Disclosure Rules for Economists

By James Kwak

In October, Gerald Epstein and Jessica Carrick-Hagenbarth released a paper documenting potential conflicts of interests among academic economists writing about the financial crisis and financial reform. Focusing on the Squam Lake Working Group on Financial Regulation and the Pew Economic Policy Group Financial Reform Project, they found that a majority of the economists involved had affiliations with private financial institutions, yet few of them disclosed those affiliations even in academic publications (where they do not face the word constraints imposed by print newspaper editors), preferring to identify themselves by their universities and as members of prestigious institutions such as NBER. To be fair, they did not find a strong relationship between economists’ affiliations and their positions on financial reform, perhaps because of the small sample and the limited amount of variation in the positions of members of these groups.

Epstein and Carrick-Hagenbarth called in their paper for economists to disclose any potential conflicts of interest, especially when writing for a general audience. This proposal has picked up some steam, first in the blogs (me; Nancy Folbre in EconomixFelix Salmon (“it’s not going to happen: there’s too much money riding on the continuation of the status quo”); Mark Thoma; Mike Konczal; Planet Money) and, more recently, thanks in part to the movie Inside Job, in the mainstream press. According to Sewell Chan in The New York Times, the AEA claims that it will consider a new ethical code or at least disclosure rules for economists — although, in a forthcoming book, “[George] DeMartino describes concerns dating to the 1920s about the influence of business on economic research, and cites multiple calls within the association for a code of conduct — all of which have been rebuffed.”

Epstein and Carrick-Hagenbarth have drafted a letter to the president of the AEA asking for the adoption of a code that requires economists to avoid conflicts of interest and to disclose ties that could create the appearance of a conflict of interest. If you are an economist and would like to sign on, you can email Debbie Zeidenberg (peri at econs dot umass dot edu) by Sunday evening. The full text follows.

We strongly urge the American Economic Association (AEA) to adopt a code of ethics that requires disclosure of potential conflicts of interest that can arise between economists’ roles as economic experts and as paid consultants, principals or agents for private firms. As the economics profession serves a prominent role in economic policy, the public’s confidence in the integrity of the profession will, in part, depend on how the issue of potential conflicts of interest is addressed.  We believe that the AEA, as the main professional organization of the economics profession, should take the lead on creating and adopting a code of ethics to address this issue.

More specifically we propose that the AEA adopt a code modeled on that of the American Sociological Association.[1] This code could state that: “Economists should maintain the highest degree of integrity in their professional work and avoid conflicts of interest and the appearance of conflict. Moreover, economists should disclose relevant sources of financial support and relevant personal or professional relationships that may have the appearance or potential for a conflict of interest in public speeches and writing, as well as in academic publications.”

This issue has taken on greater salience as the recent financial crisis has highlighted economists’ potentially conflicting roles that may have affected their real or perceived impartiality as analysts and experts. For example, in an assessment of 19 economists who have played prominent and influential roles in recent public policy debates, Gerald Epstein and Jessica Carrick-Hagenbarth found that 13 out of 19 economists had private financial affiliations indicative of some possible conflicts of interest, but only 5 had clearly and publicly revealed their affiliations.[2] A Reuters study of Congressional testimony by academics (many but not all of whom are economists) analyzed “… 96 testimonies given by 82 academics to the Senate Banking Committee and the House Financial Services Committee between late 2008 and early 2010 — as lawmakers debated the biggest overhaul of financial regulation since the 1930s.”  They found that “…roughly a third (of the academics) did not reveal their financial affiliations in their testimonies, based on a comparison of the text of their testimonies available on the Congressional committees’ websites with their resumes available online.”[3]

Economics is unusual among the social science professions in that it lacks professional ethical codes or guidelines.[4] In addition to the American Sociological Association, the American Anthropology Association has a code of ethics.  Similarly, the American Psychology Association and the American Statistical Association both have guidelines for ethics.  These codes and guidelines vary in several ways: some demand that professional members simply reveal potential conflicts; others demand that they do whatever they can to avoid or end such conflicts.[5]

We anticipate that objections may be raised to this proposal for a code of ethics. First, some may argue that this code would be redundant since many academic economists are already working under a conflict of interest policy as put forth by their respective universities.  But these codes primarily proscribe conduct that would conflict with the interests of their universities and do not address potential conflicts with respect to the broader public or government. Moreover, many economists are not academic economists and they too should be held to uniform standards of professional conduct.

