Scandals put teaching of economics in the dock

The spate of financial scandals that are rocking Chile have stirred a wholesome debate in the country on the importance of ethics in the teaching of economics.

The Pontifical Catholic University of Chile’s economics and administration faculty has been under the spotlight since three of its former students, previously hailed as 'star students', were prosecuted and jailed for a week in March pending trial for tax fraud and other financial crimes.

In the past few years, other well-known Catholic University economics graduates were also charged for collusion, market manipulation and cheating on clients’ credit lines.

The faculty of economics and administration at the Catholic University “rejects this sort of behaviour… that muddies the reputation of several thousands of economists”, stated José Miguel Sánchez, dean of that faculty, in a letter to the daily El Mercurio.

The deans of economics of five main universities interviewed by the financial daily Diario Financiero also condemned the wrong-doings and lay the blame on the persons under prosecution, not on the institutions.

Ethical implications

The deans also have explained in a series of press reports how their faculties have reacted to the situation and reflected on whether the way economics is taught in Chile may have a bearing on the financial crimes under investigation.

“Though we cannot be held responsible for the things our graduates do, we do have the responsibility to give them tools to sort out the good from the bad and to make ethical choices in their professional future,” Sánchez told University World News.

“Once they graduate they will make their own decisions but at least we should get them into the habit of asking themselves about the ethical implications of their actions, the sense and purpose of their decisions, who may be affected and how.”

At the Catholic University, the faculty of economics offers elective courses on business ethics. A curriculum reform, now under way, will include an obligatory course on applied ethics. Teachers will be prompted to include ethical considerations in all the subjects they teach.

In contrast, deans of other leading universities such as the University of Chile, Adolfo Ibáñez, Los Andes and Diego Portales, say that they do not need to make reforms, claiming that ethics in business permeates their economics curriculum.

“Our practice is to incorporate the ethical dimension in all our courses,” Manuel Agosín, dean of the faculty of economy and business of the University of Chile, told University World News.

“Furthermore, we have a body charged with ensuring, among other things, that teachers always consider the ethical dimension in their lectures.”

Neo-classical economics, a factor

Neo-classical economics, the prevailing economic theory in Chile and in most countries, is cited by some Chilean economists as a factor behind the financial crimes that have unleashed a political crisis in Chile. President of Chile Michelle Bachelet hopes to address the turbulence by taking stiff measures against conflicts of interest, influence peddling and corruption.

“All schools teach [the same] matrix, which centres on maximising profits and reducing costs. In this logic, tax avoidance through illegal means may be regarded by some as a valid tool,” Gonzalo Durán, an economist from the NGO Fundación SOL and a former Catholic University student, told the online news service El Dínamo.

Nicolás Grau, assistant professor of economics at the University of Chile, elaborates: “Telling students of economics that the aim of enterprises and individuals is to make money for themselves excludes cooperation and social wellbeing and has a bearing on what students may consider right or wrong.”

Gonzalo Polanco, director of the Tax Studies Centre of the University of Chile, adds that "the prevailing extremely competitive environment leads companies to hire professionals who are ready to reduce their tax burden or make money in any way, not those who shy away from ethically questionable practices”.

Overhauling the economics curriculum

The unending series of financial scandals have worried students of economics. They are discussing them openly on their campuses while teachers are using them as examples of the need to reinforce professional and business ethics.

At the University of Chile, vocal groups are pressing for changes in the way economics is taught. Among other things, they are canvassing for more diverse perspectives and for more attention to be paid to the interaction between economics, society and politics.

One of the leaders of the protest movement is Camila Cea, an economics graduate, who is advisor to the “Curriculum Open-access Resources in Economics”, or CORE, project funded by the UK Institute for New Economic Thinking.

“It’s great to see that the [CORE] curriculum addresses questions of inequality, climate change and financial crises – the questions students come to economics with,” she wrote in the preface of CORE’s interactive e-book for new students of economics. CORE’s online course sets economic questions in social, political, ethical and behavioural contexts.”