Fallout from NYT Article: Are Economists Dumb?

There are a number of articles regurgitating what was said in the NYT yesterday, including the Baltimore Sun, Forbes, and the Wall Street Journal (wouldn't it be nice if these guys spent their morning time working on their own stories instead of recycling someone else's?)

But one short reaction piece that especially struck me came from Dean Baker at the Center for Economic and Policy Research. To wit:

Most of the thousands of economists gathered this weekend at the annual convention of the American Economics Association in Denver would probably agree with MIT economist David Autor, that the big problem facing the U.S. labor market is that our workforce is not being adequately educated.

By contrast, the NYT devoted a lengthy article to tell readers about the dismal job market facing young lawyers. . . . It is worth noting that if Autor is right, then the NYT has seriously misrepresented the state of the legal market.

Wrong. Completely, stupendously, absolutely wrong.

First, Autor and the other economists are correct on some small level. We do need a more educated workforce, but it must be education that fits our economic needs. Piling on random years in school does not meet that need, and a society where everyone has a law degree is no more "educated" than a society of high school dropout dunces. We need people to study medicine, hard sciences research, international business, foreign languages, etc.; a law degree for a lower-tiered grad right now is no better than an art history degree in meeting our need to be "more educated."

Second, screaming "more education" from the mountaintops is no answer to American's economic problems; rather, it's calling for a band-aid after a grenade has torn two limbs and left shrapnel all over Uncle Sam's back. We have simply farmed out everything that can be farmed out without sharing the profits of the farming even though the costs are carried by everyone. That's essentially created a class of people who are forever screwed in this economy.

What happened with law school (and in undergraduate education and by some accounts in pharmacy school and in film school and in paralegal programs) can certainly happen in every other area of education where apparent demand (boosted by naive economists, advertising, and mass media) can far outpace actual demand, causing a glut of applicants, skyrocketing enrollments and tuition, a veritable economic bubble, and a lot of aspiring, otherwise-intelligent young people getting screwed with non-dischargable debt.

People have been "getting educated" for years. There are people in my law school who are trilingual and on advanced degree number three. Generation Y is the most paper-educated in history thus far and guess what? It's no defense when there's someone in India who can do the job for cheaper. The Indians and Chinese and Vietnamese and Malaysians can educate themselves just the same as we do. Why would a degree be any defense when the Board of Directors at Company XYZ decides to move some operation overseas or to Mexico to cut costs?

Such thinking is silly and short-sighted, a thoughtless solution to a weighty, perplexing problem.

The fact that something calling itself the Center for Economic and Policy Research can neither see right through this nor see that even if it were entirely accurate the New York Times may have been dead-on accurate is rather pathetic.

They've Outsourced Spam, Too

Sorry for the brief break. It's been a hectic few weeks. I finished my finals last Thursday and was on vacation over a rather busy weekend.

I was looking around for topics today and lo and behold I found the answer in my spam filter, for this putrid company not only exists (which is bad enough), but decided to spam one of the posts where I mentioned outsourcing. I've been meaning to make some posts about attorney advertising, but I think this outsourcing company's disgusting website is a good place to start, even though I know I'm preaching to the choir here.

You know it's a bad sign when a business has to rationalize its own existence. And there's plenty of it on SDD' website. Take this for example:

The ABA ethics opinion on legal outsourcing [ABA Comm. on Ethics and Professional Responsibility, Formal Op. 08-451 at 2 (2008)] described the trend towards outsourcing as: “a salutary one for our globalized economy.” The ABA Committee concluded that “there is nothing unethical” about the outsourcing of portions of legal services, so long as all services are provided with the “legal knowledge, skill, thoroughness and preparation reasonably necessary” for representation, and the lawyers involved satisfy their other professional obligations. The Committee also stated that outsourcing "affords lawyers the ability to reduce their costs and often the cost to the client to the extent that the individuals or entities providing outsourced services can do so at lower rates than the lawyers' own staff."

Right, and the ABA has shown itself able to understand ethics or economics...when?

Channel 4 Television Corporation hired SDD Global to assist in defense against a high-profile media libel case filed in the Superior Court of California, Los Angeles County. The case involved a plaintiff who sought US$800,000 dollars in damages, all allegedly due to the inclusion of her name in a comedy routine. SDD Global’s US-law-trained Indian attorneys handled nearly all of the litigation work for the defense, with supervision by U.S. attorneys. Granting Channel 4’s motion for summary judgment, the court threw out the lawsuit with a landmark decision that could benefit comedy writers, performers, television broadcasters, and film studios across the United States....
Channel 4 was delighted that it chose to fight and defeat the lawsuit, with the high-end yet low-cost offshore legal services provided by SDD Global. Without legal outsourcing to India, battling this lawsuit would not have made economic sense. With SDD Global doing most of the work, it was less expensive for Channel 4 to fight the suit, than to settle it.

This was one of the cases where some idiot sued Sascha Baron Cohen for making fun of them as his character Ali G. It's no where near the ballpark of "landmark" and was "thrown out" on two independent grounds, neither of which required going overseas or would have been too costly without outsourcing. "Battling this lawsuit would not have made economic sense" is a blatant lie.

SDD Global has also provided its services to solo practitioners in California. These attorneys were so overburdened with work that they had to turn down new clients.

So they then could absorb clients that could have gone to other struggling solo attorneys and kept them in business? That sounds wonderful, Random Indian Guy!

People who defend outsourcing often argue that American workers don't have the right skills to compete. Well, there is an excess supply of 15,000 government-backed, indebted lawyers pumped out in America every year who are trained specifically to write memoranda, draft basic documentation, and perform legal research. New graduates may not be ready to go to court or fly solo, but they certainly have the skills that this ridiculous leach of a company provides.

I continue to believe that anyone who defends outsourcing is mentally deficient in some key respect. The only people who benefit in outsourcing are the owners of the businesses (here, law firm partners). Cost savings to clients are marginal, and only rarely would they be passed to consumers. While a small number (business owners) may profit enormously, the decrease in jobs is an immense loss to a far greater number. The business owners who benefit disproportionately have a tendency to horde their wealth and not redistribute it by spending more on domestic products and services.

That, in five sentences, is the history of the last 40 years in America. It's sad that an organization like the ABA - who should be the ethical guards of the industry - can't see that it's become part of the problem instead of part of the solution. It's not merely a matter of economics when you bankrupt two generations and cripple the United States in the process; it's a moral one, too.