For those of you who read the “Law Graduate Overproduction” page on this blog, this is the update. I’ll revise the page later.
I read Brian Tamanaha’s “The Failure of Crits and Leftist Law Professors to Defend Progressive Causes,” which castigates politically liberal law professors for participating in institutions that encourage both the class schism in the legal profession and law students to borrow unpayable debts. How could they not know what was going on? Tamanaha writes:
Seduced by the allure of prestige of material comforts, Crits and progressive law professors have become a part of the system they set out to reform. Watching market-thinking become pervasive and the gap between rich and poor in America steadily increase, knowing that on broader economic issues we had lost, we succumbed to the temptation to grab what we could for ourselves and our families. (35)
Ouch. It occurred to me while reading this passage that of all the topics I think or write about, legal education is the one where I think we need more “market-thinking,” so I end up sounding like a perfidious neoliberal. I’m not. Instead I think that what passes for “market-thinking” has largely shielded liberal law professors: Lawyers are regularly perceived as playing outside market rules. They chronically overcharge their clients—a belief that’s readily reinforced by actual instances of file-churning, etc.—and they don’t do enough for the poor given their awesome privilege. For the more conspiratorially minded, they file frivolous lawsuits against one another to drive up business, or they use their dominance in legislatures to enact laws that create yet more work for themselves. Even corporate America is powerless to negotiate lower rates against the almighty leveraged, billable hour.
The public’s uncharitable perceptions aren’t helped by economists who misunderstand the effects of professional licensing. Anyone who reads Dean Baker’s Beat the Press will regularly find the author complaining that free trade advocates are willing to subject manufacturing workers to competition with cheap foreign labor, but they hypocritically use professional licensing regulations as trade protectionism. Never mind that professional services aren’t as fungible as precision-made goods; that lawyers’ contributions to legal matters are usually more valuable than assembly line workers’ to their products; or that most states, including California, New York, D.C., Texas, Illinois, and Florida, allow foreign-trained lawyers to take their bar exams (subject to various other requirements, admittedly) with no evidence of lower lawyer incomes there as a result. For some inexplicable reason, foreign lawyers will be able to topple biglaw in a way that tens of thousands of unranked law school grads cannot.
An even better example is Clifford Winston’s, Robert W. Crandall’s, and Vikram Maheshri’s 2011 book, First Thing We Do, Let’s Deregulate All the Lawyers. The authors calculated that lawyers earned 50 percent more than people who had the same amount of education. They also found that over time lawyers’ incomes increased even though their GPA and LSAT scores did not, and that the number of lawyer jobs created each year is significantly less than the number of people who apply to law schools. Therefore lawyers must be creating a huge deadweight loss to society.
No one pointed out to them that (a) demand for legal services is income elastic, which means rich people and corporations spend more money on brand-name firms as they become wealthier (and they have become wealthier); (b) the wages of lawyers are determined by their marginal product, not their education; and it might just be the case that lawyers are more productive than people who drop out of English PhD programs; (c) incomes for high-test-scoring people have increased generally over the last few decades as credentials from elite universities have led to higher-paying jobs; and (d) demand for legal education is not the same thing as demand for legal services.
One need only read First Thing We Do‘s introduction (PDF) to understand the methodological problems with the authors’ argument:
As regulatory economists, we find it natural to reason that occupational licensing, like other regulations that restrict entry, benefits existing suppliers by limiting competition. Thus its primary effect is to generate earnings premiums to practitioners in a particular profession such as law—earnings premiums that could be inefficient.
In short, it’s an argument from incredulity nestled in a begging-the-question fallacy: We can’t believe the legal profession would allow more people to purchase legal education than there are jobs available for them because that would mean lawyers are bad at creating licensing restrictions, and they would be callously dumping over-indebted, underemployed law graduates onto the labor market and tolerating a massive wealth transfer to law professors that doesn’t directly benefit lawyers. Therefore, the licensing requirements must be restricting supply and raising incomes.
However, the fact is, applicants’ willingness to risk rejection, which indicates they would pay full freight if accepted, increases with tuition. Behold the number of rejected full-time applicants at private law schools (ex. Puerto Rico’s and Brigham Young) and public law schools whose tuition is higher than the average private law school’s.
Those of you who wanted an upward-sloping demand curve, here is your upward-sloping demand curve.
