Professors Make More Than a Thousand Dollars an Hour Peddling Mega-Mergers

https://www.propublica.org/article/these-professors-make-more-than-thousand-bucks-hour-peddling-mega-mergers

by danso • 10 years ago

317 144 10 years ago

viridian• 10 years ago

This seems like a problem that appears everywhere in science, not just in the case of economics. There is a known phenomena of science results agreeing with the organizations that fund the science, and this seems to be an extension to that.

Is there any good way to solve it that won't result in less valid science work getting funded?

harrumph• 10 years ago

Is there any good way to solve it that won't result in less valid science work getting funded?

Bona fide science has peer review and falsifiability. Also imperfect, but nowhere nearly as commonly manipulated as is economics for hire by business interests and their think tanks.

In fact, this seems like a good time to mention the only Senator I've ever seen in decades of observing politics who actively attacks this problem is Elizabeth Warren.

https://www.washingtonpost.com/politics/how-elizabeth-warren...

euyyn• 10 years ago

Funnel plots are used in meta-analysis to detect the self-censoring bias of publishing only results when an effect showed up. Maybe they can be used or adapted for this too?

arcanus• 10 years ago

Most of economics is an intellectual veneer to justify politically motivated policy actions. The 'science' is seldom predictive, nor does it even attempt to be. It has more in common with augury.

This blurb, for instance, openly admits their expert opinions are for sale,

'Economists have an “incentive to get a reputation as someone who will make a certain type of argument. People will hire you because they know what testimony you will give,” said Robert Porter, an economist from Northwestern who has never testified on behalf of a corporation in an antitrust matter.'

cmdrfred3• 10 years ago

Indeed I suspect a great number of people who scream on TV never actually read The Wealth of Nations or at least not this passage:

"It is but equity...that they who feed, clothe and lodge the whole body of the people, should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed and lodged."

btilly2• 10 years ago

The Wealth of Nations should be understood as the attempt of someone whose cultural tendencies (from Scotland) were socialist, to explain the wealth of a rabidly free market society (England).

Nobody from inside of England could have written the book - it would be like a fish trying to explain water. But his underlying sympathies emerge in numerous places.

rm_-rf_slash• 10 years ago

Paul Krugman once said something to the effect that all economists agree on supply and demand, but disagree on everything else.

I think you're right in your assertion that the "dismal science" is cherry-picked to support a perspective, not unlike using hard science in the same way, but without the ability to reliably reproduce results.

snrplfth6• 10 years ago

The trouble is that economists, of whatever theoretical school (well, except Marxians who are rather different) usually are asked to weigh in on the issues that are not well-investigated and where considerable disagreement exists. Basic concepts like supply and demand, and subjective value, are taken for granted by economists, even though they're the things that the average layperson does not understand and really should. The genuinely important insights of economics are too rarely discussed, while the controversies get all the airtime - so of course what we hear is the non-reproducible, opinion-driven stuff.

bjourne3• 10 years ago

Paul Krugman once said something to the effect that all economists agree on supply and demand, but disagree on everything else.

That's why it is hard to take economists seriously. If economy is a science, then facts should establish themselves and economists should agree on more and more things. That does not seem to happen.

Take the statement "Lowering income taxes causes people to work more and in the end generates more revenue for the state". That theory has been put to test in many countries (like in the US during Reagan's presidency) but they still can't agree on if it is true or not. So how can economy be a science when empirical evidence doesn't cause facts to accumulate?

chimeracoder• 10 years ago

This blurb, for instance, openly admits their expert opinions are for sale,

This has nothing to do with economics - that's how expert opinions work in law. It happens with all kids of expert opinions presented as testimony, from economics to medicine to cryptography.

Take a look at the way the expert opinions presented from both sides of the Newegg trial worked if you want to see jaw-dropping expert testimony action - Whitfield Diffie's own testimony on RSA (which he co-invented) was, a priori, given equal weight to the testimony of an expert hired by TQA. It was up to Newegg's and TQA's respective legal teams to convince the jury that Diffie's testimony was more mathematically sound than the other expert's testimony.

myowncrapulence2• 10 years ago

  Most of economics is an intellectual veneer to justify politically motivated policy actions.

