I’m not going to go through this whole debate because it’s largely been beaten to death (although I still haven’t seen a really great explanation or set thereof), but this one paper (with a fantastically small sample size of 19) seems to indicate that one simple tweak to regulations academic/professional Economists are subject to may help us avoid this problem again.
Economists, especially those that like to tell Congress, the SEC, etc how Wall Street should be regulated may be due for a taste of their own medicine. How about we make all economists, from Krugman to the whole Squam Lake Group, to the National Association of Realtor’s economist adhere to something similar (if not more strict) than SEC Reg FD (Fair Disclosure)?
What? One of the members of Stanford faculty and an economist on the Squam Lake group is on Moody’s Ratings Board? He should have to explicitly make that aware every time he speaks, writes, and appears in the media. The National Association of Realtors’ economist cites statistics/predictions 20% rosier than anything “independent” economists do? Fine, but everytime the media quotes the NAR’s #’s, they should have to explicitly state the painfully obvious conflict of interest.
Now, I’m not nearly so naive as to expect this will happen within my lifetime or ever, but regardless, the fact is that these economists appear to the public, our lawmakers, regulators, and the media as (among the most) unbiased commentators, yet unless I’m mistaken, they have no formal, legal requirement to disclose conflicts of interest? On what planet does that make sense? Largely, these men and women went to the same schools, had the same professors/mentors, were taught and adhere to similar, if not the same ideologies, etc. The public has a right to know about any and all conflicts of interest these economists may have, end of story. If you’re a econ professor at the University of Chicago, you shouldn’t be allowed to identify yourself as such if you also happen to be a consultant to several investment banks. That’s all I really have to say on the matter right now.