Even in my private life, I’ve encountered two economists (whom I respect) who thought “licensing = labor cartel” applied to lawyers ipso facto. In fairness, it’s not self-evidently untrue, but it shows the heuristics that go into analyzing who’s cheating society and who isn’t.
Okay, I didn’t write this post to rehash First Thing We Do—not that I didn’t savor the empty calories and hope you did too—rather, I brought it up to show that “positions, not interests” explain conventional views about lawyers and law schools:
- Lawyers = cheaters, thieves
- Law students = greedy turds who refuse to serve the poor at lower pay and are whining because they’re bitter they didn’t get to be cheating thieves
- Law professors = tragic figures because despite their liberal agendas, their students still refuse to serve the poor and aspire to be cheating thieves
- Student debt for education = good because education = “upward mobility” = good
Once this framework for the law school debate sets in, it’s no wonder that Tamanaha’s peers call him an outrageous elitist conservative. It takes the ideological equivalent of a spontaneous reversal in the earth’s magnetic field to recognize that law schools have more in common with Bain Capital than they do with Legal Services NYC, which has been working without a contract since July 2012 and might go on strike soon. The dominant liberal story over the last thirty years is that rich conservatives and neoliberals (including cheating thieving lawyers) captured the government to crush labor and redirect incomes from the poor to themselves. Thus, liberal law professors are the types of people we’d least expect to support too-big-to-failist institutions. The fact that conservatives tend to hold anti-higher education and anti-student lending views further warps the discussion along ideological lines.
That law schools were caught fighting on the wrong side of the class war at the same time the banksters wrecked the economy is only a coincidence, but it doesn’t appear that way to the students, who are increasingly seeing a generational war between entrenched, entitled boomers and themselves. Law schools’ legacy will be a severely cynical generation—not something supposedly labor-loving liberal academics see themselves as promoting.
Filed under: Uncategorized | Tagged: Boomers/Generational Non-Warfare, Brian Tamanaha, Higher Education, J.D. Oversupply, Legal Education, Legal Education ROI, Legal Sector, student loans | 3 Comments »
A question that needed to be asked.
Here’s some Felt:
Editorial, “Reviewing Legal Education Reform,” Japan Times.
In the last decade, Japan went on a 74-law-school binge (!!) because too many people were failing its bar exam. The belief was that American-style law schools would better-train people to pass the test. Instead, the result is more law school graduates who’ve wasted a lot of money on a legal education that opens no doors to them. It’s an old, old story that I’ve written on before here and here.
So the Japan Times is back with another editorial on the topic. Now it appears that people have wised up to the Failing-Law-Schools-Japan-Edition, and they’re not applying. The result is that one law school shuttered its doors in March. The government’s current solutions are to drop its 3,000 annual bar passage rate target and consolidate some of the law schools. Kill the metric, not the messenger.
The Times believes the problem is that some law schools are just bad at teaching to the test, not the licensing system itself, so it argues:
The government, bar associations and law schools should redesign the system for nurturing legal professionals. They should think about how to increase [rural] job opportunities for novice lawyers and how to improve legal services for people even if the pace of reform slows.
Although the editorial may be right that the government isn’t willing to analyze “what went wrong,” it too still seems unwilling to admit that American-style legal education doesn’t in any way increase access to legal services or create jobs (except in the law schools). That’s the lesson that’s slowly being learned in the United States with no thanks to resistance from law schools and indifference by licensing authorities. Can someone direct me to the first Japanese law school scamblog?
Or can you?
Catherine Groux, “Law School Students Use Passion and Flexibility in Struggling Job Market,” U.S. News University Directory.
The U.S. Bureau of Labor Statistics states that [the reason the NALP says the employment rate for 2012 law school graduates hit its lowest point since 1994] is largely due to the fact that accounting firms and paralegals now handle many of the tasks once reserved for lawyers.
No, that is not what the BLS said. Its reference to paralegals and accounting firms was a future projection:
[G]rowth in demand for lawyers will be constrained as businesses increasingly use large accounting firms and paralegals to do some of the same tasks that lawyers do.
The BLS said that some amount of the current law graduate underemployment is due to there being too many law schools:
Competition should continue to be strong because more students are graduating from law school each year than there are jobs available.
