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Policing the economists

THE invitation said the meeting would be addressed by a prominent member of the think-tank, and an ‘economist’.

I’d never heard her name before, so I started googling. After much floundering in the high-blown verbiage on her website – the lady in question runs a consultancy business – I eventually found a brief reference to her qualifications: MCom MMIT, which, I found out, means Master of Commerce – Management, Marketing, Information Technology.

That seemed a rather impressive achievement, but perhaps not the sort that would qualify you to talk with authority about issues relating to poverty, for example. So what sort of qualification do you need to call yourself an economist?

Surely a PhD, I thought. After all, your words are going to have possible life-and-death effects: what you advise or dismiss on a radio show or in a newspaper article, in published papers and policy documents, could influence not only individuals but corporates and even government policy.

So I started asking around. Mike Schüssler of Economists.co.za said: “I think the norm is at least an honours degree. Most have masters or doctors degrees. But I would also add about five years of working for another economist or economic environment.”

But a professor of economics told me there was no legal requirement. You could do any sort of Economics 101 and call yourself an economist – which means that even I, with much of my academic qualifications coming out of humanities disciplines, could call myself one!

“Economists do not have to register with a professional body or write a qualifying exam before they can work as economists,” writes the Commerce Department at UCT.

No professional body? But surely… health practitioners have to register with the Health Practitioners Council of South Africa, auditors have to register with the Independent Regulatory Board for Auditors, lawyers… it’s part of being a professional to be required to register with some statutory body, which is usually charged not only with determining scope of practice and things like that, but also offers the promise of some accountability.

Which we surely sorely need.

“I see zero accountability for bad performance within economics, either among those who write about it as academics or for those who practice it in business and government. This is very clear as we seem doomed to spend a decade or more digging out of the wreckage of the housing bubble. Instead of trying to hold people at the Fed, in the Bush administration, at the regulatory agencies, at Fannie and Freddie accountable, the refrain ‘who could have known’ is used as a collective alibi. Holding economists accountable for this policy failure of monumental proportions is seen as just plain vindictive.

“Of course this is not the only policy failure for which economists have used the ‘who could have known’ alibi. The collapse of the stock bubble gave us almost 4 full years of zero job growth. Still no one in policy circles saw their career suffer in any way for failing to see this bubble and the implications of its collapse.

“There are many other examples where the economists in charge completely missed it (e.g. the East Asian financial crisis and the IMF response, Argentina’s crisis and the IMF response, the Mexican peso crisis).”
(Dean Baker, co-director of the Center for Economic and Policy Research in Washington DC, writing on Reuters’ website, July 26 2011.)

“The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in economics. […] The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public. This state of affairs makes clear the need for a major reorientation of focus in the research economists undertake, as well as for the establishment of an ethical code that would ask economists to understand and communicate the limitations and potential misuses of their models.” (David Colander et al, The Failure of Academic Economics)

The establishment of an ethical code… has anything happened about this, does anyone know?

I know that the American Association of Economists adopted a new ethics standard in 2012, but all it said, basically, was that any article submitted for publication “should state the sources of financial support for the particular research it describes,” as well as identifying sources of significant financial support for the author, “any paid or unpaid positions as officer, director, or board member of relevant non-profit advocacy organizations or profit-making entities”.

That’s a start (although I note that only 1.7% of its 17 000-odd members were keen on the idea), but surely we need a global code of ethics for a global profession with local and global implications? Surely there should be some basic requirements about the qualifications and the contents of those qualifications?  

And finally, although I’d hate to see economists skewered for not nailing predictions about the Reserve Bank’s shifts in interest rates or similar small day-to-day things, surely on more critical issues there should be some means to hold them accountable?

That’s not vindictive; it’s a way of ensuring they give their very best efforts, thought and research, just as we expect of other professionals.

 - Fin24
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