Has economics sold its soul to Wall Street, or does it just seem that way? An economist can wear many hats – as media commentator, academic, political advisor – while also collecting significant income from gigs in the financial services industry. Do we have a right to know about such links?
Nearly 300 economists signed a letter last month urging that the American Economic Association adopt a code of ethics that would require economists to disclose possible conflicts of interest when, for instance, publishing newspaper articles or giving speeches.
The resultant debate has been fascinating, not least because economists are acutely alert to two countervailing risks: the possibility of self-serving, financially motivated behaviour, but also the chance of unintended consequences if a rule is adopted too hastily. George DeMartino, an economist at the University of Denver, has just published a book advocating professional economic ethics called The Economist’s Oath – but fearing the consequences of haste, he did not sign the letter.
DeMartino argues that there is far more to the question of professional ethics than a disclosure code. Economists wield their influence in many different fields, and DeMartino wants the whole profession to reflect far more deeply on the ethical issues that might arise in the course of practising economics.
To return to the narrower idea of disclosure, practical objections soon occur. For instance, Professor DeMartino’s book is published by Oxford University Press. My first book was published by Oxford University Press and I still receive royalties from them. Was it essential that I disclose that financial relationship now that I have mentioned DeMartino’s book? Could any written code reliably guide that judgment call?
Dr Ben Goldacre, who is currently researching a book on the pharmaceutical industry, says that when it comes to disclosing conflicts of interest, “medicine is the best of a bad lot”. Medical journals can and do require authors to disclose relevant financial interests, but Goldacre complains that other activities – such as speeches – can be carried out without disclosure. A researcher could also accept a $500 honorarium from half-a-dozen companies and hundreds of thousands from a single backer. Since the sums of money are not disclosed, the true financial interest can be buried in a pile of trivia. Nor is it terribly attractive to suggest that economists must release their tax returns in order to publish in a peer-reviewed journal.
Even if disclosure is necessarily imperfect, isn’t it better than nothing? Professor Lant Pritchett of Harvard strongly disagrees, arguing that the entire idea is not only unworkable but actively corrosive. “Disclosure is going in the wrong direction.” What should matter, he says, is the quality of argument, analysis and evidence. “If we really wanted to improve economic science, we’d insist that every article be anonymous, rather than saying, ‘This guy is friends with so and so, and has a consulting gig.’”
I suspect Pritchett is fighting a losing battle, and believe that economics journals should figure out a way of managing disclosure without reducing all economic debate to ad hominem debates about who is funding whom.
Yet Ben Goldacre makes a telling observation: “Part of the process of changing the culture around conflict of interest lies with the audience for conflict of interest statements.” In other words, you can expect sensible disclosure of potential conflicts only in a world where other people read and digest disclosure statements in a sensible fashion, rather than exploiting any whiff of impropriety for political advantage. With memories of the crisis so fresh, it may be some time before we live in that world.
Also published at ft.com.