Day: 2010/09/21

Links Dances—JDs Rising Gets the Tuition Bubble

Just so you know, I’ve never heard the Who’s Face Dances–a mystery I’m happy to leave unsolved.

Kelly Francis, “Law School Debt and the Mortgage Meltdown,” in JDs Rising

Mark Cohen, “Law School Debt: It’s Broke, Why Won’t Anyone Fix It?” in MinnLawyer Blog

Comparing legal education to the subprime mortgage market, Francis writes a post responding to Heather Diersen’s post (that I also wrote up recently):

The law schools, the ABA, and the federal government have shown a startling degree of irresponsibility in handing out student loans and law degrees to whoever will sign on the dotted line, regardless of their ability to land a job or eventually make good on the debt.  In turn, the students themselves should certainly shoulder their fair share of the blame for failing to read between the lines or see the forest for the trees.  Much like the mortgage crisis, however, it’s difficult not to assign blame to the parties that appear to be profiting the most from the drunken free for all, and in the current situation, that’s not the students.

Focusing on who profits is important, but we also need to focus on those who were in the best position to prevent the crisis.  In this case, it’s the Federal Reserve for recklessly ignoring an $8 trillion housing bubble, and the federal government that operates under the belief that full employment and income equality are discretionary duties of the state.

What’s difficult for many of us to fathom is this concept that something like higher education, even with federal student aid, is just not something that all Americans can afford.  If this is true, what does that mean for America?  What does that mean for capitalism?  What does that mean for the future?… Anytime you question long-standing beliefs about God or country like that, you should expect to have some venom thrown your way.

It occurred to me that the irrational exuberance that fuels asset bubbles is an incomplete statement about the social dynamics at work.  During an asset bubble, people who think they’re being risk-averse are actually taking an incredible risk (this is why But I Did Everything Right! is so aptly titled); likewise, they criticize anyone who doesn’t buy the asset as being risk-acceptant when the opposite is actually true.  The two groups pull far apart (Francis’ venom), yet once people start defaulting on the loans, risk-averse and risk-acceptant switch violently—much like the Earth’s magnetic fields reversing polarity at six degrees per day.