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The end of the law school scam and the limits of transparency

[ 135 ] April 17, 2014 |

Three years ago this week I published a piece in the New Republic, outlining the various ways in which the graduate employment rates law schools advertised were deeply misleading. At that time, only a handful of mostly elite schools published meaningful employment data: by contrast, the standard practice was to report a nine-month employment rate that aggregated all employment, legal and non-legal, full-time and part-time, temporary and long-term, school-funded and real, into one impressive-sounding percentage. (Indeed until that very spring law schools were even allowed to get away with excluding graduates who they claimed were not seeking employment from their calculations).

On top of that, schools routinely published “average” salary numbers that didn’t reveal the percentage of graduates — often consisting of a tiny and completely unrepresentative sample — that these “average” numbers represented.

After pointing out how a closer look at the real numbers would alter radically the impression prospective law students would have on their potential six-figure investment, I argued what one would have thought was a non-controversial position:

All of this suggests the extent to which prospective law students need more and better information. Of course, such information will make law school look like a far worse investment than it does at present. Still, if we assume that the point of academic work is to reveal the truth, rather than to engage in the defense of a professional cartel from which law professors benefit more than almost anyone else, then this work needs to be done.

There was in fact tremendous resistance from the law school establishment to requests for more and better public information (This was information which all law schools collected every year already, but again with a tiny handful of exceptions didn’t publish. That the information was already collected made arguments that it would be costly to supply it to the public frivolous on their face. This didn’t stop lots of schools from making that argument, however). Today, the reason for that resistance is even more obvious than it was in April of 2011: the hypothesis that more transparency would produce a big decline in law school applicants has now been tested, with unambiguous results.

This fall, around 37,000 to 38,000 people will enroll at ABA law schools. Taking the higher end of the estimate, this represents close to a 30% decline in what law school enrollments looked like before the law school reform movement successfully pressured the ABA Section of Legal Education and the Profession — which has tended to be controlled by deans and faculty from low-ranked schools, who had the most to lose from increased transparency — into forcing schools to disgorge something resembling realistic employment numbers (the ABA still refuses to mandate any publication of salary data however).

The decline in applicants has been even sharper — nearly 40% — as law schools have slashed their admission standards to keep enrollments from cratering further.

Meanwhile schools have been cutting prices: it’s quite likely that average effective per capita tuition — sticker tuition minus discounts — is actually going to be lower in constant dollars for this fall’s entering class than it was for students who matriculated three years ago. The combination of far smaller entering classes and lower real tuition has forced many schools into serious cost-cutting mode, after decades of largely unrestrained extravagance.

Faculty-student ratios actually fell in half between 1978 and 2011 despite much larger enrollments, while administrative positions proliferated far faster than faculty lines. Faculty salaries nearly doubled on average in real terms, while administrative compensation skyrocketed in ways that made faculty raises look modest by comparison. Many schools replaced perfectly adequate facilities with increasingly palatial physical plants, in a sort of perverse amenities-based arms race for tuition dollars.

Of course all this had to be paid for, and it was, mainly by tuition tripling at private law schools and increasing five times over for resident students at public law schools. This has produced a situation in which the average educational debt of law students graduating this spring — that is, members of the last entering class before the law school reform movement began to have an impact on the structure of legal education in this country — is around $150,000, while the median salary, including salaries of zero, for this group will likely be well under $50,000.

Now that the party is mostly over, we can see that the push for transparency has accomplished a great deal. If — and of course it is very much an if — the market for legal jobs remains at its present level (the percentage of GDP dedicated to legal services in America has declined by a third over the past quarter century), then it’s possible that around three quarters of people enrolling law school this fall will get jobs as lawyers, rather than slightly more than the one half of all graduates who have gotten such jobs, liberally defined, over the past few years. (This article lays out and discusses the facts supporting the assertions in the previous three paragraphs).

This is being celebrated in some quarters as the epitome of a “great time to go to law school,” which, I suppose, is a reflection of among other things the effect of drastically lowered standards (Imagine if a quarter of all medical school graduates weren’t getting jobs as doctors, and this was treated as an advertisement for what a great time it was to go to medical school!).

