Economists in Politics

Do top financial economists reach consensus because they practice a science? Or are other influences pushing them toward conformity? Recent research from Gerald Epstein, chairman of the UMass Amherst economics department, and Jessica Carrick-Hagenbarth, suggests that we would do well to learn more about the full set of influences on elite opinion in the area:

[The researchers] examined a group of [19] influential economists, scoured publicly available resumes, biographies, articles, and interviews, and found that the majority had made money from financial institutions — but very few had disclosed these connections when writing, speaking, or giving interviews on public policy.

“We discovered there was no discernible variation among views of the 19 as a function of private affiliations. But what we did sense is there is a kind of club of prominent financial economists who share a fairly common ideology in support of less regulation.”

The film Inside Job explored the same problem. Epstein and Carrick-Hagenbarth are helping to show that filmmaker Charles Ferguson did not merely pick on a few outliers. Unfortunately, the economics profession itself may be a bit of an outlier when it comes to questions of disclosure, as Nancy Folbre discusses:

Many professional groups, including the American Statistical Organization and the American Sociological Organization, have formulated official codes of ethics to describe, among other things, specific conditions under which conflicts of interest should be reported. Such codes do not carry the force of law, but they establish normative guidelines for withdrawal of professional respect. The American Economic Association stands out for its lack of any official ethics code.

Both Felix Salmon and Brad Delong have challenged Ferguson’s Inside Job narrative, and perhaps economists are less “bribed” or “captured” than “trapped,” in Delong’s evocative metaphor:

[Our] intellectual commitments are not the result of being hypnotized by the princes of Wall Street. . . . They are the result of confidence in the intellectual power of the discipline of monetary economics as applied through the policy instrumentality of the Federal Reserve. And they are the result of the economists’ insight that whenever there is an area of economic activity that pays huge, outsized rewards the odds are that we need more of it done. But “captured” is the wrong word. “Trapped” is much better. And not trapped by the efficient market hypothesis. Trapped, instead, by confidence in modern central banking.

Whatever the mechanism for mainstream economics’s extraordinary failures over the past decade, the types of disclosures proposed by George DeMartino of the University of Denver in his forthcoming book, The Economist’s Oath, should be looked upon with interest by the field, and by its historians.

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