Misleading the public: HKS should require professors to disclose conflicts of interest

By Alexi White, Opinions Editor, MPP ‘13

Kennedy School professors are in high demand. As some of the foremost experts on public policy, they are called upon constantly to provide private consulting to governments, businesses and non-profits around the world. At the same time, journalists and the pubic rely on them for independent perspectives on issues of interest and concern to the public. But what happens when these responsibilities clash or could reasonably appear to clash if, for instance, a professor comments on the work of a government for which he or she is a paid consultant?

Unless it is required through membership in a professional association, the answer right now is nothing. Although Harvard requires faculty to disclose to the university any conflicts of interest that could undermine their “overriding commitment to the university”, there is no requirement that faculty disclose anything to the public. It’s time to live up to the HKS spirit of public service and change that.

To readers who are skeptical that such situations arise, I offer an example. A few months after meeting him in 2007, HKS professor Joseph Nye wrote an article for The New Republic that advanced a very positive and presumably unbiased view of Muammar Qadhafi. As Mother Jones magazine later reported, Nye travelled to Libya as a paid consultant for the Monitor Group, which had a multi-million dollar contract to “enhance the profile of Libya and Muammar Qadhafi,” a goal that Nye advanced with his article. Nye’s decision not to disclose his conflict of interest was a disservice to the public we are all expected to serve, but it did not violate any Kennedy School rules.

According to the University Statement of Policy on Conflicts of Interest, a copy of which is included in the HKS Faculty Handbook, “if a member is engaged in an outside activity or has significant financial interests (personally or in association with members of his or her household or colleagues) that could reasonably appear to present significant conflict [with Harvard’s interests], he or she must disclose this possibility to the Dean or Academic Dean, and, if it is deemed necessary after consultation, modify his or her activities appropriately.”

Harvard believes that conflicts of interest pertaining to the University must be disclosed to the University because faculty have a responsibility to the University. If this is a just requirement, and it is believed that faculty who provide expert commentary have some similar responsibility to serve the public, does it not follow that conflicts of interest pertaining to the public must be disclosed to the public?

The American Economic Association (AEA) is considering creating a code of conduct for its members, and the debate is illuminating. Earlier this year, the AEA received a letter signed by three hundred economists, calling for the creation of a code of conduct modeled on that of the American Sociological Association that would require all economists to disclose potential conflicts of interest. It was motivated in large part by a 2010 study on economists’ interactions with the media in the years leading up to and during the recent financial crisis. It concluded that, “The vast majority of the time … economists did not identify [their] affiliations and possible conflicts of interest.” For some specific examples, consider watching “Inside Job”, a damning 2010 documentary on the causes of the recent financial crisis.

Of course, the debate is not entirely one-sided. HKS professor Lant Pritchett disagrees with the need for a code and sees the requirement of disclosure as a dangerous idea. In a blog post for The Economist, Pritchett wrote that one’s ideas should be judged objectively based on their merits, rather than prejudged based on the author’s “peculiar bundle of biases.”

But what if bias is so widespread that the meritocracy of the free market of ideas is an insufficient filter?  Luigi Zingales, a professor at the University of Chicago Booth School of Business, has studied how economists can become entangled in the same systematic biases that can cause regulatory capture. Zingales, whose website includes a disclosure of his potential conflicts of interest, argues that because economists, like regulators, rely on the industries they study to provide them with data, an economist who criticizes an industry risks losing valuable access to it. This provides a strong incentive never to bite the hand that feeds.

When I spoke to Zingales, I asked him what he thought of Pritchett’s argument against the need for a code.

“Take house inspectors,” he replied. “You have a few days to hire an inspector to see if something is remarkably wrong with your new house. The real estate agent pays the inspector, so you can’t really expect that the inspector is unbiased, even when you can see that there are some inspectors who work hard to have integrity.”

Whether in the real estate market or the hallowed halls of Harvard, if the system creates a systemic bias in favor of a party with a stake in the expert’s conclusions, we cannot credibly assume that the few unbiased conclusions will rise to the top. The system is just too full of perverse incentives.

Zingales insisted that his research does not imply any dishonesty on the part of economists, just as economists studying regulatory capture don’t imply that regulators are dishonest. When I asked him if this principle generalizes to the study of public policy, he didn’t miss a beat.

“People who get access to the White House are generally not going to trash the President the next day. I think that the same argument applies to all the academic fields.”

If regulatory capture is a type of government failure, then faculty capture is a failure of academia. The public relies on the Kennedy School, and we exist to serve them. It’s time to hold ourselves to a higher standard, stop ignoring the problem and do something, starting with a requirement of public disclosure.