Economist’s pledge

Primum non nocere, first do no harm.  This is a good pledge for a medical professional, and would be a great pledge for a policy analyst, but it doesn’t make much sense as a pledge from an economist – as we don’t actually make decisions, we frame situations and describe trade-offs.

However, this does not mean that economists do not have some sort of moral obligation associated with their analysis.  In order to cover this off Robin Hanson discusses the “efficiency economist pledge” (ht Robbie A). :

I pledge to be an efficient economist, who helps clients find win-win deals to resolve social conflicts.

Reading the full pledge, it seems that the goal is to use economic advice to provide the client with the knowledge and tools they need to get what they are after.

This is as opposed to a moral principle I have heard discussed by Eric Crampton which pertains specifically to doing work for government.  Namely that when there is a difference between the social optimality of a policy and the policy that suit policy wonks, it is not right to provide advice that specifically benefits your client at a cost to broader society. [Do I have this right Eric?] UpdateEric lays out his view more fully here.

If I have described Eric’s additional moral requirement appropriately, then my main counter to this has always been “it isn’t the economists fault that they are taking the incentives involved, it is just an illustration of government failure”.  The illustration should be made more apparent IMO, but I do not blame analysts for acting in their self interest.

  • I’d put it this way.

    If your public agency client demands the use of a method at variance with standard method and that will provide an economically unsound figure which could mislead the public, then you should first inform your client that the method proposed is at variance with standard economic method and, if the client insists on the use of that method, you ought provide reasonable explanation in the produced report of how your method differs from the standard economic approach and how the numbers provided consequently may be limited in their application.

    So, if MoH comes calling asking for an “economic social cost” figure on the costs of, say, obesity, and insists on a method that includes the cost, say, of all hamburgers purchased by folks with BMI over 22, you ought first tell them that the number produced in that way can’t be called an “economic social cost”. If they insist, then preface your report with a disclaimer that the produced figure includes a whole pile of stuff that wouldn’t normally be considered social costs by economists. Ideally, also provide the parallel “economic cost” figure that strips out all of the costs that economists don’t get to count. This isn’t hard to do if you’re thinking about it while building up the larger figure.

    I would hope that reputation would work to punish firms that are happy to use whatever method is proposed in pursuit of big numbers: eventually, their work would lose credibility. Unfortunately, reputational feedback mechanisms here seem perverse: willingness to produce shonky large numbers gets folks more clients seeking shonky large numbers, and the public seems unable to differentiate between shonky and sound figures.

    As for the “it’s just the incentives they’re facing”, well, Matt, suppose the Ministry of Health came to you offering $130K for a report showing obesity to cost the country at least $4.8 billion per year, and suggested counting all those hamburgers as a social cost. I’d hope that you’d tell them to get stuffed, worrying sensibly that the number would inevitably corrupt public policy debate and would have you labeled as the kind of economist who’ll do special tricks for extra fees.

    I’m sure that you’d agree with me too that simply responding to incentives doesn’t make an act moral or otherwise. The rational criminal finding it optimal to hold up a liquor store still commits a wrong act.

  • @Eric Crampton

    “Suppose the Ministry of Health came to you offering $130K for a report showing obesity to cost the country at least $4.8 billion per year, and suggested counting all those hamburgers as a social cost. I’d hope that you’d tell them to get stuffed, worrying sensibly that the number would inevitably corrupt public policy debate and would have you labeled as the kind of economist who’ll do special tricks for extra fees.”

    True. And I do believe that this direct view would come under a reputation type mechanism.

    But suppose a government department offers an economist money to describe a VERY SPECIFIC question looking at a VERY SPECIFIC set of costs OR benefits. They then use these specific numbers to (IMO) unjustifiably sell a policy they wanted to implement.

    I can’t understand why doing this would make an economist uneasy – but in essence this isn’t the economists fault per see, it is the fault of institutional issues inside government. Hence why I view it as systematic of government failure.

    Now, conveniently I don’t need to worry about these moral issues personally as I’m a forecaster.

    “Unfortunately, reputational feedback mechanisms here seem perverse: willingness to produce shonky large numbers gets folks more clients seeking shonky large numbers, and the public seems unable to differentiate between shonky and sound figures”

    Agreed that this is disappointing. If only there was an objective agency that was funded to fisk these types of reports (read some magic subset of Treasury as what is in my mind here).

