Tuesday, March 8, 2011

Objectivity has a price

The movie The Inside Job is an Academy Award winning documentary which considers the origins of the Global Financial Crisis (GFC). It particularly focuses on conflicts of interest, including of economists in universities who write academic papers and books, sympathetic to vested interests, but do not reveal in those publications that they have received large consulting fees from those interests.

Last year, the director of the movie, Charles Ferguson, wrote a compelling and challenging article in the Chronicle of Higher Education, Larry Summers and the Subversion of Economics, which documents these conflicts of interest, and how they represent a serious problem for the university and government.

It is worth reading a post on the Creative Destruction blog. One economics faculty member from Gettysburg College writes:

But are these economists corrupt? Have they been peddling the economic ideology of deregulated financial markets knowing that it is a load of crap? I don't know, but my gut tells me that's going too far. I think rather that they are the victims and perpetrators of groupthink. Having entered the world of high finance they become desensitized and sympathetic to the culture and stop questioning the worldview of those who are paying their consulting fees. They lose certain of their critical faculties - and that is a real problem, because the ability to examine issues critically is central to their identity as academics. In the end a guy like Frederic Mishkin comes off in the movie not as corrupt or malevolent, but simply clueless. He's so deep in the tank he doesn't know how deep he is. In the end my contempt for these guys is rooted not in my sense that they're corrupt but that they've made themselves lousy economists.
On a related subject, the Director of the London School of Economics (LSE) has had to resign because of links with Libya, including "giving" a Ph.D to one of Gadaffi's sons.
Gaddafi's thesis proves money talks, especially in halls of academe.

As I have said before, human nature is such that once large amounts of money, power, prestige, and/or bureaucracy become involved, the quest for the real truth becomes difficult. This applies in any research.

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