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Code of ethics

Alois Berger / jrb
September 11, 2013

German, Austrian and Swiss economists agreed a year ago to a code of ethics aimed at achieving greater transparency and fairness in political consulting. But there is little sign of it today.

Scrubbing hand Bild: Fotolia/Picture-Factory
Image: Fotolia/Picture-Factory

The problem is well known in the health sector: seemingly independent studies about cigarette consumption turn out to be contract work for the tobacco industry. Such a conflict of interests is an issue in other industries as well. And it is a particularly sensitive issue with economists - the main advisors to policymakers.

That so many economists in Europe and beyond were clueless when the financial crisis hit the world raised doubts about their objectivity and independence. To save their reputation, nearly 3,800 German-speaking economists agreed to a code of ethics in September 2012. Twelve months later, an assessment of those self-imposed guidelines is rather sobering.

Difficult to fake numbers

Essentially, the code requires researchers to disclose their source of funding, not mix scientifically proven findings with subjective, judgmental estimates and consider the current state of research in their studies and recommendations. Especially the last point would seem to be self-evident. But that, according to Professor Gerhard Bosch of the Duisburg-Essen University, is an area where manipulation is rampant. Numbers, he says, are difficult to fake; omitting inconvenient truths is much easier.

In a letter to the government, for example, the scientific advisory board of the Federal Ministry of Economics expressly advised against introducing a minimum wage. "The scientific advisory board cited several German studies but simply ignored the entire wealth of international research on the issue from the past several years," says Bosch. American and British studies, he notes, have long shown that minimum wages don't hurt employment.

Professor Gerhard BoschBild: Gerhard Bosch
Professor Gerhard Bosch says numbers are 'difficult to fake'Image: G.Bosch

While Bosch assumes that money doesn't necessarily play a role in such highly questionable recommendations, he points to a market-based mainstream at German universities and economic institutions that continues to renew itself. "Anyone who has studied economics and wants to become a professor knows there are no career prospects in Germany for those straying away from the dominate neo-liberal doctrine," he says, adding that the code of ethics won't change that.

Opinions differ

Even within the Society for Social Policy in Germany, which drafted the code of ethics, opinions differ on the effectiveness of the guidelines. Established in 1873, the organization consists of 3,800 economists who either teach at universities or work at research institutions in Germany, Austria and Switzerland. Governments rely heavily on their expertise, whether it is about pensions and health insurance or collective bargaining and labor policy.

Astonishingly, not one single study has been assessed according to the code of ethics. Gebhard Kirchgässner, a professor at the Swiss University of St. Gallen who was appointed a year ago as an arbitrator, has yet to receive a single case. He has a simple explanation for that: "Everything is self-evident in the code of ethics, and if everyone sticks to it, there is no reason to take action," he says, adding that only a member can accuse another member, and this hasn't happened yet.

Magnifying glass as symbol for transparency Fotolia/Eisenhans Aktienanalyse #33508443
The code of ethics aims to achieve greater transparencyImage: Fotolia/Eisenhans

Kirchgässner makes no secret of the fact that the code of ethics was written primarily for the public in an effort to polish the battered reputation of economic policy advisors. Yet he still hopes the guidelines will have a disciplinary effect. Some members should now be more inclined to include all financial sources and sponsors in the footnotes of their studies. "Our function is to mediate and eliminate abuses," Kirchgässner says. "The only sanction that we have is ultimately to exclude a member."

Too much transparency?

Some economists believe the guidelines don't go far enough. One of them is Gert Wagner, head of the German Institute for Economic Research in Berlin (DIW). He recently demanded that researchers publish their ideological position, arguing that policymakers and other authorities often award studies to those with a similar ideology. Wagner plans to publish his membership in the Social Democratic Party and Verdi trade union as well as his religious affiliation on the DIW homepage. This sort of information, he argues, would help the media better assess economists.

But such transparency goes too far for many. A majority at a recent meeting of the Society for Social Policy, for instance, failed to agree on the need to reveal party membership.

Professor Gert Wagner Pressefoto http://www.diw.de/sixcms/detail.php?id=diw_01.c.10991.de&sprache=de
Professor Gert Wagner seeks full transparencyImage: DIW

Kirchgässner, who has lived in Switzerland for 20 years, sees cultural differences. In Germany, he says, many economists view party membership as disreputable, compared to Switzerland where it is common. "It is accepted here," he says. "We know who is in which party, so no one would think twice about disclosing such information."