Month: October 2013

LSAT Tea-Leaf Reading: October 2013 Edition

Apparently the news got out before the LSAC could update its Web site, but the proof is at The Wall Street Journal. There were only 33,673 LAST-takers in October 2013, which is just shy of the record low of 33,558 in 1998 going back to the 1980s.

No. LSAT Takers, 4-Testing Period Moving Sum

The four-testing-period moving sum is at 107,182, a record low going back to February 2000 (107,153). To give some perspective, the record low for the moving sum was 15 years ago in October 1998 (102,073). Notably, the October LSAT decline is decelerating, last year there were 16 percent fewer test-takers; this year there are only 11 percent fewer. I’m not sure if the record low for LSAT-takers will arrive next year or the year after.

Despite the news around the Web (e.g. New England Law’s consolidation plans, declining LSAT scores, etc.) it’s still remarkable how resilient law schools have been. They’re offering bigger programs for fewer applicants. I know I’ve said this before, but if it weren’t for Grad PLUS loans and nondischargeable private loans (if that), certainly some schools would’ve failed by now. Talk about a bailout that came just in time.

‘Accreditation Reform Unlikely to Change Legal Education’ on the Am Law Daily

Accreditation Reform Unlikely to Change Legal Education

I chose not to comment on the renewed attack on law professors’ scholarship in The New York Times as it wasn’t germane to my article. Sure, a few statements from judges and lawyers isn’t a scientific analysis of journal articles’ value, but as I see it, the law of diminishing returns should tell us that adding 30%+ more full-time, non-clinical, journal-article-writing instructors to law schools over 15 years can’t really add much social utility if the graduates can’t get jobs.

So… How many people are dressing up as Sister Ray for Halloween?



No Krugman, de Blasio Should Milk Wealthy Foreigners … If He Could

Paul Krugman, “Sheiks and Princelings and Beeznessmen, Oh My

A few weeks after we’re told that the “unimproved land tax” is economists’ favorite tax, Paul Krugman writes:

New York is experiencing a similar transformation [as London] into a global rentier city … It’s going to present an interesting conundrum for Bill de Blasio … he’d be governing a city where a lot of the wealth was generated somewhere else and resides in NYC for the amenities (which include the ability to rub shoulders with other rentiers.) So he needs to milk these people, but not too hard.

I guess it’s better than being Detroit.

First of all it doesn’t matter if NYC becomes a city for rentiers from the world over or just Newark. The concern is that as non-residents they benefit from the city’s services without paying much in taxes of any kind. However, as the Times article Krugman links to correctly points out, the city’s tax laws are authorized by the state government, so the mayor wouldn’t be able to tax the global elite even if the council unanimously supported it.

Since the global elite are also immune to income taxes, what’s necessary is reform of the state’s byzantine property tax system so that people who can fly into town and live in the Plaza Hotel nearly tax free or plop down $90 million for a penthouse in One57 and not even live there all year pay their fair share.

Moreover, Krugman’s implicit fear of the consequences of “milking these people too hard” is uncharacteristically illiberal of him. Hyper-wealthy people who don’t live in the city year-round but take up space nonetheless do little to benefit the city. There’s no way their consumption spending on “amenities” creates enough jobs to offset the services they consume, and their presence drives up land prices, making the city less affordable for people who live and work in it, including relatively high-paid professionals who are encouraged to leave town due to higher income taxes.

It’s not Detroit; think Fritz Lang’s Metropolis only above-ground and with commutes.

Actually, There’s Quite a Bit of Research on Land Taxes

On Slate, Ashok Rao wrote a post titled, “Meet Economists’ Favorite Tax—The Unimproved Land Tax.” He opens:

For a long time the economics profession has quietly noted that a land value tax is economically efficient but, having sussed out its theoretical benefits, left the subject for more intellectually rewarding pursuits. The result is a frustrating dearth of scholarship on the subject.

I have four problems with this opening. One, there’s no such thing as “improved land”; land is land, and improvements on land are capital. Two, the economics profession only “quietly notes” the economic efficiency of a land tax because neoclassical economics dogmatically fuses land with capital; you can thank Henry George-hater John Bates Clark for that. (Marxism didn’t help much either.) Three, there’s more recent research on land taxes than the 1985 paper by Steven Cord that Rao found. Finally, the subject of land taxes is much more intellectually rewarding than many other pursuits (in economics) because it raises topics on social justice, the history of economics, and economics’ politicization and lack of intellectual clarity.

