Speed Link: University of Baltimore Ousts Dean Phillip Closius

[UPDATE: UB president Robert L. Bogomolny responds here, claiming that releasing Closius was long-coming. President Bogomolny disagreed with Closius’s characterization of the transfers the law school made to the university. He justified the tuition increases so the law school could compete regionally (prestige) and offer more scholarships (more net revenue); neither persuades me as necessary.]

If Season 6 of The Wire could be about higher education’s failures, the University of Baltimore School of Law is perfectly situated.

Dean Phillip Closius sent an e-mail today reporting that the university’s president asked for his resignation on Thursday and it’s effective now. Why? Because Dean Closius told the ABA that the university was looting the law school, and the ABA requested an explanation. He writes:

For the most recent academic year (AY 10-11), our tuition increase generated $1,455,650 in additional revenue.  Of that amount, the School of Law budget increased by only $80,774 [!].  I do not know of any law school in the country receiving such a small percentage of its generated tuition revenue.  A recent article in The New York Times noted that a 25-30% revenue retention by a university was considered high by national standards.  As of academic year 2010-11, the University retained approximately 45% [!] of the revenue generated by law tuition, fees and state subsidy. Using any reasonable calculation of the direct and indirect University costs, the University was still diverting millions of dollars in law school revenue to non-law University functions

…

We were inspected this last academic year and the University and I received the final report of the ABA Accreditation Committee on July 27.  The report generally praised the condition of the law school but indicated a concern, among others, about the substantial amount of money the law school contributes to the University and the lack of a University explanation of a rationale by which the money retained by the University is determined.  The ABA Committee requested that the University President and Dean submit a report by March 12, 2012 which provides in part a rationale for the School of Law’s share of costs for non-law school activities and central administration services and information about any agreement between the Law School and the University regarding a fair process by which the Law School’s contribution to the University for direct and indirect costs will be determined.  The day after receipt of the ABA report, I was asked to resign.

Call in Lieutenant Daniels.

Speaking of tuition increases, the law school has become astonishingly more expensive than in the past. Here’s data from my law school tuition increases page’s source spreadsheet. Columns P through U are the increases over inflation, and Row 120 is in-state tuition while Row 121 is out-state tuition. Column H is shaded because the Official Guide recorded Baltimore’s tuition as half of what’s displayed, leading me to believe that it was reporting semester tuition, not annual.

As you can see, since fall 2004, in-state students have seen their tuition jump 52% over inflation. Who knew such a big chunk of it went to the university? What’s even more amusing is that U.S. News’ ludicrous metric, spending per student, rewards this kind of behavior.

“Sheeeeeeeeeeeeeeeeeeit!”

More importantly, this is a warning to law school deans: If you disclose “the tax” rate to the ABA, we will terminate you. The real question is whether come March 12, 2012, the ABA receives a report from UB’s president and law school dean providing a rationale, in part, as to why so much of the law school’s funding goes to non-law school programs.

The Lemmings Are All Right: Richard Matasar Responds to David Segal

Anyone who read last weekend’s New York Times piece, “Law School Economics: Ka-Ching!” by David Segal should also take the time to read NYLS dean Richard Matasar’s response, “Law School Cost, Educational Outcomes, and a Reformer’s Agenda,” on NYLS’s website. Matasar keeps his cool and provides the written pieces he sent to Segal before the article’s publication. Today’s special is what exactly caused NYLS’s large class of 2009.

Segal:

[NYLS] increased the size of the class that arrived in the fall of 2009 by an astounding 30 percent, even as hiring in the legal profession imploded.

Matasar:

For the prior 3 years our yield rate—the percentage of students who received offers, who accepted those offers, and enrolled—had been relatively steady. From 2008 to 2009, however, the yield rate increased by 10 percent, meaning that even though we accepted fewer students than the prior year (approximately 150 fewer), 170 more students enrolled. While we can’t say with certainty why this happened, we can look to the economic downturn, the opening of the new building which was receiving rave reviews, and the fact that we were coming off of a record high bar pass rate of 93.6 percent as reasons why more applicants chose to come. Again, enrollment can be very unpredictable.

So: Segal argues the 2009 1L bounce was deliberate and reckless on NYLS’s part; Matasar counters that it’s not NYLS’s fault people were clamoring to go there for its building, high bar passage rates, and law school’s low opportunity cost.

Except they weren’t.

Aside from the fact that the economic downturn translated to only a slight bump in law school applicants, NYLS saw none of this. Indeed, according to Official Guide data NYLS suffered a 25% applicant drop in 2009, complicating the story.

Instead of cobbling together an HTML table, here’s a screen capture of NYLS’s incoming classes from 2004 to 2010 according to the Official Guide.

So full-time applicants dropped 28% and part-time applicants 11%. Segal didn’t research this, and Dean Matasar has no reason to tell anyone. At some point in 2009 NYLS’s admissions office must have realized there was a problem, and it altered its acceptance strategy accordingly.

Starting with part-time students, it looks like Segal is right: NYLS deliberately accepted more applicants predicting they would matriculate. For full-time applicants, one might think that by extending fewer offers than in previous years, NYLS was expecting a smaller incoming class, but that wasn’t what it did. Bear in mind the “Offer %” was 10% higher than in previous years despite the lower numeric acceptance rate. Had it accepted 45% of its full-time applicants, with 20% matriculating, it would have an incoming class of 306, similar to 2006, which was an unusually low matriculation year for NYLS.

