LSAT Tea-Leaf Reading: February 2015 Edition


No. LSAT Takers, 4-Testing Period Moving Sum

20,358 people took the LSAT in February, up 859 (4.4 percent) from 2014. Notably, that’s growth in two consecutive testing administrations. Wow indeed.

This ends our LSAT year with 101,689 total LSAT takers, which is a record low going back to 1986. Back in those days, you said you were listening to Springsteen’s Born in the U.S.A. or Heart’s eponymous album, but we all know couldn’t take Barbra Streisand’s The Broadway Album and the soundtracks to Miami Vice and Rocky IV out of your tape deck. (Cultured readers from my age bracket will recognize how Rocky IV‘s villain’s theme closely resembles that of Unicron’s from the Transformers movie of the same period: Both were crafted by Vince DiCola.)

Back to less exciting 2015, I think there’s a little room left for LSAT takers to drop, but applicants aren’t shying away from law school as they were in the past. They’re down a mere 7 percent from this time last year.

No. Applicants Over App Cycle

It’s unlikely they’ll weigh in at fewer than 50,000, so it looks like we’re pretty close to the bottom if we’re not there already. Who knows, though, maybe it’s just people thinking they could get into elite law schools.

For some perspective on the law school crunch, here’re the trends since the 1960s.

Enrollment, LSAT, & Application Data

The only unobvious insight I can give you from this chart is how amazing it is that peak LSAT in 2009-11 just did not translate into peak applicants. Much of it is due to non-first-time test-takers, but it’s a real harbinger for how things will look going forward. We may be at the applicant trough, but folks, they ain’t coming back.

No Bubble, Just Rock!!! Vol. 9: 2000 Edition

Mellow is the Bubble
It’s been a slow week ’round LSTB-ville-burg-polis, so I reckon you deserved some relief from most things education-related. However, since the June LSATs fell to a record low going back to 2000, I figured I’d blow the dust off the ol’ CD books and see what good stuff I wish I was listening to back then but probably wasn’t.

We have the Compulsive Gamblers’ “Two Thieves.”

…And “Bicycles,” by the Clientele. The real treat is the whistling at the end, provided by me. It was my unsolicited contribution to the performance. It was said that two guys drove from Mexico up to Brooklyn just to see this show. I cherish the Clientele, but I don’t know if I could punish myself with that kind of a road trip just to see them. Maybe when I was 19.

That is all. Peace.

No Bubble, Just ROCK!!! Vol. 8: 1997 Edition

Mellow is the Bubble

Still working on that ABA task force report, but a few weeks ago when I reminded you all that back in 1997 you were listening to the likes of Barbra Streisand, LeAnn Rimes,Shania Twain, and Chumbawamba, you passionately denied me. One of you went so far as to write:

I’m waiting for the “No Bubble – Just Rock” post that graces us with Shania Twain. I suspect that has about as much chance happening as the admins have of getting 40,000 lemmings to sit for the LSAT again.

Taking this as a challenge, I listened to Come on Over the following Saturday morning. Yeah, 40,000 LSATs isn’t worth subjecting you lost souls to the Nice Guyism of,  “If You Wanna Touch Her, Ask!”

Instead, I looked through my meager collection of 1997 music and found that I already used many of the bands in earlier NBJRs. Strange coincidence, I guess. So, here’s what I came up with.

We have the Sea and Cake, which I only started listening to a month ago.

Then Sleater-Kinney

…And what I was listening to at the time, the Makers:

How Much Is the Land in America Worth? (Redux)

The land-taxers I know are pleased with Wonkblog’s decision to hand “land value taxation” its coveted “most worthwhile yet hopeless policy crusade of the year” award for 2013. I guess the land value taxation pilot program Connecticut approved last June isn’t good enough. However, Wonkblog courteously acknowledged Mason Gaffney’s work on the subject.

Aside from linking to the Slate post on the topic that I discussed back in October, Wonkblog linked to another one from December in which Matthew Yglesias informs us that his correspondents told him that the Federal Reserve’s Flow of Funds report contains enough data to calculate the value of privately held land in the U.S. The number? $14.488 trillion. He concludes:

So who cares? Well, you should care. This number is high enough that it tends to confirm that [sic] view that taxation of land and other natural resources, supplemented by pollution fees and things like congestion charges could replace all taxes on labor and investment and still fund an ample welfare state and public sector.

