Economists for hire

from David Ruccio

Charles Ferguson, writer and director of the Inside Job, has responded to Frederic Mishkin‘s attempt to defend his activities as a hired gun for the Icelandic Chamber of Commerce.

These failings would be unimportant if they were isolated and unrepresentative, and I have no desire to destroy Prof Mishkin. Unfortunately, however, these failings are not isolated, and that is the important message.

Over the past 30 years, the economics discipline has been systematically subverted, in much the same way as American politics – by money, especially from the financial services industry.  Many of the most prominent economists in America are now paid to testify in Congress, to serve on boards of directors, testify in antitrust cases and regulatory proceedings, and to give speeches to the companies and industries they study and write about with supposed objectivity. This is not a marginal activity; it is now an industry, run by a half dozen large companies.

Some prominent academics have close ties to financial services yet neither their university employers nor the journals in which they publish require them to disclose their conflicts of interest, their financial positions, or the relationship between their financial interests and the policy positions they take.

It is time to end this. At a minimum, federal law should require public disclosure of all outside income that is in any way related to professors’ publishing and policy advocacy. It may be desirable to go even further, and to limit the total size of outside income that potentially generates conflicts of interest.