Ethics for economists

Nancy Folbre


Kai Ryssdal: This week marks a year since the first of the big consumer reforms to come out of the financial crisis. New regulations for credit card companies, changes to how they're allowed to impose fees and penalties. The idea was to create more transparency; to make that fine print a little bit bigger.

Commentator and economist Nancy Folbre thinks similar rules should be applied to her own profession.

Nancy Folbre: When economists speak, whom do they speak for?

Most academic disciplines have an official code of ethics. But the American Economic Association has never developed an official code of ethics. Sadly, some of its members seem to be in dire need of one. We are now living through a period of extremely high unemployment and foreclosures, with economists playing a particularly important role in public policy debates.

Yet research by my colleague Professor Gerald Epstein revealed potential conflicts of interest among many prominent academic economists who played a key role in recent debates over financial reform. They either invested in or advised for-profit financial institutions likely to be affected by their policy prescriptions.

They didn't disclose these potential conflicts of interest before offering their opinions in public. Why not? Maybe no one asked them to.

Long before the current financial crisis burst upon us, Harvard economist Andrei Shleifer was taken to court to face accusations of advancing his own financial interests while receiving support from U.S. taxpayers to advise Russians on the best way to develop a stock market.

Both Professor Shleifer and Harvard University agreed to settle the case with no admission of wrongdoing, but paid hefty financial penalties. The case quickly disappeared from sight.

But what could undermine our professional prestige more than suspicion of unethical behavior? At its recent meetings in Denver, American Economic Association agreed to set up a committee to study the issue, but decided to keep the membership of this committee anonymous. So no economists on the committee will be required to publicly disclose whether they have any reason to fear public disclosure.

I sincerely hope that their secret deliberations lead them to challenge professional secrecy.

Ryssdal: Nancy Folbre is a professor of economics at the University of Massachusetts at Amherst. Don't keep your comments secret from us -- send 'em in.

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Professor Folbre's comments are equally gratifying and a shocking to hear regarding the economist's profession. In the legal profession, lawyers and judges are required to not only disclose, but avoid conflicts of interests. Similarly, all professions that give advice or advocate for a particular position with authority should be required to disclose and avoid conflicts.

Quick note to Guy Ryssdal: It's pronounced 'Amerst' in Massachusetts. The 'h' is silent. I grew up there; I went to school there (at U Mass). I should know. It's Am-erst, with no 'h.' I can't speak for how they pronounce it in Amherst, NY, Amherst, WI, or all those other states.

The town was named after Lord Jeffery Amherst, a general in the French & Indian War.

It seems ... odd that in a piece advocating the creation of a professional code of ethics, your commentator avoided the need for an economist to *be* ethical entirely, focusing instead on the need to be *seen* to be ethical. That is far more worrisome than any of the examples she cited.

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