What is Economic Consulting?

"So, what do you do?". "Well, I am an Economic Consultant.". And what follows, is usually a bunch of blank stares, with no idea of what you just said. And this has most often been my experience with that question. "What in the world is an Economic Consultant?"

And through many such interactions, I have perfected my answer to that question into a brief, to-the-point explanation, but it has taken some practice. I will try and break it down for you, and since we are not in a bar talking about world politics, I am going to try and get it all out, full detail.

What is Economic Consulting?

Economic consulting usually deals with quantification of legal or regulatory questions. Most of these legal or regulatory questions will need to have some numbers associated with it to show the scale of impact from the perspective of technical expertise. That is where Economic consulting usually comes into play.

Economic consulting can best be seen as an intersection of law and economics. It requires a niche knowledge of both, but more of economics than law as the name implies. Unknown to many, there are so many problems in the legal sphere, that needs an answer from an economic theory perspective. A few examples being

1. Will a merger between two firms be harmful to consumers? And if yes, how?
2. How does a regulation policy affect the public?
3. If a product being sold is overpriced, how and by how much were the consumers harmed?

So when these questions come in front of a judge, a lawyer has no expertise to answer these questions. So they will hire someone who is an expert in these matters - an economist. The economist usually comes with a team of junior economists who brainstorm, formulate, solve and finally create court-worthy reports about the economic question at hand. Written by experts, this is usually called "The Expert Report" - and the team of economists who brought it to fruition, are our obscure Economic Consultants. The same scenario is also applicable for other situations like regulatory hearings - just that in such a case, the court judge is replaced by a regulatory authority.

When most people think about consulting, the most common they have is of business consultants, in their dapper suits. Although not as high flying in social reputation as business consulting, economic consultants solves a very specific set of problems- problems that require an extremely focused skill set.

Why Economic Consulting is Lesser Known

As mentioned earlier, economic consulting mostly work towards answering economic questions about legal problems. So in most cases, the clients for the economic consultant is a law firm. While the law firm themselves represent their clients, the direct clients that the economic consultant works with in most cases, are lawyers. Most of society does not even know that lawyers hire economists as experts for any legal cases.

So in most cases, to the public eye, the lawyers are the ones who get all the limelight when a case is successfully finished. Even though within the circles of economic consultants and lawyers, the economic consulting firm that worked for the lawyers get all their due - financially as well as in reputation - to the public, economic consultant is a hidden part of the whole legal process. But within the legal and economics community, it is a well reputed and highly necessary industry.

What do Economic consultants do?

So, now that we have got the tough part out of the way, let's get to what an economic consulting firm actually does for their clients.

The client engagements can be a "consulting" engagement where you directly work with a client - for example, an economist performing market analysis or regulatory risks on behalf of a private client; or an "expert" engagement, where you are hired by a law firm that represents a plaintiff or a defendant.

As I mentioned earlier, usually a reputed lead economist is hired as the economic expert for an engagement, behind whom there will be a team of junior economists. The expert report that is finally submitted by the expert has to be detailed, has to address all economic considerations about the question at hand, should properly state the conclusion reached, and should detail every bit of concepts, methodology, data and analysis performed to reach that conclusion. An export report can be anywhere from 50 pages to more than a hundred pages, depending on the detail requirements of the report. This is no trivial task, and precisely why the lawyers hire an economic expert.

Economic Consulting vs Management Consulting

While economic consultants mainly work on engagements related to expert opinion on economic implications of policies or company actions like mergers, management consultancies mostly work with the business or organizational problems with close focus on that organization rather than a wider community. I have detailed the different scenarios for engagements in economic consulting in the previous sections. Management consulting is primarily concerned with the strategy, structure, management and operations of a company. The main goal of a management consulting engagement is to identify options for the organisation, suggest recommendations for change, as well as advising on additional resources to implement solutions. This could have many different angles to it - example engagements could be how to improve the efficiency of the operations within the organization, or whether it is a wise business decision to enter a new market, or in some cases how to restructure a company to avoid current financial burden for the organization.

So management consultants generally help organisations solve issues, create value, maximize growth and improve business performance for a particular organization. Economic consultants have a wider impact area, where usually the question is how an action by a firm or regulator will affect the general community. 

Career Progression as an Economic Consultant

While going into the contents of an expert report is not in our scope of discussion, most of the work done in drafting the report to a near final stage will be done by the team of economic consultants with guidance from the expert. This includes drafting the methodology for any analysis, detailed descriptions of the data used, every step of analysis performed and every analysis result presented as exhibits. As you can imagine, this involves a lot of brainstorming and data analysis.

This is where you as an economic consultant will contribute the most to in the initial stages of your career - working with a team or project lead to help them solve each individual problem within the larger report. As you progress in level and experience, you will handle more of the project management itself. This includes leading teams for various parts of the projects like data collection, analysis, or even leading the entire report drafting process working closely with the expert. The experts will be much more senior, having various other engagements in parallel. This means the project lead will need to work very closely with the expert, keeping the expert apprised of every stage of the project and getting their input at each stage. At the end of the day, the expert is the one who will be standing in front of the judge to explain their report. But your job, as his team lead, is to make sure everything is ready and proper for the expert to comfortably give his testimony in front of a judge.

While all this might sound like a huge responsibility, and it is, it is some of the best part of working as an economic consultant. Even from the early stages of your career, you will learn to take ownership of tasks keeping the larger picture in front of you. You will learn how different pieces of the puzzle comes together to form a giant, detailed, indisputable wall of economic evidence. You will learn to perform in-depth research, and learn about practical applications of economic theory. You will get to apply quantitative and econometric analysis techniques you learned only in textbooks on real world data sets on a daily basis. You will learn to put together compelling economic arguments for every single assertion you make. You will be surprised by how much you learn about economics by working on such projects with a team of exceptionally skilled and experienced economists.

Work Life as an Economic Consultant

Even though being an economic consultant is intellectually rewarding, in most cases it is a much less demanding of the body and soul compared to, let's say, business consulting. Economic consultants don't usually travel much - some people might think its not a great thing, but in my opinion being tossed around places for work is not as exciting as it sounds (it got to me after a while). Also economic consultants generally get a much better work-life balance compared to other high octane consulting industries. But given all this, you get to do meaningful and intellectually stimulating work majority of the time. Of course, this depends on the firm and the team you are in, but in my many many years of experience of being an economic consultant, there has been very less to complain. The pay is great too!

If you are looking for a career in Economics, but do not want to get into Academics, economic consulting can be a good starting point to a potentially fulfilling career in the large world of economics. The world of economic consulting is highly competitive, but the work is intellectually stimulating, and you actually apply what you learned all those years back in University at your job. We will discuss a lot more about economics and economic consulting in our coming articles.

Keep learning!