The most serious charge that critics have made is that corporate interests and wealthy foundations have distorted much of the university-based research agenda in economics through funding and grants for research, selection bias and pressure on academic hiring, publishing, and promotions, and even direct monetary rewards. This ranges from the more ‘simplistic’ and invidious arguments that economists, motivated by their own private interests, hide behind a veneer of science in order to endorse theories (e.g. self-correcting market economy) and policies (e.g. financial deregulation) that promote the interests of corporations instead of the public interest. The more sophisticated critics and commentators argue that even without such blatant acts of (self) deception, the incentives of academic research are skewed in a way that rewards economists who support certain special interests, on the margin, and results overall in a distortion of science (Zingales 2013). We see several problems with this argument, however.
As rational choice economists, we have no doubt that some economists do follow the money, and that, on the margin, funding can influence research output. Yet, we think the predominant situation is the reverse, where the money follows the economists. In short, those special interest groups who would prefer a regime of financial deregulation, seek out the best thinkers in the economics profession who independently have devised arguments for financial deregulation based on the theory and evidence. There is no distortion of ideas, let alone selfdeception; instead, what we have is a matching model of economic ideas and funding sources. Again, the progress and integrity of science depends upon the constant contestation of ideas, and within such an environment, the influence of funding is severely circumscribed, if not eliminated entirely.The corruption of economics that matters does not come from corporate sponsorship of research, but rather from its politicization and the state’s capture of the purpose of the discipline...the state is a big player (the biggest) in funding economics research. Yet, nothing is said in Inside Job about the role of the Federal Reserve in the funding of research in monetary economics and macroeconomics, the role of the international aid agencies (USAID, IMF, etc.) in research in development and transitional economics, or the role of the NSF in research in basic economic theory. The only malevolent force in economic research discussed is the large financial corporations that have bribed economists and business school faculty, presumably, to provide cover for their special interest politics. If one accepts the argument that the source of funding affects the conclusions of scientific research, then it seems likely the case, at least prima facie, that the state is the most important source of corruption in economics. But again, even if politicized funding leads economists to distort their research in favor of the interests of the state, the state’s direct influence on the economics discipline is constrained within a contestable scientific market for ideas. Further, although the public sector is the largest employer of PhD economists, only a small percentage of these economists actively engages in scientific research.
Rather than the state’s direct effect on economic science itself, the really crucial factor in the corruption and politicization of economics is the state’s indirect influence upon economic praxis through the political structure of policy production and social engineering. That is, the distortion of economic science arises from the links between the scientific community of economists, the economists qua policy engineers, and various non-economist political actors, bureaucrats, politicians, etc.--- Boettke, Peter J. and O'Donnell, Kyle W., The Social Responsibility of Economists. The Oxford Handbook of Professional Economic Ethics, George DeMartino and Dierdre McCloskey, eds., Oxford University Press;
After reading my piece on philosophical integrity, the GMU economist, Pete Boettke, sent me the paper from which I quoted above. The direct target of the piece is the idea of a code of (individual) ethics for economists. For the sake of argument, I grant their case. Boettke & O'Donnell (hereafter B&D) argue for an "institutional framework" (and public choice) perspective on the conditions that generate epistemically fruitful science.* I share such a perspective (characterized by what I call methodological analytical egalitarianism), so it is worth articulating the differences in our positions. They make three key claims: (i) what matters is not the sources of funding of economists, but "the constant contestation of ideas;" (ii) that regardless of funding sources, in academic research there is such a constant contestation of ideas. And (iii) that policy-relevant ideas are not constantly contested because the state's indirect influence on policy-economists who are employed primarily outside academia.
Let's grant B&D the distinction between pure economic science of academia and technocratic, policy economics. In the paper they suggest that one reason for the split between the two is that the models and theories of academic research "simply do not yield strong or unambiguous implications for macroeconomic policy." Let's stipulate this disconnect between research and policy is true in macroeconomics. It's probably less true in branches of academia that study finance, portfolio-management, and banking, where, even if one does not fully embrace ideas about performativity, theoretical innovations have been black-boxed in financial markets and financial market regulation (regular readers are familiar with my recurring critical analysis of treatments of uncertainty as mathematical randomness an idea that found its way from high theory -- Alchian, Arrow -- into most policy and pricing models). I mention this only because they frame their paper as part of the ongoing response to "the global financial crisis of 2008." (It's not my main point today.)
