Brilliant People Agree With Me

Orin Kerr on the challenging effects of your internal “yes man”:

One of the consequences of confirmation bias is that we are overly impressed by ideas that we happen to share. It’s a natural instinct, if not watched carefully. If you read something that reflects or resonates with your own views, you’ll agree with it. Upon agreeing with it, you’ll think it is highly persuasive. And if it’s highly persuasive, it’s probably brilliant. You see this often in the blogosphere when bloggers link to someone’s “superb” and “extremely insightful” post. You click on the link, and you’re underwhelmed by the post. But you realize it is strikingly similar to what the original linker thinks about the topic. It’s possible to take our blinders off, or, more realistically, to minimize them. But it often requires some work, and the amount of work that different people give varies considerably.

I’m glad to see Orin agrees with me on this…

Outsourcing to India Draws Western Lawyers

The New York Times:

India’s legal outsourcing industry has grown in recent years from an experimental endeavor to a small but mainstream part of the global business of law. Cash-conscious Wall Street banks, mining giants, insurance firms and industrial conglomerates are hiring lawyers in India for document review, due diligence, contract management and more.

Now, to win new clients and take on more sophisticated work, legal outsourcing firms in India are actively recruiting experienced lawyers from the West. And U.S. and British lawyers — who might once have turned up their noses at the idea of moving to India or harbored an outright hostility to outsourcing legal work in principle — are re-evaluating the sector.

The number of legal outsourcing companies in India has mushroomed from 40 in 2005 to more than 140 at the end of 2009, according to Valuenotes, a consulting firm in Pune, India. Revenue at India’s legal outsourcing firms is expected to grow to $440 million this year, up 38 percent from 2008, and should surpass $1 billion by 2014, Valuenotes estimates.

“This is not a blip, this is a big historical movement,” said David B. Wilkins, director of Harvard Law School’s program on the legal profession. “There is an increasing pressure by clients to reduce costs and increase efficiency,” he added, and with companies already familiar with outsourcing tasks like information technology work to India, legal services is a natural next step.

So far, the number of Western lawyers moving to outsourcing companies could be called more of a trickle then a flood. But that may change, as more business flows out of traditional law firms and into India. Compensation for top managers at legal outsourcing firms is competitive with salaries at midsize law firms outside of major U.S. metro areas, executives in the industry say. Living costs are much lower in India, and often, there is the added allure of stock in the outsourcing company.

Right now, Pangea3 is “getting more résumés from United States lawyers than we know what to do with,” said Greg McPolin, managing director of the company’s litigation services group, who divides his time between India and New York. ...

Many legal outsourcing firms have offices around the world to interact with clients, but keep the majority of their employees in India; some also have a stable of lawyers in the Philippines. Thanks to India’s low wages and costs and a big pool of young, English-speaking lawyers, outsourcing firms charge between one-third and one-tenth what a Western law firm bills per hour. ... Even white-shoe law firms like Clifford Chance are embracing the concept. ...

Many corporations agree that outsourcing legal work, in some form or another, is here to stay.

“We will continue to go to big firms for the lawyers they have who are experts in subject matter, world-class thought leaders and the best litigators and regulatory lawyers around the world — and we will pay a lot of money for those lawyers,” said Janine Dascenzo, associate general counsel at G.E.

What G.E. does not need, though, is the “army of associates around them,” Ms. Dascenzo said. “You don’t need a $500-an-hour associate to do things like document review and basic due diligence,” she said.

More on this here.

The legal industry is certainly in the midst of some large changes in the way it has traditionally functioned.  This being just one of many changes that are occurring as client’s willingness and ability to pay has weakened in the face of the recent economic climate.  These changes are forcing law firms to become more efficient and cost-effective. 

Long-term, this should lower the cost of legal services and promote greater competition among law firms.  Overall this is likely to be a good thing for consumers of legal services and for the economy as a whole.  Short-term, it is likely to make the market for legal jobs even more intense and painful – particularly for recent law school grads.

