Economic Theory

Do economists need a Code of Conduct?

I must admit I had never given much thought to this question until I attended a very interesting seminar by Dr Ioana Negru, who has recently edited a book on the ethical formation of economists. Dr Negru has argued strongly and persuasively for a voluntary code of conduct to which economists should sign up.

The American Economic Association embraced such a code last year, for example. It is fairly anodyne and difficult to disagree with, citing the need for ‘intellectual and professional integrity’ and ‘perfect freedom of economic discussion’ while stressing ‘equal opportunity and fair treatment for all economists’.

This seems to be a common trend in a range of social sciences, particularly in the Anglosphere.

What has caused this trend? Dr Negru thinks economists are capable of causing great harm, and need ethical restraints. She claims that economists working in the City cynically facilitated the construction of impossible-to-understand derivatives and thus contributed to the financial crisis. Others have argued that economists more generally were under ‘little or no compulsion to spot and thwart developments leading up to the crisis (such as the housing price bubble)’.

I don’t find this convincing. Debate continues about the causes of the financial crisis of 2008 and the role of City economists (anyway a small minority of UK economists). Some would point rather to inappropriate regulation and the behaviour – sometimes showing a cavalier or even criminal unconcern for risk – of some key (non-economist) decision-makers. In any case, would a code make much difference in practice? Accountants are already subject to various codes of conduct but they have arguably been far more to blame than economists for various financial scandals.

As for the argument that economists were under ‘no compulsion to spot and thwart developments leading up to the crisis’, this is just silly. Why should all economists be under compulsion to focus on trends in the macroeconomy? Few of us have interests or expertise in that area. It’s like saying all doctors should be focusing on heart surgery.

More seriously, it is wrong to imagine that even specialist economists are able accurately to interpret what a mass of often conflicting macro indicators are telling us, let alone able to recommend measures which will definitely offset them. If economists or anybody else believes that they know how economies work in any great detail, they are deluding themselves.

No code of conduct will ever give us the ability to predict and control economic activity which is the result of countless millions of individual economic decisions. But a worrying number of economists think they know better than untrained citizens, for example over Brexit. One danger is that virtue-signalling codes of conduct will preen the self-regard of mainstream economists as ‘professionals’, like doctors or lawyers where such ethical codes may be more obviously appropriate.

From this it is only a few steps to excluding people who don’t fit the standard framework. A report funded by the European Commission states without conditions that ‘researchers in socio-economic research are expected to hold a university degree in a subject relevant to socio-economic research or have relevant practical experience’. If such a requirement found its way into a code of conduct it would be worrying. It would appear to rule Keynes out, for example.

Speaking of Keynes, the veteran post-Keynesian Sheila Dow has also drawn attention to her concern that this code-based trend towards a narrow professionalisation may marginalise or exclude heterodox economists – in which she includes Hayekians as well as those of her own persuasion.

These codes, even if harmless now, will not stand still; the AEA one seems to have been set up with a permanent review committee. Over time they will almost certainly become more prescriptive as interest groups grab a piece of the action. Particular methodologies may begin to be privileged, as Dow fears.

Attempts to define who can legitimately be considered an economist, surely a logical consequence of increasing adherence to codes of practice, may gradually lead to some form of occupational regulation, a pernicious trend which I have discussed elsewhere.

I also worry even in the short run about the ‘voluntary’ nature of codes of conduct and codes of practice. Pretty soon they morph into being effectively compulsory. For example, voluntary codes of good practice laid down by health and safety regulators were pretty soon required to be adhered to by insurers. The advisory service ACAS has laid down codes of practice for employers which are now taken into account when employment tribunals make judgments. It is easy to imagine research-funding bodies requiring all researchers obtaining grants to have signed up to a professional code of conduct, and universities making the same stipulation.

So I’m cautious about welcoming codes of conduct for economists. We already have to obey many legal imperatives, for example in relation to intellectual property and data protection. Academic journals, including our own Economic Affairs, require us to declare conflicts of interest.  Norms about avoiding plagiarism do not need formal rules; those revealed to be guilty of plagiarism are publicly humiliated. To go further would seem to require a stronger justification. Codes of conduct for economists, attractive though they may seem to some, are solutions in search of a problem.


Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.

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