It’s surprising that Rao couldn’t find more studies on LVT. In fact, Steven Cord himself collected a list of no fewer than 237 such studies in February 2006. I’m probably being unfair and Rao wanted a dollar figure for the United States’ annual land rent. If so, point number one is that technically it doesn’t matter. Shifting taxes from labor and capital onto land logically cannot create a revenue shortfall (aside from crowding out) because the shift increases taxable land values. Mason Gaffney refers to this as the “ATCOR principle” (all taxes come out of rents). In truth, non-land taxes suppress production and commerce, so a land-tax shift would raise GDP (and counts it better too, e.g. not including land rents as a product when they’re spontaneously generated).

My current favorite example of a recent analysis of the effects of a land-tax shift is the essay collection, The Losses of Nations: Deadweight Politics Versus Public Rent Dividends. Published in 1998, the editor Fred Harrison writes, “[T]he wealth lost to nations is so large as to override all scholastic concerns for precision.” (Pages v-vi) Okay, I think some precision is warranted, but if Rao wants a more recent figure, then he should turn to chapter 6 of Losses of Nations. Authors Nicolaus Tideman and Florenz Plassmann calculate that U.S. current-dollar GDP in 1993 ($5.495 trillion) would have actually been $7.097 trillion with a land tax, a 23 percent deadweight loss. For Europe, due to its VATs, the deadweight loss is closer to 50 percent. Part of the reason it’s hard to argue for land taxes is that it’s hard to conceptualize the opportunity that’s been lost.

By the way, I’m incredulous about these numbers too, mainly because I think it’s too good to be true for Georgists, but I’m happy to be proven wrong.

One thing that land-taxers also hasten to point out is not just how government accounting reshuffles land rents into categories like “corporate profits” but how government under-assesses land values. For example, Michael Hudson wrote in 2001, “The Lies of Land: How and Why Land Gets Undervalued,” in which he noted that governments tend to use the land-residual rather than building-residual valuation methodology that low-balls land values.

According to Hudson, in 1993 the Federal Reserve found that all the land owned by nonfinancial corporations nationwide had a -$4.0 billion value! Soon after, the Fed stopped publishing national land statistics altogether. In chapter 2 of Losses of Nations, Hudson is quoted as finding that the nation’s land value in 1994 was not the $4.4 trillion the Fed reported but in fact $8.8 trillion.

And we’re told that economists don’t find this intellectually rewarding.

I’d roll my eyes if someone said Georgists sound paranoid when they take the “indifference” economists show to land taxes for political capture by the rentiers. However, so long as economists treat land taxes as a trivial supply and demand graphic in a textbook box insert instead of learning the academic and political work backing it, they won’t understand what’s at stake.

Full-Time Private Law School Tuition Projections for 2017, 2022

It’s the season for the LSTB’s perennial full-time private law school tuition projections. This is the third year I’ve made such projections, and I always try to improve the methodology to produce accurate and precise forecasts. The biggest changes this year are a large increase in source data—last year I scoured the Web for older copies of the ABA-LSAC Official Guide to the ABA Law Schools (Official Guide)—and I’ve improved the projections methodology.

In previous years, I forecasted future costs via linear regression based on law schools’ previous prices. I chose this model because it offered the lowest average costs, but it proved woefully imprecise. This year, I’ve changed to using law schools’ average annual (numeric) growth rates because it is both more accurate and precise than the linear regression methodology.

You can read about my test of the methodologies here.

As always, I exclude the two private law schools in Puerto Rico and Brigham Young’s tuition for LDS students. Unlike last year, though, I will not try to make projections for public-in-name-only law schools because there aren’t enough data to make reasonably accurate predictions. [Mini-update: The projections are in current dollars.]

Like last year, the “relative variance” column on the far right of the projections table is the percent difference between the law schools’ projected costs for 2012 (based on their 1999-2011 prices) and what they actually charged in 2012. The point is to provide an indicator for distinguishing between outliers and reasonably accurate projections. In 2012, the average private law school raised its price by less than in previous years, suggesting that going forward, costs will plateau. Here’s a chart of the distribution of tuition increases over the years.

