Ethics in economic systems and practice

Ethics in Econ III

Economic research is embedded in much of the way our businesses and governments are run. The findings of economists can therefore have a profound impact on our lives. At the core of the ethical dilemma is whether or not the economists conduct this research are conducting it in fairness, to serve the greater good, or simply to serve the needs of their financial backers.

Some recent cases have put the issue front and center. This past month in Canada, a back-and-forth debate on the issue has taken place with respect to a relatively minor study about the effects of gas price regulation on the prices consumers pay at the pump. On one side of the case was the Atlantic Institute for Market Studies (AIMS), a conservative think tank; on the other side were newspapers owned by oil companies, the provincial utility board and competing economists.

This case illustrates well the importance of discussing the ethics of think tank economics. Because the issue at hand is the price of gasoline and government intervention therein, we can see the importance of economic research. It guides public policy and touches subjects that impact on our daily lives. The think tank's motives were called, publicly, into question, on the basis of its financing structure. AIMS receives funding from seven different oil companies. Despite claims in the AIMS report that oil companies benefit from the price regulation in question, the detractors of the report suspected that the oil companies had the report produced specifically to alter public opinion to bring about the end of price regulations.

This raises a couple of important ethical issues. The first is whether or not the choice of subject for the economic research was made at the request of the oil companies supporting AIMS. The second is whether or not the study was designed with the intent of showing that gas price regulation has a negative impact on consumers. For its part, AIMS claims that the results of its survey are unbiased.

Complicating the issue is that the main critics of the report are managers involved with the government utility that set up the regulation in the first place, and the economists who produced research showing that the regulation works. These economists are employed by publicly-funded universities, and therefore receive their paycheck from the same government that enacted the price control regulations.

Debate between different economic researchers is common. There are many assumptions that must be made in the course of economic research and economists will often disagree with one another about these assumptions. Where the ethical issue arises is when the differences just happen to coincide with the positions of the entities on whom the researchers depend for employment. Truly ethical research would be free of bias, yet in this case we have economists on both sides that appear each to have a bias.

It can be argued that there is no need for either a private economist or a university professor to feel the need to produce research that supports the opinion of their financial backers. In both cases, the economist in question is not unemployable in the way that, say, an unskilled uneducated laborer is. But does the money behind the report create a moral obligation on the part of the researcher to produce research that supports certain viewpoints?

Economic Research

The issue of moral obligation comes back to the very nature of economic research.

Economic research today is generally conducted for one of two purposes. One is to provide insight into how our economic systems work. The other is to influence public policy. Can any research with the objective of influencing public policy be truly free of bias?

There are substantial ethical issues with respect to the work that think tanks conduct. By definition, their work cannot be completely free from bias. This reflects not only their raison d' tre, but also their motivations. The notion of the think tank emerged in 1945 when a commanding general in the U.S. Air Force founded the RAND Corporation. This changed the fundamental nature of the economic think tank. Whereas previously such were considered to be benign groups of intellectuals, the RAND Corporation was focused (Fetherling, 2008). It is this keen sense of focus that brings today's economic think tanks into the ethical mire.

If strong ethics depends on freedom from bias, very few think tanks would be considered ethical. However, if their bias is well-publicized, does that give them more leeway?

It is understood by those who live in the region that AIMS is a right-wing group. Therefore it is of little surprise that their research would find government price controls to be detrimental. Likewise, the rival economist at the public university changes a couple of key assumptions and produces an economic report supporting the price controls.

This raises an interesting point in this dilemma. Economic research, be in conducted by think tanks or the public sector, plays a certain role within society. Since 1945, that role has been to operate with a specific agenda. In that way, think tanks are no different than political parties. There is no moral imperative for political parties to be free from bias, indeed bias is at the core of the differences between parties. It is reasonable, then, to find the same with respect to economic think tanks. This reasoning works well if we assume that there is no fundamental difference between the economist and the politician.

The perception, however, is that there is a fundamental difference. Economics is an academic science, and the expectation among the public is that economic that is published for public consumption be relatively free from bias. This runs directly against the think tank model. In response to this view of economics, the European Union in 2004 published the EU Code of Ethics for Socio-Economic Research, in part to restore a sense of integrity to the field. The authors wrote the code in order to establish a baseline of ethics used in economic research and to spur a greater interest in the subject of ethics within the sphere of economic research.

At the heart of the debate then is the issue of whether economics is a profession, like politics, or an academic discipline, like a science. Many economists play both roles. This can make it difficult to know the exact standpoint upon which a particular piece of economic research is built.

Conclusion

What I like about the AIMS case is the very public manner in which the two sides attacked the motivations of the other. Not only did the debate about the ethics of economic research entire the public realm, but the intended audience of the debate was the general public. Much of today's economic research comes from think tanks. Indeed, it has been argued that the most advanced policy prescriptions come from such groups, rather than from government or academia. This represents the benefit of economics being a professional discipline, free from rigorous ethical standards with respect to bias.