Thursday, March 22, 2007

Get Rich or Die Tryin' as an Economist

If you are wondering whether economics majors can make a lot of money without working on Wall Street, here is the example of David Teece, who runs an economic consulting firm called LECG.

Economic consulting firms provide economic expert witnesses for court cases and are becoming increasingly valuable. Teece earns just under $3 million a year as head of LECG and as an expert witness, and he has this to say about the prospects of working in an economics consulting firm:
"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.
So if I don't show up on Monday, you'll know why...

(Source: Freakonomics Blog)


Anonymous said...

This is an extremely impressive idea. I read the article and this quote stuck out: "Prof. Teece defends LECG's business model, which showcases high-profile experts across a wide range of topics while anonymous researchers do much of the legwork. " I think this basically shows how powerful studying economics can be. Even if you do not have a particular area of study, economists can testify in cases in which they are tendored as experts(meaning they have a mastery of knowledge over a particular area of study and are qualified to formulate opinions based on their knowledge of the subject matter)in a wide variety of areas. It also gives an alternative to working on Wall Street, as jobs in New York must be in high demand and therefore low availability. This also shows an important cross-over between economics and law that is definatly of interest to me. Many economists work in the financial sector of the economy, but to me, this offers a more interesting and exciting alternative. And wow, thats a lot of money!

Anonymous said...

It just goes to show how valuable an economic mindset can be in our society. Economics does not have to be targeted at decisions on Wall Street, the basic underlying skill of weighing pros and cons to make a decision is a vital tool to become successful in this world- these economists are at the head of this game. It is no wonder that they are able to make such a high amount of money because they are the ones who are advising giant corporations and economic powers on crucial decisions that will affect the future of their firm. Yes, this is a very large sum of money but the decisions and advice they are given are well worth the price.

-- Nick Wellmon

Andrew L said...

This seems slightly misleading. First off, out of the thousands of graduates with economics degrees, and even masters degrees, how many have any prospect of making this much money? Teece is renown as one of the leading experts in his field, is a well-known professor at Berkeley's Haas School of Business, one of the leading business schools in the country, and built LECG up from nothing almost single-handedly. Also, he's 58. LECG has only existed since 1997, so this man, one of the highest paid economists in the world, had to wait until he was 48 to start making the kind of money many ibankers and venture capitalists are making at Mr. Arjona's age (career change time maybe?). It obviously took a lot of entrepreneurship and business acumen to start the company; someone with Teece's abilities could probably be making this kind of money anywhere in the business world. So, if you can become one of the top 60 economists in the world, maybe you can get a job for him making a cool half mill. But its going to take more than a BA in econ.

Brian Meier said...

This is not uncommon for Expert witnesses to get paid. They are offering a service and if the cost of their testimony was not worth the benefit then they would not hire them. They are acting as consultants to people and depending on how good they are, the more the get paid. Andrew is right when he said that for a person to do this requires quite an extensive knowledge of economics. The education to do this takes a lot of time and probabally money. More people are not doing this because for them the marginal benefit is not greater than the marginal cost. Some people do not think this is something that should get paid but all other people working in the courtroom are getting paid, so I think it is fine.

Abby said...

The fact that the study of economics can be exercised over such a wide range of job fields allows much more leeway than just working on Wall Street, but I'll agree with Andrew in the comment that Teece isn't just some run of the mill economist. He is well known in his field and clearly a great businessman if he established a successful company on his own. However, while it might display impressive entrepreneurship that Teece is using his extensive economic knowledge to earn big bucks in the law industry. I agree with the judge - it seems like "Mr. Teece will say just about anything." Maybe he'll get rich but to me he seemed a little too full of himself.