Second, some economists may believe that listing their paid positions on their CVs and/or biographies constitutes a sufficient act of disclosure. However, we do not think this is sufficient disclosure.  It is not reasonable to expect the public to look up each expert’s CV and biography when trying to assess their statements.  Our proposed code would require economists to disclose all relevant potential conflicts of interest in all relevant situations, particularly in academic articles, general media pieces, speeches and testimonies.

In conclusion, we strongly urge that the AEA create and then promote adherence to a professional code of ethics that at a minimum requires transparency with respect to potential conflicts of interest. We believe this would be an important and necessary step toward enhancing the credibility and integrity of the profession.

We urge the AEA to take up this matter at its first opportunity.


[1] The ASA code requires that “Sociologists maintain the highest degree of integrity in their professional work and avoid conflicts of interest and the appearance of conflict”.  With respect to transparency, the sociologists’ code requires that: “Sociologists disclose relevant sources of financial support and relevant personal or professional relationships that may have the appearance or potential for a conflict of interest to an employer or client, to the sponsors of their professional work, or in public speeches and writing”.  http://www.asanet.org/images/asa/docs/pdf/CodeofEthics.pdf

[3] See Emily Fliter, Kristina Cooke and  Pedro Da Costa, “Special Report: For Some Disclosure is Academic” http://www.portfolio.com/business-news/reuters/2010/12/20/special-report-for-some-professors-disclosure-is-academic#ixzz18sqrBmnL

[5] The American Psychologists Association declares in their ethics guideline that psychologists should avoid a professional role that could impair their objectivity to carrying out their duties as psychologists. The American Statistical Association demands that statisticians should not only disclose all conflicts of interest but they should also resolve them.

32 responses to “Disclosure Rules for Economists

  1. Well, I came across a disturbing link today, that reveals just how vulnerable the public actually is. The need for full and unqualified disclosure of all POTENTIAL conflicts of interest in every profession is absolute. Unless we take an aggressive stance and demand oversight, every profession will continue to degenerate in the face of virulently powerful corporate interests

  2. Ethical guidelines would be great!

    However it won’t fix the problems unless they actually develop a useful field of study in the first place.

    It’s not that understanding the ‘metabolism’ of a social organism isn’t important.

    In fact its of primary importance.

    Its unfortunate economists pay so little attention to biology, anthropology and ALL the different factors that determine the well-being of a society.

    Actually the truly unfortunate thing is that so much attention is paid to THEM.

    Same could be said for a political class (of both parties) who largely USE economists to rationalize their narrow interests (or the narrow interests of particular supporters)… and to justify their own abandonment of responsibility for the results.

  3. It gets a lot worse than failing to disclose affiliations.

    See:

    http://www.disequilibria.com/blog/?p=145

  4. That link appears to be down. Here’s another which summarises:

    http://www.0x61.com/forum/viewtopic.php?f=543&t=879824&view=next

  5. nobdoy noticed

    When I was doing graduate work in political science at a Canadian university a few years ago, I was shocked to see that the university intellectuals had run themselves into a blind alley and even the best of them were afraid to go anywhere reason and inquiry might lead them. This gave free rein to the self-serving and affiliated thinkers such as James Kwak is discussing here. The problem which had stalled their pursuit of truth was this: they had realized that whatever they thought and SAID became, all too often, a self-creating reality. Ideas, even if true, could become harmful to society. They no longer trusted in truth because in their liberal little hearts they thought everything is relative ie subjective. This became very clear to me when, at a round-table meeting of profs and grad students, someone raised a question about whether the “national character” of a country (Germany, as I remember) might have some bearing on a political thesis we were discussing. The department chairperson spoke up and stated that “there is no such thing as national character.” I asked if that was really so, if it had been proven. He answered “Well no. But those types of ideas can promote wars. So we do not go there.” I was angry and said “Just because it may be harmful, it does not follow that there is no such thing.” That was a turning point for me, and I soon left the academic scene, for I could see this was happening in the academic world in general, at least in the social sciences and psychology.
    In this postmodern, politically correct, hyper-communicative era our best university thinkers have found themselves in a hall of mirrors, fearing reification, fearing to speak truth because to do so shapes consciousness and has real effects. As if that were not always so. But now that daily life is overwhelmingly human-centered, no longer balanced and constantly corrected by interaction with nature, this is indeed a problem. Yet in the same way as nature, free inquiry and free truth serve as a correctives, giving ways out of that hall of mirrors. When we lose faith in truth, the academics who serve their own, and their masters’, interests will have free play. And they are quite willing to create reality in the way they want.

  6. Thanks for link Rue the Day!

    Seems more like a ‘club’ than a profession doesn’t it!

    Since “economists” like to graph things and love figures…

    Do any of them have an estimate of the ‘cost’ of the breakdown in trust produced by self-dealing?

    Frankly, I don’t believe they’re so stupid that they don’t understand the potential negative effects. But they’re great rationalizers.

    The biological foundation of cognitive dissonance is to enhance personal and ‘in-group’ survival (one’s cronies)…

    While this re-current situation truly pisses me off…

    (These and similar patterns are thousands of years old.)

    The really irritating thing is almost nobody PRAGMATICALLY addresses these OBVIOUS problems… and their roots.

    Generally in addressing problems… Step ONE is:
    DEFINE THE PROBLEM.

    PROBLEM = Biological altruism distorts decision mechanisms in ‘social bodies’ whose scale exceeds a hypothetical ‘natural human community’ size (Dunbar’s Number).

    The solution will not be found in pretending human nature is something it isn’t…

    But in the development and implementation of technologies to address it. (Everything from laws to constitutions to finance to telephones are technologies.)

    While I’m not actually sorry to be coming out of left field… (my life has provided some unique opportunities to see things in different ways)…

    I am sorry it makes it so difficult to get a hearing for ideas I think may be important.

    Decision Technologies: Currencies and the Social Contract

    http://culturalengineer.blogspot.com/2010/07/decision-technologies-currencies-and.html

  7. This measure is an obvious attack on free enterprise and the American Way.

    If it were adopted all the right wing, sorry Business Friendly Think Tanks would have to shut down, AEI, Cato, Heritage etc.

  8. Croak!

    http://adviceunasked.blogspot.com/2009/09/ethics-and-discipline-of-economics.html

    http://adviceunasked.blogspot.com/2010/04/licensing-econometricians.html

    http://adviceunasked.blogspot.com/2010/04/economics-as-science-paul-krugman-as.html

    A good start. I would also prefer to see the profession begin to draw a line between economics as an academic discipline and economics as an advisory practice; between pure and applied economics, in other words.

  9. From the book “AN AUTISTIC WORLD (1)”

    Across history, societies have painfully learned part of his lessons (Socrates), particularly in Occident. Still, there is a great deal of improvement to be made. The nature of man repeats itself in each democratic society showing the same characteristics over time; like a tragic play were the same actors change their masks to convey an old message. Socrates understood the necessity of having influential citizens away from the sphere of politics, as well as he understood that many citizens lack the wisdom to participate in important state decisions because they are more interested in filling their pockets than they are in searching themselves.

  10. There seems no need for economists or any professional to disclose conflicts of interest. Not as long as law-makers continue to exempt themselves. Otherwise, let them lead by example.

    http://online.wsj.com/article/SB10001424052748703871904575216491495135642.html?mod=WSJ_hps_SECONDTopStories

  11. Herbert Wetherby

    Before even looking, what can you tell me about natural laws?

  12. Just the (Jack Webb?) facts:

    Ref: “McGraw-Hill Company,Inc.”

    http://en.wikipedia.org/wiki/The_McGraw-Hill_Companies

    Ref: “Major Educational Publishers”

    http://www.readingprograms.info/ed_pubs.html

    Ref: “Standard and Poor’s”

    http://en.wikipedia.org/wiki/Standard_%26_Poor%27s

    Lastly (the ultimate conclusion,…) Ref: N.M. Rothschild’s & Sons

    http://en.wikipedia.org/wiki/N_M_Rothschild_26%_Sons

    Note: McGraw-Hill (Macmillian publishes (a huge proportion of every???) educational book in the countries school’s / S&P Rating Agency (USA & Worldwide)/ The Economist/ Newsweek/ (Gramham financier***Washington Post?) are all run by the Rothschild Family. Nice!

    God Bless You, Julian Assange, and Happy New Years :-)

  13. Brenda Vinall-Mogel

    Since it is not listed here but is mentioned:

    Code of Ethics
    of the American Anthropological Association

    http://www.aaanet.org/committees/ethics/ethcode.htm

  14. I guess it’s a good start, but this does mean that the “free market” has failed. A real “free market” would have these idiotic economists types in jail or have their head stuck on a pike next to the Wall St bull especially since their policies did manage to crash the world economy.

    So much for moral hazard. So much for the “efficient-market hypothesis”. So much for deregulation. So much f&*king bunk!

  15. Doctors some argue spend 20 percent of visit time pushing medicine. The greatest culprit might be defense contractors and the threat of terrorism and WMD. Maplight.org uses the NASA car concept of emblem/logos on the suits of politicians like race car drivers.

  16. Suppose you could choose between only two schools, say positivism and postmkdernism (with their dictionary meanings). Would it not be very difficult to discuss “national character”? I think in this case the academic staff is right. However, it is a bad example of self- censorship – for- a -bad- purpose. What James raises here is the opposite, academics should censor themselves when there is a conflict of interest between their “desinterested” academic work and the interests of the current and future patrons (to include the public sector), or at least mention the connection/potential conflict.

    I do not think it would do any harm. For instance, much writing about the so called EUR crisis was done by journalists, analysts and academics with barely hidden agendas, and it showed. In the English language press there is not much of a market for EUR-promoting ideas, and a market disturbance of this type provides attractive opportunities for speculators, because the patterns are so predictable once the thing is in motion (until the music stops of course). Plenty of reasons then for the creative set (economists included, it is a humanity, not a science..) to add their views, and why expect them to be unselfish?

    It would do no harm, but probably all of that info is already on linkedin, facebook etc. Just a few mouseclicks away.

    Incidentally, what would the national character of the Canadians be? leaning towards Scottish, American or French? Some Lebanese perhaps, or Maldivian?

  17. Bruce E. Woych

    http://www.aaanet.org/stmts/ethstmnt.htm

    Statement on ethics in American Anthropology

    (google page search links on issues):

    http://search.aol.com/aol/search?invocationType=webmail-hawaii1-standardaol&query=American%20Anthropological%20Association%20statement%20on%20ethics

    Disclosure is only one step in the ethical standards that should be an ongoing discussion for academic economists, especially those in the public arena who portray themselves as authorities in the public interest and on global stability in political economy.

  18. Bruce E. Woych

    http://www.globality-gmu.net/archives/2026

    War, Journalism and Professional Ethics

    BY HUGH GUSTERSON In the fall of 2007, I received an interview request from the New York Times journalist David Rohde, who was writing an article about the U.S. Army’s newly announced Human Terrain project – a program to embed anthropologists in military teams in Iraq and Afghanistan and send them out to “map the [...]

    Global Studies Review Vol. 6 No. 1 Spring 2010

    http://www.globality-gmu.net/archives/tag/global-studies-review-vol-6-no-1-spring-2010

    http://www.globality-gmu.net/archives/2050

    Global Financial Crisis and Fragile States

    BY AGNIESZKA PACZYNSKA Over the last three years food and fuel price increases followed by the global financial crisis have placed tremendous strains on fragile and post-conflict states, raising concerns about their ability to maintain political and social stability. At the same time, what these multiple crises have revealed is that even countries in remote [...]

  19. Bruce E. Woych

    (chapter out of the history…Greed and Good )

    http://www.greedandgood.org/BookPDFs/gghistoric.pdf

    by Sam Pizzigati
    http://toomuchonline.org/greed-and-good/ ; (source)

  20. Bayard Waterbury

    James, thanks for the article. This potential conflict issue arises for me every time is read an article or see and interview or testimony by an economist. I am not one, but have spent much time in the field, and understand the amazing ways in which an economist may make arguments based upon careful constructions to support certain argments. The main reason I believe disclosure is so important is that it would force those who would be the greatest data manipulators to be far more circumspect in their presentations, since disclosure would automatically cause questions to arise regarding economic viewpoints expressed in support of some employer or connected entity. I’m not saying that it would necessarily change their opinions, but would definitely constrain the use of skewed data or arrays of data.