The important words being “should continue” because it’s been going on before. The other reason the 2012 grads couldn’t find jobs is that the currency isn’t circulating, i.e. the economy is in a depression.
Yes, rich people are loaning the government money at a loss.
But that’s just par for the course. The substance of the article is much more entertaining:
According to a new survey by Kaplan Test Prep, half of pre-law students say they plan to use their JD in a non-traditional legal field, largely because of the current job market for lawyers. Approximately 43% of these individuals said they hope to use their legal degree to work in the business sector.
Oh God, half of pre-law students are sold on the juris doctor’s versatility?
Although the legal industry is struggling, many students say they want to earn a JD because they are passionate about law. About 71% of pre-law students said the main reason they are applying to law school is to “go into a career [they] are passionate about,” while only 5% said their primary motivator was the potential for a high salary.
Passion won’t make those bondholders sell their inflation-protected Treasuries and invest in real goods and services.
According to the Kaplan survey, 43% of pre-law students said they would be likely to postpone or alter their law school plans if they did not receive enough financial aid.
Except we all know they will receive enough financial aid—as much as they can spend really.
In other news…
Tom Brennan, “The Looming Threat for South Korean Law Grads? Unemployment,” The Asian Lawyer.
The large expansion in the number of law graduates stems from the introduction of U.S.–style postgraduate law schools in 2009. Before then, the law was only open to 1,000 students a year who passed a notoriously hard bar exam and then trained at the government’s Judicial Research and Training Institute. Unemployment was practically unheard of in this elite group. But the 25 new law schools pumped out about 1,900 graduates from their first classes last year.
I wrote a while ago on how Japan did the same thing: Adopt the defective U.S. legal education model right as it alienates just about everyone outside the law schools.
And finally, you should watch this:
Scott Waldman, “Standard & Poor’s Downgrades Albany Law School,” Times Union.
From the folks who rated mortgage-backed securities as AAA and have been downgrading sovereign debts denominated in their own currencies, S&P now thinks Albany Law School’s bonds aren’t as safe as they used to be. (Hey, it might not be credible in some things while retaining credibility in others.)
The report suggested that Albany Law is more vulnerable to the national trend of enrollment decline because it is not connected to a larger university. Law schools that are part of a larger university or university system were better able to absorb losses of the last few years. Schools tied to a university also can better attract students amid the shrinking market in the future because they are more able to offer bigger financial aid packages.
Standard & Poor’s believes enrollment will eventually stabilize at a lower level than where it is today and schools will adjust accordingly.
I opened an account with S&P, and while it doesn’t list ALS’s rating, I did manage to find Cooley’s, which is BBB – stable, where ALS now finds itself.
“We believe that over the outlook’s two-year period, Albany Law School will likely maintain its financial resources at current levels, continue to generate surpluses on a full-accrual basis, and stabilize student enrollment,” Standard & Poor’s credit analyst Emily Avila said in a statement.
The real question is how many of ALS’s students are paying full tuition.
The answer: About two-thirds. The median grant for both years was $20,000, which puts it in an 11-way tie for the 20th highest median grant to full-time students at a private law school. Remember: The nucleus of every law school enrollment body consist of people willing to pay whatever the law school tells them to.
Also, don’t forget that the schools can do whatever they want and no individual will ever be held personally liable for any of their debts. Student debtors, on the other hand, aren’t so fortunate.
Ethan Bronner, “No Lawyers for Miles, So One Rural State Offers Pay,” New York Times.
Before I start ranting, let me first say that South Dakota’s plan to subsidize legal services for rural communities is the exact type of thing I’ve supported for a while now, much more so than subsidizing law schools, even cheap public ones in western states.
Now I start:
Rural Americans are increasingly without lawyers even as law school graduates are increasingly without jobs. Just 2 percent of small law practices are in rural areas, where nearly a fifth of the country lives, recent data show.
[South Dakota's law] follow[s] a growing call for legal education to model itself on medical training to increase practical skills and employability. They also come amid intense debate on the future of the legal profession, and concerns about a possible glut of lawyers. In the past two years, only about 55 percent of law school graduates, many with large student loans to repay, have found full-time jobs as lawyers.
