impact on economic policy. Perhaps it is the enormity of that impact that makes it difficult for economists to wrap their minds around their ethical obligations.

The push-back from this debate has led the American Economics Association to introduce a requirement that authors submitting articles must disclose any potential conflicts of interest.

It is a good first step.

I am currently pushing for the introduction of a requirement to study ethics in economics degrees.  And like many others, am promoting the introduction of a code of ethics for members of the professional economics association.

But like DeMartino I am finding it that economists have a lot of trouble wrapping their minds around ethical issues.  For someone whose training in property valuation made me acutely aware of professional responsibility, I found the resistance and confusion amongst economists quite surprising.  Property valuers operate under a Code of Ethics, Rules of Conduct, Concepts, Principles and Definitions, and Practice Standards. Their opinions hold sway in court.  Yet all they do is estimate the price of one property asset at a time.

Economists typically estimate policy impacts on prices, distribution and output, promote certain policies in the media, and provide advice to governments.  The title of economist does hold sway in the community, yet they baulk at being required to conduct themselves in a manner expected by the community of qualified professionals.

This is despite most other professions having a code of ethics administered by a professional body, such as teaching, counselling, pharmacy, medicine, engineering, pubic servants, property valuers, and electricians among many others. Or alternatively a code of conduct in professions such as town planning, law and building and construction.

While 61% of the 530 Australian economists surveyed by the Economic Society of Australia in 2011 agreed that the Society should maintain a code of ethics that applies to all members (with only 19% disagreeing), I have heard a number of arguments a against a code of ethics for professional economists.

  1. There are no ethical issues for economists
  2. Ethics is too grey.  How do we teach that if there are no solutions?
  3. We assume people act ethically – it’s not our job to give people their morals
  4. It is too hard to monitor or enforce

No ethical issues for economists

Wrong.  From the World Economics Association online conference in ethics, we find some interesting conceptual framing of ethics for economists –

professional ethics draws attention first and foremost to the complexities that arise out of relationships — among the members of a profession, between professionals and their profession, and between these individuals (and their profession) and those who populate the communities in which the profession operates and that are affected by the profession’s work. Ethical duties stem from the professional’s relationship to clients and/or the institutions who pay for the professional’s services, of course, but also to non‐clients who may also be affected by the professional’s work.

My personal bug bear, one I commented extensively on in the past, are the vested interests within the profession.  Paid to promote a point of view using the reputation of the economic profession as a whole.  My view is that if it such conduct would be unethical for a doctor, than it should be unethical for economist.

Ethics is a grey area

Right. But so is economic theory, but that doesn’t stop anyone teaching it.

As DeMartino writes

This point is fundamental: the challenges of professional practice entail ethical ambiguity and aperture, not clarity and closure… We should not presume nor look for axiomatic solutions in this domain. To put the point in economic terms, there is no ethical equivalent of pareto optimality.

The whole point of teaching ethics is that it is not all black and white. And if you have trouble teaching how to think about ethical issues there is a fantastic blog devoted to teaching and discussing ethics and economics.

Assume ethics

Need I say more.

Too hard basket

Not sure what to make of this. What really is the point of a professional body if not to have review processes in place to monitor the conduct of its members?  Surely the value of membership of a professional body is the quality of service it signals to others.

If all the professions I listed before can do it I don’t see what is so difficult.

Finally, I want to present a basic outline of what might be included in a Code of Ethics, which draws on the Handbook of Economics and Ethics.

  1. Conduct between professional economists
    1. sharing of data, appropriate recognition, and rights of reply
  2. Honest teaching by professional economists
    1. include the full suite of assumptions applicable to economic theories
    2. objective representation of empirical record and analysis
  3. Conduct between professional economists and their employers and clients
    1. disclosure of potential conflicts of interest
    2. not presenting opinions without evidence
  4. Conduct between professional economists and the community at large
    1. disclosure of funding when making public statements

The forth point is critical.  The title of economist has stature in the community.  Economists are the ‘go to’ social scientists. Politicians don’t call sociologists for advice.  When an economist writes in the media it is assumed they have some expertise, not that they are paid advertorial for a policy of their employer’s choice.

As a package I would hope this proposed code would bring some humility to the profession.  A professional economist would not be able to simply offer an opinion in the media.  They would be able to offer ways of thinking about a problem which would involve discussions about what factors are relevant to analysing a problem.  But drawing conclusions from these alternatives would require some evidence presented, even if the case is understood to be overwhelming within the profession itself.  A simple phrase could suffice, such as “multiple empirical studies show this relationship holds under such conditions.  A recent overview is found in…”

Whether or not such a voluntary code would bring substantial change in the profession I am not sure.  But combined with the compulsory study of ethics for economics degrees, the economics profession of the future could be one that conducts itself with far more integrity.  Ultimately I would hope this leads to better policy.

Please share this article.  Tips, suggestions, comments and requests to [email protected] + follow me on Twitter @rumplestatskin


  1. But Cameron, unlike doctors and lawyers and accountants, are there any cases of economists being known beyond reasonable doubt to have produced faulty work because of vested interests?