    “I’m sure that you’d agree with me too that simply responding to incentives doesn’t make an act moral or otherwise. The rational criminal finding it optimal to hold up a liquor store still commits a wrong act.”

    Indeed. However, the rational criminal is directly impinging on someone elses liberty. The economist that does a study which is in turn inappropriately used (and has knowledge that his will be the case) is merely aiding and abetting …

  • @Matt: In your VERY SPECIFIC example, I’d hope that the firm whose number was quoted out of context would soon put out a note saying that they do not endorse that use of their number. Didn’t Covic do that recently?

    Totally with you on Treasury.

    Re: aiding and abetting: ok, you’re a biotech firm. Tinpot African Dictator, in middle of a genocidal campaign, wants some expert advice on how a virus could be developed that’s targeted to the ethnic group he’s fighting against. You don’t have to make the virus, just give some advice.

    I’m with you that government failure is root of all this, but there’s no reason for economists to be complicit.

  • @Eric Crampton

    “I’d hope that the firm whose number was quoted out of context would soon put out a note saying that they do not endorse that use of their number. Didn’t Covic do that recently?”

    Indeed. Although the economic firm may feel that they are not best placed to discuss the context of a clients work – or may explicitly be told that they are not allowed to.

    “Re: aiding and abetting: ok, you’re a biotech firm. Tinpot African Dictator, in middle of a genocidal campaign, wants some expert advice on how a virus could be developed that’s targeted to the ethnic group he’s fighting against. You don’t have to make the virus, just give some advice.”

    Exactly. You are being paid to discuss the idea and further knowledge …

    “I’m with you that government failure is root of all this, but there’s no reason for economists to be complicit.”

    That is true. I just find it hard to criticise economists, as I don’t see economics as the subject that reaches conclusions. I place the blame on those who use the framework to cause harm – I agree that this in itself is a pretty extreme moral judgment, but I just can’t see any other way.

  • @Matt: I’d be awfully nervous about signing a contract with anybody that precluded me from complaining if my number got twisted up.

    I’d also reckon the biotech firm should tell the tinpot to get stuffed and further should warn the State Department (among others)….

  • @Eric Crampton

    “I’d be awfully nervous about signing a contract with anybody that precluded me from complaining if my number got twisted up. ”

    Agreed in theory … but when it is someones income at stake they may look at it a little differently.

    “I’d also reckon the biotech firm should tell the tinpot to get stuffed and further should warn the State Department (among others)….”

    Agreed as well. But again, if this is the only funding the firm can find, and they are willing to perform the service given the likely immoral final consequence.

    Overall, if I was asked to do work in a way that felt inappropriate there would be a moral cost I would incorporate – I just feel uneasy judging anyone else on their moral values. In the end, I’d like responsibility for actions to fall on those choosing the action directly – hence why my weight of judgment falls more on institutional problems in government rather than “advice whoring” by hypothetical economists.

  • First best is a structural fix where Treasury gets a lot more ballsy about calling out crap reports.

    I’m far less willing to grant “well, I’d have to go into another line of work if I didn’t do evil” as legitimizing. Hypotheticals so cheap talk, but if a condition of my employment in academia were that I murder a toddler once a year, I’m pretty sure I’d find another line of work. Having to choose another line of work hardly puts you into a lifeboat situation….

  • @Eric Crampton

    “First best is a structural fix where Treasury gets a lot more ballsy about calling out crap reports.”

    Agreed of course. Let’s do that.

    Of course, the government never will as it impinges on their ability to sell crap to the public and get voted in 🙁

    “Having to choose another line of work hardly puts you into a lifeboat situation….”

    Agreed. But I still see this choice as an individual one. I guess it lets you infer something about the morality of hypothetical economists that do this sort of thing right?

  • It’s something you might hope for more from a National administration though. Recall that firms will often lobby for regulations that hurt them so long as they do even more damage to their competitors.

  • @Eric Crampton

    You need to make an Economists party. Our only policy will be to change the institutional structure of government so it runs better, before resigning so that there can be a new election with parties with opinions 😉

  • You’ve read my now oldish piece on expressive voting and constitutional constraint? Your idea might work for a while, if you could convince folks to love the constitution qua constitution, but if that would work, I’d redesign things instead to be Grand Poobah for Life….