“In some areas we probably do have an oversupply of lawyers, but in others we have a chronic undersupply, and that problem is getting worse,” said David B. Wilkins, who directs a program on the legal profession at Harvard Law School. “In the 1970s, lawyers spent about half their time serving individuals and half on corporations. By the 1990s, it was two-thirds for corporations. So there has been a skewing toward urban business practice and neglect of many other legal needs.”
In other words, law graduates don’t move to rural communities because they aren’t trained to serve individuals instead of corporations. The law schools corrupted the profession, so moving those underemployed, indebted law graduates to a rural community would be like laboratory animals perishing in the wild after eco-terrorists liberate them. The fact that such a large percentage of lawyers live in urban areas supports this.
I’m dubious of this theory. One, as the big daddy of lawyer-per-capita calculations, I can tell you that the land need not be blanketed with a minimum number of lawyers per person. Demand for lawyers’ services is what counts. Two, human lawyers are a little more resilient than cutie-wootie fluffy bunnies in some cocaine addiction experiment at the U. For example, the rural lawyer the Times interviewed started working in 1949 and claims there were five or so other lawyers in Bennett County, SD at the time. Now he’s the last, and he’s surprised about it. Here’re a few questions the Times could’ve asked if it cared about the causes of rural legal deserts:
(1) Why didn’t anyone replace the other lawyers as they retired since 1949? It’s not like there haven’t been any recessions that produced underemployed, indebted law graduates since then.
(2) Did the lawyer interviewed by the Times, much less his former peers, ever hire any associates if the work was as plentiful as he claims?
(3) What income does operating a small practice in rural America provide? Is it greater than what one could get in non-legal service sector jobs in a city?
(4) What differences were there between rural and urban America in 1949 as opposed to 2013? What differences are there in law practice?
(5) What are the employment outcomes of lawyers graduating from the University of South Dakota?
As you can imagine, my intuition on questions (1)-(4) suggest that there’s more going on than simply law school graduates being programmed only for corporate work. It’s unlikely that all the previous lawyers there retired since 2005, so if law school graduates from decades past didn’t want to practice there, why should we expect current law graduates to want to? If the last-lawyer-in-town says there’s work to be done, why didn’t he try to hire anyone to help him do it? Isn’t he loaded down with currency from his free monopoly?
The obvious source of replacement candidates would be South Dakota’s law school, and a quick analysis of its graduates’ outcomes suggests the question isn’t “Why won’t they open small practices?” but is instead, “Why won’t they open their small practices in Bennett County?
The article gives a possible answer:
Thomas C. Barnett Jr., executive director of the State Bar of South Dakota, said … that in contrast to an earlier era, law graduates seemed increasingly drawn to urban life for the better shopping and dining as well as job opportunities for their spouses. In addition, he said, young graduates need mentors.
Another thought is that perhaps a lot of law school graduates, including those from South Dakota, are unmarried and aren’t too keen on their romantic prospects in a county with a population of 3,400, 35 percent of which is below the poverty line.
I suspect that today’s new lawyers aren’t much different from the medical professionals in the National Health Service Corps (who aren’t shamed by boomers into living in places they otherwise don’t want to live in). Like most people in their twenties, they prefer urban life. If that means they’d rather work at Wal-Mart (or Wall Drug) than open a small practice, that’s their right. If you don’t like that, then do as South Dakota is doing and pay!
The Statesman gave me the opportunity to air my beef with the University of Idaho College of Law’s dean’s specious claims that student debtors pass their loan costs onto their employers and clients.
Also, it’s spring! So time to listen to the Byrds.
Kinda wonder what happened to the cage dancers.
Karen Sloan, “Arizona Cuts Law School Tuition, Marking a First,” National Law Journal
Following up on Wednesday’s post on neoclassical economics gone wrong, we have the University of Arizona loudly announcing a 10.7 percent tuition cut for in-state students. That’s $27,288 in 2012 down to $24,381 in 2013. The last time Arizona’s tuition was this low was … uh, 2010 when it was $23,540. In fact, Arizona’s mean nominal tuition increase since 1999 has been 16.2 percent, which is certainly due to state funding cuts and not academic bingeing. This is why I focus more on private law school tuition increases.
The painfully obvious question the first-publicized “big” tuition cut raises is, Will it persuade more people to apply (and attend)?
