Irene van Staveren
This chapter analyzes the financial crisis from three ethical perspectives. It starts from utilitarianism, the ethical theory underlying neoclassical economics, which has partly driven the crisis. The best-known alternative is deontology, a rule-based ethics. This has failed to prevent the crisis because the dominant utilitarianism has undermined professionals’ belief in universal rules. The third approach is the ethics of care, a relational ethics grounded in moral commitments between people in their particular contexts, which emerged from research on families, households, and healthcare. There are two case studies that illustrate that the ethics of care is not necessarily limited to micro practices shaped by women’s traditional roles as caregivers. One case is on “caring finance” in Rabobank, and the other is on gender differences in financial behavior. They illustrate that the ethics of care deserves more attention from economists.
Jessica Carrick-Hagenbarth and Gerald Epstein
Conflicts of interest in the economics profession received attention after the Great Financial Crisis of 2008. There is evidence that some academic economists hold one or more significant financial interests in addition to their university positions. We argue the economics profession must adopt and codify rules to deal with potential conflicts of interest. Economists should disclose all potential conflicts of interest in their publications, presentations, interviews, and in Congressional testimony. The economics profession must delineate situations when disclosure is not sufficient and complete avoidance of the conflict of interest must occur. For conflicts of interest policies to be effective, disclosure and avoidance requirements need to be monitored and enforced. In lieu of a licensing agency, this can be accomplished by a combination of university conflicts of interest policies, a professional conflict of interest policy, rules by journals, such as those published by the American Economic Association, and research organizations, such as the National Bureau for Economic Research.
Robert J. Thornton and John Ward
The involvement of economists as expert witnesses in civil tort actions has grown rapidly in recent decades. This involvement most often involves economists being asked to estimate damages in litigation involving personal injury and wrongful death. Because there is considerable discretion in the methods and data sources used by forensic economists, as well as potential conflicts of interest, there is suspicion that some economists act unethically in presenting damages estimates that are biased toward the party (plaintiff or defense) hiring him or her. As a consequence, the National Association of Forensic Economics (NAFE) has formulated a statement of ethical principles and practice, one of the only codes of its type to have been passed by an association of economists in the United States. A central issue addressed in this chapter is whether such codes can have a favorable effect on the quality and impartiality of economic testimony in litigation.
Sharon D. Welch
There are moments in history where there are major breakthroughs in the power of social movements. Large numbers of people recognize the depth of injustice, see possibilities of beauty and integrity heretofore unknown, and find new forms of coming together to bring about change. We are living in such a moment. In this chapter I explore the work of historians, social scientists, economists, and political activists who are helping us understand how to be creative, constructive, and effective agents of social justice. At the core of this effective work for social justice is the embrace of a fallibility based world view and an ethic of risk. This embrace constitutes the emergence of a new honor code in which the measure of our success is not the perfection of our efforts but our honesty, humility, accountably, resilience, and audacity in the face of unintended consequences and ongoing challenges.
Neoclassical Economics as the New Social Engineering: The Debacle of the Russian Post-Socialist Transition
This chapter compares the role of neoclassical economics in trying to socially engineer the shock therapy post-socialist transition in the former Soviet Union with the robust pragmatism and incrementalism of the Chinese transition to a market economy. The Chinese transition was a success and the Russian transition a debacle—in both cases, of historic proportions. The problem lies not only in the lack of accountability of the elite Western advisors and advisory institutions such as the World Bank and International Monetary Fund, but in the whole orientation of neoclassical economics as the new “scientific” basis for social engineering on a vast scale.
The economics profession lags behind others in adopting policies to regulate conflict of interest. The purposes of conflict of interest regulations, which are often misunderstood, are to minimize bias in research and maintain confidence in the profession. With only minimal rules of professional ethics (such as those in the American Economics Association code), the work that economists publish and advice they give are at risk of manifesting analytic bias and generating public distrust. More effective procedures for regulating conflicts must go beyond disclosure. They include divesting, creating blind trusts, pooling multiple sources of support, and establishing an independent oversight bodies. Some relationships may have to be prohibited when the source of support is closely related to the research. Failure to deal with the challenge of conflict of interest is likely to undermine efforts to address the other serious problems the profession faces today.
Peter Boettke and Kyle W. O’Donnell
Following the global financial crisis of 2008, the economics profession has been criticized for its apparent complicity in promoting corporate and financial industry interests at the expense of the public interest, resulting in increased scrutiny of its ethics. We argue that the only social responsibility of economists is to maximize their career advancement within their scientific community, and the appropriate target for criticism and reform is the institutional framework of that community. Rather than “good” scientists, good rules of scientific engagement for ongoing contestation of ideas through open, critical discourse are required. The true source of corruption is not corporate and special interests but the state’s capture and politicization of the discipline. A code of conduct would be an ineffective solution and largely irrelevant to the economics profession. A radical humility in economics would reduce opportunities for corruption and limit potential harm from the economist qua social engineer.