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Steve Diamond, academic fraud

[ 39 ] July 20, 2013 |

Updated below

Friend of LGM Steve Diamond has once again turned his attention to our blog:

[Campos] argues in a recent post at the equally notorious website “Lawyers, Guns and Money” which Professor Campos uses as his home base (Guardian journo and Edward Snowden interviewer Glenn Greenwald refers to LGM as a “filthy cesspool” and a “cesspool of unprincipled partisan hackdom”) that the discounted value of a JD at the median is something north of $100,000. He concludes that he has therefore succeeded in “critiquing” the paper by Simkovic and McIntyre.

He has, however, done nothing of the sort.

He has simply done exactly what the paper implies all analysts of the value of a JD should do – apply relevant costs such as potential debt and taxes and subtract those from the expected and discounted future cash flows. Sure enough, even with his inputs (like the implication that students must borrow $200,000 to go to law school) the result Professor Campos comes up with is a NPV of $109,000, i.e., positive . . . So, far from undermining the Million Dollar JD Value paper, Professor Campos simply confirms its fundamental insight: law school is a positive net present value project for the vast majority of law students even when tested by the institution’s leading opponent.

This is completely dishonest and hackish. It’s a grotesque mischaracterization of my critique of the Simkovic and McIntyre paper.

(tl;dr: Even accepting all of their data, methods, and interpretations as sound for the purposes of argument, S&M overstate the net present value of a law degree by nearly ten-fold, since going forward the typical law student will have to invest $311,000 in present dollars to get a $420,000 liftetime return in NPV (minus investment costs) terms. But their data, methods, and interpretations are in fact highly suspect, because in the face of compelling evidence to the contrary they assume no long-term changes in the labor market for law degree holders, they have no data on recent graduates, their sample of law degree holders not practicing law is highly vulnerable to self-selection bias, they must assume correlation equals causation, and they do not stratify their data by type of law school).

Diamond is well aware that the vast majority of readers don’t click through to a linked article, so he’s simply lying about what I have to say about the paper, in the knowledge that most readers will take his word that his characterization is fair.

In one sense Diamond is at the right institution: Santa Clara’s law school has engaged in, even by the abysmal standards of its peers, what certainly appears to be egregiously fraudulent mischaracterization of its graduate employment outcomes, by for example classifying 90% of its vast numbers of unemployed graduates as unemployed by choice. He also likes to out anonymous critics and inappropriately reference their personal lives. His comments in that vein in this thread were so shameless that Dan Filler decided to delete them.

Update: For a sense of what Santa Clara’s $70,000 annual cost of attendance is buying its students, check out this comment regarding what this professor of corporate finance teaches his students about the “fundamental rules of net present value.”

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  1. Erik Loomis says:

    I’ll say this–the more Greenwald’s description of this blog gets known, the worse it makes him look. Which of course pleases me.

  2. Another Anonymous says:

    LGM: you will never find a more wretched hive of filth and hackery.

    … Actually, the filth is sadly lacking.

  3. Linnaeus says:

    the equally notorious website “Lawyers, Guns and Money”

    LGM should have a link to this on its front page.

  4. fka AWS says:

    WTF should it matter for purposes of an argument about law school what GG thinks about the site? Way to ad hominem there with a dash of appeal to authority.

    • Mr. Ekko says:

      False. A personal attack is not necessarily an ad hominem.

      If I call you a fucking retard, that is just an insult. If I say “your argument is invalid *because* you are a retard” it’s an ad hominem.

      • Aaron says:

        The structure of the argument implicates the fallacy called “poisoning the well” – presenting negative information about a person that, whether true or false, for the purpose of discrediting the person. It’s reasonably classified as a form of ad hominem attack because it implies the conclusion – that assertions made by the subject of the negative remark should be viewed less favorably because of the negative information provided.

  5. kindasorta says:

    “In the world of corporate finance there is a very simple decision rule: managers should accept all positive net present value (NPV) projects. This is a very simple and powerful concept. It lies at the heart of how we train managers at every business school in the world.”

    No. It’s more like, “Managers should reject all negative net present value (NPV) projects.” Out of a universe of things worth doing because there is an expectation of gain, some things are more worth doing than others because the potential for gain seems either larger or more assured than it is for competing options. If I had it to do all over again, I would have opened a bar in the town where I went to law school because I would have a piece of real estate complete with fixtures and inventory to sell no matter how things went, not to mention the fact that people don’t ever seem to get tired of leaving their homes to get drunk.

    “The steps in applying the rule require a projection of cash flows over a certain period of time, an estimate of the startup costs for the project and the calculation of an appropriate discount rate. All three of those components are then combined by dividing the future cash flows by the discount rate and then subtracting the startup costs. [...]

    If the resulting figure is positive, the rule dictates that the project should be undertaken. This is true even if that positive number is very small. It is this last dimension of the rule that can be the most mystifying and it is, indeed, the one that has thrown off Professor Campos.”

    So, no matter how pathetically tiny your positive expectation may be, it’s worth it, because guess what: my positive expectation is pretty goddamn large as long as you suckers keep thinking it’s worth it.

