A Code of Conduct
The recent controversy around the BIS Shrapnel report on the impact of negative gearing tax concessions has led to some interesting discussions as to the professional standards associated with economics consultancy behaviours. The Australia Institute has responded with a proposed code of conduct for economic modelling, which I believe makes some good points—whilst also presenting some significant challenges if implemented. The proposed code suggests five key behaviours:
"1) Clearly disclose who, if anyone, commissioned a piece of work.
2) Clearly discuss key assumptions and provide sensitivity analysis where appropriate.
3) Provide an explanation of the choice of model and, where appropriate, discuss the pros and cons of alternate choices of models (for example, input-output modelling versus computable general equilibrium modelling).
4) The author(s) of a report should be made clear and the author(s) should take responsibility for both the plausibility of the results and the appropriateness of their presentation, including the presentation of their work by those that commissioned the work.
5) Full modelling results should be made publicly available at the time of their release to the media."
I see potential issues with numbers 4 and 5, as well as with the definition of economic modelling.
What is meant by “economic modelling”? Do we need a register of economists? How does internal modelling by political parties, unions and various industry groups get treated? How about the back of the envelope calculations prepared by journalists?
In regards to 4 . . .
Despite the fact that I have wished for the power to do so many times, dictating to clients how they use a product that they have commissioned would represent a significant shift in how IP in consulting contracts generally operates. In many cases clients (and their wonderful legal counsel) contractually insist that IP developed over an analytic project is owned by them. This is understandable—if I pay for the car, I own the car. It would represent a significant change in the standard contractual process (as I have experienced it anyways) for me to claim control over how the outputs of my work may be utilised in the future.
In regards to 5 . . .
Over the years I have had a number of public and private clients who actively sought good quality evidence and advice but were cautious with how this advice is made public in terms of extent and timing. If this code of conduct was interpreted literally (that any release, whether planned or inadvertent, results in the full modelling results being made public), I fear that these clients would become even more cautious in commissioning evidence-based analysis on the basis that it represents too great a risk to their organisations. I believe strongly that this would be a negative outcome. Sometimes it takes a few rounds of input for opinions to change.
Yes, absolutely, to a code of conduct that makes explicit the client and assumptions. But tread carefully to ensure that the side effects don't lessen the benefits.
Big Ugly Prediction: Nothing will change on this front—there are too many interests that find bad modelling quite useful. However, as in the US, partisan consultancies will increasingly be recognised as such, with the media still happily reprinting press releases as news.