The Economist's Oath

The Economist's Oath: On the Need for and Content of Professional Economic Ethics by George DeMartino is a very stimulating book, although I disagree with the author's argument.

Let me start by summing it up. Economists have great influence over the lives of many other people because they are so influential in public policy jobs. Even when practised by moral people, economics has proven harmful – look at the financial crisis, or the effect of IMF austerity policies, or the collapse of life-expectancy in post-Soviet 'shock therapy' Russia. Economists have always resisted the idea that they need a professional ethical code because they see their role as the scientific investigation of social realities – when working in government they are doing so as technicians, not as philosophers or politicians. What's more, economists say, there are no barriers to entry. Unlike medicine or law, anyone can describe themselves as an economist and maybe even get a job as one. DeMartino rejects the positivism of these self-descriptions, saying economists must recognize that neutral policy advice is impossible in their field. And while there are no barriers to entering the profession, he argues that economists have created an intellectual monopoly and developed their own power in policy decisions. Economists' “faith in free markets” caused the financial crisis. What's more, economists are sloppy in their econometrics and tied to orthodoxy in their beliefs. Professional ethics are needed urgently so that the training of future economists includes awareness of the inherent contestability of economic models and policies.

I think this is a fair summary, and it would be hard to disagree with some of the steps of the argument. On the other hand, it's clear that DeMartino opposes 'orthodox' economics and – as so many 'heterodox' economists do – sets it up as a monolithic set of beliefs which actually only represent the views of a sub-section. For example, there are not many orthodox economists who cling as ardently as Eugene Fama to the Efficient Markets Hypothesis.

Another weakness in his argument is that he slips between discussing academic economics and applied economists working in policy jobs. The latter group are those he would like to adopt professional ethics as they make the decisions that affect others. However, it's the academics (mainly American) who develop the theories the policy economists (around the world) apply; and it's some of those theories that DeMartino objects to. As I noted in my previous post on this book, economists may be best compared to certain groups of non-experimental scientists such as geologists or astronomers, in trying to discover how society/rocks/stars work.

I think he also downplays the importance of economics not being a closed shop and overplays the idea that there is a professional consensus advanced by a powerful economic priesthood. Certainly economists try to keep out amateurs with the use of jargon and institutional structures, but largely they fail – to the extent that it's become a cliche that you can find an economist to argue any side of a debate. ('On the one hand.. on the other hand….') The idea that there is an “intellectual monopoly” in economics (p106) is vastly over-stated, and it is those who like to identify themselves as 'heterodox' who try to claim this. (My previous book, The Soulful Science, tried to show how varied and rich the house of 'conventional' economics is.) I think the power of free market economic philosophy in the early 1980s stemmed from the political power of Mrs Thatcher and Mr Reagan, rather than the other way round. The tide of free marketism had receded within the economics profession itself long before the financial crisis.

DeMartino says the Economist's Oath needs to recognise two principles: Do No Harm; and recognise people's autonomy by getting their advance consent. I would suggest that policy economists would be mystified by the idea that they need to codify the first of these, as all the economic assessment of policy incorporates at a minimum a benefit-cost analysis and often – as in competition policy – an explicit consumer and citizen welfare analysis. The policy advice might turn out to be wrong but it is always trying to 'do no harm' – subject to the caveat that there will be winners and losers, and therefore ultimately political judgments about the balance of benefit and harm. When it comes to gaining consent in advance, this is inextricably bound up with the legitimacy of those implementing the decision and therefore also a political question. In a democracy, an elected government has gained prior consent for its policies.

Having disagreed with the author's argument so much, the book ends with a sample 'oath' it would be hard to object to in outline – serve the public good, recognize the limits of economics and its links with political choices, watch out in particular for the weakest members of society, and keep in mind the virtues of pluralism in economics itself. I think most 'orthodox' policy economists would see themselves as already signed up to these principles – unless by 'pluralism' DeMartino means they ought to agree with him.

I do think economists of any variety would enjoy reading this book. It makes some valid points about weaknesses in economic practice, and about the fact that the economics used in the policy world is often actually political economy and so should not be portrayed as objective truth. My version of an economist's oath would certainly include careful econometrics, acknowledgment of alternative perspectives and humility. The book is also clearly written and jargon-free with some interesting history of the past debate within the profession about codes of conduct and ethics.

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