When a drop in applications occurs, the quality of the applicants (LSAT & GPA) drops as well. The bell curve contracts and shifts rightward towards zero. Looking at the full-time class of 2009, I characterize what happened to NYLS as a “downshift.” NYLS had to compromise accepting students with lower-than-usual credentials against under-enrolling its incoming class. It accepted 212 fewer applicants, but it inaccurately predicted the matriculation yield. Consequently, Matasar is right to the extent that NYLS didn’t predict the willingness of people who got B’s in college to go to NYLS over those who got B+’s.

I suspect geography explains the downshift. The only other law schools in New York State that accepted the kinds of students that NYLS did in 2009 were Albany, Syracuse, and Touro. Albany and Syracuse are mid-state, and Touro is beyond Gatsby Country on Long Island, making it more attractive to New Jersey-based applicants.[i] In 2009 NYLS accidentally discovered that it is in a prime location to serve the market for B-average prospective law students. In 2010, NYLS adapted again by accepting its usual number of part-time applicants, roughly, but it reduced its numbers of offers despite a slight increase in full-time applicants. Its matriculation yield was still 10% higher than before 2009, but the incoming class largely recovered to median B+ college students, though the high-end GPAs were slightly lower. It will be interesting to see what happens to NYLS in fall 2011. However, of the 2,000 or so fewer NYLS applicants in 2009 and 2010, some of them may have realized a law career would not be available to them if they went to NYLS.

The good news that Segal missed and Matasar declined to mention is that not all lemmings jump.

---

[i] Supposedly West Egg is a parody of Great Neck, which is northwest of Central Islip, but it was a good line so I couldn’t pass it up.

A Reading List for the “Conversation about Employment in the Law and Legal Occupations”

Expressing relief at not being named in Cooley’s lawsuit against four John Doe bloggers, BIDER’s Angel includes the e-mail by Cooley’s president, Don LeDuc, to his students assuaging their possible concerns that their law degrees may not be very marketable. He writes:

The entire conversation about employment in the law and legal occupations is almost entirely wrong [eyebrow rises]:

1. According to the Bureau of Labor Statistics (BLS), the unemployment rate among lawyers in 2010 was 1.5%, for those in all legal occupations it was 2.7%, and for all occupations it was 9.6%, which drops to 8.9% when those who have never been in the labor market or are returning from military service are excluded.

2. The 2.7% unemployment rate for legal occupations, including lawyers, was better than the rate for all other occupations in the BLS category of management, professional, and related occupations except for health care practitioners and technician occupations (2.5%). This data shows that becoming a lawyer is a better choice for those considering a career, not a worse choice.

(I omitted the third and fourth points about NALP and Cooley’s unemployment rates because they aren’t germane to this post.)

I spent more time than I wanted to verifying President LeDuc’s facts, not because I thought he was making them up but because I wanted to know where in the BLS they came from. I mostly succeeded; most of what LeDuc is discussing can be found here, but the only place I found the 1.5% lawyer unemployment number is at the Wall Street Journal. The non-seasonally adjusted legal sector unemployment rate jumped to 4.2% by June of 2011, so much of what President LeDuc says loses whatever force it had.

The lawyer unemployment rate, of course, is not the appropriate measure of a law degree’s value for at least two reasons: (1) Only the BLS’s Occupational Outlook Handbook includes self-employed attorneys in its data, so anything else about unemployed attorneys is probably excluding ousted partners and failed practices. (2) Measuring unemployed attorneys assumes the legal profession is a closed system, that is, everyone who finished law school before 2008 had gainful employment in the legal profession if they wanted it. Not so. There are far more JD-holders in the economy than are needed to staff the legal profession, and we are producing more than are necessary going forward.

By the way, this is what employment in the U.S. legal sector has looked like:

Notice how there was almost no job growth until dotcom bubble and how its current employment has both fallen to 2003ish levels and stagnated since late 2009.

As far as law schools are concerned, LeDuc’s “conversation about employment in the law and legal occupations” is only now starting to take graduate output seriously, a development I welcome. A good example of the conversation is between Professor Theodore Seto of Loyola, Los Angeles and Professor Brian Tamanaha of Washington University. TaxProf Blog served as the forum. I think the two viewpoints are important because they introduce readers to many themes I’ve written about before, making it a good reintroduction to the LSTB. Tamanaha sees the drop in applicants (what I called “Scam Blogger Victory (V-SB Day)” a while ago—an interregnum until some kind of formal reform is enacted), and Seto stands by the “bottleneck” and “versatile juris doctor” arguments to show there is no long-term employment problem. Here’s a summary:

• Tamanaha, “The Coming Crunch for Law Schools,” showing that law schools are continuing to over-enroll relative to available lawyer jobs due to overexpansion of faculty. The declining number of applicants will force them to adjust or fail.
• Seto, “Is The Sky Really Falling in Legal Education?” focusing on Tamanaha’s over-enrollment point by giving us the bottleneck argument (graduates per capita is the same as 20 years ago) and the versatile JD argument as well as a novel one that faculty spending isn’t growing relative to other law school expenses so faculty expansion is irrelevant.
• Tamanaha, “The Crunch Is Coming for Law Schools,” pointing out that tuition has increased over inflation and over the perceived ROI of a law degree, which is leading to the applicant decline.
• Seto, “The Law School Pricing Problem,” restating that graduates per capita is unchanged and that faculty expansion is not causing law schools’ problems, while conceding that he doesn’t know whether tuition has increased past the point of equilibrium.
• Tamanaha (comment), reiterating that he’s writing about the number of applicants dropping and that graduates per capita isn’t relevant to projected job openings.

For extra credit you can read Stephen Bainbridge’s, “Consolidation in the Law School Industry,” pessimistically arguing that law schools and their alumni will not go quietly into the night, resisting closure and consolidation for many years to come.

