Are economists ethical? Short answer: no more than most. Long answer: well, it's not something they think about much.
The
question of ethics is starting to raise its head among economists, both
overseas and in Australia, particularly in NSW. It's an issue the
Sydney branch of the Economic Society is likely to start debating in the
next few months.
The issue is arising as more economists find
ways to sell their services to big business for big bucks. Business is
attracted by the status, expertise and authority economists bring, and
is willing to pay for it.
Various aspects of conventional
economics make economists susceptible to such transactions. Almost all
economists believe in the market system and believe that the bigger the
economy grows the better off we are. So they have an inbuilt sympathy
with business and its objectives.
They believe self-interest is a
good thing because it's what motivates a market economy. It should never
be a bad thing because it's held in check by countervailing market
forces.
And there's a belief among economists that their
discipline is "positive" rather than "normative". It's a "value-free"
description of how the economy actually works, not a statement of
opinion about how it should work.
It's because of this belief
that, for example, many economists take no account of the implications
of their recommendations for the way income is distributed between rich
and poor. That's a "value" question they aren't qualified to comment on
and so leave to others, such as politicians.
That's what they say
when challenged. When they're not challenged they usually give the
impression that distributional issues don't arise and economic
efficiency is the only issue worth considering.
In truth, the
neo-classical model is loaded with values, the most important being that
individualism is superior to communitarianism.
So you see why
ethics isn't something economists think much about. And this is
reinforced by the profession's lack of organisation. Economics is
unregulated; anyone can call themselves an economist (I don't, by the
way).
Economics has no true professional body. The Economic
Society is the closest they come, but it's essentially a discussion
group that anyone can join. Its other function is to sponsor the
academic economists' annual conference and the main Australian economic
journal (which the academics don't rate highly because it's only
Australian).
Without a proper professional association you could
argue economists aren't a profession, just an occupation. Most are
employed by governments and, these days, by banks and other financial
services firms, which means they're not free to express opinions at
variance with those of their employer. Academic economists are free, but
often don't bother.
The question of economists' ethical standards
arose in the US after the global financial crisis, when impertinent
journalists pointed out that academic economists were writing articles
posing as independent experts, without disclosing the financial firms
they were affiliated with or for whom they had done consultancy work.
In
Australia the spur is the rise of the new breed of economic consultancy
firms, which are paid to provide allegedly independent modelling to
private interests seeking to lobby governments. Sometimes even
governments commission private modelling to provide evidence supporting
some policy the pollies are pursuing.
For some reason, when the
independent consultants run their models they invariably reach
conclusions that support their paying customer's proposal. Remarkable.
These
carefully contrived conclusions are then used to bamboozle the public,
politicians and even judges who don't know enough economics to know how
dodgy many modelling exercises are and how easily models can be tweaked
to produce whatever answer you're seeking.
The issue has reached a
head in NSW, where Dr Richard Denniss, of the Australia Institute, has
appeared as an expert witness in a couple of court cases disputing the
"independent" modelling being used to claim the development of a new
mine will bring huge economic benefits to the district.
One judge
was scathing in his condemnation of the use of an "input/output model"
to exaggerate the indirect job creation from a project. A report by the
independent Planning Assessment Commission on another project criticised
the NSW Department of Planning for its uncritical acceptance of
estimates of the project's economic benefits that had been challenged
and were "not credible".
Last week the department's new minister,
Pru Goward, announced that it would commission separate expert economic
analysis of all future major mining projects. Good luck.
Issues of
independence and conduct will be discussed during the NSW Economic
Society's forum on cost-benefit analysis on July 18. And a later meeting
of the society is expected to debate whether economists need a code of
ethics. I'd start with an ethical code for modellers.
