Month: January 2011

An ethics code for economists

Richard, a loyal MR reader, asks:

What are your thoughts on the recent proposal to implement an ethics code for economists? Do you see this having any effect on the general field/body of work being published in the near future? Will the general public find that these ethical guidelines afford them a more scrutinized body of work (i.e. Will they trust the profession more? Will this help to serve as a bulwark against negative views of the profession?)

Annie Lowrey offers background.

I favor such codes, but I'm not sure they will help much.  First, most economic research doesn't matter in the first place.  Second, the research which does matter very often is distorted anyway.  It is pulled out of context, exaggerated, presented by intermediaries and political entrepreneurs without qualification, and so on.  That's the real problem.  In this context I'm not sure that a conflict of interest statement is going to push people closer toward truth; the process wasn't accurate or finely honed in the first place.  What is published is already so much more scientific than the policy process itself.  Improving the former inputs with an ethics code seems like pushing on the less important lever and to some extent it is a very weak substitute for the almost complete lack of an ethics code in politics itself.  Third, a lot of the problem is economists in government –advising – rather than what is published in economics journals. 

Newspapers already have conflict of interest policies for many (or all) of their writers, but I don't see they are much enforced or have much improved the quality of most Op-Ed pages as policy advice.

Ideally, the employing university should enforce such policies, but of course individual universities do not have much incentive to "move first" on such issues.  Furthermore, universities are notoriously selective in their enforcement of other rules, such as limitations on how much time a professor can spend consulting.

If you take the cases presented in the movie Inside Job (which by the way is half very good and half terrible), a code of ethics would have changed individual behavior but it is very unlikely that it would have improved economic policy in the United States.

The biggest potential gain is simply keeping or extending the public's trust in the economics profession.  In other words, the biggest potential gain is fairly small.

Is there any downside from trying to raise ethical standards and transparency in research?  One problem is that "all-government funded" probably will be seen as high status, when I am not sure it should be.  Explicit political bias is not my main concern, rather this funding source encourages false precision and an excess of technocracy.  Another issue is how disclosure might interact with anonymous donations to universities.  Either anonymous donations become more costly or impossible, which makes universities poorer, or they become a means of circumventing the transparency. 

I don't have easy answers there, but I wouldn't conclude that we should give up trying on matters of professional ethics.  It still seems to me that some individuals are creating a negative externality for the economics profession as a whole.  Simply doing the right thing, even when you can't see what immediate gains it will bring is often…the right thing to do.

Why all the dead animals?

Here's a list of the major cases.  Here is a Google Map.  From National Geographic, here is a responsible account.  Loud noises, fireworks, crashes, and an availability cascade seem to be the major hypotheses under consideration.  Cold weather and poisoning and hypoxia have been cited as well.  Don't forget the dead fishes and crabs; the world seems slightly more sub-Malthusian than before.

Here is Twitter on #deadbirdsIn Germany and Schweiz they are talking about "Vogelsterben" and fog; Schweiz had some previous cases over the last few years.  Here is a 2009 report from Western Australia, no one seemed to pay heed at the time.  There was talk of poison pesticides.  Here are many other reports of group animal deaths.  

This guy thinks it is all a strategy to scare people.

I'll chalk it up to two or three different causes, combined with coincidental clustering.  Is there betting on how many more cases will surface?

Are DeLong and Boudreaux jointly Hansonian?

Brad writes (to Don's initial challenge):

I can't get Don to bet that real oil prices will return to the energy cornucopian feast levels that they were at in the first post-World War II generation.

The most that he will bet is that the average price of some index of five resources will decline. That's not a good bet for me to take.

…It is somewhat odd: given that we have different beliefs about the world, there ought to be a bet we can make where we both think we have an edge.

(Update: Read Brad's post, it now turns out that Don has not refused the bet and Brad's original statement was in error.)

