Do Economists Need a Code of Ethics?

The field of economics has taken a beating over the past couple of years. For all their brilliant models and complex analyses, most economists completely failed to predict the disastrous outcome of the housing bubble. Was the problem simply a feature of an imperfect discipline or the result of biases on the part of many economists that made them blind to the truth? Those who have too much faith in the field of economics to give the former possibility much credit might advocate for a potential solution to the latter possibility: develop a code of ethics for economists.

Sewell Chan from the New York Times reports that the American Economic Association will soon propose enhanced ethical standards for academic economists. Currently, they are not always required to explicitly state all sources of income and funding that could cause bias to creep into their work. For example, does an economist consult for an accounting firm, investment house, or Fortune 500 company? If such influences are transparently presented, then those who are looking at an economists' work may do so with a warier eye.

Indeed, in other disciplines, such codes of ethics are common. Chan writes:

Universities and medical schools have tightened disclosure requirements and conflicts of interest policies for scientists, engineers and doctors in recent years, and the main professional associations for political scientists, sociologists and psychologists have all adopted ethical codes.

If economics is a science, shouldn't economists face the same ethical demands as other scientists? Even if it is only a mere social science, shouldn't they follow the lead of sociologists and psychologists? Indeed, in many situations, economists' work is even more likely to be pushed in one direction or another due to outside influence than that of other scientists and social scientists. There's often a lot of money at stake in either business or politics depending on what the wisest economists in the land claim to be truth.

While such standards certainly may help, is listing outside sources of income enough? What if an economists' husband or wife works for a major company that could stand to benefit from his/her work? Should an economist also disclose political affiliation? Does it matter whether they subscribe to Keynesian or classical economic theory?

Considering how much influence can affect economic analysis moves the discussion back to the question asked earlier: could it just be that economics doesn't work that well as a science? If personal biases can have such a profound effect on the work of an economist, then maybe the discipline itself is the problem after all. While there are always disagreements in the hard sciences, they're often less significant than some of the fundamentally different schools of thought within macroeconomics. You can have two equally respected economists perform two very well-thought out and rigorous analyses, but come to two different conclusions. That shouldn't be possible in a hard science. Facts plus analysis should lead to a conclusion that can be proven through observation.

Economics is rarely that simple, because its subject matter is often too complex to aggregate. If you want to know how a firm will be have in a specific environment given a set of defined initial conditions, then you can probably get somewhere. But if you're trying to figure out how a group of people will behave with a multitude of different psychological and emotional reactions at work, then you're going to have a lot of trouble. In the real world, even if people behave in one way at one moment, some unanticipated external variable can result in their behaving differently at another time. Failing to entirely account for that variable will throw off the entire analysis.

Does that make macroeconomics useless? Not necessarily, but it does make the discipline imperfect. Because there's not always a clear answer to a real-life economic problem, various analyses and opinions should be sought, and ultimately the most plausible, convincing solution chosen. Would a code of ethics help to get to that end? It couldn't hurt, but it won't suddenly make economics a more objective science where no one ever gets anything wrong.