The two professors’ discussion advanced my thinking in some ways.

(1)  Bottleneck-believing law school faculty appear to have contradictory views of legal ed. reformers and scambloggers. On the one hand these are disgruntled graduates, among others, who are fomenting a “bank run” on the law schools, depriving the legal profession and the public of the high caliber attorneys they need. On the other hand, they see the drop in applications as a response to the business cycle, making reformers a “natural” economic outcome.

(2)  When discussions of ROI lean on noneconomic benefits for persuasiveness, the utility of government loan programs becomes dubious. For example, Seto writes, “Many parents would prefer to be able to say ‘my child is a lawyer’ rather than ‘my child is a plumber’ even if plumbers, on average, make significantly more than lawyers.” Government loan programs don’t exist to make people’s parents happy; they exist to provide the economy with human capital. Once we start selling degrees as status symbols, the loans cease to be necessary.

(3)  Tamanaha asserts that structural forces require law schools to over-enroll to maintain their faculty while Seto says faculty aren’t taking as much out of the budget as before. This isn’t a conundrum. Law schools spend the increased tuition on something, and lower faculty/student ratios combined with salary increases above inflation should verify Tamanaha’s claim.

(4)  How do we reconcile Tamanaha’s prediction that law schools are structurally constrained against Seto’s students per capita argument? Here’s a new graph for you:

While the ABA law schools aren’t enrolling more people per capita than they did in the past, fall 2010 was the second highest year for students per law school. The record year, starting fall 2004, was merely 0.2% higher. 1991 comes in third. To give you a better perspective, the decade average students per law school was highest in the 2000s. This translates to a record decade of revenue for the existing law schools, especially since tuition is higher than ever before.

DECADE	ENROLLMENT PER LAW SCHOOL
1970s	684.2
1980s	708.4
1990s	712.2
2000s	726.1

Thus, an applicant decline will hit the law schools relatively harder today than if it occurred in the past.

Circling back to the Thomas M. Cooley Law School, which began today’s discussion: Cooley built three branch campuses in Michigan (the ABA still counts it as one law school), the Lansing baseball stadium is named after it (the school, not the jurist!), and it has been a significant driver of the 2000s enrollment increase. From the Official Guide:

YEAR	ENROLLMENT	NUMERIC GROWTH	GROWTH RELATIVE TO 2004
2004	2,868	N/A	N/A
2005	3,252	384	13.4%
2006	3,606	354	25.7%
2007	3,664	58	27.8%
2008	3,678	14	28.2%
2009	3,727	49	30.0%
2010	3,931	204	37.1%

In 2010, Cooley’s enrollment accounted for roughly 2.7% of all ABA JD candidates (147,525), or roughly one law student in 38 (I should add that the majority of Cooley’s students are part-time, which distorts its 1L class sizes from its matriculation rate). That’s up from 2% in 2004. Seeing the unusual growth in 2010, Cooley’s 204 students account for 8.9% of the 2010 ABA enrollment increase (2,286), leading me to speculate that either this growth is wholly attributable to its Ann Arbor campus (opened in 2009 at Ave Maria’s old building), or it is “saving up” enrollments in preparation for law school applicant winter.

As Tamanaha points out in his first post, Cooley accepted more of its applicants than any other law school, 83.3% in 2010, up from 79.1% in 2009, and 61.3% in 2008. Contrary to what President LeDuc says, the entire conversation about employment in the law and legal occupations is almost entirely right, college students—law schools’ target demographic—distrust the sellers’ representations about their employment prospects and they’re voting with their feet. The crunch is coming, and for Cooley, it may have already begun.

Two Quick Comments on David Segal’s Portrait of Richard Matasar

(1)  Law schools cannot self-terminate.

I suppose it’s safe to say that when NYLS dean Richard Matasar stepped down, I was easier on him than David Segal is in today’s NYT piece, “Law School Economics: Ka-Ching!” My personal opinion that I realized after I published my piece is that if you want to be a reformer who acts against your own interests, you must show some noblesse oblige. That means you do not criticize your peers’ practices while making half a million dollars off your students’ debt. You take a voluntary pay cut to show that you are serious, and you make enrollment cuts like Albany Law School supposedly did over the last decade. If you get ousted, you go back to teaching. At some point one must be willing to lose for one’s principles. Matasar’s ineffectualness/perceived hypocrisy never surprised or shocked me. To me it’s obvious that non-Ivy League law schools have no hope of internal reform without losing their place in the U.S. News rankings and by consequence access to high LSAT-scoring applicants, for they should realize by now that the legal education system has over-expanded and will certainly contract. If they’re not going to make symbolic gestures personally, reformers at lower status law schools might as well save their breath and tell the board of trustees that it’s time to close up shop.

(2)  Demand for legal education and demand for lawyers is not the same thing. One must fall.

Segal writes:

[T]here’s no business like the business of law school. The basic rules of a market economy — even golden oldies, like a link between supply and demand — just don’t apply. Legal diplomas have such allure that law schools have been able to jack up tuition four times faster than the soaring cost of college. And many law schools have added students to their incoming classes — a step that, for them, means almost pure profits — even during the worst recession in the legal profession’s history.

It should be clear: demand for lawyers is separate from demand for law degrees, and the ABA’s goal of law as an elite profession contradicts its concurrent goal of law as a democratic profession open to the masses (especially minorities, which is the ABA’s biggest insecurity). That’s the basic problem, and as J-Dog opined before taking a blogging break, the irreconcilable conflict entails the solution: Either:

(a)   A Gorbechev figure takes over at the ABA and initiates law school accreditation perestroika that circumvents antitrust concerns: minimum LSAT score requirements, mandatory experience in a legal position, or mandatory undergraduate course streams. Such reforms would smash the legal education system, and enrollments would fall to what they were in the 1960s. Law remains a selective, elite profession.

