Home > Real-World Economics Review > RWER issue 56: George DeMartino

RWER issue 56: George DeMartino

The economist as social engineer: Maxi-max decision, utopia and the need for professional economic ethics*
George DeMartino   [University of Denver, USA]


             The economics profession has attracted a good bit of attention lately due to revelations regarding the failure of influential economists to disclose potential conflicts of interest when serving in the role of public intellectual. For this we are indebted to filmmaker Charles Ferguson, whose film “Inside Job” ought to serve as a wake-up call to a profession that has suppressed its ethical obligations for over a century. Even worse, the film makes clear that the economists it exposes have never given the matter of disclosure a moment’s thought prior to being grilled on camera by Mr. Ferguson. The film spawned several studies that further documented a failure to disclose among leading economists, and pressure from the business press on the AEA to explain just why it has no general rules or guidelines that speak to this issue (Epstein and Carrick-Hagenbarth 2010; Flitter, Cooke and da Costa 2010). In response, the AEA established a committee “to consider the Association’s existing disclosure and other ethical standards and potential extensions to those standards.”

            These developments are important: like doctors (who sometimes shill for pharmaceutical companies), economists must routinely be required to disclose their financial entanglements so that the public can make informed judgments about the dependability of the economic advice they receive. Economics ought to adopt rules similar to those in place in other professions, as Epstein and Carrick-Hagenbarth rightly argue. That said, this is but one of many ethical issues that arise in the in the context of economic practice.

            Economists routinely affect the life chances of others, for better or worse, and often decisively. This is the heart of the case for professional economic ethics. The extent and depth of economists’ influence over others necessarily entail ethical burdens that the profession has been most resistant to engage—in the U.S. and, with few exceptions, across the globe.[1] And in the vacuum created by that negligence, economists have come to act badly especially when the stakes are highest and the costs of bad behavior are most grave. If I’m correct—if the problem is as severe as I believe that it is—then this amounts to a failure of the economics profession as a whole rather than of just the individual economists who run afoul of the most basic ethical norms. The chief take-away from “Inside Job” should not be that some economists have acted badly, but that the profession has failed in its deepest ethical obligations.

            There is much to be said about these matters, which I explore in depth in The Economist’s Oath (2011). Here, I will take up just one that is particularly disturbing. It concerns the “decision rule” that economists have come to embrace without much thought when confronted with the opportunity to shape public policy that bears on the most fundamental economic institutions and practices, and as a consequence, the most vital economic flows and outcomes. 

            The argument is this: In the most important policy matters of the past several decades, influential economists have embraced a decision rule that could not possibly pass muster under any imaginable body of professional economic ethics, were there to be such a field.  Without ever speaking its name, the profession adopted the utopian decision rule of the revolutionary—a decision rule that entails substantial risks for those the economist purports to serve in the hopes of establishing the best of all possible worlds.[2] And the profession did this without any serious consideration of just what it was doing. Like those individual economists who neglected to disclose their potential conflicts of interest when advocating policy, the profession more broadly never deemed it necessary to think through just what it means to be an ethical economist; or for economics to be an ethical profession.

* Many of the arguments that appear here are more fully developed in The Economist’s Oath: On the Need for and Content of Professional Economic Ethics, Oxford University Press, 2011. Thanks to Anya Parakhnevich for her research assistance for this article.

[1] In the U.S., the National Association of Forensic Economics (NAFE) is the only economic association that has pursued a code to guide the behavior of its members (NAFE, undated). In contrast, three professional associations of applied economists in Sweden have adopted non-binding codes.

[2] Equally egregious, it involves cashing in the lives of some for the presumed benefit of others without sufficient attention to the ethical issues that attend this practice (see DeMartino 2011).

You may download the whole paper at: http://www.paecon.net/PAEReview/issue56/DeMartino56.pdf

  1. Peter Radford
    March 14, 2011 at 6:44 pm

    The requirement for an ethical examination of economics is simultaneous with the requirement to overthrow absolutist thought. The ethical disasters described in this article – and I do regard them as humanitarian disasters – are not simply the result of ethical failure on the part of many very significant economists. That failure is well documented here and those economists should be censured. But the failure is significant more because of the extreme ideologically driven and utopian nature of the beliefs being forced upon societies by those economists. I sense no remorse. I hear no apology worth anything. I see no demotions. I read of no dismissals. In no other field that I am aware of would such calumny be followed by such utter indifference. Except for banking. Do economists want to be thus associated?

    These people still collect very high salaries. They still teach their utopian foolishness. They still dominate discussion. They still clutter the upper echelons of economics with their dreamscapes. And, worse still, they affect [infect?] young minds daily.

    DeMartino has done us all a favor by shifting ethics to onto the agenda. We should respond by pressing the debate vigorously, and by admitting that utopian ideas have no value in practice.

  2. Dave Taylor
    March 23, 2011 at 9:16 am

    Of course I entirely agree with George and Peter that the leadership and education of the economic profession has become dangerously unethical, not least for lack of study of professional ethics.

    I’m contributing anyway because George says economists have only influence, in which case politicians come into the picture too. In the days before neoclassicism, of course, the discipline was called Political Economics.

    Also, lessons are missed when engineering and utopia are given a bad press. The original Utopia was a fiction designed to shame a supposedly Christian Britain which enclosures had turned into a land where “sheep eat men”. That wouldn’t have been necessary had we, like the Utopians, been reasonable rather than rational. That was why Francis Bacon created scientific method: not to satisfy curiosity but for The Advancement of Learning, i.e. how to generate not-yet-existing [Utopian?] trades to employ the destitute.

    Real engineers have offered lessons which “social engineers” have ignored at our peril. They secure the safety of static structures by providing “safety margins”, and in dynamic processes they use that “redundancy” without loss of “efficiency” to provide reliable outcomes. Though the brain uses this technique, personality differences leave the clever guys using the (word) index rationally and relatively few learning to reason reliably from richly diverse and so redundant experience. The lesson in that is problematic only when crooks learn it and Everyman doesn’t. Then we get narrow specialisation and dumbed-down education.

    Things needed in any Professional Ethic, then, are warnings against specialist hubris – we can’t know everything – and a duty to understand what others are up to, including crooks.

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