  • Unfortunately, reputational feedback mechanisms here seem perverse: willingness to produce shonky large numbers gets folks more clients seeking shonky large numbers, and the public seems unable to differentiate between shonky and sound figures.

    I would argue that when it comes to public policy, this is probably true since once a number is in the publics mind the damage is already done even if the number itself is dodgy. I.e. the “court of public opinion” has paralells to a one shot game.

    I think the reputational feedback mecahnisms are much stronger when you are dealing with the Commerce Comission and Courts since it is much more of repeated game. In this setting you are dealing with the same judges/comissioners on a repeated basis and people on the other side of the issue always hire opposing economists to look at what are you are saying.

    Note: I also offer my usual disclaimer that I haven’t read all of the comments due to time constraints!

  • @agnitio: that all sounds right.

  • @agnitio

    Makes sense to me – its all about incentives 😉

    I wouldn’t say the Comcom necessarily provides a perfect reputational feedback mechanism to all consultants though – I’m sure you would agree that sometimes there is work that “could be better”. But it does explain why that sort of work is usually to a much higher standard than some hypothetical “policy cost/benefit” work …

  • dragonfly

    I am annoyed to see Covec’s report mentioned here in a favourable context, because it seems to me that their report is a classic example of one that “provide[s] advice that specifically benefits [a] client at a cost to broader society”.

    And, curiously, it was Covec’s report on GST and leaky buildings that led me to these economic blogs. I first saw mention of Covec’s report on Bernard Hickey’s blog, where he was claiming that they had backed down on what they’d said in their report. I looked at the report and saw that Bernard was wrong, but nonetheless I was shocked by the nature of the report which seemed to me to be a shameless, made-to-order effort carefully constructed to entirely match the interests of Covec’s client, the North Shore City Council.

    Also, there was an Orwellian pointlessness to the report, which attempted to quantify revenue collected by the state as a result of the leaky building issue, even though (and this is mentioned in the report) this revenue might have been collected anyway due to spending on other things in the absence of a leaky building problem. I cannot understand how such a report ever came to be commissioned.

    If Covec had quantified the revenue to the state from the leaky building problem, then explained why, in isolation, that was a stupid and pointless exercise, and then left it at that, their report might have been acceptable. Instead they proffered this lame justification for the report:

    “[The report] provides an estimate of the extent to which spending on repairs to leaky buildings would contribute to the Government’s tax revenue. Although this estimate does not in itself provide an economic justification for the Government to contribute towards the problem, it gives some context to the scale of weathertightness problems, and may provide information regarding the perceived fairness of any contribution of the Government as the entity responsible for establishing the overall regulatory environment within which this problem has arisen.”

    That’s poorly reasoned to the point of being incoherent, in my view. Later in the report they go from bad to worse with some vague mumbling about why taxpayer assistance for leaky home owners is a good idea for all sorts of other reasons too. Really, it might as well have been one of those rambling, ill-disciplined letters to the editor for all the substance they provide in support of those arguments.

    Matt Nolan says:

    “But suppose a government department offers an economist money to describe a VERY SPECIFIC question looking at a VERY SPECIFIC set of costs OR benefits. They then use these specific numbers to (IMO) unjustifiably sell a policy they wanted to implement.”

    Substitute “North Shore City Council” for “a government department”, and this is pretty much the story of Covec’s report. The question arises, though, whether Covec ever advised the council that the report was a dumb idea, or whether they were complicit in coming up with something, anything, to help the council come up with the conclusions that suited it.

    It reminds me of the days when you could shop around for a WOF, but when you wanted to sell your vehicle and make a good impression you would get a WOF from the state-owned WOF providers. These providers did not do anything other than provide WOFs and they had a reputation for being impartial. As a result a WOF from them carried more weight than others did. Maybe it will come to be the same with economic consultancies.

    Anyway, after reading the Covec report I began to wonder if this mindless cheerleading on behalf of clients is typical of reports provided by economic consultancies, and that is how I came to read on other economic blogs about the BERL alcohol report and the PWC report on adult community education. It was enlightening and dismaying, and, no, as the taxpayer/ratepayer who pays for this trash and then bears the cost of bizarre policies that arise as a consequence, I don’t think it’s alright.