    In the past two years, since the crises unfolded, there have been massive differences of opinion by economist relating to the causes, outcomes and future relating to the post-crisis fallout and its effects on the future. Many of the opinions expressed have been incredibly skewed, irrationally biased and just plain obfiscatory. The fallout has been a great loss of faith in the obvious charletans, but, also a substantial discrediting of the public’s view of the profession. The last items makes me sad. Although I certainly understand the endless limitations of the profession, I also believe that it has a place in the world of governance and policy making. If it become more discredited, we could lose it as a tool for social betterment, and that would be a tragedy.

  21. nobdoy noticed

    Rien, it is one thing to self-censure, and quite another to say that “there is no such thing.” And if a subject does not fit well in some (fashionable) current school of academic thought, that might just make it MORE important, not less, because it may indicate a blind spot in our silo mentalites.

    Why should one have to choose between “schools” in thinking on any question? I was making over 4.0 marks and was told by my advisor and the department head, both very good men, that I did not need to footnote my papers any more because I was doing original thinking. They certainly did not expect me to stay within any “school” — just to be able to understand how such perspectives might bear upon my work.

    As for your question about the national character of Canadians, of course it has been shaped historically by the most dominant founding groups, but on a deeper level Jung said all of his North American patients had Native American souls. So perhaps our national character arises from the earth itself, as theirs did, and all the Canadian mosaic is slowly being shaped in that direction. And being a mosaic is in itself a large element of our national character; our ability to embrace and enjoy diversity would not be a characteristic of Japan, say, or China. (It is however characteristic of Native peoples.)

    Your reductionist sarcasm is typical of academic “national character,” by the way.

  22. nobdoy noticed

    “Publish or perish” leads to a lot of this skewed, irrationally biased and obfiscatory publication. To build an academic career one must invent an angle or get on board a cutting-edge “school”. Since there are thousands playing the game (a game begun when social science was new, the journals few and the players merely hundreds) the ideas published get stranger and stranger. I found one exceptionally clever young academic who was deliberately so obfiscatory no one could dare criticise him — and thereby winning kudos and journal publication — I got a real kick out of reading his stuff and used to laugh out loud at what he was getting away with — i called what he did “dancing on their heads.” Once, as an undergrad, I needed to do an overnight term paper so I began with one of those superbly obfiscatory papers, and without attempting to understand it, turned all the sentences inside out and rearranged the paragraphs a bit, stuck in the odd footnote from another source, and turned it in. It was all so obscure you really couldn’t tell whether or not it was making sense. I aced it. And a lot of stuff published in journals is much the same only not so supremely over-the-top.

    In another environment that young man might be using his brilliant mind for social betterment. And that too is a tragedy.

  23. Good point.

    From the book “AN AUTISTIC WORLD (1)”

    In the eye of the hurricane, a bald-headed philosopher called Socrates was convicted by the winning party of corrupting the minds of future generations of democratic citizens. These citizens, after following his reasonable advice of questioning practically everything, didn’t wanted to convey the senseless message imposed by the society’s ruling majority, and on their own decided to change it with unfortunate results. Socrates was found responsible of inciting the revolution and was judged by the same crowd of people, that he had condemned in the past for being ignorant, foolish, and violent. In his Apology, he defended the freedom of thought and expression, morality, and self wisdom, which in the crowd’s view left him with two choices: to withdraw openly the beliefs that he had embraced during the course of his life and then leave the city, or to die. Socrates choose the virtuous option sealing in great manner the destiny of Athens.

  24. @ nobdoy noticed___Wunderbar…Ich bin sehr dankbar fur`:-))

  25. nobdoy noticed

    Thanks kanino and earle — sometimes I feel all alone . .

    ( i’m going to read that book, kanino. )

  26. Stealing has been around as long as the human species has been around – maybe some amateur anthropologists would like to post a cave dwelling painting about “justice” being delivered to cave thieves :-)

    It’s very very very simple. Thousands of times repeated in “history” – most recent was the saga of “rare minerals” extraction for cell phones in the Congo. The $$$ earned by “labor” was used to buy guns (recycling the cash back to the technologically advanced, the “superior” human genes, of course), then they formed a gang and then they lived happily ever after picking a choosing a farming community to “privatize” after the harvest was complete – with superior weapons it was the cheapest and most efficient way to “rob the bank” – kill all the farmers after the harvest.