I wonder if some aspiring entrepreneur will take advantage of this situation and set-up outsourced legal services to make it easier for solo practitioners to get into business (although this is going to be much easier for experienced attorneys than those freshly out of law school).  You might run into some ethical issues involving client confidentiality, but with some care and ingenuity, those issues could probably be overcome.  With the increasing number of young, bright law graduates with non-ideal employment prospects, this might help create a climate allowing smaller, low-cost law firms to start chipping away at some business of the big law firms.  In time, who knows?  Maybe this kind of law firm model could do to law what the mini-mills did for steel?

(HT Paul Caron)

What Social Science Does—and Doesn’t—Know

A highly recommended essay in City Journal by Jim Manzi about just how little we know about the human condition:

But what do we know from the social-science experiments that we have already conducted? After reviewing experiments not just in criminology but also in welfare-program design, education, and other fields, I propose that three lessons emerge consistently from them.

First, few programs can be shown to work in properly randomized and replicated trials. Despite complex and impressive-sounding empirical arguments by advocates and analysts, we should be very skeptical of claims for the effectiveness of new, counterintuitive programs and policies, and we should be reluctant to trump the trial-and-error process of social evolution in matters of economics or social policy.

Second, within this universe of programs that are far more likely to fail than succeed, programs that try to change people are even more likely to fail than those that try to change incentives. A litany of program ideas designed to push welfare recipients into the workforce failed when tested in those randomized experiments of the welfare-reform era; only adding mandatory work requirements succeeded in moving people from welfare to work in a humane fashion. And mandatory work-requirement programs that emphasize just getting a job are far more effective than those that emphasize skills-building. Similarly, the list of failed attempts to change people to make them less likely to commit crimes is almost endless—prisoner counseling, transitional aid to prisoners, intensive probation, juvenile boot camps—but the only program concept that tentatively demonstrated reductions in crime rates in replicated RFTs was nuisance abatement, which changes the environment in which criminals operate. (This isn’t to say that direct behavior-improvement programs can never work; one well-known program that sends nurses to visit new or expectant mothers seems to have succeeded in improving various social outcomes in replicated independent RFTs.)

And third, there is no magic. Those rare programs that do work usually lead to improvements that are quite modest, compared with the size of the problems they are meant to address or the dreams of advocates…

At the moment, it is certain that we do not have anything remotely approaching a scientific understanding of human society. And the methods of experimental social science are not close to providing one within the foreseeable future. Science may someday allow us to predict human behavior comprehensively and reliably. Until then, we need to keep stumbling forward with trial-and-error learning as best we can.

Read the whole thing.

Was Today’s Poverty Determined 3,000 Years Ago?

William Easterly:

1500 AD technology is a particularly powerful predictor of per capita income today. 78 percent of the difference in income today between sub-Saharan Africa and Western Europe is explained by technology differences that already existed in 1500 AD – even BEFORE the slave trade and colonialism.

Moreover, these technological differences had already appeared by 1000 BC. The state of technology in 1000 BC has a strong correlation with technology 2500 years later, in 1500 AD.

Why do technological differences persist for so long? The ability to invent new technologies is much greater when you have more advanced technology already. James Watt had acquired a lot of tech experience in the mining industry which he used to invent the steam engine. Other people with the ability to make steel could then slap his steam engine on a vehicle running along steel rails and give us railroads.

Past technology alters probabilities of future success, but does not completely determine it. The most famous counter-example: China was historically technologically advanced and did NOT have the industrial revolution.

A large role for history is still likely to sit uncomfortably with modern development practitioners, because you can’t change your history. But we have to face the world as it is, not as we would like it to be: deal with it. Perhaps when you acknowledge the importance of your own history, you are then more likely to transcend it.

More on this here.

Negative Equity in Underwater Homes

A chart by Alex Tabarrok who also says:

Calculated Risk gathers the data on underwater homes:

• There are 14.75 million underwater homes and 4.1 million of these have more than 50% negative equity (the homeowners owe 50%+ more than their homes are worth).
• The total negative equity is $771 billion.

What this graph doesn't show is that there are great variations in the rates of negative equity around the country, as shown in this chart: