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date: 21 January 2022

(p. xiii) Foreword

(p. xiii) Foreword

Discussing ethics makes economists uncomfortable, for some good reasons and some bad ones. Economics is ill-suited to discuss ethics in some ways, but very well-suited in others.

The best reason not to discuss ethics in economics is that we do not want to turn our debates into dueling ad-hominem attacks about unethical motivations for our arguments. Like other professionals such as physicians, we economists view ourselves as motivated by professional norms and not by crude self-interests that could be unethical. Moreover, we know that even if there are unethical motivations for an argument, this is not sufficient to disprove the argument—it still needs the kind of debate on theory and evidence that would have happened anyway if we had ignored ethics.

Nor do we want to allow declarations in economic debates that one position is morally superior to another. Economics is traditionally viewed as ill-suited to discuss competing ethical norms.

Yet economics is well-suited in other ways to address the very same concerns about discussing ethics. Whether we have a reputation for professionalism is not under our control—it is up to our audience to decide. We can do a better job convincing our audience of our professionalism by discussing self-interest openly rather than ignoring it. Our models of human behavior give insights into the need for professional norms. For example, sellers of a good whose quality is imperfectly observable will get a better price if they can convince buyers that the sellers obey ethical norms of not cheating on quality. The existence of a strong ethical norm that sellers don’t cheat, along with some enforcement mechanism, would actually lead to a better outcome for sellers. It is economics that gives the paradoxical insight that your self-interest sometimes requires convincing everyone else that you are not responding too much to self-interest.

The belief that economics cannot adjudicate competing moral values is also overstated. Our normative analysis of what makes people better off is impossible without presuming some ethical positions. Take, for example, the concept of revealed preference: that if you chose A over B, then A must make you better off than B. Revealed preference analysis presumes that the individual does and should have the right to make her own choices and that she is the best judge of her own well-being. Most of our models make the same assumptions. Individual choice and autonomy are ethical values over which there has long been and still is a huge worldwide debate. If economists tried to do revealed preference analysis in a situation where there was actually coercion rather than (p. xiv) choice, we should certainly take notice—and so we cannot avoid the global debate on individual choice.

So how should we economists confront our own ethical behavior and values? On our core ethical values of individual autonomy and consent, it seems straightforward. Whenever we apply models or analysis based on individual choice, shouldn’t we also analyze whether individuals are indeed free to choose? There may be disagreement on how or whether to do this, but let’s air those disagreements rather than avoid the topic of ethical values altogether.

The question of whether there is a profound tension between our professional norms and our self-interest deserves careful attention. Conflict of interest in economics gained much (unwanted) attention after the documentary Inside Job accused some finance economists of doing analysis favorable to financial industry interests while receiving undisclosed pay from those same interests. Even if you believe, as I do, that Inside Job was unfair to some of its targets, it did fuel a crisis of confidence in economists that we all have a strong interest in correcting. The response has been to strengthen the norms that we disclose possible conflict of interests in our research and policy recommendations; this is surely a good thing. An example from my own field of development is that researchers on foreign aid should disclose whether they are employees of or consultants to agencies dispensing foreign aid (or conversely, recipients of funding from anti-aid interests).

Yet the issue of conflict of interest is too complex to be so quickly dismissed by a simple disclosure requirement. A lot of attention has been focused on conflict of interest in academic research, where the norms were already fairly strong and were at least partly self-enforcing through reputational incentives. Conflict of interest is potentially more severe and the existing norms weaker in some of economists’ other roles as government officials, as advisors to governments or international organizations or political candidates, as critics or advocates of political ideologies, or as public intellectuals shaping policy debates. Sometimes the conflict of interest is obvious and easily resolved, other times not so much. For example, it will be obvious that an economist advising a political party or serving as a political appointee has a conflict of interest in research or policy recommendations that support or oppose that party’s positions. The economist should obviously disclose any such relationship to political parties or causes if it is not already public knowledge.