Note that if each already has bet optimally (relative to forecasts) in extant liquid markets, each should not wish to make an additional bet with the other at what are presumably above-average transactions costs.  The real question here is which market bets the two already have made, or not, and thus we still do not know if they are jointly Hansonian, or not.  We do know that the blogosphere does not threaten to displace the Chicago Mercantile Exchange.

Cowen and Lemke, on employment

The problem:

…Before the financial crash, there were lots of not-so-useful workers holding not-so-useful jobs. Employers didn't so much bother to figure out who they were. Demand was high and revenue was booming, so rooting out the less productive workers would have involved a lot of time and trouble — plus it would have involved some morale costs with the more productive workers, who don't like being measured and spied on. So firms simply let the problem lie.

Then came the 2008 recession, and it was no longer possible to keep so many people on payroll. A lot of businesses were then forced to face the music: Bosses had to make tough calls about who could be let go and who was worth saving. (Note that unemployment is low for workers with a college degree, only 5 percent compared with 16 percent for less educated workers with no high school degree. This is consistent with the reality that less-productive individuals, who tend to have less education, have been laid off.)

In essence, we have seen the rise of a large class of "zero marginal product workers," to coin a term. Their productivity may not be literally zero, but it is lower than the cost of training, employing, and insuring them. That is why labor is hurting but capital is doing fine; dumping these employees is tough for the workers themselves — and arguably bad for society at large — but it simply doesn't damage profits much. It's a cold, hard reality, and one that we will have to deal with, one way or another.

The solution?  Here is a paragraph which did not make the final editing cut:

…being unproductive in one job doesn’t mean a lifetime of unemployment. A worker who wasn’t worth much sweeping up the back room is suddenly valuable when new orders are flowing in and he is needed to ship the goods out the door. And if all those new orders require keeping the warehouse open late, the company may need to bring in a new night watchman. To paraphrase a common metaphor, a rising tide eventually lifts most boats. When the economy’s expanding, a worker who previously was worthless will at some point become valuable again. But this means that workers at the bottom of the economic ladder will have to wait until the entire economy has mended itself before they have the chance to improve their lot: That can be a painstakingly slow and uncertain process.

Equine ethics for a sub-Malthusian world carrying costs exceed liquidity premium

Here is a recent story:

Less than four years after the last equine slaughterhouses in the U.S. closed down, an unlikely coalition of ranchers, horse owners and animal-welfare groups is trying to bring them back.

…Though horse lovers cheered when the last slaughterhouses were shuttered, some now say they may not have thought through the consequences.

The slaughterhouses disposed of the thousands of horses abandoned or relinquished each year by owners who find them too old or temperamental to be useful or who simply can no longer afford to care for them. Now, many of those horses are sold for $10 or $20 at low-end auctions and packed on crowded trailers to be slaughtered in Mexico. Animal-welfare experts say the horses often suffer greatly on the journey.

In 2006, just 11,080 U.S. horses were shipped to Mexico for slaughter. In 2008, after the American industry shut down, that number jumped to 57,017, according to the U.S. Department of Agriculture.

Animal-rights supporters have been lobbying Congress for a ban on exporting horses for slaughter. They've had no success–but even if a ban did pass, some activists say, it would do little to ease suffering, as owners desperate to shed responsibility for their animals might simply abandon them to starve. Hiring a veterinarian to euthanize and dispose of a horse can cost hundreds of dollars. Horse-rescue groups take in some unwanted animals, but they don't have the resources to care for them all.

What does ethics look like when there are many more beings than can be supported alive by available resources?  How much of the animal kingdom falls under this designation?  How much of human history?  Or does this question not apply to humans?

Here is a story about abandoned horses in Ireland.

One way to cut health care spending

Total national health spending grew by 4 percent in 2009, the slowest rate of increase in 50 years, as people lost their jobs, lost health insurance and deferred medical care, the federal government reported on Wednesday.

Here is more.  This was also striking:

“Federal Medicaid spending increased 22 percent in 2009, the highest rate of growth since 1991,” Ms. Martin said, while “state spending decreased 9.8 percent, the largest decline in the program’s history.”