(b)  Water down legal education requirements (especially the costly wasteful ones) to the point that nearly anyone can get a law license provided they meet certain minimum criteria. Law becomes a democratic profession.

Until some kind of formal change is adopted, expect more legal education volatility: wary applicants, warier bondholders, and defiant law school behavior (like Vermont’s increasing its tuition and LL.M. students to compensate for declining JD enrollment).

Speed Link: Law Professor Wants Taxpayers to Shovel More Money to Universities

The folks from Kratola Films, producer of Default: The Student Loan Documentary sent me this surprisingly poorly thought out piece scholarship.

Jonathan Glater, “The Other Big Test: Why Congress Should Allow Students to Borrow More Through Federal Aid Programs,” the Journal of Legislation and Public Policy

Glater, a visiting law professor at the recently provisionally credited UC-Irvine School of Law, spares his readers with some concise writing, summarizing his assumption in one paragraph.

This article contends that, if we accept at face value the normative claim that widespread higher education benefits and protects democracy, and that the government’s efforts to promote access to higher education are appropriate, then we should also endorse more complete government intervention in credit markets, in order to preserve the public benefits flowing from the education of more students. (16-17; pdf 6-7)

I do not accept at face value the normative claim that widespread higher education benefits and protects democracy because higher education is not a sacrosanct institution immune from accountability. Nor do I accept at face value the normative claim that the government’s efforts to promote access to higher education are appropriate when higher education is transmitted the same way it was in the 1950s before the digital age and costs more nonetheless. In fact, scholars are not supposed to accept anything at face value unless they’re fundamental and irreducible like the real number system, nor should they be basing 63-page articles off such broad ideological assumptions such as:

Higher education generates unique returns. It produces a citizenry better able to make enlightened judgments and resist tyranny, and it develops wiser leaders. (13; pdf 3)

Certainly such a bold claim emerges from a careful review of empirical research into higher education’s outcomes? Nope, it’s just one source, that renowned expert on 21^st century higher education, Thomas Jefferson. Footnote 6: “See Thomas Jefferson, Preamble to a Bill for the More General Diffusion of Knowledge (1778), in 2 THE PAPERS OF THOMAS JEFFERSON, 526–27 (Julian P. Boyd ed., 1950).”

I agree (or want to) with the Jefferson/Glater assertion that education is a means to enlightened society and wizened leadership, but note that Glater’s argument cleverly sidesteps Richard Vedder’s concerns that tens of millions of Americans aren’t using their college degrees and that plenty of those who do have the aptitude to do what they’re doing without them. As far as Glater is concerned, we’re all better off because Vedder’s B.A.-holding bartender is an enlightened citizen.

However, our legislators don’t appear to demonstrate the wise leadership Glater sees. According to Michael Morella of U.S. News and World Report, the previous Congress, boasted 499 of 533 members with bachelor’s degrees or greater. Now, in fairness, I have a cautiously positive opinion of the 111^th Congress as it actually passed legislation aimed at the good of the country rather than at keeping feeding tubes in one brain dead individual, but it wasn’t exactly the 21^st century New Deal Congress the country needed.

As for the Senate of the 112^th Congress? It boasts 53 B.A.s, 8 B.S.s (including a bunch from military schools), 40 J.D.s/LL.Bs, 2 M.D.’s, 5 M.B.A.s and a smatter of others. These wise leaders, along with an Ivy League educated president with a law degree, are resisting tyranny by advocating deflationary policies during a depression.

Potshots aside, Glater is essentially arguing that the terms of private student loans are onerous, their lenders devious, so the government should expand its lending program to cover rising tuition. Just why are costs rising? Glater doesn’t say. He merely accepts as a given that cost increases over inflation are reasonable, but spends pages 66-68 disagreeing with the Center for College Affordability and Productivity’s (CCAP) Andrew Gillen that increased federal aid causes increased tuition. In the process, he misreads Gillen:

Gillen’s argument suggests that somehow, scarcity of credit has constrained tuition hikes by colleges and universities—a questionable assertion. Given how colleges’ prices cluster around each other, the only current, evident constraint on tuition appears to be a desire not to be too much of an outlier. (66; pdf 56)

No, CCAP argues that increases in credit influence tuition hikes because colleges capture federal aid. They know how much students can afford to pay when calculating total cost of attendance and raise their prices accordingly. It does not dispute that colleges factor in competitors’ tuition. CCAP’s problem—and mine—is that higher education does not compete to keep prices down as free markets are supposed to. Nothing Glater writes disputes this. Indeed, as a law professor he can see it firsthand: since fall 2009, legal education can be fully financed by Direct Loans and Grad PLUS loans with many graduates eligible for income-based repayment. Universities did not promptly raise prices to $100,000 per year to bleed their students and taxpayers dry, but they have continued raising tuition in line with their competitors as we’d expect. My favorite was Stanford’s justification for increasing its 2011-2012 tuition by 5.75%:

[Stanford Board of Trustees President Leslie] Hume explained that the school was “under-pricing” itself relative to its competitors. “There was a feeling that we were delivering a quality product equal to or better than our competitors, and yet our tuition costs less,” she said.

In normal markets, this would be good. Not here, apparently.

Beyond that, Glater does not argue for debt servitude; he favors income-based repayment as a backstop against poverty, and one of his objectives is to make it easier for people to go into public service.

