Wednesday, August 31, 2011

Academic Entrepreneurism and Rent Seeking

            While perhaps few in number, professors like me execute on their capitalist beliefs.  I am glad to augment my sparse teaching salary with consulting work.  Just as corporations seek to enhance shareholder value I will maximize my rents, particularly for distasteful work such as serving as an expert witness for a case that should never reach a court room.
            But unlike many ventures in the telecom sector, like AT&T Wireless, I am upfront about my work: I can be rented, but not bought.  Similarly I may not maximize my earnings, because non-quantifiable matters like reputation in the community matters to me.  I have passed up on work that I simply cannot support.  I am upfront with prospective and actual clients.
            The same cannot be said for a client like AT&T which uses dollars to subvert scholars into shills.  AT&T has invested millions of dollars on academics and consultants who will help legitimize the acquisition of T-Mobile as a wise, noble and cheaper effort to expedite wireless market penetration in rural locales.
            In truth AT&T has come to realize two basic realities:
1)         It is cheaper to buy out competition than to compete with a larger set of competitors; and
2)         It is cheaper to support mergers and other deregulatory campaigns with lawyers, lobbyists and consultants than to work harder in the marketplace.
            AT&T can enhance shareholder value and improve the odds than stock options remain “above water” by buying market share.  If a venture has to compete less it logically follows that a greater return on investment may result.  Why devote sleepless afternoon competing when readily available and comparatively cheap advocates can help frame a merger in terms of promoting competition and narrowing the digital divide?
            What’s remarkable is the reality that this sham would not possibly pass the smell test of fair minded people, but for a relentless campaign to legitimize outrageous propositions.