Conflict of Interest and Decision Making

This chapter looks at conflicts of interest (COI). It first considers tools of analytic philosophy to highlight the notion of COI, and in particular, the connection between COIs, choice and judgment, emphasising why decision making is a central element in the characterisation of COIs. Drawing on these elements, it is clear that any question of regulation and institutional design requires a sophisticated understanding of the capacity of individuals to recognise and resist bias in themselves and others when making judgments and decisions. The chapter then studies two specific mechanisms—bounded rationality and cognitive biases—that affect the behaviour of people in COI situations. It starts by analysing how rationalisation can reframe questionable behaviour as appearing acceptable, and how a sense of invulnerability encourages people to downplay the impact of COIs. The chapter then looks at techniques (policies, procedures, incentives, etc.) used to address COI situations in the light of insights from psychological studies. It concludes that both fiduciary duties and procedural requirements reflect an erroneous understanding of psychology and have led institutions and policies to deal ineffectively—if not indeed counterproductively—with the problems caused by COIs. Finally, the chapter assesses how alternative mechanisms may overcome the highlighted deficiencies. It specifically focuses on the key role that professional norms can play in dealing with unavoidable COIs while preserving trust between the affected parties, and the potential for self-regulation to provide worthwhile tools in combatting the harmful effects of COIs.