The Shamanism in Economism

posted by Frank Pasquale

On the 10th anniversary of David Shenk’s Data Smog , his discussion of the commodification of expertise is still well worth reading. The WSJ’s George Anders had a great piece on the growth of the industry, focusing on the work of economist David Teece. As Anders explains, “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.” Consultancies like CRA, FTI, and LECG rake in hundreds of millions of dollars per year to “crunch data” and tell a persuasive story for their clients.

As Robert Frank and Philip Cook explained in The Winner-Take-All Society, the arms race for talent has already driven up lawyers’ salaries at many firms, and perhaps it’s natural for that trend to affect accounts of the facts underlying commercial disputes. However, I’m worried by the rise of publicly traded expertise factories. The academy may have its biases, but at least most of its institutions have more diverse goals than making a profit. A publicly traded expertise factory may well be duty-bound to its shareholders shill for the highest bidder.

Of course, such a strategy may be self-defeating; if an expertise factory consistently pushes the more tenuous (but wealthier) side in litigation, it may end up making predictions and assurances that are ultimately discredited. Moreover, litigators can bring up in court how much the opposing expert was paid, and question their objectivity accordingly.

But sometimes I doubt the efficacy of these correctives. Big billables may mean bias; they may also command respect along the lines of the ancient street wisdom “If you’re so smart, why aren’t you rich?” Moreover, I don’t even see how some of this testimony is falsifiable. For example, consider this example from Teece:

The estate of deceased smoker Fredric Reller [contended Philip Morris] concealed cigarettes’ health risks. Philip Morris, which had lost two similar suits in California, decided to recast its defense strategy. It put Prof. Teece on the stand and asked him, as an economist, whether he thought tobacco companies had enjoyed monopoly power to prevent smokers from learning about health dangers.

“It’s just not feasible for Philip Morris to regulate the information market,” Prof. Teece declared. He presented a diagram identifying sources of knowledge about smoking. Doctors, scientific journals and the media each got a separate bubble. The surgeon general’s antismoking report of 1964 got prominent play. Even if Philip Morris denied the risks of smoking, it would be overwhelmed by this medley of sources, he suggested.

This strikes me less as testimony on some set of facts important to the case than as a declaration as to the ultimate issue. I don’t want to comment on the merits of Reller’s suit–I just don’t understand how an economist qua economist has particular expertise on how a smoker in the 1950s and 60s understood the dangers of cigarettes. But the rest of Anders story suggests that the expertise in question here was not strictly scientific, but something charismatic, an almost shamanistic authority exuded by the professor:

For much of his testimony, Prof. Teece was as plain-spoken as a 10th grader in a social-studies class. Any of Philip Morris’s executives or lawyers could have said the same thing. Yet because the cigarette company had positioned Prof. Teece as a prominent scholar and independent thinker, lawyers for both sides say, his remarks carried extra weight. Several days after Prof. Teece’s testimony, jurors ruled in favor of Philip Morris.

Should a jury take someone at his word simply because he is “a prominent scholar and independent thinker?” Such a blunt heuristic may as well lead them to accede to the recommendations of any number of authorities. For example, a shaman “acts as a medium between the visible world and an invisible spirit world”–perhaps one could be called to testify on various “invisible” states of mind?

I suppose one of the key powers of an expertise factory is to “position” its experts as the rare “wise men” capable of mediating between the “learned” and the “conversable” (to use Hume’s old distinction). The situation reminds me of a basic confusion between scientific authority and charismatic authority that is becoming increasingly common in a “black box” world that rewards people more for navigating opaque surfaces than for understanding the fundamental dynamics that govern events. As Sherry Turkle notes, we have been trained by much of our computer-driven work lives that “it is more fruitful to explore the world of shifting surfaces than to embark on a search for mechanism, origins, and structure.” We are trained to “trust authorities,” but to put less and less effort into critically understanding the nature and basis of their expertise.

I worry that expertise factories like Teece’s may give the patina of scientific objectivity to testimony that is basically driven by one-sided data. Consider this critique of Teece’s work for the RIAA from the Napster litigation:

While Plaintiffs rely on Dr. Teece’s report to forecast harm, Dr. Teece relies on literally nothing. Dr. Teece had not seen any of Plaintiffs internal documents of Plaintiffs regarding plans for the digital download market and was unaware of specifics regarding Plaintiffs’ plans for pricing proposals, encryption, standards-setting, download changes, or profiling. Teece reviewed no data other than Plaintiffs’ papers as to the actual use, or impact, of Napster in the marketplace. Teece simply speculates that “it should not be surprising if Napster’s presence undercuts the willingness of consumers to pay for music.” As Dr. Hall points out, that speculation by Dr. Teece runs counter to well-established economic theory and to well-documented historical examples. The two “problems” Teece identified in his report as exacerbated by Napster—the difficulties of adjusting consumers to a new format and new method of distribution, are precisely what the Napster service is facilitating at no cost for Plaintiffs.

Clearly this is itself a biased account of the issues in the case, but it raises some serious problems with Teece’s work, too. Nevertheless, the district court heavily relied on Teece, but excluded much of Napster’s expert witness testimony. Napster may not have had the most polished report, but I would have hoped the district court would have sought *some* outside expertise on the matter.

A final reflection: perhaps the esoterica of economic forecasting really are beyond the grasp of the average juror, and all an expertise factory can properly manufacture in a fundamentally dysfunctional legal situation is an aura of charismatic authority for its witness. However, I have to side with Philip Rieff in worrying that “Forgetting the humility associated with charisma in the New Testament [may lead us to] ‘our most dangerous scientific experiment — with moral disorder.’” The commodification not merely of advocacy skills, but of the basic facts that advocacy has to work with, may well chip away at the foundations of legal authority. In any case where only one side can afford the services of an expertise factory, both judges and juries should be very wary of the facts they receive. It may well make sense to require some rough equality between the level of “expertise” purchased by each side.

Photo Credit: Flickr/Vitafluida, Shaman Ice Sculpture.

 March 26, 2007 at 9:26 am   Posted in: Economic Analysis of Law    Print This Post

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