    My opinion is that just as giving a WOF to a vehicle that should not have got one is immoral, because of the potential to cause harm to others, so is writing a deliberately biased economic impact report. That too has the potential to cause harm to people who end up bearing costs on behalf of others. Maybe, for example, poor children end up with less access to health care and their lives may be severely circumscribed by the likes of rheumatic fever because taxes were instead spent on the relatively privileged owners of leaky homes.

    It’s one thing to lay out the whole story in the interests of enabling informed decision-making (in which case I agree the economist most likely has no moral responsibility for actions later taken by those who commissioned the report). It’s another to collude with those commissioning the report and then calculatedly lay out half the story with the intent to misinform and assist in the biasing of outcomes.

    I understand why you might have an unwillingness to condemn others when you are not sure how you would behave yourself if offered the same opportunities, and many people do in fact think they are a lot better than they are. But to always refrain from making any moral judgement ever on others is to allow bad things to happen. Understanding why people do bad things and recognising that you might be capable of the same in similar circumstances is quite different to condoning bad behaviour and taking no action.

  • @dragonfly

    Hi Dragonfly,

    I agree with what you are saying about the report per see, see here:

    http://www.tvhe.co.nz/2010/03/26/im-sick-of-this/

    I believe the favourable comment from Eric came from the fact that Covec came out against the conclusion taken from their report – see the comment here:

    http://www.tvhe.co.nz/2010/03/26/im-sick-of-this/comment-page-1/#comment-23450

    And the report here:

    http://www.covec.co.nz/leaky-buildings

    I don’t fully agree with even this justification per see, but it is an improvement.

    “I understand why you might have an unwillingness to condemn others when you are not sure how you would behave yourself if offered the same opportunities, and many people do in fact think they are a lot better than they are. But to always refrain from making any moral judgement ever on others is to allow bad things to happen.”

    Trust me, my personal opinion on these reports is a lot more colourful than the opinion I provide on the blog – and the sort of things I say about this in person also sounds different. If there is ever an “economics blogger drinks” I am sure what I say would sound entirely unfamiliar to anyone who reads the blog …

    However, on the blog I refuse to hold economists to a higher moral standard than other disciplines – which in turn leads me to place the blame on those asking for the reports, namely parts of government.

  • dragonfly

    I appreciate your need to exercise tact and discretion in what you say on your blog, but I just can’t see that Covec deserves any plaudits in this case. They intentionally produced a very one-sided report that was designed to support the North Shore City Council’s interests. And that report was surely produced with the intention of misleading people who don’t know anything about economics (most of us). It certainly wasn’t targeted at the economically literate. They succeeded brilliantly in the case of Andrew Williams. I am no admirer whatsoever of Andrew Williams, but in this case I have some sympathy for his confusion. I mean, if the economic consultants you’ve hired won’t tell you that the tax revenue argument for the state bailing out leaky home owners is a stupid one, then who is going to? In fact, if those same consultants have written a whole report on the subject you might, not unreasonably, imagine that they’ve done that because there’s at least some merit in that aspect of the argument.

    But then Treasury called Andrew Williams out on his ridiculous claim. Covec at that point decided their most face-saving option was to play-act the role of learned economists whose report had been tragically misunderstood by ignorant non-economists. The thing is, their report was designed to do that very thing. They had to come out against the conclusions that were being drawn from their report, because the conclusions that were being drawn were wrong, as they had intended them to be, because wrong conclusions were in the interests of their client.

    When my children try that “It wasn’t me, I didn’t do it” line on me, it gets them nowhere. However it appears that in the arcane world of economic bloggers it will gain a fully-fledged adult economist a gold star 🙂

  • @dragonfly

    I would note two things:

    1) I’ve never said I approve of the Covec report, either in a post or comments.
    2) When Eric mentions the report favorably, he means in comparison to other reports where the authour made no effort to clear things up – or even worked to add to the confusion.

    I understand what you are saying for sure. I cannot go any further in a negative direction talking about these reports, but I must point out that I haven’t done anything in a positive direction – there are definitely no stars (let alone gold ones) being handed out 😀

    If you want to do something like a guest post where you say what you think about these sorts of reports I would be more than happy to put it up of course.

  • dragonfly

    Thanks for the offer of a guest post, but I’ve said all I want to say, and I am not qualified to add anything more to a discussion of this issue. I have appreciated the opportunity to express my thoughts on this, and appreciated the feedback also.

  • Pingback: Healthiness For Life » Stephanie Vitorino: New Year New You, Day 1()