Retail spending on prescription drugs, however, continued to rise at a rapid rate, higher than in 2008.

Thwarted markets in everything

Or so I predict:

Ecuador has taken a decision that no other oil-endowed country has so far considered. It will refrain from developing the reserves beneath Yasuni national park and leave the forest untouched, if the outside world will compensate the country with half the money it would thereby forgo.

Extracting the oil would yield $7.2bn for Ecuador’s government. Rafael Correa, president, is asking for $3.6bn over 13 years in return for leaving the reserves in the ground.

I could be wrong about my prediction of the outcome; if not the inability of the international community to do such deals does not augur well for our future: "…unless the first $100m arrives by the end of this year, the proposal will die."  So far some token amounts have been raised, most of all from Spain.

Very good sentences

His brothers sell vegetables from a cart and wish they could be rat catchers too.

Here is more, from Mumbai, and this too:

The competition for rat catcher jobs in Mumbai is stiff. Only men aged 18 to 30 need apply. They must be able to lift a 50 kilogram (110 pound) sack and run a few kilometers (miles). They must demonstrate their ability to catch and kill a rat in the dark within ten minutes.

Each rat catcher must kill 30 rats a night, six nights a week. If he doesn't make the quota, he doesn't get paid.

Arun Bamne of the city's insecticide department, which oversees the rat-catching, says people badly need jobs. The last time the city recruited, he said, over 4,000 people – some with university degrees – applied for 33 rat catcher positions.

And this:

There is young Wasim, dragging a rat as big as his forearm from a trap and smacking it to death. His mom giggles as she watches the video.

Such is the parents' pride, they could be watching their son playing the heroic lead in a school play.

"Now he's putting his hand in the burrow," the father said, beaming. "I'm never worried about disease. I have faith in God."

For the pointer I thank George McQuistion.

We are less willing to help the victims of man-made disasters

People are more willing to donate money to help victims of natural, as opposed to man-made, disasters. Hanna Zagefka and her team found this is because people generally perceive victims caught up in man-made disasters to be more responsible for their predicament and to be less active in helping themselves, as compared with victims of natural disasters.

There is much more here.

The January test for the eurozone

Portugal was on Wednesday forced to pay big interest rate premiums to borrow from the markets in the country’s first test of sentiment of the new year.

Lisbon had to pay 3.68 per cent in yields for six-month loans, a jump from 2.04 per cent compared with a similar sale in September and 0.59 per cent a year ago.

One strategist said: “This is ominous. Portugal is heading towards a bail-out as the country’s borrowing costs are continuing to rise. This is unsustainable.”

The article is here, there is more to come in what will be an active month for European bond issues.

*The World in 2050*

The author is Laurence C. Smith and the subtitle is Four Forces Shaping Civilization's Northern Future

This book is excellent on at least two questions:

1. Which environmental problems remain real, even taking into account the dynamic adjustment properties of markets?

2. Why the northern countries will grow in economic and political importance over the next forty years.


Extraction industries will favor projects nearer the water.  Looking ahead, our northern future is one of diminishing access by land, but rising access by sea.  For many remote interior landscapes, the perhaps surprising prospect I see is reduced human presence and their return to a wilder state.

My main criticism of this book is that it does not direct enough criticism at government water subsidies and their role in worsening this environmental problem. 

Here is the book's rather non-Hayekian close:

No doubt we humans will survive anything, even if polar bears and Arctic cod do not.  Perhaps we could support nine hundred billion if we choose a world with no large animals, pod apartments, genetically engineered to algae to eat, and desalinized toilet water to drink.  Or perhaps nine hundred million if we choose a wilder planet, generously restocked with the creatures of our design.  To be, the more important question is not of capacity but of desire: What kind of world do we want?

Definitely worth the read.  I don't agree with everything here, but this is a book (very well-written by the way) which should be making a splash.  For the pointer I thank a loyal MR commentator.