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Inside Job

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Economics, at its best, has a noble goal: Figure out what makes people better off and how we can have more of it. Its practitioners in academia need to do a more effective job of defending that ideal against private interests. Academic economists have recently become the unaccustomed subjects of intense scrutiny. The 2010 documentary “Inside Job” drew public attention to the board seats, consulting gigs and sponsored research that tie many of them to Wall Street. They often failed to disclose such conflicts of interest in their research papers and public comments on topics such as financial reform -- omissions that could influence decisions affecting the lives and livelihoods of millions of people. At its annual meeting earlier this month, the American Economic Association took a step toward solving the disclosure problem. It adopted guidelines requiring economists, when making public comments or publishing papers in AEA journals, such as the American Economic Review, to detail any funding they have received from interested parties. Universities and other research institutions should follow suit, and some already are. As employers, they have more power to turn guidelines into rules. And by adopting common standards, they can help academics avoid confusion over what needs to be reported. Disclosure Not Enough

Disclosure, though, won’t eliminate the actual conflicts. Even the best-intentioned economists -- and particularly those in the area of finance -- face a litany of influences pushing them toward a rosier view of the industries they study. In a yet-to-be-published paper, Luigi Zingales, a finance professor at the University of Chicago’s Booth School of Business, likens the pressure to regulatory capture. A pro-business attitude, he notes, can increase an economist’s chances of landing lucrative consulting, expert-witness and research contracts, and can facilitate publication in academic journals whose editors are themselves captured. (Zingales is a...

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