Ultimately, Glater wants life to imitate art: Winston Universities, Potemkin institutions whose sole purpose is to suck on the teat of federal loan money and provide degrees (and four years reprieve from the “real world”) because everyone needs one. Whether they have high standards, controlled costs, students who are intellectually capable of Jeffersonian enlightenment, and connection to gainful employment doesn’t matter to him.

While he appears indifferent to the Private Student Loan Bankruptcy Fairness Act/Fairness for Struggling Students Act that would return bankruptcy protections to private student loans, Glater believes nondischargeability in federal loans in bankruptcy remains necessary:

There is a rationale for making it difficult for borrowers to cancel federal student loans through bankruptcy, too, because those loans are taxpayer subsidized. (61; pdf 51)

At first blush one wants to agree. It’s taxpayers’ money, so they need special protection. Wrong. If the government wants to play private sector lender, it plays by free market rules. There is no “special exception” whether it’s lending money to students or requisitioning ballpoint pens for the Office of the Comptroller of the Currency. This entitled attitude has consequences. Consider: Which is cheaper and more efficient for taxpayers?

(1)  Reducing or eliminating all federal loans (which lowers costs), treating student debt like all other debt, with fewer than 1% of student borrowers discharging their student debt in bankruptcy as they did before Congress enacted the first “special treatments” in the late 1970s?

vs.

(2)  Allowing colleges to capture unlimited federal aid and overcharge students relative to the labor market value of their degrees, forgoing four years of their output as workers, and then forgiving tens of billions in student loans on IBR plans after twenty-five years?

Glater characterizes his option (2) as a counterintuitive progressive policy prescription, but in practice it’s an irresponsible ploy by higher education to scam taxpayers and water down higher education.

Quick Link: In Japan, Blame for Widespread Bar Exam Failure Placed on Exam, Not Scores of “La Vernes”

Before reading Miki Tanikawa’s New York Times piece, “A Japanese Legal Exam That Sets the Bar High,” you should read Takahiro Saito’s law review article, aptly titled, “The Tragedy of Japanese Legal Education: ‘American’ Law Schools,” in the Wisconsin International Law Journal (2006ish). Saito writes:

In 1985, about five hundred candidates, out of twenty-five thousand, passed the National Bar Examination in Japan. This low passage rate led to strong criticism by some that the examination was too difficult to attract able young people to the practice of law. This criticism sparked a very strange reform in Japanese legal education.

Until 2000, some believed that the best solution to the problem was to increase the number of successful applicants to the bar examination. However, the Japanese government decided instead to import the “American” legal education structure to address the low passage rate problem. The business community endorsed the reform plan because it wanted to increase competition in the lawyers’ market, and the mass media generally supported the reformers due to the endorsement by the business community.

Japan now has more than seventy newly established law schools, although all are still in the two-year preparatory stage. For the 2005 academic year, the number of applicants for most schools is far below that of the 2004 academic year, so some of these schools may close in the near future. The real victims, however, are not the law schools but their students. Most students will be forced to spend approximately four million Japanese yen (US $36,000) on tuition for three years of study. However, fewer than 40 percent of these students will be able to become legal practitioners… (197-198; pdf 1-2)

Before the reforms, like many civil law countries, Japan allowed students to study law during their undergraduate years—sort of like a political science degree in the U.S., people use it in business and other professions if not law—and then sit for the bar exam before going to the law institute. A civil law bar exam requires memorizing the civil code, which is much harder than any U.S. bar exam. As Saito points out, the passage rate was brutal, so some people complained that the bar was too hard, which led to the reforms. As to whether there was an attorney shortage, I’ve seen conflicting evidence, but the main point is that the reforms began due to people thinking the exam was too hard and not to address a shortage. I’m fairly sure that the reform was an outcome of administrative turf fights typical in Japanese politics. However, the Tanikawa piece quotes lawyers who believe there’s now a surplus of underemployed lawyers who are working for loan sharks.

The problem is that when scores of law schools opened, and many of their graduates did not (or could not) pass the bar, it looks really bad for the law schools with low passage rates. Unlike “employment at nine months,” bar passage rates are not stats law schools can juke. People began avoiding them. For whatever reason though, in the U.S. people enroll at institutions like the California’s disaccredited University of La Verne that have awful bar passage rates publicly available. Unlike La Verne, though, the criticism is aimed at the bar exam, not at the institutions for taking in too many students who lacked the aptitude to pass it, unless you talk to Japanese bar authorities.

I wish I could say there’s a moral to this story, besides a warning not to take comparisons between the Japanese and American legal education systems’ problems at face value. The only true commonality I see is that neither country is reforming its professional education system to match demand for professional services. The fact that they can’t even come up with a system that doesn’t fail large numbers of young people after years of study and money is shameful.

Consumer Credit Update (2011 July)

It’s the fifth business day of the month, which means the Federal Reserve has updated its G.19 Release, its estimate of outstanding consumer credit. One problem the U.S. economy faces is that consumer credit is growing faster than the economy. While the G.19 Release doesn’t quantify how much nonrevolving debt is student debt, it is very likely that most increases in that category are attributable to student loans because of the near impossibility of discharging them in bankruptcy. Link here for my analysis of increasing nonrevolving debt relative to GDP.

First quarter 2011 numbers have been revised again.

	2010 Q4		2011 Q1 r		2011 Q1 r
Total	$2,407.3 bln	2.1%	$2,421.9 bln	2.4%	$2,421.4 bln	2.3%
Revolving	$800.6 bln	-3.1%	$791.1 bln	-4.8%	$790.6 bln	-5.0%
Nonrevolving	$1,606.7 bln	4.7%	$1,630.9 bln	6.0%	$1,630.8 bln	6.0%

Here’s what we get in May.