    The argument between Alan W. Evans and John Grigson, and between you and me, about the supply of land for urban use and the effect of urban growth containment, is a classic case in point. Do you want to be chargeable with unethical behaviour? You will respond that it is you and Grigson who are on the side of the angels, not Evans and me.

    There is hardly anything that is so surrounded in opinions and polarisation, than economics. What economists do, is not like blowing a client’s trust fund money on the horses.

    The problem is that a code of ethics for economists is absolutely going to reflect the political opinions of those who draft it, and it is going to be nothing more than creeping totalitarianism and shutdown of objective debate.

    It is always a give-away that one side in politics wants controls and censorship and codes of ethics; and the other wants a DEBATE. The historical record is not particularly supportive of the idea that the the side that wants a debate, is the one needing policing. But the side wanting a debate, is at root all about freedoms; hence it seldom ever acts to police the other side.

    • I do agree though that many economist-consultants are guilty of knowing what side their bread is buttered on; but how many of them are going to testify to this? The bureaucratic empires and other vested interests have so much control over who gets work, that it is this that needs to be addressed. Yes, it would help if economists who miss out on consultancy work due to their honesty, can lay complaints on ethical grounds, regarding those who did get the work and did produce massaged findings.

      I am particularly acquainted with this sort of thing in the areas of transport policy and urban planning.

    • Rumplestatskin

      “are there any cases of economists being known beyond reasonable doubt to have produced faulty work because of vested interests?”

      Every think tank, almost all of the time.

  2. Ethics sounds like a waste of time for the Economics profession.

    I’m honestly not meaning to be cynical, but, Dont most economists simple bark when their master yells BARK?

    I’ve always found it to be far more informative and illuminating to understand who actually pays a given economists. I believe it was the New York Times (maybe Krugman) that did an analysis of the shifting ideological positions of big name economists, depending on the source of their funding….

      • Which is why the NYT hired him. “Selection bias” is just the corollary to “playing the tune the piper calls”.

    • Isn’t this the whole point of the article?

      “Conduct between professional economists and the community at large

      disclosure of funding when making public statements”

    • The Householder

      No. There are a lot of consulting economists out there who maintain that to keep your reputation up, you must not compromise your standards, and will firmly tell a paying client that they will not do bad economics, even if it means they lose the client. What usually happens is that clients will shop around for a firm that has a similar ideological perspective (or one with lower standards) and go with them.

      • Rumplestatskin

        That’s right. I didn’t mention it (the post seemed long enough), but there is a group of professional economists who would embrace a code of ethics or code of conduct to improve their ability to signal their quality. I personally know a few consultants who would be on board, because they wouldn’t change their behaviour, but they would have a better way of signalling their quality standards.

        The question is what share of the profession is this group, and how influential are they?

      • Right….! I am right on board with you guys on this. That is what I was asking in my comment above; are there honest consultants who are missing out on work, who would testify to the need for a code of ethics?

        My initial concern is that arguments over whether something was ethical or not could end up a partisan opinion slug-fest over the underlying economics. For example, I would say that any economist who testifies that urban growth containment regulations do not affect the housing market, certainly should be the subject of an ethics investigation. But it might be possible to ring-in quite a number of economists who would back up this theoretical misinterpretation, and it would be anybody’s guess which way a judge would jump.

        • I don’t see how making your data available to others (Reinhart/Rogoff, anyone?), disclosing conflicts of interest, and basing arguments on facts, implies that there must be agreement on policy implications.

          The suggestion is that conflicts, methods, and data be disclosed by economists, not that all economists must agree on which policies are ethical and which are not. I don’t think you understand the proposal, go look at that list of suggestions again and explain how any one of those would require a judge to make determination between differing economic rationales. DISCLOSURE is what’s being suggested here, not agreement on conclusions.

  3. I’d sooner demand a code of ethics for politicians. Personally though, I’d prefer more of a law with massively severe punishments for hypocrisy and lying.

    This whole business with Abbot criticizing Labor for policies and results where he, by his own word, would would do no different is a case in point. Lying is normally not a huge crime but when it comes to bad policy, it can be worse than any.

    I really don’t know why people so meekly accept that politics isn’t all about honesty and co-operation instead of bitching matches. Get what we deserve I guess.

    • +1. Make politicians subject to the Trade Practices Act. In particular the provisions re “misleading and deceptive conduct”. With compulsory sentencing. Minimum = jail term.

      • Have you guys ever read Thomas Sowell’s “Intellectuals and Society”?

        He says that generally, “intellectuals” are people against whom there is never any come-back for the flawed and damaging ideas they spread. We see this in the results of all sorts of government policy – for example, the “intellectuals” who assured governments back in the 1970’s that a solo mothers benefit would not have any “perverse incentive” effect…… I don’t THINK any of them were dismissed let alone fined let alone jailed…..

        • Or the central/town planning bright sparks who thought that the best place for those with least resources, training and skills was to live together in whole suburbs of social housing far from potential employment sources, retail or commercial centers or interaction with a broader cross section of the community.

