Economists Debate Ethics in Economics

This short video from the INET Conference earlier this year features a number of well-known economists discussing the question of how deeply rooted questionable behavior is in the discipline and whether the adoption of a code of ethics would help. Personally, I think a code of ethics would be a marginal plus, in that the process of articulating standards would keep the issue of conduct in focus and force the discipline to make explicit where the boundaries of acceptable behavior lie.

However, I don’t harbor any illusion that a code of ethics would have much impact. Harvard Business School looked into the question of how to encourage its students to engage in more upstanding behavior. This was in the the early 1990s, after a number of graduates were involved in high profile shady conduct in the LBO era, in particular Paul Bilzerian, who was convicted of securities and tax fraud and sentenced to four years in prison. The school concluded that it could not change students’ behavior, since individual ethical standards were well entrenched by adulthood. The best it could do was to make more of an effort to screen for students who adhered to high standards of conduct. It goes without saying that this effort has not been a ringing success.

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  1. gs_runsthiscountry

    Good grief…I read the headline, and the name that immediately came to mind was Frederic Mishkin. Mishkin authors a text under the title “Money, Banking and Financial markets” that many universities use…the irony.

  2. Tao Jonesing

    However, I don’t harbor any illusion that a code of ethics would have much impact.

    Funny. What is the law but a code of ethics that is enforced by the State?

    The school concluded that it could not change students’ behavior, since individual ethical standards were well entrenched by adulthood.

    That’s why it is important to enforce the laws on the books. The laws, if enforced, would have changed behavior.

    1. Tao Jonesing

      The law, when not enforced, is just a code of ethics relying upon “self regulation.”

      We know how that turns out.

      1. nonclassical obvious attempt to ignore huge percentates of American citizens calling for “transparency, oversight, accountability” of banking fraud..

    2. Jack Parsons

      The law must be worthy of respect. The blanket ban on marijuana has destroyed all fundamental trust in the law; anyone under 70 knows that it is “mostly harmless” in the same league as alcohol.

      1. Travizm

        You make the presumption that Alcohol is safe which I disagree with. Alcohol CAN be safe….but so can heroin….hmmmm

        Cannabis is extremely pschoactive and its short and long term effects are yet to be fully described.

        I suspect from empirical observation and current understanding of its action that it has a high abuse potential and can lead to poor health outcomes…particularly depression and lung disease.

        Moderate use however….infrequent low(er) doses…is probably harmless…perhaps even beneficial like a standard drink or two of alcohol.

        Special access to groups (terminal cancer patients, chronic pain sufferers) and decriminalisation to the rest would appear to be the way forward.


  3. Nick

    I don’t understand the notion of morals in economics. Morals are in the eye of the beholder. Creative destruction itself could be considered immoral from one end of the spectrum, it would be near impossible to draw a line where something could be immoral.

    1. Linus Huber

      It is about what they teach at universities that is being questioned here or in other words, has the income side of teaching economists an influence on the theories they teach. Unfortunately, as we all know human nature, it most definitely has an influence.

      A better question might be how to reduce/eliminate corporate influence (e.g. in form of funding projects of study etc.). Obviously, corporations have increased their influence to a rather unhealthy level and should be restricted to manage a business without influencing politics and education.

      Western society’s success was based on adherance to the rule of law. Corporate lobbying allowed the spirit of the rule of law to be corrupted which resulted in avoidance of creative destruction in many areas. It also allowed those schemes of insane personal benefits to florish in some areas of the economy. When looking at the whole situation objectively, the greatest theft takes place in broad daylight and most of those in charge have been corrupted by the prospect of benefiting from the present situation on a personal level.

      The real entrepreneurs enjoy their influence, of course, as everyone and his pet can be bought to do their bidding.

    2. Justicia

      There is such a thing as “moral capital.” It’s the degree of trust and integrity that exists among economic actors that reduces transactions costs. It has to do with the rule of law and social mores.

  4. dearieme

    When letting our property in a college town, our rule has been to reject tenants who teach or study (i) Law, (ii) Economics, or (iii) Business. We have ended up with a pleasant selection of chemical engineers, civil engineers, vets, archaeologists…..

  5. robert

    does anyone know if it is against the law to ignore a regulator or regulation or is just the regulator that can impose a penalty?

  6. F. Beard

    A government backed private money monopoly is unethical from the get-go. Some, the so-called “credit-worthy”, are allowed to steal purchasing power from all other money users, including and especially the poor who are usually not considered “credit-worthy” themselves.

    I suggest that the Progressives start to consider the problem of ethical money creation. The Right Wing has their so-called ethical money scheme – a government enforced gold standard.

  7. solo

    The point is not “individual ethics”; institutional ethics governs, whether for the heroes of business or for their high priests in academe. Pasting a code of ethics on the outhouse of neoclassical economics would serve only to mislead those whose civic nose is already defective. Reminder: The PRSA (Public Relations Society of America) has a code of ethics, while their profession, whether in commerce or politics, is lying of every sort. The job of academic economists is to rationalize the status quo (the system of corporate capitalism/imperialism); which involves untruthfulness of every sort, from junk science (Samuelson’s “engineering production function,” for example) to outright lies (capitalism is a sane & efficient system for humans and their world). You might as well take seriously the notion of a code of ethics for . . . politicians.

  8. masaccio

    I don’t think ethics will help. I think the field needs higher standards in publications and books.

    I can’t imagine writing a legal brief without discussing all of the important precedents, whether or not they help my case. All scientific papers have extensive bibliographies, which show prior work, and most explain the differences between their work and significant prior work.

    That isn’t done in economics as a general rule. Forcing scholars to explain why their paper is better than prior papers and other writings will make more of a difference than ethics rules. It may even cut down the number of stupid papers.

  9. Ishmael

    The biggest destroyer of ethics in economics is the Federal Reserve. They give out billions to economists every year and are probably the biggest giver of funds in the economic area. So, if you right a parts saying the Fed is full of crap what do you think the chances are of you getting any funding.

    The practice of the Fed handing out funds to economists should be totally eliminated.

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