	2011 Q1 r		2011 April r		2011 May p
Total	$2,421.4 bln	2.3%	$2,427.1 bln	2.8	$2,432.2 bln	2.5%
Revolving	$790.6 bln	-5.0%	$789.8 bln	-1.3	$793.1 bln	5.1%
Nonrevolving	$1,630.8 bln	6.0%	$1,637.3 bln	4.8	$1,639.1 bln	1.3%

Superficially, it appears credit card debt is the story for May. Nonrevolving debt saw a net increase of $1.8 billion, but this conceals much.

As for holdings of nonrevolving debt, which differs from the top portion of the release because it is not seasonally adjusted, finance companies lost $3.3 billion but everyone else added a total of $7 billion. Of that increase, $5.5 billion (79%) belonged to the federal government.

	April (revised)	May (preliminary)	Annualized Increase
Government	$359.4 bln	$364.9 bln	20.0%

It appears growth of government nonrevolving debt accelerated in May, for in April it was only 15.1%.

Contrast all this with the BLS’s Employment Situation release, which reported a net growth of 54,000 jobs in May 2011.The BLS issued the June release today as well, which saw only 22,000 nonfarm payroll jobs added.

Indiana Tech Utterly Irresponsibly Predicts A Future Attorney Shortage

I was merrily sojourning the Internet when I came across the blood-soaked battlefield testifying to a pitched fight between J-Dog and Indiana Tech.

The Committee cherry-picks sources, and egregiously so, to the level of intellectual dishonesty. If this report were peer-reviewed, it would be rejected by anyone with two brain cells and a Google search box. The fact that it’s an official-sounding report from a university makes it all the more embarrassing.

Why J-Dog, what on earth did this innocent university do to you to deserve such ghastly bludgeoning and violent dismemberment? Wiping blood off his weapon, he gestures with link to Indiana Tech’s feasibility study justifying opening a new law school. Looking at one portion of this piece, dismemberment was justified.

However, absent dramatic change in the way law is currently practiced and given the dynamics of the national demand for legal education, the United States may need to import foreign lawyers or increase the outsourcing of legal work to foreign lawyers in their home countries to meet this country’s projected demand for legal services. (Page 9, pdf page 17, emphasis LSTB)

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA! IMPORT FOREIGN LAWYERS?? Oh God. How did they come to this astonishingly absurd conclusion? Let’s chuck a few shuriken into the carcass J-Dog mutilated by looking at “Chapter II: The Need for New Lawyers.” Here are some targets.

(1)  “The market for new law schools, and for legal education generally, involves a complex interplay between the need for lawyers and the demand for legal education.” (Page 3, pdf page 11, emphasis original)

FALSE: The market for new law schools solely depends on demand for legal education. It is wholly divorced from demand for legal services. If there were a connection, enrollments would drop in half starting this fall, probably more to account for the large number of Juris Doctor-holders who aren’t employed as lawyers (cyclically or otherwise).

(2)  “The growth of law firms, accompanied by bright job prospects for new law graduates over the two decades proceeding the recent global recession, was evidence of a growing need for lawyers.” (Page 4, pdf page 12).

FALSE: Of the legal profession in 1994, the Bureau of Labor Statistics stated, “The supply of persons trained as lawyers should continue to exceed job openings … As in the past, some graduates may have to accept positions in areas outside their field of interest or for which they feel they are overqualified.”

(3)  “Today the economy is recovering.” (Page 5, pdf page 13).

FALSE: According to the most recent Bureau of Economic Analysis press release, “Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.9 percent in the first quarter of 2011.”

(4)   “Today a useful model for visualizing the relative need for lawyers over time can be created by dividing the number of lawyers into our gross domestic product (GDP) and charting the results.” (Page 5, pdf page 13)

FALSE: Nonsense. Just looking at real legal sector output over time demonstrates the the lack of relative need for lawyers. For Indiana here’s a better idea, divide legal sector output by state by state population to get spending on legal services per capita. Go BEA data.

