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Law and law school economics

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David Segal has written another interesting piece on the state of legal education, this time focusing on the business side of law schools. Much of the piece is taken up with a case study of New York Law School and its dean, Richard Matasar. I’ve long been an admirer of Matasar’s efforts to reform the basic structure of legal education in America, which he was involved in long before he became a dean (in my view reform efforts hinge largely on being able to convince the ABA to make its accreditation standards more flexible). As the piece illustrates, Matasar’s reformist agenda has ended up in considerable tension with many aspects of his administrative career.

A cynic might consider Matasar a hypocrite. If even he ends up engaging in many of the same practices he deplores, does that mean his efforts at reforming legal education are a sham? I disagree with this interpretation. In my view, Matasar’s career illustrates the paradoxical and even potentially tragic character of attempts to reform powerful, well-established institutions. Unlike the revolutionary, who can indulge in creative destruction, the reformer must work within a system, using tools that are designed to impede his efforts at reform. His position ensures he runs the risk that his efforts will be so compromised by practical realities that he will end up helping to perpetuate the very things he is trying to change.

Anyway, a question that deserves more attention than it has gotten from legal academics is, precisely why has the cost of legal education skyrocketed over the past generation?

This is a complicated matter, but I’ll use a few statistics from the law school from which I graduated (Michigan) to illustrate the current situation. (All of the following financial information is expressed in constant, 2010 dollars).

Thirty years ago, annual in-state tuition+fees at UM Law was $5,367, and out of state tuition was $11,514. This fall, the respective figures will be about $47,000 and $49,500. In other words, in-state tuition has increased by a factor of nine in real inflation adjusted terms. Part of this is no doubt a function of the gradual withdrawal of tax subsidies for in-state tuition. But note that out of state tuition, which was never tax-subsidized, has increased by four and a half times in real terms. One result of these trends is that the 84% of 2010 UM Law grads who borrowed money during law school graduated with an average debt of $112,133. (That class matriculated when tuition was nearly $10,000 per year lower, so the entering class of 2011 is likely to average close to $150,000 in law school debt when it graduates three years from now).

One main driver of increasing costs across legal academia has been an increase in the size and the compensation of law school faculty. For example, 30 years ago the salaries of Michigan’s tenure-track law faculty ran from about $75,000 to $155,000 in 2010 dollars. Today the comparable figures are about $140,000 to $300,000 (This counts only base salary. Actual salaries are about 15% higher for most faculty because of “summer research grants” that for most faculty are de facto salary supplements.). Interestingly, 30 years ago the law school’s dean’s salary was no higher than that of several other senior faculty. Last year the dean’s published salary was $442,000.

Meanwhile over just the past decade the number of full-time law faculty at ABA-accredited schools has increased by 40% (a related statistic that will surprise no one familiar with academia is that over the same period the number of law school administrators more than tripled).

All this has been taking place at a time when the number of jobs for law graduates whose salaries justify six-figure debt loads has dropped sharply. Meanwhile, legal academia has barely begun to grapple seriously with the issue of who (other than independently wealthy people and partners of well-paid spouses) is going to be able to afford to take public interest legal jobs, the vast majority of which pay salaries that will not allow today’s average law school graduates to service their educational debts while at the same time paying for even a modest life style. (Note that the figures on law school indebtedness do not include undergraduate or consumer debt).

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