The Cost of Law School Does NOT Influence the Cost of Legal Services

John O. McGinnis and Russell D. Mangas, “An Undergraduate Option for Legal Education,” courtesy of TaxProf Blog.

I dealt with McGinnis’ and Mangas’ argument way back in January 2012 on the Am Law Daily, back in those halcyon days when it was just a Typepad blog. Now, the authors have sharpened their argument first laid out in The Wall Street Journal many moons ago into a full-fledged journal article.

I don’t want to spill too many more electrons on this because I fully endorse their proposal to make law an undergraduate major. It would certainly save students time and money, and for McGinnis, a law professor, to support that signals his willingness to argue against his own interests. This is good, as is the article by another law professor, Douglas A. Kahn of the University of Michigan, who argued the same thing in The National Law Journal a couple weeks ago. Credit where it’s due.

However, three things annoy me about McGinnis’ and Mangas’ article:

(1)  Unlike professional economists, McGinnis’ and Mangas’ actually discuss the impact of marginal cost theory on wages (instead of comparing lawyers’ earnings to those of people with the same number of years of education), yet they frustratingly veer off into nonsense territory by supporting the “higher education theory of wages,” which basically marries the versatile juris doctor theory to the labor theory of value—both discredited. For example:

With educational debts that they cannot discharge [lawyers] may exit the legal profession for other more lucrative work open to the well-educated if their fees continue to fall beyond that which allow them to comfortably service the heavy debts often necessitated by graduate school education. (14)

But demand for lawyers is not the same thing as demand for JDs. There is no evidence of a causal connection between more education and higher wages, it’s only correlational, and plenty of people who have JDs work in jobs that do not require them, making law school a waste. I covered what happens to doctoral and professional degree holders last year. We don’t know what happens to JDs specifically, but overall, given that the legal profession has been saturated for decades, it’s likely that they are not using their degrees for their jobs unless they obtain further education to become audiologists, for instance.

(2)  McGinnis and Mangas ignore juris doctor oversupply and assume that the marginal cost of hiring a new lawyer must include the cost of sending someone through law school at current prices.

If [the marginal cost of providing legal services] is measured even farther back, when the future attorney has just received his undergraduate degree, it will include the cost of a graduate law degree and the opportunity cost of not working for three years … As this example illustrates, over a long enough time period, marginal cost includes all costs incurred to provide the service. At that point marginal cost equals total cost. (15)

If a law firm that needs a new lawyer, the marginal cost is the time and effort spent finding a licensed attorney. This is not an expensive process as there are many people who are licensed but aren’t practicing or who are practicing but aren’t paid much. Moreover, the marginal cost certainly stops at finding someone who has a JD. Why? Because there are hundreds of thousands of people who already have law degrees (and probably paid less for them). The expanding firm doesn’t need to pay to send someone through law school, college, high school, nursery school, etc. because the eligible workers are already there. Heck, the firm could find someone who’s given up after failing the bar exam and send them to take the test again after doping them with Adderall. You can see how many “Idle Attorneys” there are in each state here.

Consequently, the market value of a JD, independent of other factors like prestige and experience, is nearly zero. This is the reason to reduce the number of years of legal education. The current system places all risk on the would-be lawyer while the schools and the employers bear none of it, even though there’s little demand for new juris doctors.

(3)  Thus, McGinnis and Mangas assume that education costs are passed forward to clients, ignoring all evidence the contrary.

I won’t quote from the section on pages 18-19 which attempts to augment Herwig Schlunk’s calculation of the net present value of legal education with the potential savings of cheaper legal education to clients, but it falsely assumes that student debt logically cannot impoverish debtors, as though wealthy employers are spearheading the student debt movement. If this were true, then an unemployed person could buy real estate in midtown Manhattan and instead of renting it out demand a high-paying job from a grudging employer to pay off the mortgage.

That should sound silly to you, but throughout McGinnis’ and Mangas’ article runs what should be an equally silly incredulity about law school graduates’ long-term outcomes. Like, if you were to present them with the facts, they’d say, “But that would mean law school has been a bad investment for decades, and we all know that law graduates are trained professionals who always have access to good jobs (except during recessions).”

I could say more about this, like why firms aren’t jumping on graduates from the cheap Puerto Rican law schools, or public law school versus elite private law school graduates, or cheaply trained California lawyers, etc., but I think I’ve remade the point: Those who think cheaper lawyer training will lead to cheaper legal services will be disappointed when that doesn’t come about, not that cheaper training is a bad idea.

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6 Responses

  1. “Thus, McGinnis and Mangas assume that education costs are passed forward to clients, ignoring all evidence the contrary.”

    McGinnis and Mangas should head out into the solo practice world and talk to some recent grads and ask them how they come up with their hourly rates. I wonder if the socio-economic condition of the geographic area the lawyers practice in has anything to do with it . . .

  2. The “profession” is severely glutted. And adding more clinics will help students learn the trade, but it will do nothing to alleviate the over-saturation.

  3. I was going to reference your post on “Lawyers Per Capita Per State” on my “Irreverent Lawyer” blog but was puzzled at the ‘low’ number of lawyers in California, which historically ‘enjoys’ the largest number of lawyers in the nation.

    At 159,824 and a per capita ratio of 42 per 10,000, it seemed way low. Lord knows there are a ton of lawyers in the Golden State and I would have bet good money that California was in the top 5 in per capita numbers. Granted, the qualifier is that your source data notes only “active and resident” lawyers as of 2012. However, a quick check with the Cal Bar’s Website at http://www.calbar.ca.gov/AboutUs/StateBarOverview.aspx
    confirms the overall number as of May 2013 is considerably larger — at more than 242,000 strong.

    Good work, though, Matt. The take-away, of course, is that there is a glut and the legal establishment continues to delude itself on solutions. Indeed, tantamount to sending arsonists to put out a fire, they are instead looking at problem-exacerbation.

    The latest instance is a move afoot in California to copy what the State of Washington recently did, to wit, to license non-lawyers to practice law under a so-called “Limited Practice License.” http://www.calbarjournal.com/May2013/TopHeadlines/TH1.aspx

    Of course, leave it to Washington State, as despite record declining law school enrollments, an oversupply of 200 plus ABA law schools, and new lawyers unable to find jobs, there’s nonetheless a group of clueless Washingtonians hoping to resurrect a law school in Tacoma, WA — as a branch of the University of Washington.

    http://www.thenewstribune.com/2013/05/25/2612035/group-hopes-to-bring-law-school.html

    • Thanks lawmrh.

      It says that 176,000 CalBar members are in active practice. That’s *only* 15,000 above the ABA’s estimate, which it got from state attorney rolls. Don’t know why CalBar gets a higher number though. If you use the 176,000 figure, though, then California has 46.26 lawyers per 10,000 residents—barely beating out New Jersey as No. 5 in the country (excluding D.C.).

      There’s really no solution to the lawyer glut that doesn’t sell out either recent (and not-so-recent) grads or potential new entrants. I have no idea whether limited practice licenses provide cheap, unbundled services or if they’re just a swinging door for fraud.

      I read about Tacoma’s attempt to rebuild its law school after it moved to Seattle. Don’t remember why I didn’t write about it at the time.

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