But it does — or rather it would, let’s not get too far ahead of ourselves — represent a great improvement over the recent status quo. Huge problems, of course, would remain, even in a world in which “only” 25% of law graduates weren’t getting legal jobs, since among other things the vast majority of entry-level legal jobs don’t pay anywhere close to enough to service $150,000 of educational debt on the terms under which that debt is supposed to be repaid.

Still, it’s real progress. In a sense, one could say that we have reached the end of the law school scam — in the sense that young people who enroll in law school today have every opportunity to avoid being misled about the prospects that await them. Of course this is no excuse for continuing to engage in aggressive sales tactics that sound more like a condo time-share pitch than a disinterested scholarly evaluation of the evidence.

In other words, we’re moving toward a situation — we’re not there yet, mainly because of the cultural lag in recognizing what has been happening to the legal profession, i.e., the Legally Blonde Syndrome — in which law students will be no more prone to overestimate their career prospects than Ph.D. candidates are now prone to overestimate their odds of getting a tenure track job (I”m assuming here that the latter don’t tend to indulge in too much optimism and confirmation bias, although I have to admit that this assumption isn’t actually based on anything other than my own optimistic wish that this is the case. My co-bloggers and many commentators are in a position to confirm or correct this impression, and I hope they do so).

That is all to the good, but, in terms of genuine reform, it’s very much half or perhaps a third of a loaf. Genuine reform goes far beyond even optimal transparency (which is still far away in the law school world), because the crisis of the American law school is just a particularly sharp example of a far broader crisis: that created by an economy that simply doesn’t produce anything like enough appropriate (halfway decent-paying, skills based) jobs for our increasingly educated, and increasingly disaffected, younger generations.

The real scam, in other words, is the contemporary structure of our society. Making that transparent is a goal towards which the law school reform movement is playing its own small part.

Donald Rumsfeld frightened and confused by US tax code

[ 280 ] April 16, 2014 |

I have sent in our federal income tax and our gift tax returns for 2013,” Rumsfeld wrote. “As in prior years, it is important for you to know that I have absolutely no idea whether our tax returns and our tax payments are accurate.”
cloud

In his letter, Rumsfeld attributed his ignorance of whether he paid his taxes properly to the complexity of the tax code.

“The tax code is so complex and the forms are so complicated, that I know I cannot have any confidence that I know what is being requested and therefore I cannot and do not know, and I suspect a great many Americans cannot know, whether or not their tax returns are accurate,” Rumsfeld wrote.

Rumsfeld noted that he was confused about his taxes even though he “spent more money than I wanted to spend to hire an accounting firm.”

“I do not know whether or not my tax returns are accurate, which is a sad commentary on governance in our nation’s capital,” Rumsfeld wrote.

Speaking of complicated tasks, it’s too bad Turbotax doesn’t offer Nation Building software.

(h/t taxprof)

OK, now you really cannot be serious

[ 155 ] April 15, 2014 |

Updated below

In a stunning last-minute upset, Erwin Chemerinsky and Carrie Menkel-Meadow’s NYT piece appears to have been nipped at the wire by Oregon Law School professor Rob Illig for top honors in today’s Law Profs Posting Clueless Tone-Deaf Things on the Internet contest. Illig sent a couple of emails around, bewailing a proposal by the dean to dedicate this year’s faculty raise pool to funding public interest sector fellowships for what would otherwise be unemployed grads of the school (Oregon’s employment stats are horrendous).

I’ve watched as our culture has eroded now for almost three years.
Everyone is in everyone else’s business, instead of their own. Everyone
is worried about what everyone else is getting, not what they can
personally contribute. If some professor or professors want to donate
their raise to the students – or to some other worthy charity – that’s
their business. (Personally, i give to Food for Lane Country, Planned
Parenthood, and the United Way. I feel that having given up the chance
at a seven-figure annual income is charity enough for the students, and
I am particularly saddened by hungry children. Maybe I should move that
the recipients of summer stipends donate those funds to the poor and
needy?)

