Early this year the American Economic Association, a leading group of academic economists, adopted more stringent conflict-of-interest rules to their code of ethics. That move was in response to criticism that the profession not only failed to predict the 2007-2008 financial crisis but may actually have helped create it through conduct which some contended should be unethical in the industry. These criticisms were made most prominently in the 2010 film "Inside Job," the 2011 Academy Award winner for best documentary.
In the course of providing advice to corporations and governments, these economists were accused of often having significant financial incentives to give specific advice, which incentives were sometimes undisclosed. These relationships allegedly led them first to miss signs of the crisis and then to recommend prescriptive action that served only their clients’ interests, at the expense of the economy as a whole. These seem to be accusations both of unconscious blindness due to financial incentives and conscious advocacy on behalf of their clients without concern for the general impact of their advice.
Lawyers too have been called to task as to whether their roles as strategists and implementers contributed to the financial crisis. There were, of course, lawyers behind all those mortgages and specialty securities and swaps and insurance products; even employment lawyers who helped fuel the banking boom have taken some heat. While many lawyers bristle at these charges–"we were only doing our job"–there are others who are not so sure of our innocence. See the controversy at the roundtable discussion on Should Lawyers Shoulder Any Blame for the Financial Crisis?
At the annual meeting of the American Economic Association where the new ethical rules were adopted, University of Illinois Prof. Deirdre McCloskey said that economists too often had "acted like lawyers, standing up for a certain point of view regardless of the evidence…The master sin, in American economics especially, is advocacy without regard for the truth."
Apart from the sting of being the profession that other professionals use as an epithet, the charge raises some interesting questions as to how lawyers and economists should act ethically. Ms. McCloskey’s emphasis seems to be on the sin of disregarding the truth.
But do we as advocates disregard the truth? And to the extent we do, aren’t we just putting our clients’ best foot forward? Or is there truth that we disregard at our and our clients’ peril?
As we pointed out in Part 1 of What’s Ethics Got To Do With It?, power is one of the influences that may make lawyers uninterested in the truth: "[E]ven fleeting feelings of power can dramatically change the way people respond to information. Instead of analyzing the strength of the argument, those with authority focus on whether or not the argument confirms what they already believe. If it doesn’t, then the facts are conveniently ignored."
Randy Kiser of DecisionSet has documented some specific ways in which litigators fail to acknowledge "the truth." According to his review of a large number of litigators’ cases, more than 60% of plaintiffs’ counsel and more then 24% of defense counsel (lower by percentage but 19 times greater in dollar amounts for each mistake) turn down settlements only to find at trial that settlement was a better deal. He notes that 66% of federal judges and 59% of state judges attribute parties’ failure to settle to an unrealistic assessment by one side of its chances for success on the merits.
As Laura A Kaster pointed out in the New York Dispute Resolution Lawyer this spring (Vol. 5, No. 1), "the study lawyers [Kaiser’s participants who were most skilled in assessing and prosecuting their matters] seem to be aware of the competing roles they play as advisor and advocate, at once trying to persuade the opposition and the court of the merits of the case and then trying to give objective assessment to the client… they feel a duty to help the client see reality…and seek out third-party review from colleagues and out-siders and feedback on the strengths and weaknesses…to counter overconfidence bias."
Kiser’s results are clearly that while many litigators aren’t particularly friendly with the truth, those who are end up being the best advocates and advisors. A similar case could be made for lawyers who make sure clients are aware of the potential impact of their business deals on a broader arena than just their financial statement–there are certainly clients who are grateful today for the caution that their lawyers promoted during the go-go years, even if they weren’t so happy to hear it at the time.
Yet an implication of McCloskey’s accusation against lawyers is that we aren’t concerned about the impact of our advice on the greater economy. We do have enough instances of legal advice that results in loss to one constituency or the other, but usually lawyers are not viewed as the culprit in the matter (although see, for example, the fate of some of the legal advisors to Sanford’s Ponzi scheme), But, again, isn’t this a lawyer’s’ duty? To promote their client’s cause without hesitating because of another’s situation?
No doubt at this point someone is likely to raise the issue of empathy. Isn’t the financial crisis just another instance of narcissism run rampant with our best and brightest unconcerned in the end with the fate of others?
Power once again plays a role in reduced empathy: "people with lots of authority tend to behave like neurological patients with a damaged orbito-frontal lobe, a brain area that’s crucial for empathy and decision-making… "
This point was dramatically illustrated in an experiment, cited in the article above, in which students were asked to place the letter E on their forehead. Those who had been pumped up with delusions of power invariably wrote the E backwards–how they would see it if they were able to see through their forehead but without consideration for the viewpoint of the others reading the letter in front of them. Kiser’s study attorneys, on the other hand, are described as "good at putting themselves in the juror’s shoes and seeing the case from the perspective of the jury."
The natural conclusion, therefore, is that power, coupled as it often is with lowered empathy, makes both professional and ethical mistakes more likely. Whether you are an economist who doesn’t really want to see the truth or a lawyer who is convinced the only truth that matters is his/her own vision of the case.
Of course, while clearly a good attribute, what does empathy really have to do with ethical conduct in the end? "Empathy makes you more aware of other people’s suffering, but it’s not clear it actually motivates you to take moral action or prevents you from taking immoral action," David Brooks has concluded. "These days empathy has become a shortcut… It has become a way to experience the illusion of moral progress without having to do the nasty work of making moral judgments." People in the end are too entranced with their own self-interest to self-monitor. Codes of conduct have more impact on behavior, he opines.
Hence, the economists’ new code of ethics.
In any event, according to Brooks’ research, empathy is in great decline, particularly among the younger set. "Almost 75% of the students today rate themselves as less empathetic than the average student 30 years ago."
In 2011, Yale Law School established a new ethics clinic following the participation by a professor and law students in a Supreme Court case challenging the ethics of a lawyer in a capital criminal case. The "Ethics Bureau" "advises lawyers on how to proceed when faced with violations of the Model Rules of Professional Conduct and other ethical dilemmas. Students draft amicus briefs in cases involving professional responsibility; help people with ineffective assistance of counsel claims; and offer ethics advice to nonprofit organizations."
That is a start in promoting a greater awareness of and adherence to ethical behavior in our profession. But the real challenge may be in learning how to sacrifice self-interest in the apropriate case, not an easy lesson for any of us.