Economists display little interest in ethics code

The world's largest association of economists is considering ethics guidelines after outrage about undisclosed conflicts of interest, but only a handful of its 18,000 members have bothered to offer any input.

The American Economic Association earlier this year charged a five-person panel with looking into ethics and economics -- in part a response to the 2010 documentary "Inside Job" that vilified a number of big-name economists for arguing in favor of deregulation while on Wall Street's payroll.

The film also notably skewered former Federal Reserve Governor Frederic Mishkin, who wrote a glowing paper about Iceland's financial system in 2006 -- for which he was paid by the Icelandic Chamber of Commerce. Two years later, the country's financial system collapsed.

The panel, chaired by Nobel prize-winning economist Robert Solow, asked for input from the broader membership, with an end of June deadline, but so far, Solow said, he has received at most a dozen responses.

That's not a surprise to David Card, an economics professor at the University of California in Berkeley and member of the AEA's ad-hoc ethics committee.

"There are a few people who feel very strongly about this, but it's not a big deal to most economists," said Card.

"Maybe there are a few people in finance who make a lot of money. I'm a labor economist. We don't make any money. This is not relevant for the people I work with."

'Chasing Crumbs'

This January about 300 economists, including former White House economic adviser Christina Romer and Nobel Prize winner George Akerlof, signed a letter urging the AEA to adopt an ethics code. None of the members of the ethics committee, which also includes Derek Bok, William Nordhaus and Nancy Stokey, where among the signatories.

The letter cited a study of 19 financial economists that found the vast majority did not reveal their private affiliations when writing academic papers on financial regulatory reform or opinion pieces in newspapers.

It also cited a Reuters investigation of lack of disclosure of consulting gigs and directorships in congressional testimony on financial reform.

"The real money in the financial crisis was bailing out the big banks who are now controlling the political process," said Card. "You're chasing crumbs while the elephants are leaving the room."

While the committee may also look at other ethical issues in economics, Solow said, its first area of focus is disclosure of conflicts of interest -- though only as it relates to work published in the AEA's seven journals.

"We have no authority to tell them what to do elsewhere," Solow said.

The AEA has already taken a small step: As of July 1 it requires that anybody reviewing a journal article be told the name of the author, which they hope will help the journal referee spot potential conflicts of interest.

George DeMartino, who recently published a book on ethics and economics, said he is worried the committee might take too narrow an approach.

"That would represent a terribly lost opportunity -- one that, given the historical allergy of economists to professional ethics -- is not apt to come around again any time soon," he said. DeMartino was one of the economists who sent a comment to the committee. He said in an email that he hopes the committee will reach far beyond conflicts of interest and address the broad range of ethical challenges economists face.

The AEA committee last week circulated among panel members a new disclosure policy by the National Bureau of Economic Research -- a group of top research economists.

The NBER code stipulates that the source of funding for the research must be noted at the start of any research paper.

It also states that researchers should disclose any "relevant and material" financial ties that bear on their work, such as consulting or ownership relationships with firms that may be affected by the research. A reasonable guideline, it says, is that a relationship is material if its value exceeds $10,000 per year.

Card said it is possible the AEA's conflict of interest guidelines will be written along similar lines but said any code would be difficult to enforce.

"We are very modest about the possibility of actually policing badly-intended people," he said. "How can you figure out who got paid by who if they don't want you to know?"

Card added that the committee is reluctant to be too prescriptive.

"Economists have lots of flaws, but there is a general belief that economists don't like to tell other people what to do. This particular committee is made up of a broad group of people but no one who is a tell-other-people-what-to-do type of person."

[Source: By Kristina Cooke and Emily Flitter, Reuters, New York, 08Jul11]

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