Monday, August 12, 2013

Insights on How Many Economists Operate

In the last few months I’ve participated in two debates with economists and have been dressed down by one of the rock stars in the academy.  While I know many cordial economists I have met far too many that lack basic civility and tact.  Perhaps they respond to incentives that favor aggressiveness over compromise and rich financial sponsorship over unbiased search for the truth.

            While I am painting with a broad brush I see far too many economists with the following characteristics:

1)         They receive ample financial sponsorship that supports results-driven research and advocacy.

2)         They may not disclose their sponsorship.  If they do, they still will insist that outcomes supportive of their sponsor are incidental.

3)         They make up their own rules.  As a lawyer I have to work within case precedent and the rule of law.  Economists can create rules that become legitimate by use and the aforementioned financial sponsorship, e.g., the Efficient Components Pricing Rule.

4)         They place a premium of aggressiveness and snarkiness.

5)         They personalize and attack when the merits do not favor their position.  In one debate an economist did not address the merits of my arguments, but instead emphasized that “Professor Frieden and his ilk” are bad for America, etc.

6)         They revile laws that don’t make economic sense, but freely engage in the practice of law without a license.

7)         They are better at math than most people and consider this as confirmation of their superior intelligence.

8)         They consider themselves the smartest people in the room and let you know it.

9)         They often create papers that recite the obvious, or advocate something counter-intuitive that they can "prove" with math; and

10)       They have freedom to assume anything to provide any solution.  How does an economist get out of a hole?  He or she assumes a ladder.

A Senior Economist Calls My Comments “Stupid”

            I’m just back from a conference in Perth Australia where a major economics professor from a northeastern university headlined.  After his presentation he stuck around perhaps allocating a small portion of his considerable intelligence to following a later discussion.  A colleague of mine presented a paper comparing wireless policies and market performance of carriers in the U.S. and E.U.  He noted that U.S. carriers have some of the highest average return per user, but also some of the lowest rates on a per unit basis.  He also noted that the U.S. market has less concentration than many other E.U. markets using the Herfindahl Hirschman Index (“HHI”).

            Using the traditional peer review process I mentioned that the HHI score used in the paper was low compared to more recent measures that include additional acquisitions by Verizon and AT&T.  I also noted that high volume, plan-based consumers can benefit from world class low rates, but low volume users do not.  I made an analogy to the pricy breakfast buffet at my hotel.  People like me with a healthy appetite enjoy low cost per gram, but my wife incurs a high unit cost as she consumes less.

            Professor x chimed in with the stupid criticism based on his view that the HHI is not worthy of use and the availability of prepaid plans that do not lock in subscribers.  I didn’t know what a touchy, third rail topic the HHI is, particularly to researchers sponsored by incumbents keen of making acquisitions while also insisting on how competitive the wireless marketplace is.  The Professor noted that 17% of wireless consumers in the U.S. don’t have a plan, but he never got around to acknowledging that these per call and per text users pay far higher rates than the world class levels incurred by consumers who make thousands of text messages monthly.

            So the smartest guy in the room offers a clear snapshot of how to act like an ugly American bully in nation adverse to tall poppies.  30+ years as a scholar in both academic and applied telecommunications issues and Dr. Big Shot dismisses my contrary evidence as stupidity.  Not smart.