Day: 2013/11/11

Why Would Admissions Offices Think the LSAT Nosedive Is Temporary?

The National Law Journal ran an article recently about the low October 2013 LSAT numbers. It quoted Drexel law professor Dan Filler saying, “I think there was a kind of optimism bias among a lot of people in the academy, and maybe a sense of disbelief that the number of applicants could and would continue to decline.” Later he said that some law deans had requested funding from their universities arguing that the nosedive would “reverse or at least level out.” The University of Michigan’s Sarah Zearfoss also opined that “admissions officials” believed the low drop in June LSATs this year indicated a leveling off.

These statements are all hearsay, but that doesn’t mean we must disbelieve them. Nevertheless, the “surprised” response raises the obvious question: Why do law schools and parent universities believe that people will suddenly start taking the LSAT and applying to law school again or that the decline will stop?

To begin with, past experience indicates that law schools should be booming right now as young people are thoroughly jobless. I’ve been sitting on this for a few months, but now I think it’s time to trot it out: The 2001 Official Guide contains the total number of LSATs administered going back to 1963. If you want “past experience,” this is it.

Enrollment, LSAT, & Application Data

(Source: ABA, LSAC)

I count five peak-to-trough cycles: 1973-1980, 1981-1985, 1990-1997, 2002-2005, and 2009-2012+.

Here are their average annual rates of decline. (I’m not going to bother compounding them.)

CYCLE Average Annual Growth Rate
1973-1980 -3.12%
1981-1985 -6.31%
1990-1997 -5.29%
2002-2005 -2.42%
2009-2012+ -13.07%

So yes, in case you were wondering, the current annual decline is more than twice as steep as any previous one, the only caveat being that the typical composition of first-time and repeat test-takers might be significantly different from previous years because of the rule-change allowing law schools to report applicants’ highest LSAT scores rather than averaging them.

Whether the 2013-14 administration year will be lower than the 1997-98 one (103,991) is disputable, but given that there were fewer total applicants in 2012 than 1985, it’s possible that first-time takers are at an all-time low going back to the 1960s. The last 1L low point was 1986 (40,195), and 2013 might have crossed that line. If it hasn’t, 2014 probably will.

Another observation worth noting from the chart: 2012 was the first year that there were more graduates than 1Ls, a phenomenon that should continue for the next few years until a trough is reached. It further illustrates the steepness of the current nosedive(s).

…Which returns us to the question of why the academy is surprised we’re not there yet. Looking at the older LSAT data demonstrates just how countercyclical demand for legal education was until 2009. Each of the LSAT peaks pretty much coincides with recession years: 1973, 1981, 1990, 2002, and 2009. The troughs coincide with recoveries. I’m recalling that Slate article from a few months back rationalizing the applicant nosedive on what now passes for “economic recovery.” You get the point, though. It would be one thing if the economy had recovered rapidly, but it didn’t at all. This is the first “cyclical” downturn in LSATs.

Part of the academy’s surprise, I guess, is that belief in the human capital hypothesis in a sense cuts both ways. Law schools continue to believe (and argue) that their degrees make people more productive and aren’t at all positional goods. It follows that they would be surprised that LSATs/applicants/1Ls/etc. would decline past the boundaries of the normal cycles in legal education over the last few decades.

I suppose at some point an equilibrium will be reached because some law schools can credibly promise their graduates access to elite law careers, regardless of biglaw’s fortunes. For instance, going by the Current Population Survey and Occupational Outlook Handbook, all levels of government reliably employ roughly 127,000 to 160,000 lawyers, about 16-18 percent of the total. That, and demand for legislators, judges, and corporate honchos of various stripes will keep law a winning career for some. When the alternative is underemployment, elite law schools will always be able to find people willing to graduate with higher debt-to-income ratios than their predecessors.

A lot of other people will continue to attend due to misinformation, believing that the degree will signal more than it does. At some point the damage done to them will be mitigated whenever student loan reform comes along, but you can’t prevent everyone who shouldn’t go from going, especially when they face desperate unemployment as an alternative too.

As a final, philosophizing note, I see the irreparable, generational shift in attitudes toward law school as a limited political victory against Americans’ fetish for positional goods. (I use “positional” rather than “Veblen” because I’ve come to think all Veblen goods are either positional goods or some other explainable exception to the neoclassical theory of demand.) The sequence of events is: see wealthy with positional goods, get angry, legislate subsidy for poor people to access positional goods (student loans, subprime mortgages), watch poor get poorer fighting their way up the ladder, and then spitefully deny them liquidation rights.

I don’t expect admissions officials to agree, but I am interested in what their response will be in the next couple years when the numbers of LSATs, applicants, and 1Ls reach record lows going back as far as most of the profession can remember.

I would, however, like it if people and politicians recognized that subsidizing zero-sum wealth is self-defeating.