    I’m beginning to grasp why most of the revolutions of the last century featured executions of public intellectuals at the outset.

    • Hogan says:

      “In the world of corporate finance there is a very simple decision rule: managers should accept all positive net present value (NPV) projects. This is a very simple and powerful concept. It lies at the heart of how we train managers at every business school in the world.”

      So he’s saying everyone should go to law school.

  6. Origami Isopod says:

    Glenn Greenwald refers to LGM as a “filthy cesspool” and a “cesspool of unprincipled partisan hackdom”)

    Greenwald, who of course has never done anything unprincipled in his life.

    (Tangentially related. I can’t remember if anyone’s mentioned it here yet.)

  7. Rick Massimo says:

    “100,000, a million, whatever.”

    He’s also completely overlooking the fact that, um, a person only has one life and one career and probably only one window to get an advanced degree, and can’t just devote years to any proposition that’s gonna make him a few bucks.

    Good God, that’s foofery on a Brooksian scale:

  8. Anti-Pushkin says:

    “In the world of corporate finance there is a very simple decision rule: managers should accept all positive net present value (NPV) projects.”

    “If the resulting figure is positive, the rule dictates that the project should be undertaken. This is true even if that positive number is very small.”

    Oh. My. God. This guy teaches corporate finance?

    I’ve been associated with NPV calculations for a number of large organizations, and **nobody** applies those two rules as Diamond states them.

    There are a couple of reasons for this: 1) all organizations have a capital constraint of one sort or another, and organizations generally have more projects that seem desirable to do than they have funds available, so they establish a threshold NPV return for even considering a project, which is much higher than zero. (Organizations want to avoid becoming too indebted, so there are limits on how much money an organization is willing to borrow.)

    2) Projects are **risky**. Just because something pencils out on an NPV calculation doesn’t mean that the project will proceed as forecast. Things screw up, the benefit provided by the project can change unexpectedly (due to a change in market conditions, for example), so even if a project passes the initial screen, people are going to take a hard look at the risk of the project. The higher the risk, the higher the required NPV for proceeding with the project.

    • Anti-Pushkin says:

      Also, the scale of the project matters. If you are examining one hundred small projects, you may be willing to accept a lower NPV on the basis that even if some of the projects fail, some of the projects may be unexpectedly more successful than forecast, so it may all come out in the wash.

      For a “bet-the-company” project, you are going to require a high NPV, since your company goes away if the project fails.

      From the standpoint of an individual, attending law school and incurring enormous indebtedness is a “bet-the-company” project.

    • howard says:

      this kind of blathering nonsense by diamond – to which i will add of course there is no such rule as he propounds about net present value – reminds me why warren buffett says “i’d rather be approximately right than exactly wrong.”

    • Anonymous says:

      I will send Professor Diamond $1 if he sends me 1000 copies of the Mexico City telephone directory written in his own hand on foolscap. I will defray all costs of materials and postage.

      There, I don’t think we have to worry about hearing from Mr. Diamond for a while…

      • Warren Terra says:

        Plus, we already know that h isn’t concerned by an order of magnitude difference in reward when he makes these considerations. So this offer starts to look slightly better – and if that slips a bit, if he isn’t concerned about several orders of magnitude, or an order of magnitude difference in number of orders of magnitude, it’s an incredible offer he’d be a fool to pass up!

  9. djw says:

    I thought he deleted his blog in shame.

  10. [...] sadly anonymous commenter in our cesspool: I will send Professor Diamond $1 if he sends me 1000 copies of the Mexico City [...]

  11. Balu says:

    I had never heard of Vandeplas Publishing until I read about Diamond”s 2013 book. What is Vandeplas Publishing?

    • Warren Terra says:

      Well, via a bit of Googling around, one person’s take on them:

      And too much is lost by the nature of the almost-vanity publishing.
      The book desperately needs an editor both to sort out what goes where and to make serious suggestions about what to cut. Vandeplas explains on its website that they don’t edit.
      They don’t proofread/copy edit either. Or fact check. And they don’t insist on a typeface that’s easy to read or on an index or on the thousands of things that.

      Obviously, I know nothing of the author of that quote, nor whether they’re accurate, nor typical of the publishing house. If they are, that’s fairly damning.

  12. B says:

    Diamond’s revealing personal information of people that comment on his blog now? Taking page from Leiter, I see.

  13. I’m getting to this thread late, but Santa Clara is also among the worst performers when it comes to the Net Price faced by low-income undergraduate students. Undergraduate tuition is a little out of the Campos beat, but there are huge differences in the Net Price that poor students pay/borrow at places like Amherst & Reed vs places like Santa Clara and Miami (FL).

    http://education.newamerica.net/sites/newamerica.net/files/policydocs/Merit_Aid%20Final.pdf

  14. Populist says:

    What’s funny about Diamond is he claims to be heavily involved with the labor movement. You would think he would be advocating for piss-poor law students shackled in debt and not advocating for himself.

    In South America, there are actual Marxist professors who actually are heavily involved with labor movements and actually care for their students.

    This Diamond is a wannabe, a fraud, a real piece of garbage.

    The emperor has no clothes with this guy.

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