This is the most poignant statement about "economics" as I've ever read. It's entirely too accurate.

saosebastiao2• 10 years ago

It's quite possibly the least poignant and lowest-common-denominator populist cliche I've ever read. It's like describing Computer Science as the study of how to make Flappy Bird clones and To Do apps.

bpodgursky• 10 years ago

You're operating off of an observability bias. The ones who spend all day writing op-eds in the NYTimes or WSJournal are more likely to be using a thin veneer of economics to shill for a particular policy.

The ones doing actual actionable economics are publishing and working on policy in non-sexy journals you're never going to stumble across. Or working in invisible, non-controversial advisory roles.

So yes... the economists spend their lives _not actually doing economics anymore_ are probably pushing politically motivated actions. Shocking! Scandal!

cheald• 10 years ago

This theory would make a lot more sense if political tradewinds adhered a little more closely to economic consensus.

Economists broadly want to eliminate the mortgage interest deduction, corporate interest deductions, and reduce the corporate income tax, want employers to stop providing health insurance as an employment benefit (http://www.igmchicago.org/surveys/tax-reform, http://www.igmchicago.org/surveys/healthcare), and broadly disfavor rent control (http://www.igmchicago.org/surveys/rent-control). Yet before we go off accusing economists of being right-wing shills, they also broadly want carbon taxes over income taxes (http://www.igmchicago.org/surveys/carbon-taxes-ii) and favor open immigration policies (http://www.igmchicago.org/surveys/high-skilled-immigrants).

None of these are particularly politically-fashionable positions to take, with the possible exception of the CIT issue, which plays well with one half of the electorate and is broadly viewed as liquid evil by the other half.

snrplfth6• 10 years ago

Exactly. It's like how I keep seeing people accusing "economists" (usually as an undefined group) with being concerned with "justifying the status quo". This, despite most economists having frequent, major disagreements with common current policies in many areas. What it tells me is that they're probably not really looking at the field as a whole.

It's the trouble with people making equivalences between "a particular person calling themselves an economist" and "economics". There are hundreds of thousands of people with economics degrees, it is trivially easy to find one who says what you want to hear. But then, that economist's words are often taken to reflective of economics as an entire field of study - regardless of the reasoning behind it, or how many other economists actually agree. So most economists may have totally sensible reasons for supporting Policy A, but when one dissenting economist supports Policy Not-A, the "consensus view" gets ignored. I don't know why this is. Maybe because people feel competent to judge economic reasoning in a way that they don't with other fields (and which might lead them to seek more opinions.)

erostrate2• 10 years ago

Economists are in favor of carbon taxes because the alternative is environmental regulation. They favor open immigration policies because it brings flexibility to the job market. Leading to less job security for low skill workers and more profits for multinational companies.

Economists are not intentionally supporting multinationals interests over people's interests. They do so as a side effect of their belief in the correctness and practical relevance of microeconomics and neo-classical theories. This behaviour is in turn encouraged and rewarded by multinationals and investment banks, leading dissenting voices to be marginalized. Of course there are notable exceptions, Stiglitz, Krugman, Rodrik, and a few others. But the general point is that if you want to get an economics PhD from a red brick university you will have to support this viewpoint.

robotresearcher• 10 years ago

There's an important difference between "This is my opinion. You may contract me to express it at your venue" vs. "You may contract me to express any opinion you wish at your venue".

The former seems completely legit to me. The lawyers just need to look around for a witness that already has the opinion they prefer.

It's up to the people receiving the testimony to judge the credibility of the witness.

No scandal here.

JadeNB3• 10 years ago

There's an important difference between "This is my opinion. You may contract me to express it at your venue" vs. "You may contract me to express any opinion you wish at your venue".
The former seems completely legit to me. The lawyers just need to look around for a witness that already has the opinion they prefer.

I agree with you, but think that it's important to distinguish "No scandal here" (your words) from "no problem" (an easy apparent synonym). Getting paid to espouse your honest opinions is (almost by definition!) not dishonest, but lending the lustre of academic support to fringe positions can lead to bad policy and decision-making. (The general public is, or even just non-academics and non-specialists are, not in a position to evaluate whether the paid opinion is representative of the academic consensus, or a fringe opinion held by a few; and, though the latter opinions have every right to be heard, it may be important to be aware of their status.)

metaphorm3• 10 years ago

for this reason I've always held that the term "political-economy" is a more accurate and appropriate name for the field than "economics".

edblarney7• 10 years ago

"Most of economics is an intellectual veneer to justify politically motivated policy actions"

This is completely unfair. 'Most of economics' is just academic, and has little to do with policy.

Moreover, there's absolutely nothing wrong with companies hiring economists to build models for things that interest them.

AT&T's acquisitions are mostly their business, and so long as the government does it's job, then there should be little concern.

The 'issue' should be the competence and ability of those green-lighting M&A.

turc1656• 10 years ago

Absolutely. In fact the original name of what we call Economics today was actually "Political Economy" and has its roots in moral philosophy. Rest assured, there is very little of anything resembling science going on. It's all agenda. There is something that they want to push and they are trying to find a way to justify it and make it palatable to the rest of society.

If science had anything to do with it we would eventually see a consensus form after a sufficient amount of time regarding issues of monetary policy and other topics that are currently contested.

mikeyouse2• 10 years ago

Slightly off topic, but ProPublica does really great investigative work. They recently took over many of the technical functions that The Sunlight Foundation was going to shut down. They do important work on civil rights, criminal justice reform, asset seizure, public corruption, corporate corruption, etc.

If you have some spare cash, setting up a recurring monthly donation in any amount really helps them operate and plan for the future. I've added a subscription to the WaPo and recurring donations to ProPublica, ACLU, and The Marshall Project. This work is too important to neglect.

aluminussoma3• 10 years ago

There are some stories they do that are really good. But as with all stories - ProPublica or not - please understand there may be an implicit bias or agenda.

On a different matter involving trial lawyers and an industry group, they reported a "scandal" where there was none. I am familiar with that issue (so I have my own biases!). It was my opinion that they were repeating the trial lawyer's argument and calling that an investigative journalism piece. Others may disagree with my assessment. I do not want to link to that story here.

This is one reason why I choose not to financially support ProPublica.

EDIT: I'm getting sick of the downvotes on Hacker News. This is not reddit where a downvote == disagree. Just don't upvote it. It's frustrating to take a few minutes to write a comment and then watch it get nuked because it's "controversial". But please feel free to downvote away because my off-topic rant.

mikeyouse2• 10 years ago

Fair point, they won't be perfect for everyone and they may rightly or wrongly ding organizations that people hold in high esteem (e.g. when they displayed the rank incompetence of the Red Cross a few years ago).

I'd argue that funding ProPublica and then funding an outfit who takes a contrary position on whatever issue is important to you is a better solution though. We need more journalism not less.

dv_dt• 10 years ago

Just because a side is associated with trial lawyers doesn't say anything about bias to me, one way or the other.

Sometimes they get involved in issues which seems like it would increase undesirable litigation. (of course people have differing opinions of what is undesirable).

But going further, sometimes laws are setup by congress which essentially 'outsources' enforcement to private parties. You can hold a good or bad opinion of the practice, or specific laws which are enacted, but in those areas, cases going to litigation can be the only way that the law is ever enforced.

conistonwater2• 10 years ago

I downvoted you because you are repeating the tired old trope about implicit biases and agendas. It's as if once we think we've identified someone's agenda, we can tell whether they're telling the truth. But this is false: the proper way is to assess the quality of reporting first, and if it is low-quality, then we can ask questions about how shoddy work got through, and then the answer might be biases and agendas. If it's good reporting, then biases and agendas are irrelevant. But in any case objective quality always comes first.

nkw• 10 years ago

I do not want to link to that story here.

Why not? You say they did something wrong, but then do not cite to what it was other than saying it involved "trial lawyers and an industry group". Why not provide a link to go along with your opinion and let people read it and decide if they agree with you or not rather than insinuating impropriety?

jedberg• 10 years ago

FWIW, downvote == disagree is not how reddit is supposed to work either, and didn't used to. So good luck fighting that trend!

tobltobs• 10 years ago

I did downvote for "I do not want to link to that story here.". What is that, anecdotal evidence without evidence?

icebraining3• 10 years ago

This is not reddit where a downvote == disagree

Says who? Not the creator of this site, at least: https://news.ycombinator.com/item?id=117171

(Note: I personally don't downvote when I disagree, but I don't think there's an official position by the site)

jackmott• 10 years ago

I didn't donwvote till you added the edit about downvotes

grzm2• 10 years ago

"Please resist commenting about being downvoted. It never does any good, and it makes boring reading."

https://news.ycombinator.com/newsguidelines.html

swehner• 10 years ago

Don't worry about the down-voters. They are just learning

alistproducer2• 10 years ago

Everyone has an agenda. Here's an idea; judge a piece or organization by the quality of the work. I'll read pieces from the National Review even though I don't share their bias. Why? Because they employ good journalists and check their work.

Even without the cesspool of comments, I won't read Breitbart because the editorial quality is non-existant. Same goes for crapy left-wing blogs like RawStory.

Houshalter• 10 years ago

In once case they released a study of how algorithms used by police were supposedly biased against minorities. Their results were "almost statistically significant". In other words, they weren't statistically significant. But they went ahead and published it anyway, under an alarming clickbait headline. https://www.chrisstucchio.com/blog/2016/propublica_is_lying....

It makes me pretty upset, because that is the study/article that everyone references when discussing that issue.

LeanderK• 10 years ago

Can you explain what you mean with agenda? When i read the nytimes i expect a bit of an bias, i am totally ok with that. Every newspaper has an opinion. But i would not be ok with an agenda if you interpret that as selecting stories that mostly fit with your goal and bending stories to favour your goal. That's not journalism.

radmuzom• 10 years ago

Thank you for the suggestion. Set up a monthly recurring donation of $5. Will also subscribe to NYT now.

I am not American but after the US elections have decided to actively get involved in supporting progressives/liberals anyway I can.

cowardlydragon• 10 years ago

John Oliver gave them a shoutout on the last show of the year.

They will be sorely needed...

aluminussoma3• 10 years ago

It's not just economists. I recall professors in other departments were contacted for "consulting" work. General Electric offered one political science professor a lucrative hourly rate (I think it was $650/hr) to consult on a legal case for the Dabhol power plant. This was years ago, so surely the fees have gotten larger. The professor turned it down for other reasons but said it would have been "easy money".

ghaff2• 10 years ago

Based on my personal experience, that seems like a fairly typical ballpark number for hired expert work in legal cases. It can take a big chunk of time (and it may not see the light of day), but it can be interesting and the pay is quite good.

jononor• 10 years ago

Take the money, write the op. But before sending it off, offer the academic you disagree with most fervently half, and ask her/him to write a counter-opinion. Publish both.

delinka2• 10 years ago

And never get asked again.

denzil_correa• 10 years ago

The best way to handle this seems to be accountability. There needs to be a reasonable way to hold companies to what they say. Currently, a company says the effect would be X in 5 years. In 5 years, these effects should be studied and if the variance is more than a reasonable standard - the merger should be relooked at and appropriate recommendations should be taken.

The current system looks at merger decisions as a one time policy decision. It should take it up as an iterative exercise.

oli5679• 10 years ago

This is really interesting. One solution would be social norms expressing scepticism towards pundits that made bold claims without publicly placing a large bet corresponding to the position.

1024core• 10 years ago

I don't understand. Why doesn't some academic analyse these professors' claims and show that they're bunkum, as the article claims?

droopyEyelids• 10 years ago

Because there is limited time in the day, and you can't run a simple experiment to prove these issues, and you need money to eat and have shelter.

This is really a case study in how the morality of individuals in a country determines the fate of the country.

cerrelio• 10 years ago

Then that academic can make a company out of it, and charge $2000/hr. :)

The issue is academics cashing in on their research. I think this is fine in general. Having been through grad school I've worked with professors who I felt placed their entrepreneurial endeavors ahead of their educational requirements. This is an ugly practice. Ethical standards need to be in place to address this. If you're primarily conducting business using your academic credentials, then relinquish your chair to someone else, and take up some "fluff" title and pay your grad students out of your own kitty. Also, pay the university for the non-human resources you use, because it's like you're a hairstylist renting a chair in a salon to obtain and service clients.

I think this is primarily the reason why there's a generation of postdocs sitting on the sidelines waiting for a full professorship. They eventually get bored (and hungry) and move into the private sector, robbing academia of fresh blood and new ideas. So a de facto privatization of research emerges. We all lose when this gets out of hand.

