Wednesday, August 03, 2011

Mainstream Economists Lack Ethics

Speaking of occupational hazards, lawyers are known as liars while economists are known for their lack of ethics.

Al Lewis at the writes (via Mises Blog Mark Thornton) [bold emphasis mine]

Economist Martha Starr thinks there’s something you should know about economists: They have no code of ethics.

Starr has worked for the Federal Reserve, the World Bank and the U.S. Agency for International Development. Today, she’s an economics professor at the American University and the editor of a new book of essays, “Consequences of Economic Downturn: Beyond the Usual Economics.”

“Economists have absolutely no guidelines regulating their conduct,” Starr said. “Accountants, financial professionals...sociologists, anthropologists, historians, mathematicians and physicists all have standards, but not economists.”

This includes the economists who were wrong about the Internet bubble, the housing bubble and whether the Fed’s multitrillion-dollar liquidity injections would revive the economy. It also includes the economists who are now offering us differing views on what happens if America loses its Triple-A credit rating or defaults on its debt.

Economists don’t have to disclose relationships that leave them fatally conflicted. They too often work for banks, real estate groups, trade associations, corporations, political organizations and other aggressive players with a vested interest in a nation of suckers thinking that things they buy will always go up.

Economists don’t have to disclose the big, fat speakers fees they might receive from a Wall Street investment firm. They don’t have to mention their roles as corporate board directors, consultants and paid expert witnesses in corporate litigation. Or even the investments they’ve made personally that could benefit from some good, old-fashioned economic cheerleading.

Mainstream economists, along with politicos, are one of the main practitioners of the principal-agent conflict of interest (agency problems). Many of them are shills and operate on a revolving door relationship with government agencies as the US Federal Reserve

Worst, they have a string of very poor track record in forecasting markets


Chart from NewsNEconomics

Yet here is the kicker (from the same article):

Economists are not responsible for the consequences of their forecasts. They don’t even stand to be embarrassed for failing to disclose conflicts or living up to any sort of code.

Al Lewis is right, even sewer workers have standards!

No comments: