Here are some more sources: Schlesinger, Jacob M. and Paul M. Barrett. 1998. Microsoft's Battle Offers Plenty of Work For Lawyers, Lobbyists and Economists." Wall Street Journal (20 May): p. B 12. Economists say they are being offered anywhere from $300 to $800 an hour to consult with one of the combatants. The hottest experts come from the small community of former Justice Department chief economists. Rick Warren-Boulton, who held the post from 1983 to 1989, has been hired by the states for their companion lawsuit against Microsoft. "Each of us keeps popping up," he says. The Massachusetts Institute of Technology has expert witnesses on both sides: Franklin Fisher, who filed a paper Monday on behalf of the Justice Department, and Richard Schmalensee, who is doing consulting for Microsoft. Mr. Fisher's role has drawn notice because he was an important witness on behalf of computer titan, International Business Machines Corp., when it fended off a massive federal antitrust investigation in the "70s and early "80s. ## Phillips, Michael M. 1998. "Economists Who Testify in Court Enjoy a Very Lucrative Sideline." Wall Street Journal (5 June): p. B 1. For the elite group that dominate the field, they earn as much as $800 an hour. He mentions Dennis W. Carlton, whose consulting rate is $490 an hour. ## Mandel, Michael J. 1999. "Going for the Gold: Economists as Expert Witnesses." Journal of Economic Perspectives, 13: 2 (Spring): pp. 113-20. 113: "It is becoming much more common to call leading university or think-tank economists for comment, and discover that they cannot speak publicly because they have signed up with one side or the other to provide expert advice or testimony. Or they will only agree to speak in theoretical terms. Or they are willing to talk, but a little probing reveals that they. have taken money in the past for expert advice or testimony in a related case. Or perhaps the most disturbing, they are providing secrecy (in these situations the honest ones often simply do not return phone calls secrecy (in these situations the honest ones often simply do not return phone calls from journalists)." 114: "The expert witness boom exerts a hidden yet powerful influence on the behavior of economists, both inside and outside of academics." 114: "Full or partial financial data are available on four of the largest providers of economic litigation support: CRA, based in Boston; LECG, based in Palo Alto, California; National Economic Research Associates (NERA), whose headquarters are located in White Plains, New York; and Lexecon, based in Chicago. The first two firms went public in early 1998 and 199?, respectively, and were required to supply financial histories at that time (subsequently LECG merged with the Metzler Group)." 115: "The published data show that from 1994 to 1997, total revenues for the first three firms increased by roughly 60 percent. The explosive growth likely continued into 1998, since the latest financial results from CRA show another 18 percent. Moreover, the boom is not unique to these particular companies. For example, economic consulting revenues at another large firm employing roughly 100 professionals nearly tripled over the three-year stretch from 1995 to 1998. 115: "From 1994 to 1997, there was a 61 percent increase in the number of merger transactions which needed to be reported to the government, almost exactly paralleling the growth in revenues. The trend continued in 1998, with an additional 28 percent increase." 117: According to "Dennis Carlton, a University of Chicago professor, who is president of Lexecon: 'You have access to data you never otherwise would have had access to.' Toys 'R Us, for example, allowed Carlton to use confidential data far his published work." 118: "the most desirable expert witnesses are top empirical economists, whose time is all too often diverted into studies that contribute little to the progress of economic knowledge." But antitrust cases generate considerable data that will be kept secret. 119: "a career as an expert witness encourages people to stick with positions, even if they might otherwise have changed them. That's the nature of the legal process, which flaws in research. One example occurred during the Microsoft antitrust trial, when flaws in research. One example occurred during the Microsoft antitrust trial, when Schmalensee, testifying for Microsoft, was attacked for contradictions between his testimony and an article published in 1982. That's not unusual. 'If I get up as an expert witness, the other side will read everything I have ever written,' says Shapiro. 'That can chill some academic debate.' Adds Hausman: 'people get locked into their testimony. That's a significant negative externality'." 119: "Top economists are granted lifetime tenure, required to do little teaching, and paid high salaries so they can pursue long-run research projects without worrying about having to meet a bottom line or short-run goals. The question is: what sort of responsibility is implied by this unique position?" Anders, George. 2007. "An Economist's Courtroom Bonanza." Wall Street Journal (19 March): p. A 1. "He has testified in court about baby formula and cigarettes, software and cement. On the witness stand, he is a sage about semiconductors, a maven of music, a pundit on patents. Meet David Teece, renowned expert on lots of things and pioneer of a lucrative consulting niche that has transformed business litigation. The University of California, Berkeley, business-school professor is one of America's busiest expert witnesses, billing corporate clients as much as $850 an hour for his insights. He has built a publicly traded 1,300-person research shop, LECG Inc., that does much of the legwork for him and other economists, so they can zoom through more assignments." "For high-profile economists like the 58-year-old Prof. Teece, expert testimony has become a way to earn $2 million or more a year. Their rise has its roots in the Reagan era of the 1980s, when a free-market view of the law inspired by University of Chicago scholars gained ground. Courts now rely far more on economic analysis, with its apparent precision, to reach decisions. As a result, big companies in legal disputes race to enlist top economists on their side, paying top dollar in an arms race for talent." "Cases that might have been expert-free 30 years ago now involve as many as eight experts, four on each side, says Russell Frackman, an intellectual-property lawyer at Mitchell Silberberg & Knupp in Los Angeles. Economists are part of each side's roster; so are specialists in a myriad of other fields. "Even if you don't think the other side's expert will have much influence," says Mr. Frackman, "you don't want the jury to wonder why you couldn't find another expert to offset him or her." "Born in New Zealand, Prof. Teece came to the U.S. in the early 1970s, hoping to join the World Bank. Then, while working toward a Ph.D. in economics from the University of Pennsylvania, he learned that Exxon Corp. needed help fighting price-fixing charges. That became his summer project, for a fee of $3,000." "He moved west and won tenure at Berkeley at 33. In a widely cited 1986 paper, "Profiting from Technological Innovation," he argued that the big winners from breakthrough ideas can be companies that control distribution and customer service, not the inventors." "Prof. Teece's economic work was so panoramic that he could be plugged into almost any industry dispute and presented as knowledgeable. He didn't fluster under cross-examination. And his New Zealand accent worked nicely on the witness stand; it made him sound erudite without being pompous." "By 1988, Prof. Teece was being offered more expert-consulting work than he could handle, even though he works until 2 a.m. most nights. So was Berkeley law professor Tom Jorde. They decided to set up Law & Economics Consulting Group, an off-campus research shop in nearby Emeryville, Calif. There, they and some similarly busy Berkeley professors built a staff full of newly minted Ph.D.s to help pull together their testimony." "This arrangement not only saved time but also pumped up economic experts' incomes. Besides billing hundreds of dollars an hour for their own work, these experts also collected a markup on their aides' time, much as partners in a law firm do for associates' work. On big projects, with dozens of aides working round the clock, the markup could be worth $100,000 or more to the scholar in charge." "I won't get many thank-you notes for this, but we've given economists the chance to earn investment bankers' incomes," Prof. Teece says. "If you're successful with us, it isn't hard to make half a million dollars a year." He estimates that 60 LECG experts topped the $500,000 mark last year. "This research-boutique idea has caught on at other college campuses. Even before LECG got started, MIT economists helped form CRA International Inc. University of Chicago economists started LexEcon Inc. And in Menlo Park, Calif., Cornerstone Research drew heavily on Stanford's faculty." "LECG in 1997 became the first to go public. Its financial disclosures shocked many on the Berkeley campus, who hadn't realized that Prof. Teece was earning more than $700,000 a year from his LECG work. A statewide review panel ultimately decided that this off-campus work needn't be banned, though it called on the professors not to let research priorities be tainted. To soothe any lingering concerns, Prof. Teece switched to half-time status at the university a few years ago, cutting his salary to about $65,000 a year." "Prof. Teece doesn't dispute estimates that his career earnings from expert consulting amount to at least $50 million, if one includes LECG stock sales and assets held in trust for his children. He holds a 7.3% stake in LECG, currently valued at about $17 million. He earned $2.6 million in fees and another $339,583 in salary in 2005, the most recent year for which data are available." "LECG has been a fast-growing company for most of its existence and has 32 offices in 10 countries. But it stumbled last year, when it earned $21.5 million on revenue of $354 million. That was below Wall Street's expectations, and some analysts believe the company pays its experts and staff too generously, leaving too little for shareholders. LECG's stock has fallen about 30% in the past two years. On Feb. 27 LECG announced that it was appointing an interim chief executive, Michael Jeffery, and looking for a permanent one. The company had lacked a CEO for several years; Prof. Teece, the chairman, had called most of the shots." "Antitrust cases have been a particular boon for economists. Traditionally, trust-busters focused on blatantly illegal behavior, such as price-fixing, leaving little leeway for an economist's interpretation once the facts were established, observes Howard University law professor Andrew Gavil. More recent cases, such as the one against Microsoft Corp. in the late 1990s, have involved tricky calculations of how much consumers might be damaged by a company's market domination." "Economists are great at answering hypothetical questions with great precision," says Asim Varma, a partner in the Washington, D.C., law firm of Arnold & Porter. "But you have to find out what the assumptions are. If they're spinning the assumptions to help the client, all that precision is illusory." Three other such companies are listed: CRA International, with almost a thousand employees, FTI International, with more than 2000 employees, and Navigant Consulting with 2300 employees.
-- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu michaelperelman.wordpress.com