JadeNB3• 10 years ago

If you're primarily conducting business using your academic credentials, then relinquish your chair to someone else, and take up some "fluff" title and pay your grad students out of your own kitty.

This may be fair to ask of the professor, but it is perhaps reasonable to consider whether it is fair to ask of his or her graduate students (who are probably not to be blamed for their advisors' extracurricular habits). I work in math, where corporate sponsorship is (generally) not an issue, and so my opinion may be skewed; but it seems to me that a graduate student of someone with a 'fluff' title might be perceived less seriously than a graduate student of someone with a grander academic title, and so suffer even if his or her work is sterling. (On the other hand, perhaps driving students away from working with corporate consultants is a desireable side effect …?)

burkaman• 10 years ago

"Once a merger is approved, nobody studies whether the consultants’ predictions were on the mark. The Department of Justice and the Federal Trade Commission do not make available the reports that justify mergers, and those documents cannot be obtained through public records requests. Sometimes the companies file the expert reports with the courts, but judges usually agree to companies’ requests to seal the documents. After a merger is cleared, the government no longer has access to the companies’ proprietary data on their pricing."

mathattack• 10 years ago

While in school I went to an event hosted at the home of an Econ professor who worked on the Microsoft trial. It was lakefront property in a very posh suburb. We called it "The house that Bill Gates built."

jccalhoun• 10 years ago

I'm an adjunct instructor. I'll do it for half that.

confounded• 10 years ago

See also, Google's anti-competition monopoly-shill joining the Trump team

https://theintercept.com/2016/11/15/google-gets-a-seat-on-th...

calcsam• 10 years ago

One of my favorite econ professors at Stanford got an inquiry from a big oil company.

They wanted her to do some consulting for them, relevant to mergers, acquisitions and the result on oil prices.

She wanted to politely tell them no. So she quoted triple her normal hourly rate, already hundreds of $ per hour.

They said "sure" -- so she had to tell them no the old-fashioned way :)

jazzyk• 10 years ago

The sad fact is that academics these days occupy themselves with chasing money and power, not science (at least the ones in "elite" schools).

Check out the movie "Inside Job":

- Glenn Hubbard (the Dean of Columbia University School of Business). His work for Countrywide Financial for $1200/hr, attesting that the lender's loans were no worse than a control group of mortgages and not fraudulent, was examined by an attorney for MBIA. MBIA was suing Countrywide over its mortgage practices.

https://en.wikipedia.org/wiki/Glenn_Hubbard_(economist)

- Frederic Mishkin, who, according to the Wall Street Journal, was paid almost $135,000 by the Icelandic Chamber of Commerce in 2006 to author a report that praised the stability of Iceland's economy and banking system—two years before they collapsed.

https://en.wikipedia.org/wiki/Frederic_Mishkin

Most of the profs in "elite" business schools sit on boards of big companies like GE, are members of Council on Foreign Affairs, etc.

Just sad.

beambot3• 10 years ago

Genuinely curious: You think business school profs serving on the boards of big companies is "sad"? If I wanted to get an MBA, I would prefer to learn from people who have actual real-world experience rather than studying with someone whose experience was purely theoretical...

lallysingh• 10 years ago

I think there's a valid concern about academic independence from industry. Without a reputable source of independent research, we fall into gaslighting pretty quickly.

beambot3• 10 years ago

I guarantee the lawyers are making way more than $1000 per hour... so why vilify the professors?

tnuc• 10 years ago

What next? Vilify the lobbyists?

notgood• 10 years ago

Lawyers from the very first day in law school are _intended_ to serve their clients (guilty or not); in the other hand professors -and educators in general- are supposed to be a lighthouse for knowledge, not another source of bad science due being paid.

beambot3• 10 years ago

In this context, calling professors "educators" is like calling lawyers "paralegals." Professors are academics. They are being paid for their professional, informed opinions based on knowledge and years of study. This is the same as lawyers sharing their legal opinions based on educational background (knowledge of the law) and real-world experience.

Also: In mergers, there is no "guilty or not". There is contract law, risk mitigation, strategy, and negotiation. Lawyers do so much more than simply saying what is "legal or illegal."

edblarney7• 10 years ago

"in the other hand professors -and educators in general- "

An economist need not be either a prof or an educator.