Lamentably, Yglesias doesn’t show his readers why $14.5 trillion in land value “tends to confirm that view that taxation of land and other natural resources … could replace all taxes on labor and investment.” Indeed, his statement implies that the only thing standing between handing every American a citizen’s dividend equivalent to median household income is a posse of mustachioed landowners.

Alas, this is not how land value taxes work, but Yglesias’ vague editorial provides an opportunity to discuss the difference between “land value” and “land rent.” Land rent is the annual amount one pays to use land. Land value is the purchase price of real estate absent improvements. Land rent is like annual income; land value is like lifetime income once you’ve accounted for your JD premium. The ratio of land rent to land value is the “capitalization rate,” a percentage that differs among cities. Basically, it’s the discount rate; the higher it is, the lower the land value.

When Georgists talk about taxing land rent, the calculation is easy: Just multiply the rental value by the percent to be taxed. Let’s say we have a parcel that rents at $100,000 annually. Divided by a capitalization rate of 5 percent, its land value is $2 million. If we want to tax 80 percent of the land rent, we get $80,000 in land rent tax. Easy-peasey.

Now, like the typical Slate reader you’re thinking, “Why not tax land values instead? Wouldn’t an 80 percent tax on that yield $1.6 million?” And it’d be a good question—two even. The reason is that the amount taxed gets subtracted from the rental value, so as the land rent tax goes up, the land value drops. The rental value, however, remains the same. Here’s the equation:

Land Value = (Rental Value ­– Tax Amount) / Capitalization Rate

So taxing $80,000 from our parcel leads to a net rental value of $20,000 divided by a 5 percent capitalization rate and we get a land value of $400,000, not $2 million. If we want to express the land value tax as a percentage, then we modify the equation:

Land Value = Rental Value / (Capitalization Rate + LVT Rate)

…And then solve for the land value tax rate. In our case, it’s a 20 percent land tax on a $400,000 parcel, not an 80 percent tax on a $2 million parcel. Got it? Good.


So we have a $14.488 trillion chunk of land that Yglesias believes tends to confirm the view that land taxes can finance an ample welfare state and public sector. Unfortunately, he gives readers neither his estimate of the land’s rental value nor that of the capitalization rate he used to close the accounting identity detailed above.

I can help. I’ll assume a generously low capitalization rate, 3.88 percent, the same as the current yield on 30-year T-bills (the aforementioned Gaffney recently demonstrated that wealthy people get much lower discount rates than poor people). We get a mere $562.1 billion in taxable land rent, which isn’t even enough to cover the federal deficit.

Now’s the part where Slate readers might question why Yglesias thinks this is sufficient to finance an ample welfare state and public sector, but they wouldn’t realize that government at all levels collected about $4.3 trillion in taxes in 2012. Add that back to annual GDP and we have $21.1 trillion to work with. How much of that is land rent? Again, we’ll have to fill in the annual rental value because Yglesias does not. Let’s say it’s only 20 percent, and we get $4.2 trillion in taxable land rent and at our 3.88 percent capitalization rate, $108 trillion in pretax land value.

You can tweak the capitalization rate and the percent of land rent as a share of GDP, but I think 20 percent is too low, if only because by the time you tax the land value down to $14.5 trillion as we do now, governments get less revenue than under the current tax system. This is implausible. Raise the percentage of GDP that goes to land rent to 30 percent, and you have well over the $5.7 trillion U.S. governments currently spend. Anything more is Hanukkah.

Of course, none of these calculations account for the increases to national income by recovering the deadweight losses imposed by our current tax system or the costs of administering it. Nor do we know if the Fed’s assessments undervalue land, which I—as does Gaffney—bet they do because hiding wealth in land is a time-honored practice. So yes, we should be confident that there’s enough land value (plus other rents, like spectrum rights, mineral rights, IP rights, etc.) to finance government and the welfare state, but a $14.488 trillion land value assessment alone is insufficient to prove it.