I believe the children these days favor the acronym WTF? to describe the appropriate reaction to this.

But wait there’s more. In reaction to a commenter pointing out, reasonably enough, that under the circumstances Illig should count himself lucky to have his current job:

No Justin, it’s quite the opposite. The UO and its students are lucky to have me and all the other wonderful university faculty and staff who have sacrificed to be here. It’s time somebody said out loud what a great contribution every faculty and staff member is making to this community And all of us would be making more money at any of our competitor universities.

We know jobs for graduates are scarce, but scaring us away won’t make more jobs appear. And believe me, we’re working hard to help the students. That’s our job.

In my former life, I was an M&A lawyer at a large New York law firm, where I was all but certain to be earning more that $1 million annually. No one can tell me I’m not on the students’ side.

My students are my life. I sacrifice for them every day. Today, I spent the morning trying to get one of them a summer job at Nike. I do the same every day.

But ask yourself how many of those UO graduates would have jobs if I and the other dedicated faculty and staff at this university left.

Illig was an associate at Nixon Peabody, a mid-sized Boston firm, for seven years, so how he knows that he was “all but certain” to end up getting paid like a top rain-making partner is fairly mysterious, as is his belief that there’s a tremendous demand out there right now for former Oregon Law School faculty members who dump their $150,000 jobs in a fit of pique. (How this act of professional self-immolation would depress Oregon’s already abysmal employment results is also left unexplained).

There’s a bunch of other stuff in there about his Summer Sports Institute, the financial struggles of law professors, the ingrates who fail to appreciate the sacrifices he’s making etc., that has to be read to be believed.

Or maybe this is all an elaborate parody.

Update: I suppose it’s a sign of progress that the Chemerinsky/Menkel-Meadow NYT piece has produced nothing but what sounds very much like embarrassed silence from all the top legal academic blogs, not one of which so much as mentioned it today (Normally of course a NYT op-ed regarding the state of legal education would set off a commenting frenzy in our severely self-referential little world).

They wouldn’t print it if it wasn’t true

[ 175 ] April 15, 2014 |

Erwin Chemerinsky and Carrie Menkel-Meadow in the NYT on the “supposed” “crisis” “in” “legal” “education:”

According to the Association for Legal Career Professionals, as recently as 2007, close to 92 percent of law-school graduates reported being employed in a paid, full-time position nine months after graduation. True, the employment figures had dropped by 2012, the most recent year for which data is available, but only to 84.7 percent.

As my second all-time favorite tennis player would put it: You have got to be kidding me. You cannot be serious.

I don’t know what’s more egregious here, the laziness or the intellectual dishonesty.

As to the former, if you’re going to spin your stats in the most misleading way possible, at least bother to get them right in the first place. The claim that way back in 2007 92% of graduates “reported being employed in a paid, full-time position nine months after graduation” is wrong: NALP’s figures include part-time jobs and unpaid jobs (and part-time, unpaid jobs). 5% of law graduates with jobs reported their employment as part-time, while an unknown number weren’t being paid (the latter is an increasingly common arrangement in a world in which young people are expected to work for free in order to get their feet inside slamming employment doors). And even with all these caveats, the reported percentage of 2007 graduates with jobs of all kinds still wasn’t “close to 92%” — it was 85.3%, since NALP wasn’t able to ascertain the employment status of 2% of graduates, and another 4% of the graduating class attended schools that didn’t report their data.

Of course anyone who has paid the slightest attention to the supposed crisis in legal education will have noticed a far more egregious “oversight” in this analysis (which isn’t an oversight at all, since whatever else they may be Chemerinsky and Menkel-Meadow aren’t idiots): At this late date, EC and CMM still have the chutzpah to trot out the law school’s scam’s oldest and crudest trick, which is to imply that their employment statistics are referencing actual legal jobs.

