Almost 300 economists, including yours truly in her IRL alter-ego, have signed a letter to American Economic Association President Robert Hall asking that the AEA 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." This article by Annie Lowry at Slate does a pretty good job of describing the underlying issues as well as both the ethics and economics of such conflicts of interest. You can read other accounts here, here, and here.
From the letter:
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. 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.”
Economics is unusual among the social science professions in that it lacks professional ethical codes or guidelines. 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.
Reuters reports that AEA President Hall is skeptical of the effectiveness of an ethical code, believing that because the AEA has no power of enforcement, a code of ethics would have no real effect. This seems an unusual position from a member of a profession that has built much of its theory on the rational self-interest of fully-informed consumers.
I like to think the "market" works a little better than that.
If a professional organization has a code of ethics and someone violates it, then public revelation of that information should have the effect of imposing a reputational cost on that person even in the absence of formal sanction. The reputational cost derives from the existence of a professional standard that has been violated. At present, failure to declare a conflict of interest can be viewed as an oversight. With a professional standard, it becomes at least a putative duty and obligation to reveal one's COIs.
In order to make it a real duty and obligation, I suspect that adoption of a professional code of ethics is a necessary first step toward the day when revelation of conflict of interest becomes ingrained in our professional personae and roles, part of a fiduciary responsibility that has become second nature. As long as there is no professional standard, there is less likelihood that such ethical behavior will become the professional norm and it must become the norm if the standard is ever to have real meaning.
There may be other benefits to adoption of a professional code of ethics. It serves as a reminder that when we speak or advise, it has the potential to harm or help others. Sometimes millions of "others." We economists tend to be somewhat individualistic in our orientation; some of us solidly in the caveat emptor camp. I wonder if sometimes it blinds us to the potential harm our advice could inflict on (less knowledgable) others. As with other professions (perhaps more so than many), economists have the potential to impose real externalities for good or for ill on the rest of our countrymen (and women and children). This is why it is so important that our private objectives and incentives be transparent, especially when they might be at odds with the public's interest.
Finally, a code of ethics that requires transparency with regard to conflicts of interest must almost certainly be net beneficial to our professional "brand." As the letter to the AEA puts it:
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.
In my very humble opinion, a professional code of ethics for economists is long overdue.
(I wonder if anyone will read this? They're all at the annual conference.)