Dispersal of Full-Time Private Law School Tuition Price IncreasesDispersal of Full-Time Private Law School Tuition Price Increases (Zoomed In)

Analysis of the Official Guide data also shows that the percent of full-time students paying full freight has dropped considerably in the last decade:

Percent Full-Time Law Students Paying Full Tuition

It might be the case that the real tuition today are less for the median student than a few years ago, but it’s still important for people to know that law schools will continue to depend on students who pay full freight. Because it’s harder for them to choose to drop out, 2Ls and 3Ls are especially likely to be asked to shoulder higher costs as their scholarships are rescinded.

The Official Guide data can be found on the LSTB data page, which I’ve updated to include the 1999-2000/2003-2004 academic years and inflation-adjusted tuition instead of percent increases. Okay, here are the projections. Enjoy.


Another Note on Private Law School Tuition Projection Methodologies

It’s the time of year again in which I offer my projections of how much private law schools will charge full-time students five and ten years from now. This requires a note (or digression) on the methodology I use. Last year, I went to great lengths to justify my decision to use law schools’ tuition data in individual linear regressions for the projections. Two things are different this year:

(1)  Because I scoured the Internet for older copies of the Official Guide, I now have more law school tuition data. My data go back to 1999 instead of 2004. The data alter the projections.

(2)  I may’ve found a better projection methodology than individual linear regression.

The added data speak for themselves, but it occurred to me that another potentially effective way of projecting future law school tuition is by using the average annual growth rate.

This table ought to explain what I’m talking about:

1999 20,980 N/A
2000 22,055 1,075
2001 23,194 1,139
2002 24,413 1,219
2003 25,968 1,555
2004 27,617 1,649
2005 29,229 1,612
2006 30,915 1,686
2007 32,841 1,926
2008 34,710 1,869
2009 36,510 1,800
2010 38,097 1,587
2011 39,697 1,600
2012 41,132 1,435

The questions are (a) is the average annual growth rate more accurate and precise than linear regression, and (b) if so, is it better to project each law school’s tuition individually or apply the overall average ($1,550) to each law school to snuff out outliers (Faulkner, I’m looking at you)?

On average the linear regression and average annual growth rate methodologies produce the same results.

Private Law School Tuition Projection Methodologies Comparison (2012-2022)

So let’s take this to the individual law school level by asking, “Which methodology on average most accurately and precisely predicted law schools’ 2012 costs based on their 1999-2011 prices?”

No. Private Law Schools by Tuition Projection Percent Variance by Methodology (2012)

Here are the average percent variances between the projected tuition prices and actual results (closer to zero is better) and the average deviations of the percent variances as a share of the average percent variance (smaller is more compact, which is better).

  • Linear Regression: 0.2% (average variance); 1,072.5% (deviation share of average)
  • Average Annual Growth Rate: 0.4%; 382.2%
  • Average Annual Growth Rate (Individual): 0.5%; 308.7%

You can see why I’m dissatisfied with the linear regression methodology: great average, horrible distribution.

The two average annual growth rate methodologies raise a conundrum: Applying the average law school’s average annual growth rate to each school is more accurate (closer to zero) while calculating the average annual growth rate for each school individually is generally more precise (tighter deviation). Here’s what it would look like projected out to 2017.

No. Private Law Schools by Tuition Projection Percent Variance by Methodology (2017)

  • Linear Regression: 20.7%; 15.4%
  • Average Annual Growth Rate: 19.3%; 12.8%
  • Average Annual Growth Rate (Individual): 19.8%; 9.4%

I’m pleased enough with the individual average annual growth rate’s precision that I’m willing to adopt it for this year. The only other revision to this methodology I can imagine is weighting the average annual growth rate on recent tuition increases on the basis that future tuition increases are going to be more like recent ones than those of the mid-2000s. I’d like to wait and see how much (or little) tuition costs increased this year before running that experiment.

Because of the change, here are revisions to past projections according to the older data and newer methodology. Note, the revisions do not include more recent years’ data to keep them consistent with the older projections.


GUEST POST—Don’t Go to Law School (Unless) (Flow Chart Edition)

(Connecticut attorney Samuel Browning obtained permission from Paul Campos to create a flow chart version of the book Don’t Go to Law School (Unless). Mr. Browning’s herculean effort is displayed here as a single graphic taken from his spreadsheet with only some proofreading on my part. I have not read the book, so any unclear points and errors are the author’s own.)

Browning--DGTLSU Flow Chart (2.0)