Monday, July 25, 2011

The Frederic Mishkin Prize

UPDATE BELOW

Anyone who enjoyed the film The Inside Job about the financial crisis will surely enjoy a new prize instituted by the blog Naked Capitalism: The Frederic Mishkin Iceland Prize for Intellectual Integrity.

For those who haven't seen the film, it is very much worth watching, especially as it raises serious questions about prominent economists (Mishkin, Glenn Hubbard, Martin Feldstein and others) who have been writing supposedly objective economic papers attesting to the wonders of financial deregulation without ever disclosing that they had been paid quite handsomely to write these reports by banks and other interested parties.

Mishkin? In 2006, he co-authored a report entitled Financial Stability in Iceland which concluded that Iceland's banks were "essentially sound" despite growing concerns that deregulation there had triggered a huge and unsustainable housing bubble. Nowhere in the report does Mishkin disclose that how much Icelandic Chamber of Commerce paid him to write the report: $124,000.

Mishkin is a professor of economics at Columbia University. I'm not sure what the university thinks about this glowing example of intellectual integrity, but I can't see how it is anything less than academic and scientific fraud.

UPDATE: I just came across this article, which is encouraging, from the Columbia University news service (I believe). As a direct result of the film The Inside Job, Columbia University has now initiated a review of its policy on financial disclosures and conflicts of interest, aiming to come up with some stronger code of conduct.

See also this online debate arranged by The Economist on whether the profession needs a more code of conduct. Most participants seem in favor of more or less full disclosure of potential financial conflicts of interest, although many of the contributions follow the irritating habit of conceptualizing the world of ideas as "the marketplace of ideas." Please, we're not buying and selling ideas, we're thinking about them, debating them, and we hope changing them.

One highlight from the category of "Impossible that anyone but an economist could have said it" comes from Lant Pritchett of Harvard University, speaking of policies in place before the crisis and the economists who pushed them:
While some people were right and some people wrong about the consequences of policies, I have yet to see any evidence any economist acted on anything other than their best reading of the evidence, much less that their views were biased by particular financial ties, much less that a "code of conduct" would have altered this behaviour which would have in turn affected the course of events. The only evaluation I have seen suggests those who got it "wrong" were no more more likely to have had "ties" to the "financial industry" than those who got it right

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