    Funny how self-proclaimed “economists” always show up to “rob the bank” AFTER the hard labor of civilization is finished and it’s time to CONSUME it….in Occidental Civilization, we worship the “shrewdness” of them having constructed a bank to capture all the deconstruction of the civilization – symbolically – with FIAT $$$.

  27. Stealing has been around as long as the human species has been around – maybe some amateur anthropologists would like to post a cave dwelling painting about “justice” being delivered to cave thieves :-)

    It’s very very very simple. Thousands of times repeated in “history” – most recent was the saga of “rare minerals” extraction for cell phones in the Congo. The $$$ earned by “labor” was used to buy guns (recycling the cash back to the technologically advanced, the “superior” human genes, of course), then the armed ones formed a gang (the ultimate “small government” model)

    and then after the Money Gods left (environmental mess beyond Polish cleaning women capabilities)

    the GANG lived happily ever after picking and choosing a farming community to “privatize” after the harvest was completed – with superior weapons it was the cheapest and most efficient way to “rob the food bank” – kill all the farmers after the harvest. True “sociological” story – look it up.

    Funny how self-proclaimed “economists” always show up to “manage” everyone else’s wealth AFTER the hard labor of civilization is finished and it’s time to CONSUME it….in Occidental Civilization, we the stupid seem to worship the “shrewdness” of thieves in venting the IDEA of a “secure bank” to house all the profit from the deconstruction of the civilization.

    Human beings did not CONSTRUCT themselves, either, just like humans did not CONSTRUCT Spaceship Earth’s perfect atmosphere. One need to question the point of letting Urologists, or any other body part specialist, set themselves up as the Big Giant Head….what body organ is compromised and sacrificed to the body organ guarded by the Urologist?

    It’s just one more item to add to the LONG list of cherry-picking data (and spending WAY too much money on the act of NOT collecting real data – how about some austerity there?)

    – the 2010 Census –

    HUGE increases in suicides and crime is no longer being reported – go figure…

    overheard people discussing how to write a clause in their renter’s agreement that holds the family responsible for paying the rest of the rent if the renter commits “suicide” – I kid you not…

    “The heat was on, he opened a window and committed suicide that way, your Honor…”

    Why young veterans are committing suicide in such huge numbers – quite the “mystery” of biology, huh?

  28. noddoy,

    Thanks for your reply which seems to indicate that I had missed your point entirely. I thought that you had a problem with both main schools of thought in, roughly speaking, the social sciences (I would prefer them to be considered humanities, except for small specialized areas where there is opportunity for empirical work in environments where past information is truly relevant). But apparently you have a problem with reductionism (a term widely used by neo marxists, apologies for not including them in my little set) which is pretty difficult to have in academia, except in parts of the UK and Western Europe.

    All of these schools of thought, including the main systems created to organize knowledge, speculation and theorizing about economics (in my book, economics is little more than a branch of applied mathematics, with bits and pieces looking pretty much like the real world might be and of course there are very good, practical reasons for that), have to stylize reality and omit details, facts etc others my think relevant. One man’s reductionism is another’s high definititon reality, so to speak. Which makes it impossible to have a meaningful discussion on many things if people belong to different schools and neglect to elaborate that. Suppose the game of bridge would not allow players to ask their opponents what system they intend to use!

    However, reductionism becomes a point when theoretical, axiomatic economics is used to make political arguments without highlighting the distortions that might follow from the type of analysis and choice of relevant facts. We all know that there is no such thing as an Aroow-Debreu world and we should not base policies on the mere belief that maybe this is how the world should look (by removing lots of socially valuable sources of inefficiency), or by ignoring the model’s simplifications. If states were listed corporations, no one would invest money in a management making those mistakes…

  29. At least, through the lens of the great anti-democrat Platoon!

  30. There are a few independent economists, but most of the jobs are either in corporations, as part of the marketing department for Wall Street, or for the government, so those who might consider that the Fed only delays and exacerbates economic swings need not apply. The universities that do not churn out economic product for these two bins do not place their graduates and probably see their economics departments wither and die. So, what would you expect? Integrity?

  31. True. Socrates wasn’t very fun of democracy either; just because the majority represents the crowd’s will, doesn’t necessarily indicate that rightness is on its side.