#	STATE (No. ABA Law Schools)	2009 POPULATION	2009 LEGAL SECTOR OUTPUT ($MILLIONS)	LEGAL SECTOR OUTPUT/CAPITA ($)
1	District of Columbia (6)	599,975	9,972	16,620.69
2	New York (15)	19,522,612	32,213	1,650.04
3	Delaware (1)	884,124	1,071	1,211.37
4	Illinois (9)	12,893,278	15,458	1,198.92
5	Massachusetts (7)*	6,592,205	7,056	1,070.36
6	California (20)*	36,887,615	31,273	847.79
7	Pennsylvania (8)	12,602,112	10,333	819.94
8	New Jersey (3)	8,693,723	6,663	766.42
9	Rhode Island (1)	1,057,451	804	760.32
10	Connecticut (3)	3,514,826	2,670	759.64
11	Florida (11)	18,509,936	13,235	715.02
12	Louisiana (4)	4,489,490	2,911	648.40
13	Maryland (2)	5,688,399	3,646	640.95
14	Georgia (5)	9,813,588	6,178	629.54
15	Minnesota (4)	5,262,824	3,311	629.13
16	Washington (3)	6,671,597	4,129	618.89
17	Texas (9)	24,770,651	14,704	593.61
18	Missouri (4)	5,982,234	3,487	582.89
19	Virginia (8)	7,862,480	4,563	580.35
20	Colorado (2)	5,015,155	2,830	564.29
21	Nevada (1)	2,638,588	1,349	511.26
22	Hawaii (1)	1,288,285	638	495.23
23	New Hampshire (1)	1,322,181	634	479.51
24	Maine (1)	1,315,889	598	454.45
25	Alabama (3)*	4,707,496	2,139	454.38
26	West Virginia (1)	1,821,290	825	452.98
27	Oregon (3)	3,823,058	1,725	451.21
28	Vermont (1)	621,436	279	448.96
29	Ohio (9)	11,531,860	5,046	437.57
30	South Carolina (2)	4,554,258	1,931	424.00
31	Oklahoma (3)	3,685,640	1,549	420.28
32	Wisconsin (2)	5,650,751	2,326	411.63
33	Michigan (5)	9,955,260	3,986	400.39
34	North Carolina (7)	9,357,107	3,663	391.47
35	Tennessee (3)*	6,291,220	2,460	391.02
36	Nebraska (2)	1,794,852	700	390.00
37	Arizona (3)	6,587,653	2,548	386.78
38	Mississippi (2)	2,949,943	1,128	382.38
39	Kentucky (3)	4,312,268	1,542	357.58
40	Utah (2)	2,780,871	945	339.82
41	Montana (1)	974,163	331	339.78
42	Wyoming (1)	544,391	181	332.48
43	Indiana (4)	6,417,276	2,131	332.07
44	Iowa (2)	3,008,331	959	318.78
45	New Mexico (1)	2,007,315	623	310.36
46	Kansas (2)	2,817,430	791	280.75
47	Alaska (0)	694,690	186	267.75
48	Arkansas (2)	2,887,331	720	249.37
49	South Dakota (1)	810,814	202	249.13
50	Idaho (1)	1,544,465	384	248.63
51	North Dakota (1)	645,903	142	219.85
	USA	306,656,290	219,167	714.70

(Note: This table does not imply that D.C. (much less anywhere else) has an attorney shortage, just that a lot of legal work is done there relative to its tiny population. The Washington-Baltimore-Northern Virginia combined statistical area had a population of 8.5 million in 2010, so much of the D.C. legal output is diffused among its neighbors, but it’s still a lot. Comparisons become more useful past jurisdictions that see unusual qualities or quantities of economic activity, esp. the Northeast. Although, that might be the problem with legal services in America…)

Notice how Indiana is near the bottom with $332.07 in legal spending per capita. That means it’s a small market for private legal services. It’s also an unusual one. It’s more populous and has more law schools than its immediate neighbors. It’s the 16th most populous state overall, yet it has the lowest legal output per capita of the 30 most populous ones. Even if there weren’t already a JD surplus, these are reasons to close law schools in Indiana, not open more.

(5)  “One can conclude that as long as GDP per lawyer exceeds $11 million in constant 2005 dollars, there will be a healthy demand for legal services.” (Page 15, pdf page 7)

FALSE: Indiana Tech made this number up. It should be measuring real legal sector output, but if it did, it’d find the sclerotic legal sector means no new law schools are necessary.

(6)  “The American Bar Association reported national lawyer populations of 1,018,000 in 2000 and 1,180,856 in 2009 … the average increase in the number of lawyers during this time was about 18,000, or less than 1.8% of a base lawyer population that is in excess of 1,000,000. GDP … is now projected to exceed 3 percent in growth in 2011. It can be difficult to focus on and comprehend the relevance of these trends, but it is worth the effort.” (Page 7, pdf page 15)

FALSE: It is not worthwhile to focus on the number of “active and resident” attorneys, outside of academic pursuits such as my own. Rather, the number of law degrees conferred and employed attorneys is worth focusing on. Since Indiana Tech uses a 35-year time horizon, I shall too.

I suspect the 35-year law degrees rate actually crosses the employment line around 1980.

We find that there have been ample law degrees in the economy for many years, which suggests that it should be easier to bring one of them back into practice than to train new ones. Indiana and its neighbors have plenty. In 2008, Indiana had 3,824 “idle attorneys” (attorneys “active and resident” but not employed as lawyers according to state government data). Illinois had 23,179, Michigan 13,101, Ohio 16,784, and Kentucky 5,366. If Indiana needs lawyers so badly, it could easily import from its neighbors at near zero cost.

I believe J-Dog eviscerated the rest as I can read no more.

If Indiana Tech were serious about considering a law school before importing foreign lawyers, it would (a) look at my law graduate overproduction page and conclude that there is no Shangri-La in America that desperately needs attorneys, and (b) check the Indiana Department of Workforce Development’s website and find that it projects 340 job openings annually while the LSAC reports that Indiana’s law schools conferred 846 JDs in the 2009-2010 academic year.

If there are more grads than job openings, then there is no need for a new law school.

846 grads is more than 340 annual job openings.

Therefore there is no need for a law school.

Quod Erat Demonstrandum

This concludes our shuriken chucking.

No Bubble, Just ROCK!!! Vol. 6

It’s the Fourth of July, meaning, you get to listen to one of Galaxie 500’s best songs, which former member Dean Wareham of Dean & Britta played as an encore when they were in Prospect Park, Brooklyn two years ago. ‘Twas awesome; one of the best outdoor shows I’ve ever seen.

Good ol’ dream pop; nothin’ beats that!