We can recognize in (i-ii) a kind of free-market in ideas hypothesis (an idea promoted by B&D). This market is a credit economy with incentives like "publications, citations, awards, grants, academic positions, and other typical measures of scientific careers." In their model, research-money is treated as a negligible incentive that is, in other respects, external to the ordinary functioning for of the ordinary scientific credit economy. This is a bit odd, but I will agree with them in order to make my point. Let's stipulate that whatever epistemic distortions are introduced by sources of funding are eliminated by the contestation of ideas. But B&D ignore what we may call displacement effects. The contestation of ideas is costly in time and effort. This matters because time and effort are scarce resources.
All other things being equal, it follows that if some ideas X are being discussed/contested others Y get less attention or are ignored. So, one way in which external donors skew research is by generating interest in some topics of contestation which, in turn, displace attention from others which do not get contested at all. Such displacement effects grow larger when the funding is skewed toward PhD, Post-doc, and permanent positions because then they generate endowments effects well into the future in favor of certain topics. In practice this entails that the future focus of a discipline is being directed toward some set of topics and not another. (There are other side-effects: in the bits of Europe where I work, PhD positions are nearly entirely funded by external grant agencies--this has had predictable effect of producing PhDs that are experts in some areas but not well prepared (say) to teach in standard undergraduate curriculum.)** All of us that get such grants from Templeton and state-science foundations participate in a process that skews the research agenda. (The previous sentence is not sour grapes: I am richly rewarded by grant agencies.)
Note that displacement effects are compatible with individual epistemic and moral virtuousness. They are largely a consequence of systemic features. They do have the same effect as, say, (elite-)journal capture by some intellectual faction or all-too-human impact of prestige/credentialing bias (recall Helen de Cruz). These are all mechanisms that narrow the scope of ideas that may be contested, while not preventing the contestations of idea that are published. So, from the fact that ideas (X) are being contested vigorously and rigorously it does not follow we have a free market in all ideas (Ys). A focus on the possibility of contesting ideas generates path-dependency and endowment effects that may displace other ideas from consideration entirely.
Grants and sponsored research are a non-trivial part of the institutional structure that shape the course of scientific process. Let me conclude with an observation. Let's stipulatively agree with the following diagnosis by B&D:
We do not necessarily need moral scientists to produce good science, but we do need good rules of scientific engagement to produce good science. What matters is that ideas are constantly subject to contestation by one’s peers, and that the ideas that become part of the public discourse are subject to the contestation of democratic decisionmaking. Just as the market process does not depend on the motivations of individual actors to generate socially beneficial outcomes, but on the institutions within which those actors pursue their self-interest, so too does the institutional framework shape the course of the scientific process and whether scientific knowledge progresses, stands still, or regresses. Thus, the question of the corruption of economics does not hinge upon the ethics of individual economists—whether they are motivated solely by a lust for fame and recognition, or tireless truth-seekers—rather, it depends upon the institutional structure within which economists do economics.
B&D are right to suggest that we need more and better contestation of policy-relevant ideas. One response to this is the epistemic "humility" and "modesty" that they advocate. I am not against this stance. But without a change in incentives of society (as they note 'political actors are likely to employ economists whose ideas comport with their goals—such as electoral success, bigger budgets and staff, more influence, etc.") and academia the stance is utopian.+
So, meanwhile, there is a need to focus on improving the institutional structure of academia in three respects: (a) policy ideas need to be contested and tested before their widespread application; (b) the markets in pure and policy science need to be more fully integrated; (c) we need to create institutional incentives and ideas that counterbalance the generation of what we may call scientific oligopolies (which give rise to the-everybody-did-it (TEDI-)syndrom). Merel Lefevere and I have argued that addressing (a-c) is the responsibility of science-funding institutions and those scientific aggregators that benefit the most of the status quo.
*I used to be a regular visitor to GMU and there is no doubt that we share both common influences (Tullock, Buchanan, Levy) and that Boettke has influenced me.
+As Liam Kofi Bright has noted (on Facebook) given that B&D advocate the contestation of ideas it is a bit odd that they claim "the theory of the self-regulating market economy is the unassailable foundation of economic science''
**I thank Michael Kremer for catching a typo in this sentence.
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