How Diversifying Helps a Lawsuit

A related set of lawsuits involving billions of dollars has provided employment opportunities for a number of consulting economists specializing in antitrust issues or labor economics issues. I’ve been involved in three of the cases, and they have been great fun (and a good way of paying dental bills).

I was crestfallen to find out that I am not likely to be asked to work on the other cases, so I asked the attorneys why. They said very simply: if the other side finds a mistake or problem in your work on one case, they can use it on all the other cases; so we like to diversify.

I had never thought of risk aversion as being a basis for choosing workers in this kind of activity, but it makes good sense. No doubt it characterizes lots of other decisions about hiring individuals to work on related projects.

(Hat tip: DE)

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COMMENTS: 12


  1. deriuqer says:

    Probably not a very important reason. In fact, sounds like an excuse.

    There are a lot of boutique consulting firms, like Chicago Partners, for example, that rely mostly on the human capital of a limited number of prominent partners. Your story would predict a net reduction in clientele as a function of previous activity, but they don’t seem to be lacking clients. So although diversification exists, it is probably not as important.

    Also, how many prominent and untapped researchers are out there that have never participated in legal consulting? Assuming that dental needs are uniformly distributed across economists, I’d guess not many… And if the case wouldn’t require a big-name-rubber-stamp, they wouldn’t contact you anyway.

    So don’t worry. Assuming that you are good, they are probably just cheap.

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  2. Dennis says:

    Another lawsuit, raising the cost of goods for the rest of us so that we cannot pay our dental bills. Great.

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  3. clyde McPhat says:

    Not new at all….I had my daughter seen by a nuerosurgeon who treated only children. He actually told us he could treat her in only one particular way (even though he conceded to us that she was a specific case) because he had testified in so many cases that his treatment of my daughter could be held against him.

    Yep. True. The guy made a ton of money testifying in cases involving head injuries. He had his testimony down pat. No need to let actual medicine interfere.

    BTW, Daniel, no offense. But that’s two unbelievably whining pieces from you in a row. You can stop now.

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  4. Joe Smith says:

    It is standard operating procedure for lawyers to research the prior record of expert witnesses called by the other side. You run the name of an expert through databases of legal decisions. I did it on a prospective expert on a matter last week and after reading a judge’s comments on the quality of the man’s work decided that I would NEVER hire him.

    In your case, one of the cases will be the first to go to trial and if the experts on that case are discredited then the whole case may collapse.

    The lawyers may also be up against a limit on how many experts they can have per case per issue. Since the cases will inevitably overlap at some point, by hiring different experts for each case they may be able later to point to the fact that multiple experts are all arriving at the same conclusion.

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  5. Newsworthy says:

    Dear Clyde;

    Heard about that case- daugher committed suicide. Sorry to have to break the news to ya. what a joke- hey- I say- not funnty or whiny at all- Sic.

    Reminds me of another story of a woman who committed suicide- wonder if the two are related somehow- I know- maybe they had the same father. A reversion of theseus-

    my suggestion to the owners of this blog- require participants to post their full name- otherwise– people like that will continue to get away with murder.

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  6. PekeCMS says:

    Readinf this ost was really interesting. It is amazing how a bad situation for some (in this case those being sued) turns out to be a beneficial opportunity for another (lawyers). I must say that the economy is going bad, and many people are losing jobs and are having a harder time, but it is incredible how some people actually benefit from an economic downturn. Some lawyers and people who have liquid money to invest can make lots of money by buying cheap and selling high.

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  7. clyde McPhat says:

    newsworthy…what are you talking about?

    I said the doctor could not prescribe treatment for my daughter that went against his testimony in many cases. And you said what exactly?

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  8. maxicms says:

    This strategy of changing your employees seems to be quite clever, and have positive externalities. Firstly, the lawyers gain credibility because of their continual success. And then economist profit because it becomes like a rountine circle where each employee is given their chance to work and earn profit. Thus, it provides a lot of opportunities for the working individuals. hence, this strategy will keep the demand for economists up since they are constantly on the search for new ones.

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  9. sarahCMS says:

    This is definetly a smart strategy and beneficial for lawyers and some economists. Since they gain money from their success, which they are able to achieve because of the economic downfall; a great example of how lemons serve for a lemonade! Economists, this is your season to sell those lemonades! Just be sure your “lemonade” is clever, since one small mistake in your work case, can easily make someone else take your job.

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  10. SHUN-CMS says:

    I agree with Peke, I am surprised how economic downturn can actually benefit some people. This indeed creates a virtuous (great) cycle as Maxi said – however on the flip side, is it really a positive externality which benefits everyone? I am not arguing about how it helps the economists, but as Mr. Hamermesh mentioned: “if the other side finds a mistake or problem in your work on one case, they can use it on all the other cases.” In a “fair” world of the court, one’s mistake or weakness should also be brought up, and the final decision by the judge should be made rationally according to the lawyer’s argument specific to each case. Hence, though lawyers/economists caring about each other’s future is a normal human (irrational) behaviour, one must not forget to sell the quality of their lemons and not hide the rotten, dark side of the moon.

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  11. HildaCMS says:

    The idea of alternating their lawyers so that no negative assumptions or declarations can be made towards that lawyer is actually pretty well thought. It is bad though because it takes away the incentive to work as hard as possible. I mean if you are going to be taken off the job a few cases later what’s the point of giving your best? Also, they will only be able to alternate for a certain amount of time. After all, there is a limited amount of economists in the world..

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  12. Rob says:

    The comment moderation is working well, then?

    Anyway, this sort of litigation is so utterly stifling; America’s unrelenting legalism is frankly pathetic. Not that we’re (UK) so far behind.

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