Lawyers Per Capita by State (2010 Edition)

[****THIS IS AN OUTDATED POST ON LAWYERS PER CAPITA. THE PERMANENT VERSION OF THIS POST CAN BE FOUND ON THIS PAGE. PLEASE LINK TO THAT INSTEAD.****]

Many readers find their way to Law School Tuition Bubble by searching for the “number of attorneys per capita by state,” and discover research I did way back in the summer of 2010. Other searches bring people to the Avery Index, which used the 2000 Census with 2007 Martindale-Hubble attorney listings. We have better data available, but I credit the Avery Index for teaching me to calculate per capita rates in terms of a set number of residents (10,000) to make comparisons easier. In the past, one would have to shell out $45.00 to buy the Lawyer Statistical Report: The Legal Profession in 2000 from the ABA bookstore, which is no longer available except for a five-page excerpt on the ABA’s Market Research page. So, here’s the 2010 update, open source for all.

This page uses the number of attorneys “active and resident” according to the “ABA’s National Lawyer Population by State” document (NLPS) and population figures from the U.S. Census Bureau. This does not tell us the number of inactive or nonresident attorneys, which was around 7% in the early 2000s. To give you a comparison for the 1.2 million attorneys on the rolls, between 1970 and 2010, the ABA conferred just less than 1.5 million law degrees, and about 750,000 people were employed as lawyers in 2008. Those numbers will be updated later as they become available.

So, here’s what y’all came here for. As always, I consider D.C. and Puerto Rico states.

#	STATE	2010 POPULATION	# LAWYERS (2010)	LAWYERS/10,000 RESIDENTS (2010)
1	District of Columbia	610,589	49,207	805.89
2	New York	19,577,730	157,778	80.59
3	Massachusetts	6,631,280	44,121	66.53
4	Connecticut	3,526,937	20,309	57.58
5	Illinois	12,944,410	60,069	46.41
6	New Jersey	8,732,811	40,286	46.13
7	Minnesota	5,290,447	22,585	42.69
8	California	37,266,600	153,155	41.10
9	Missouri	6,011,741	23,728	39.47
10	Louisiana	4,529,426	17,688	39.05
11	Rhode Island	1,056,870	4,098	38.77
12	Colorado	5,095,309	19,737	38.74
13	Maryland	5,737,274	22,149	38.61
14	Pennsylvania	12,632,780	47,453	37.56
15	Puerto Rico	3,791,913	13,282	35.03
16	Vermont	622,433	2,166	34.80
17	Washington	6,746,199	23,204	34.40
18	Alaska	708,862	2,418	34.11
19	Florida	18,678,049	62,875	33.66
20	Michigan	9,931,235	32,731	32.96
21	Ohio	11,532,111	37,335	32.37
22	Oklahoma	3,724,447	11,711	31.44
23	Hawaii	1,300,086	4,077	31.36
24	Texas	25,213,445	77,049	30.56
25	Oregon	3,855,536	11,766	30.52
26	Delaware	891,464	2,706	30.35
27	Wyoming	547,637	1,636	29.87
28	Montana	980,152	2,921	29.80
29	Alabama	4,729,656	13,655	28.87
30	Nebraska	1,811,072	5,149	28.43
31	Kentucky	4,339,435	12,334	28.42
32	Virginia	7,952,119	22,472	28.26
33	Kansas	2,841,121	8,009	28.19
34	Maine	1,312,939	3,663	27.90
35	Georgia	9,908,357	27,398	27.65
36	Wisconsin	5,668,519	15,078	26.60
37	New Mexico	2,033,875	5,269	25.91
38	West Virginia	1,825,513	4,725	25.88
39	Tennessee	6,338,112	16,365	25.82
40	New Hampshire	1,323,531	3,396	25.66
41	Nevada	2,654,751	6,523	24.57
42	Utah	2,830,753	6,778	23.94
43	Iowa	3,023,081	7,080	23.42
44	Mississippi	2,960,467	6,786	22.92
45	South Dakota	820,077	1,839	22.42
46	Indiana	6,445,295	13,850	21.49
47	North Carolina	9,458,888	20,226	21.38
48	North Dakota	653,778	1,397	21.37
49	Idaho	1,559,796	3,299	21.15
50	South Carolina	4,596,958	9,264	20.15
51	Arizona	6,676,627	13,384	20.05
52	Arkansas	2,910,236	5,789	19.89
	USA AVERAGE	312,842,729	1,201,968	38.42

And for your viewing pleasure here’s a chart of this by state, excluding D.C. because its number dwarfs the scale.

In this map, Maryland is the national average. It just goes to show that lawyers are clumping in a handful of states.

Here’s the same data by Census divisions, excluding Puerto Rico:

CENSUS DIVISION	2010 POPULATION	# LAWYERS (2010)	LAWYERS/10,000 RESIDENTS (2010)
Middle Atlantic	40,943,321	245,517	59.97
New England	14,473,990	77,753	53.72
Pacific	52,532,034	201,143	38.29
South Atlantic	59,659,211	221,022	37.05
East North Central	46,521,570	159,063	34.19
West North Central	20,451,317	69,787	34.12
West South Central	36,377,554	112,237	30.85
Mountain	19,724,149	53,024	26.88
East South Central	18,367,670	49,140	26.75
USA	309,050,816	1,188,686	38.46

And here’s a map of this, the Pacific division is close to the national average.

The most recent NLPS does have the number of lawyers active and resident in 2011 but (a) we don’t have population data for each state yet, and (b) Puerto Rico and Illinois shamefully chose not to respond, which will mess the data up. There’s probably a correlation between active and resident status and bar authorities requiring high fees and CLE requirements, which I’m interested in investigating. The fact that Massachusetts lost 5% of its lawyers over the course of 2010 strongly suggests that many attorneys changed their status due to an inability to afford bar fees and CLEs. The ABA Market Research Department should probably start counting inactive attorneys like it did in the 2000s. We may learn much.