The Ethical Responsibilities of Economists and the Complexities of Economic Harm

The podcast critically examines the economics profession's unique failure to establish a body of professional ethics, a standard practice in other influential fields. George DeMartino, author of "The Economist Oath," highlights that this omission stems from a historical fear of oversight and accountability, despite economists wielding enormous, albeit indirect, influence over global life chances. He argues that this lack of ethical introspection has profound consequences, leading to an inadequate recognition of the profession's duties and the harms it can inadvertently cause.

DeMartino's subsequent work, "The Tragic Science," delves into the complex nature of economic harm, challenging the profession's tendency to oversimplify it. He critiques "moral geometry"—strategies like cost-benefit analysis and social welfare functions—which reduce intricate ethical dilemmas to simple mathematical problems. This reductionism treats diverse harms as commensurable and compensable, often through monetary means, a perspective DeMartino deems ethically irresponsible. He illustrates this with examples like the irreplaceable loss of a child or the multifaceted harms of unemployment (loss of identity, social standing, health, political exclusion), which cannot be adequately addressed by a welfare calculus or financial compensation alone. To address this blind spot, he introduces the term "econogenic harm," paralleling medicine's "iatrogenic harm," to describe economist-induced damage.

A significant contributor to econogenic harm is identified as the "knowledge problem" and epistemic hubris within the profession. Economists are often trained to believe their predictive models function as "economic time travel machines," capable of forecasting the long-term impacts of policies with certainty. This overconfidence in the face of an inherently unknowable future leads to tremendous damage when decision-makers, relying on these flawed predictions, are left unprepared for actual outcomes. DeMartino argues that this fundamental mistake necessitates a radical rethinking of how economists approach policy design and advocacy.

The proposed solution is a shift towards "Decision Making Under Deep Uncertainty" (DMDU), an approach that acknowledges the future's inherent unknowability. DMDU advocates for designing "robust" policies that perform "well enough" across a multitude of possible futures, rather than striving for "optimal" policies based on single, uncertain predictions. Crucially, DMDU empowers stakeholders as primary decision-makers regarding risks and social objectives, fostering collaboration between economists and affected communities, rather than economists dictating solutions from an isolated position. DeMartino expresses optimism, noting that DMDU strategies are gaining traction in institutions like the Rand Corporation and the World Bank, driven by the urgency of "wicked problems" like climate change and supported by emerging economic theories such as complexity theory, signaling a potential "watershed moment" for a more responsible and effective 21st-century economics.

this isn't just wrong-headed this is ethically irresponsible

economics is the only one that's never pursued the idea of creating a body of professional ethics

economists have enormous influence over the life chances of people the world over

harm is an extraordinarily complex concept

moral geometry is the strategy by which really daunting difficult ethical dilemmas are reduced to simple math problems

the problem is not all harms are commensurable

I offer the term econogenic harm Economist induced harm

the problem in economics is that we train our students to believe that they have economic time travel machines

we need to move away from efficiency toward robustness policies that have a chance of doing well

it should be the stakeholders who are the primary decision makers when it comes to figuring out what risks to take in furtherance of what social objectives