Wednesday, August 11, 2010

Economist Warning Labels and Disclosures

To protect the public, cigaret packages have warning labels, as do over-the-counter and prescription medicines, air bags, gasoline pumps, pesticides, herbicides, fertilizers, paint, and so on. It seems to me that writings and public pronouncements of economists should also be required to include warning labels.

I have in mind something along the following lines: “Warning: The recommendations and advice stated or implied in my paper or remarks can result in damage to your financial health, or that of your family, community, and country. Use with care.”

Over the years, I have watched a succession of members of the president’s Council of Economic Advisers appear on CNBC and other networks after important economic data are released, e.g., Department of Labor monthly jobs gains/losses and the unemployment rate. It’s easy to take credit for good news; not so easy for bad news.

Compounding the problem is that members of CEA are usually economics professors with a track record of publications in books and academic journals. Sometimes a CEA member appears in an awkward position when his or her academic research contradicts the president’s economic policies and objectives. Everyone understands that a CEA member must defend the president’s policies (although the member will be free to criticize them after leaving public office and returning to academia).

I suggest the following disclaimer appear each time a member of the CEA [or other government office] states an opinion, or spins economic results to make them look good: “As head of CEA I am required to publicly defend the president’s policies and put the best face on monthly economic data, even if my academic research does not support or even contradicts the president’s policies.” One might add “This statement applies to all past and future heads of CEA.”

Alternatively, the media could stop interviewing government spokespersons knowing that they cannot reply with full candor. Stating political talking points or slogans does not inform the public.