But the political role of economists brings with it a subtler ethical need for accountability. Again, research in our own field gives us some insight on this. We have a lot to say about how bad it is for agents to be able to play with other people’s money. To return to finance examples, we know a lot about how bad it is for banks to socialize risk through taxpayer bailouts while keeping any rewards from those risky investments. Analogously, economists making risky policy recommendations allow the cost of our advice to fall on everyone else, with only weak individual accountability for economists ourselves. There are still hardly any positive or negative individual consequences of good or bad advice for the dispensers of advice. In this environment, we should consider the ethical implications of our overpromising on the payoffs to our recommendations or overstating the certainty with which our promises will be realized. (p. xv)

There is the hope, of course, that economists affiliated with opposing parties will tend to subject each other’s overpromising and excess certainty to critical scrutiny on the traditional grounds of theory and evidence. Just as we think competition is a positive force in markets, competition among partisan economists should be a positive ethical force in keeping the debate healthy.

Yet sometimes competition is not as sufficient as it is assumed to be. Both sides may have a common interest in overstating the importance of economists’ recommendations in general, such as overstating the importance of current policy decisions in any direction. Both sides may want to downplay competing explanations of outcomes from the economics literature, ones that suggest outcomes are also dependent on other forces far beyond the control of the current policy-makers, such as culture or history. So we are left with a possible self-interested bias on the importance of economists as policy advisors, even as we disagree with each other over particular policy proposals.

Economists on opposing partisan sides may also have a common interest in limiting debate to what is politically feasible for the current mainstream parties, avoiding viewpoints that pose a more fundamental challenge to the status quo.

These subtler biases are evident in my own field of economic development. On the status quo bias, development economists as public intellectuals seem to be expected to direct all their efforts to advising the current development establishment of rich country governments, aid agencies, philanthropic foundations, and non governmental organizations on how to end poverty. Even critics (such as this author) focus attention on the mistakes of this establishment and how to correct them. Public intellectuals who simply dismiss this establishment as irrelevant or inherently counterproductive—rightly or wrongly—have far more trouble getting a hearing. So self-interest of public intellectuals militates against fundamental challenges to the status quo, and, indeed, there are few such public intellectuals in the development field.

On the importance bias, public intellectuals in development (including this author) seem to have a common interest in exaggerating the importance and certainty of our own advice on how to end poverty even if we disagree on how to do so. Less “constructive” views that challenge how much we economists really do know are a threat to the status and power of economists as public intellectuals in the development field.

It seems to take a lot of ethical commitment to admit publicly to something so nihilistic and self-destructive as the limits to our knowledge and expertise as economists. Yet such ethical effort could really pay off for the field in unexpected ways. To take finance again, the audience for finance economists wanted them, above all, to give advice on how to find surefire high returns on investments. It took some courage to embrace theories that bluntly state finance economists are useless in helping you beat the market. Yet this freed the most courageous finance economists to develop principles under which financial markets work well for all their participants, such as the earlier admonition against banks socializing risks through unlimited taxpayer bailouts.

In development, there is a principle similar to “you can’t beat the market”: if there really is an easy and tangible solution X to end global poverty, why didn’t X end global poverty already? Suppose development economists were ethically obliged to admit to (p. xvi) their audiences an inability to find such easy answers if we do indeed have such inability. This could free us to develop and advocate the principles of a whole problem-solving system in which many different private and public entrepreneurs will discover the more difficult answers to the problems of poverty—as indeed economists (usually the ones not facing so much pressure for immediate and direct solutions) have already been doing for a long time. It could be surprisingly liberating for economists to overcome our importance bias to admit how little everyone actually needs us economists to run the economy.

This brief discussion of ethical issues for economists has chosen an idiosyncratic grab-bag of issues, and this selection and discussion probably reflects this author’s own self-interested biases. But what this fascinating volume shows is that the open discussion of professional ethics in economics has great potential to provoke debate on many exciting questions and that there is no reason to continue inexcusable and counterproductive silence on the topic.

William Easterly