Tons of them work for banks, specialists just like devs, consultants, mathematicians, lawyers etc..

gaius• 10 years ago

The is why The People are sick of "experts".

tankenmate• 10 years ago

« They debated who had the better case. Carlton conceded that AT&T and T-Mobile would have found it hard to win at trial, according to an attendee. But he wished it had gone to court. He was eager to try out a new and provocative argument for mergers: That even though prices would have risen for customers, the companies would have achieved large cost savings. The gain for AT&T shareholders, he contended, would have justified the merger, even if cell phone customers lost out. »

According to this, obviously hearsay, Carlton truly wanted to argue that a merger was beneficial because shareholders won even though customers lost; this boggles the mind because the major intent of anit-trust law is to protect customers!

matthjensen2• 10 years ago

This article is focussed on anti-trust regulation, but the problems it addresses are much broader.

Every spending and tax law, for example, is scored by the Congressional Budget Office/Joint Committee on Taxation to determine the budgetary impact. Economists are hired to lobby these organizations about the "right" way to score policy, and then the organizations might or might not adjust their methodologies. Sometimes Congress can place pressure on the scoring organizations, too.

This would all be fine, except that neither the economic methodologies nor the data are publicly available. Sure, the big picture methodology is disclosed, but not the key assumptions.

If the economic methodologies were disclosed in full, I'd be all for outsiders suggesting ways to improve the methods. Then a scientific discussion could be carried out in public, and I think it would be obvious to anyone observing the process that the JCT or CBO economists are trying to do the best job that they can.

One step towards disclosing methods is through documentation, but given the importance of detail in the types of analyses that JCT and CBO do, supplemental documentation is unlikely to be sufficient. Instead, the organizations need to make their analytical code available. In other words, CBO and JCT should make their code available to the public and take outside suggestions for improvements. They should be open source!

Granted the data won't always be available to the public given that CBO and JCT rely on administrative data that is highly private, but they can at least produce dummy datasets and detailed summary statistics.

All of this same reasoning applies to the anti-trust situation. They ought to open source their analyses as well.

[Disclaimer, I'm a contributor to a few open source models for public policy analysis.]

mtw• 10 years ago

It is possible mega-mergers make sense economically. However economists do not take into account individual ambition. A chairman or a CEO might say satisfying words for a merger, but with real plans to increase prices due to increased market share

vasaulys• 10 years ago

I never knew you could get a job writing automation scripts. That's pretty cool.

qwrusz• 10 years ago

As someone who studied economics and works as an economist, I agree economics today is full of bull$h^t and biased "experts" and politicking masquerading as legit social science work, I see it daily. And it goes on in mainstream and heterodox economics, in industry and in academia.

(I'd preferred to call my job something like "statistician focused on economics and finance" - not economist, but it didn't fit on the business card)

I just wanted to point out $1000 an hour pay is a quite common amount paid to any/all professions when law firms needs an outside expert opinion for a case.

This $ is not unique to company merger cases nor economists.

e.g. if a lawsuit needs a medical expert or engineering expert it's likely they are getting paid ~$1000 an hour for this time. And I don't doubt the clients are being billed way more than that - $1000 is just the expert's cut.

Not defending anything, just pointing out this amount is what law firms commonly pay for outside "professional expert" opinion work.

ada1981• 10 years ago

Curious if there is a way to force these companies to place bets on the predictions that they make. They say that a merger is going to do XYZ -- well, with what degree of certainty? And are you willing to take a position tied to the outcome? Because as it stands, they can make an argument it will help with consumer choice -- but that isn't the driver, it's about profits. So if the idea is to protect the consumer or benefit them, make a prediction about that and then take a position where you will get an additional payoff if you are right. If you are wrong, you'll be "fined" by having to cover the bet.

iamleppert• 10 years ago

Dennis Carlton is as crooked as they come. Smart for sure, selfish of course. He has a legion of poorly paid graduate students publishing his junk science and manipulating data from flawed studies to say whatever it is he likes.

And at the end of the day, what makes you smart does not mean you're intelligent. Just because you can master a discipline to achieve your goal of extreme wealth accumulation is unimpressive. I feel that some day when money does not matter, rich people who actually created very little value (and may have even been a net negative) will be looked on as one of the great evils of society.

Professors Make More Than a Thousand Dollars an Hour Peddling Mega-Mergers

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