Answer: Not nearly to the extent that the dean interviewed by the NLJ hopes, but Brian Tamanaha makes a good point that it might help UA poach some applicants from ASU, which isn’t a great victory since applications are dropping there too. Instead, Arizona intends to “make up for the lost revenue by expanding existing master of laws and doctor of juridical science programs [HA!] and introducing a new LL.M. for non-lawyers [BIGGER HA!]. It also plans to reduce its pool of scholarship money.” With less scholarship money, the price cut is even more likely to be a non-event.
Why won’t this entice the swarms of 0Ls? you ask? Because people like Eric Posner wrongly believe that the elasticity of demand for legal education is static throughout time. (Did I mention I loathe neoclassical economics terminology? It’s so stilted.)
So yes, until 2010, you could increase law school tuition and people would still apply. Did I mention that you can increase tuition after 2010 and people will still apply? (Okay, it’s probably lower on average due to scholarships, blah blah blah.)
According to what I’ll call the “conventional thought,” applicants are insensitive to tuition hikes, yet the opposite is also simultaneously true: Make law school cheap and the deans will have to stand at opposite ends of a console, and then turn their keys simultaneously to open the weapons locker containing all the pitchforks they’ll distribute to the green professors to fend off the insatiable hoards of 0Ls demanding to pay someone a six-figure salary to tell them the difference between the parol evidence rule and the statute of frauds. If law school isn’t expensive, the “conventional thought” warns, it’ll be like WarGames meets Zulu.
However, the “conventional thought” suffers from a flaw: The 0L hoards only came because there was just about no way for them to know the net present value of a law degree minus that of their college degrees. Then along came a bunch of scamblogger types who said that it was probably negative, and the 0Ls realized the solution was not to play.
Take it away John Bates Clark and Alfred Marshall: Not only is demand for legal education dropping, but also the price elasticity of its demand is shifting.
If you think that an upward-sloping demand curve hints that I think legal education was once a Veblen good (and possibly a Giffen good too), you have gained wisdom grasshopper. The question is to what extent that’s still true.
The other reason no one should take the “conventional thought” too seriously is that law school tuition has never been uniform throughout the country. For example, we’d expect dirt-cheap law schools like the University of D.C. or New Mexico to be overflowing with students. Instead, Georgetown, NYU, Harvard, American, Columbia, and George Washington have some of the largest student bodies in the country and aren’t known for their bargain-bin prices.
We’d also thus expect price competition among law schools, especially in California where you can become a lawyer via correspondence programs. If you object that ABA degrees are a separate class of goods from those of the unaccredited mills, you’ll have to tell me why that should matter. A lawyer is a lawyer, and the ability to pass a bar exam is largely set in stone before one has taken out one’s number two pencils at the LSAT center. If the fact that UCLA charges more than $45,000 per year for its law degrees has nothing to do with its (perceived) reputation for placing people in good lawyer gigs—and 0Ls perception of how many good lawyer gigs there are, the likelihood that they’ll get them, etc.—then you too are ready to start editorializing on economics.
Just be sure to wow your readers by using “at the margin” every third sentence.
Eric Posner, “The Real Problem With Law Schools (They Train Too Many Lawyers),” Slate.
“A crisis is looming in legal education,” writes the author. Why this isn’t a “student debt crisis” or “jobs crisis” instead of a “legal education crisis” is unclear, but the article earns a response because it so heavily leans on my new favorite logical fallacy, argumentum ad econ one-o-oneum: the misapplication of neoclassical economic principles to a policy (non-)conundrum due to a failure to research the underlying facts, or the misunderstanding of the neoclassical economic principles themselves.
Posner believes that the group of law school professors from mostly prestigious universities who sent a letter to the ABA calling themselves the “Coalition of Concerned Colleagues” “will make the crisis worse than ever.”
If you think that handing vouchers to everyone 18 years and up to attend law school at full cost to the government plus living expenses would be the only way things could get worse than ever (if people still even bother to apply at that), you obviously don’t know economics.
The crisis could have been predicted. Demand for legal services boomed in the 1990s and 2000s. College graduates, drawn by skyrocketing pay and subsidized by government-guaranteed loans, flocked to law school in ever greater numbers. Law schools, rational market actors that they are, hiked tuition. The higher prices people were willing to pay for legal education encouraged universities to enlarge classes and open additional law schools. Not surprisingly, supply overtook demand. The mismatch is now exacerbated by the development of technological substitutes for some legal work, including online services that enable people to fill out legal forms, and a weak economy.
