December 31, 2010
A code of ethics for economists? What about law professors?
Posted by Erik Gerding

The New York Times has an interesting story today about how the American Economists Association is considering creating an ethics code. Details on the exact proposal are not public, but the outline of the idea is to require that academic economists disclose financial interests and outside employment that could be seen as creating a conflict of interest with their academic or policymaking work. The proposal responds to some devastating criticism of economists and business schools in Inside Job, the documentary on the financial crisis I reviewed a few weeks ago.

Some of the movie’s biggest “gotcha” moments came towards the end when the filmmaker questioned economists about their failure to disclose financial arrangements that might be seen as compromising their objectivity. Frederic Mishkin, an economist at Columbia and a former Governor on the Federal Reserve Board, was portrayed in a particularly negative light. The movie examined a pre-crisis study he co-authored that extolled the benefits of investing in Iceland. Some Icelandic business group paid Mishkin to conduct the study. The filmmaker asked him what research he had done to come to conclusion that Iceland’s bank regulators were competent and well-equipped. His response was underwhelming, as was his response to why he did not disclose how much he was paid for the study. The movie quickly moved on to list the Wall Street board seats and consulting gigs of a number of high profile economists with prominent positions in the Clinton and George W. Bush Administrations, many of whom were active in deregulating financial markets. The movie’s verdict was not subtle: economists sold out.

This segment of the movie was disquieting if not completely convincing. It is fairly easy to use surprise questions and the editing room to make an unprepared interviewee look bad. Moreover, outside employment does not mean that academics manipulated the results of their research. What was truly surprising for me was the interview with John Y. Campbell, Chairman of Harvard’s economics department. The filmmaker asked whether the university had any policy that required its professors to disclose financial interests that might be seen as creating a conflict of interest. Campbell was not aware of one. The filmmaker then asked why economists were not held to the same standard as doctors who must disclose who is funding their studies. Again, the response underwhelmed. It is shocking if Harvard does not have any policy that requires economists and other social scientists to disclose.

A full code of ethics raises a host of thorny questions the surface of which the Times articles just skims. Yet a basic norm and policy of disclosure should not be that controversial. Although details may remain devilish – what kinds of financial interests might trigger disclosure? How detailed and prominent should disclosure be? Is disclosure on a c.v. on a web site enough? – I was surprised by the movie’s implications that Harvard did not already have some sort of policy worked out.

What about law professors? Should not legal scholars also disclose employment and other financial interests that might be seen as influencing our work? How well does our corner of the academy perform in this regard? Law professors also consult, conduct policy making studies for pay, and serve on corporate boards. Some of that work might be seen as potentially compromising objectivity in research. Perhaps legal scholarship is often seen as fitting more naturally with advocacy than pure social sciences. However, again, it is hard to argue with the wisdom of a basic norm of disclosure to maintain both integrity and the appearance of integrity in research.

About a year ago, I talked with a colleague who teaches professional responsibility about guidelines for when to disclose in research past client relationships that ended before entering academe. She was more concerned about present financial interests that might affect research and also noted that attorney rules on client confidentiality imposes its own restrictions. Even so, I was left wondering whether our own academic profession should spend a bit more time developing guidelines so that these issues receive the benefit of structured thought and disinfecting sunlight.

Business Ethics, Law Schools/Lawyering, Legal Scholarship | Bookmark

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