Saturday, August 13, 2016

Should Consulting Professors be Paid Less?

A recent article in the New York Times outlines how difficult it is to balance two jobs -- think tank scholar and representative of an industry or firms that have specific interests. Let's call the think tanks "think tank" and the other firms "moonlight." So is it possible to work for moonlight and not have its interests affect performance in the context of think tank? Put differently, can you serve moonlight and they switch and be a "perfect scholar" -- open minded, objective searching, etc. -- for think tank purposes. In theory it is possible but, even if it is,  the quality of the think tank product is lower in the eyes of the public.

This is relevant for law professors in that law school position is the think tank and all forms of expert witnessing and consulting are moonlight. This is hardly a new issue and was recently addressed in a "Open Letter" that suggests ethical standards for those employed by both think tank and moonlight. I think it is fair to say that proposal is two fold -- do your best not to be influenced and disclose to the reader anything that would be relevant. In fact, one particularly attractive proposal is that all sources of funding be revealed on the think tank web site. I note, however, that the ultimate way to avoid the conflict -- don't take the money -- is not proposed.

The effect of disclosure is to shift the risk to the think tank and its customers/readers to assess the extent to which the work of the moonlighter can be trusted as a scholar. This risk shifting is questionable since the party to whom the risk is shifted has no way to know just how much risk is there. But there is another problem that can be connected to products liability. Disclosure is effectively a warning label. Or perhaps it is comparable to an "as is" notice. In either case the buyer is on notice to beware.

When products are put in the market that carry warning labels their value is less than those in which the manufacturer has addresses the source of the problem. For example, if the market works, cars without air bags but containing a warning against high speed collisions (if available)  would presumably have lower prices than those equipped with airbags.  If the market works the same would be true of think tank employees who are also moonlighting. All other factors equal, those who do consult are selling a product  inferior to that of the non or infrequent consultants.

If accepting money from outside sources is not an option, disclosure makes sense but only if those with things to disclosed are paid less. It is odd that the only thing that keeps this from being the case are market imperfections.