(1) If the “crisis” could have been predicted, did anyone? Did they comment on the government’s decision to nationalize graduate student lending in 2005-06?
(2) Did demand for legal services boom in the 1990s and 2000s?
(3) If the federal loans are part of the problem why not cut them?
(4) Did pay for all lawyers grow in the 1990s/2000s, or just for those lawyers who happened to work in biglaw? Is there a difference between compensation for lawyers and compensation for J.D.s? Was this difference carefully given to applicants on a school-by-school basis? Is it today?
(5) Did “skyrocketing pay” draw applicants, or was there a correlation to the overall (negative) employment level? If not, then why do deans sometimes argue that people hide out in law school to wait out recessions?
(6) Did law schools hike tuition before the 1990s? After the 2000s? Do they hike tuition even when the number of applicants drops?
(7) Does higher demand for legal education influence universities’ decisions to open law schools? If so, why are some law schools still opening after 2010 when demand has already tanked?
(8) When did supply overtake demand? Supply for what and demand for what? Is demand for legal services the same as demand for legal education?
The “crisis,” then, is just part of the normal cycle of the economy—familiar to anyone who has held a job as construction worker, software engineer, salesman, or journalist. And the market is reacting in a predictable way. Fewer people are applying to law schools; class sizes are shrinking; some law schools may shut down.
But since the 1990s applications have been counter-cyclical: People apply to law schools when they don’t have jobs, now apparently, they’re not.
Posner then argues that the “Coalition of Concerned Colleagues’” proposals don’t “make sense in light of the group’s diagnosis of the problems lawyers face” because:
(a) Reducing the number of years of law school will counterintuitively encourage more applicants, and
(b) It’ll dump lots of lawyers on the market in the transition year.
(b) is right on; (a) is silly. Demand for legal education/law licenses is no longer such that people will apply if it’s cheap even if there are no jobs, and it’s not like law schools are obligated to accept everyone who applies.
(c) More clinical courses raise prices.
True! They also don’t create jobs.
The next one is the kicker:
[Y]ou can’t blame government subsidies for the plight of young lawyers. Government guarantees lower the cost for lawyers to obtain training. If the subsidies create a larger supply of lawyers, it should also create a greater demand for their services, by reducing the costs that they pass on to clients. Depriving students of government-guaranteed loans is hardly a solution to the problem that legal education is too expensive.
(1) Government loans (they’re direct, not guaranteed) enable tuition increases per the Bennett Hypothesis 2.0. Who would be able to afford law school at current prices if Grad PLUS loans were eliminated and bankruptcy protections restored to private loans?
(2) Once the market is saturated, the cost of legal services is determined by demand for legal services. Poorer lawyers will simply quit to work in Wal-Mart or they’ll practice out of a cardboard box. They do not pass their law school costs onto their clients, but things like malpractice insurance, bar fees, etc. create a price floor that makes it harder to serve people who don’t have money.
Posner then argues that loan forgiveness/bankruptcy will create a moral hazard, but IBR has been in operation since 2009 and the mass of IBR freeloaders has yet to apply.
[P]roposals to create a two-year curriculum and other fast-track routes to the bar will mainly help clients by reducing the cost of legal services.
No it will reduce law schools’ incomes. Who benefits? Everyone else.
Did I say that defending unlimited government student lending was the kicker? Ha! This is better:
The only realistic way to help lawyers today is to increase the demand for legal services—somehow convincing governments, for example, to pay for adequate representation of indigent defendants—but in the long term, greater demand will create the expectation of yet more job growth, and that could lead to another bust. The critics seem to think the legal profession can escape the logic of the market. It can’t.
In other words, after the law schools get their cut of the tax base, then the government should tax people to fund services we more urgently need. Readers are invited to enlighten the LSTB as to how an article whose title indicates we should train fewer lawyers can conclude by arguing for not training fewer lawyers.
The worst thing anyone can say about the “Coalition of Concerned Colleagues’” letter to the ABA is that it was too cautious re. the Direct Loan Program, which isn’t even worth a comment on a scamblog. Rather, Posner’s argumentum ad econ one-o-oneum is the only kind of logic we really need to escape from.