Pay-to-play economists

from David Ruccio

In an excerpt from his new book, Predator Nation, Charles H. Ferguson, the director of Inside Job, describes how “significant portions of American academia have deteriorated into ‘pay to play’ activities.”

Academics on industry payrolls are now so numerous and powerful that they can often prevent universities, professional associations, and academic journals from adopting or enforcing strong conflict-of-interest policies. They also have a chilling, even dominant, effect on several areas of academic research and policy analysis.

The sale of academic “expertise” for the purpose of influencing government policy, the courts, and public opinion is now a multibillion-dollar business. Academic, legal, regulatory, and policy consulting in economics, finance, and regulation is dominated by a half dozen consulting firms, several speakers’ bureaus, and various industry lobbying groups that maintain large networks of academics for hire specifically for the purpose of advocating industry interests in policy and regulatory debates.

He illustrates his argument with two examples, both economists: one a Republican (R. Glenn Hubbard), the other a Democrat (Larry Summers).

Hubbard was paid $100,000 to testify for the criminal defense of two Bear Stearns hedge fund managers prosecuted in connection with the bubble, who were acquitted. That assignment came through the Analysis Group, one of the large economic consulting firms mentioned earlier. Hubbard’s Columbia web page lists the Analysis Group as a consulting client but does not list the ultimate, real clients for whom he worked via this relationship. Nor does his Columbia web page list his paid speaking engagements. However, satisfied clients giving public testimonials to Hubbard’s speaking abilities include the Alternative Investment Group, BNP Paribas, the Massachusetts Bankers’ Association, and Barclays Bank. . .

Summers’s 2009 federal disclosure form stated his net worth to be $17 million to $39 million. His total earnings in the year prior to joining the administration were $7,813,000. He made $1,729,000 from thirty-one speaking engagements, nearly all for financial services companies; Goldman Sachs paid him $135,000 for one speech. He was also paid $45,000 by Merrill Lynch for a speech on November 12, 2008 — after Merrill had completely collapsed financially, and one week after Obama’s election. After questions were raised, Summers donated the Merrill Lynch fee to charity.

Clearly, both Hubbard and Summers, unlike most academics, have been very well paid to play on behalf of those who have a big stake in what’s being debated inside and outside the academy.

Note: Hubbard and Summers have scores of 99 (out of 100) in terms of both connections and influence on the Muckety mapping of the paths of power and influence.

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