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Econogenic harm, economists, and the tragedy of economics (George DeMartino)

By George DeMartino

DemartinoIn a recent editorial in The New York Times Harvard economist N. Gregory Mankiw acknowledged that economists have:

only a basic understanding of how most policies work. The economy is complex, and economic science is still a primitive body of knowledge. Because unintended consequences are the norm, what seems like a utility maximizing policy can often backfire.

Mankiw infers from this grave epistemic problem an ethical duty among economists to apply the Hippocratic principle “first do no harm” when assessing policy. On this basis he assails both the Affordable Care Act and new initiative in the US Congress to raise the legislated minimum wage. Both “fail the do-no-harm test”: the Affordable Care Act will lead to the termination of some insurance policies that don’t meet the standards required under the law, while raising the minimum wage “would disrupt some deals that workers and employers have made voluntarily.” But of course, applying the Hippocratic principle consistently would also require Mankiw to assail rather than support those policies to which he has an ideological affinity. Like free trade (which he supports), for instance, the harms of which to US workers surely exceed those of Obamacare. As J.R. Hicks recognized seventy-five years ago, any policy intervention that affects relative prices—which is to say, all interventions —“benefits those on one side of the market, and damages those on the other.” Surely Mankiw knows all this. What is troubling, then, is not Mankiw’s worry about the potential harm of the economic policies he opposes. He is quite right to expose the harms he associates with one policy or another. The problem is the ineptness and obvious bias with which he introduces ethical concerns into policy debate.

Now, it’s good to see an economist of Mankiw’s stature recognize in public view that economic science and policy analysis are fraught with uncertainty, and that there are risks of unintended harm to those whom economists purport to serve. Indeed, all professional practice entails a potential for harm to those whom professionals seek to serve, and to third parties. This is true in clinical medicine and public health, of course, but also in social work, engineering, law, and many if not most other professions. Partly in recognition of this fact some professions have established bodies of professional ethics in hopes of promoting responsible behavior by their members—behavior that minimizes the avoidable harms and that helps them manage appropriately the unavoidable harms that arise in the context of their practice. The medical profession is exemplary in this regard. In medical ethics we find the term “iatrogenesis” (from the Greek, “doctor-originating”) or “iatrogenic harm” which refers to the adverse effects or complications associated with medical treatment. The concept of iatrogenic harm captures physician- or clinic-induced harms ranging from those that are associated with malpractice to the unpreventable consequences of well-intentioned and expertly delivered medical interventions.

Economists, on the other hand, generally do not give sufficient attention to the ways that their own practice induces harm. We even lack the language to discuss economist-induced harm. There is no parallel in economics to the concept of medical malpractice, of course; economists are not held legally liable for their mistakes, no matter how severe the effects. More broadly, there is no economic analogue to the concept of iatrogenesis. There should be. We need a concept, and a corresponding term, to name what is as-of-yet unnamed. Let us refer to the harm economists cause with the term ‘econogenic harm.’

Why do we economists fail to examine sufficiently economic harm and econogenic harm, and why do they make such basic ethical errors when they do? First, economists recognize that harm is a regular and, likely, ineradicable feature of economic practice, as Hicks understood. It needs to be said plainly: economists are in the harm business. Almost always we cause harm as we try to do good. Hence, the Hippocratic directive “first, do no harm,” if taken as an inviolable mandate or a decision rule, has no relevance in economics since it would imply that economists can do nothing at all. Moreover, for over a century the economics profession has remained stubbornly uninterested in ethical matters. The allergy to ethics manifests in part as a mistaken presumption that one can easily bifurcate economics into its ‘positive’ and ‘normative’ components, and that the economist should privilege positive science over normative speculations. But by its nature harm does not permit such a bifurcation. This is because all questions pertaining to harm—such as ascertaining when harm has occurred, the severity of harm, who or what is responsible for the harm, and which forms of harm are morally indictable and which are morally benign—all of these involve normative judgments. For instance, is a relatively poor person harmed by an economic policy like financial deregulation that overwhelmingly benefits the wealthy and exacerbates economic inequality (even if it doesn’t reduce her own income)? She may very well think so, and at least some economists such as Joseph Stiglitz, Amartya Sen, Thomas Piketty and Jamie Galbraith would validate her view on the matter. But many economists, including Mankiw, are apt to argue that the policy has not harmed anyone in any real sense provided no one’s income has been reduced. Who’s right in this case? Answering that question requires normative decisions about whether severe inequality induces harm to the disadvantaged and, if so, whether that harm is ethically worrisome; and about who should have the authority to answer that question—those actually affected by the policy, or the economist?

Finally, economics has been particularly dismissive of the idea of professional ethics. This attitude isn’t just unfortunate, it’s dangerous. Academic economists tend to think that their ethical duties are obvious—such as not stealing the ideas of others, not fabricating research results, and the like. Many don’t generally trouble themselves with the fact that the simplified blackboard economics that they use to instruct students in economic principles, which often presumes ideal background conditions, informs the simplistic manner in which many policymakers think about economic policy; and the related fact that their work can be misinterpreted and misapplied, with damaging consequences for others. Moreover, the large majority of economists in the United States today work outside of academia where they engage in applied work that bears directly on policy formation, regulation, and other government interventions; affects the outcome of legal disputes; entails consulting to private actors; influences financial market developments; etc. In all these areas the well-meaning economist can do substantial harm while trying to do good.

Yet, we have no professional economic ethicists, or any texts, journals, newsletters, curriculum, regular conferences, or other forums that explore systematically what it means to be an ethical economist, or what it means for economics to be an ethical profession. Unfortunately, the absence of professional economic ethics deprives us of a tradition of careful inquiry into the nature of and responsibility for econogenic harm.

This can’t be the proper attitude of a responsible profession that is committed to enhancing the welfare and freedoms of others. Instead, the prevalence and severity of econogenic harm carries an ethical burden for the economics profession to attend more carefully to the nature and distribution of the harms that its practice causes.


George F. DeMartino is the author of The Economist’s Oath: On the Need for and Content of Professional Economic Ethics. He is Professor of Economics at the Josef Korbel School of International Studies at the University of Denver. He writes widely on ethics and economics, as well as labor issues and political economy theory. He is a member of the Association for Social Economics and a frequent participant in ASE conferences and events.

This post is reprinted from OUPblog with the author's permission. The arguments that appear here are developed much more fully in "‘Econogenic Harm’: On the Nature of and Responsibility for the Harm Economists Do as they Try to Do Good," to appear in George DeMartino and Deirdre McCloskey, eds., The Oxford University Press Handbook on Professional Economic Ethics (forthcoming).


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