          Don’t recall any public shaming or punishment for condemning a generation to welfare dependence.

          Chances are they are enjoying a juicy pension right now and blaming the failure of their nutty vision on someone else.

  4. If economists were forced to disclose their interest and affiliations (including political) when penning articles and doing interviews it would be a major step forward.

    Economists and economics hold sway over huge portions of the population and can determine the prosperity of nations. A Code of Ethics must be enforcable and that is where I see some major challenges in getting it over the line. Setting standards that inform customers – the “buyer beware ” principle- can be done almost immediately providing positive effect.

    • Theres a youtube vid from Ed Harrison. Jeff Sachs with Hugh Hendry in an interview.
      Different topic but…

      Welcome him with caution.

  5. I think professional economists adopting an ethical code of conduct is a fine ambition, however with the dominant economic paradigm remaining intact, what constitutes ethical behaviour within that bubble of perception would still be considered marginal elsewhere.

    Until mainstream economics abandons certain ideological mindsets embedded in their theory, truly ethical behaviour is unlikely in my opinion.

    This relates to the Tim Soutphommasane article in the links page for today too. Cooperation is a word disappearing from the English language thanks to the ‘triumph’ of the Neo-Classical dogma (in favour of the systemic narcissism of the individual), and with it, any sense of responsibility of individuals for the collective.

    Economic theories have within them certain embedded assumptions about human behaviour, most of which seem to be biased towards some ideological blueprint bearing little resemblance to reality, or are simply made to justify an ideological stance. Too few assumptions are questioned (or even broached) when it comes to the discussion of policy advice, and all too few are empirically tested (and fewer still abandoned when shown to be false).

    Change the focus from ideologically loaded assumptions to empirical observations and then ethics will follow. While I note the code you have proposed would aim to address this, I seriously doubt that the desired effects would take hold without a thorough exorcism of the neo-classical dogma from the mainstream field.

  6. Red district specials Vs red light specials on economists!!!!

    The oldest profession is up in arms about the whoring and prostitution of the economic professional classes. There are professional rights to antiquity- from the temples to the bordellos.

    We serviced the ivory tower, not to compete with it! (Prostitutes unite)

    “MY” words of reflection
    Words of the wise across the ages:

    “Economics exists to make astrology look respectable.” J. K. Galbraith

    “Economics is haunted by more fallacies than any other study known to man.
    Henry Hazlitt ”

    “Sooner or later, everyone sits down to a banquet of consequences.” Robert Louis Stevenson’

    You’ll live. Only the best get killed. Charles De Gaulle

    War is when the government tells you who the bad guy is. Revolution is when you decide that for yourself. –Author unknown

    Man has only one tool to fight error: reason. Ludwig von Mises

    The class of those who have the ability to think their own thoughts is separated by an unbridgeable gulf from the class of those who cannot. Ludwig von Mises

    “In economics, hope and faith coexist with great scientific pretension.” John Kenneth Galbraith

    A man will fight harder for his interests than for his rights. Napoleon

    Politics: “The conduct of public affairs for private advantage.” Ambrose Bierce

    “The test of good writing is to simplify complex subjects.” James Cook

    The men who pay wages ought not to be the political masters of those who earn them, for laws should be adapted to those who have the heaviest stake in the country, for whom misgovernment means not mortified pride or stinted luxury, but want and pain and degradation, and risk to their own lives and to their children’s souls. Lord Acton.

    ‘Nothing doth more hurt in a state than that cunning men pass for wise.’
    Francis Bacon.

    “Among a people generally corrupt liberty cannot long exist.” Edmund Burke

    “The worst thing that can happen to a good cause is not to be skillfully attacked, but to be ineptly defended.” ~ Frederic Bastiat

    Economists use statistics like a drunk uses a lamppost – for support rather than illumination. W. Churchill.

    “All government, indeed every human benefit and enjoyment, every virtue, and every prudent act, is founded on compromise and barter.”
    Irish statesman Edmund Burke (1729-1797)

    Some whores are economists (tenured or politically appointed). The very statement of the alt- political econonomy- says a lot in it

    Does anyone remember the ex-Fed econ. who said that Iceland was terrific and then was busted for trying to alter same said facts later?

    Why whores? If finance is the handmaiden of trade then why is it arseabout?

    Econimics is now the handmaiden of finanance-a whores whore.

    Ethics or morals be damned.

    A vocation -yes or maybe- but a hired gun hand for law according to political favour no!

    Are we children of the “Enlightenment” or children of the “Endarkenment”

    Econimics is an arena where competion is not required per se but a consensus of independent minds.


    No advice only termperment on expectationss. Zero advocation to the political.

    Economists must understand that they are liable for their advice both in the privave arena, but also in the public arena and the interjunction of both.

    When the BOUGHT opinions affect not only simple concepts such as- Political, Economy, Social and Technical — BUT how they interact in a dynamic environment calls reining in of the so called treaury or rba advisors is extremely risky/dangerous.