But they’re not. Even in the halcyon days of 2007, just before one third of all big law entry-level jobs disappeared, only 68.9% of graduates were reported to have acquired full-time long-term jobs requiring bar admission nine months after graduation. That total has declined by 17% since, and goes even lower when you exclude law school-funded “jobs” and people who list themselves as having set up solo practices. Barely half of 2012 –and 2013 — law school graduates got a legal job, broadly construed, within nine months of graduation, rather than the utterly phony “84.7%” figure the authors cite to what they must hope is a profoundly naive readership (Note how even the latter wildly pumped up total employment figure is pretty grim, given that the current employment rate for 25 to 34 year olds, which includes everyone from high school dropouts to interdisciplinary JD/MPH/PhDs, is 93.2%).

The rest of the op-ed is if anything even worse, featuring a bunch of disingenuous tongue-clucking about how unfortunate it is that the cost of “college” (not law school, which has actually risen by much more) has gone up by more than 1100% since 1978 — as if a brand-new and (to put it mildly) superfluous law school in a hyper-saturated legal employment market just had to charge the $47,300 in resident and $53,900 in non-resident annual tuition and fees that Chemerinksy’s vanity project is charging this year, because of reasons. (These figures don’t include three years’ worth of living expenses in one of the most pricy areas in the country).

The most nauseating aspect of all this is the gelatinous patina of sanctimony the authors slather onto their exercise in profoundly anti-intellectual — if “intellectual” is taken to mean “minimally honest” — hucksterism. “Legal education is still an excellent choice for those committed to serving others in a rewarding career,” they primly observe. Yes, it’s certainly been an excellent choice for them. Let’s take a moment to contemplate how well these public-spirited scholars are doing for themselves by “serving others.”

The first person Chemerinsky hired onto the UC-Irvine faculty when he got this self-abnegating enterprise rolling five years ago was his wife. In 2012 this dynamic academic duo pulled down a combined salary of $597,000 from the University of California’s perpetually cash-strapped system.

Meanwhile Menkel-Meadow took home a salary of $320,000, so it’s safe to say a career in public service is working out OK for her as well.

The absurdity of the contemporary American law school, Part 743

[ 26 ] April 14, 2014 |

Nova Southeastern has become the latest law school to announce publicly that it’s buying out a significant number of its tenured faculty. In Nova’s case, everybody whose age + years of service adds up to 60 is eligible. Assuming typical demographics this category probably includes a solid majority of the tenured faculty. The school says its capping the percentage of buyouts at 20% of the faculty (It’s unclear whether this means 20% of the faculty as a whole, 20% of tenured faculty, or 20% of the tenured faculty who are eligible.)

The terms of the buyout offer weren’t disclosed, although it does include three years of continued health insurance coverage. Not surprisingly, universities are discovering that this is a crucial consideration when trying to buy out faculty who are not yet eligible for Medicare within The Best Health Care System in the World ™. From what I’ve been able to gather, two years salary seems to be more or less the going rate for buy outs these days; in any case at least one Nova law professor was more than happy to take the deal:

“It’s a very fair offer,” [Bruce] Rogow said. “I accepted right away. This frees up the opportunity to hire new, fresh faculty. In the long run, it’s very good for me because I have something else that fills up my time, which is the practice of law. Teaching was just for the pleasure.”

Rogow, who served as acting dean of the law school in 1984, still may teach a class or two from time to time, but his career as a tenured law professor is over, he said. A prominent appellate lawyer, he plans to continue working full-time at his Fort Lauderdale-based solo practice.

Apparently referring to Rogow as a prominent appellate lawyer is something of an understatement. Per his CV:

In addition to teaching, Mr. Rogow has argued over 400 cases in federal and state courts,
including 11 cases in the Supreme Court of the United States. No one in Florida has argued more
Supreme Court cases than Mr. Rogow. He has been listed in Best Lawyers in America for 22 years.
In 2009 he was named in 4 categories: Appellate Practice, Commercial Litigation, First Amendment
Law, and Criminal Law. He is also listed in Chambers USA as a top commercial litigator. Mr.
Rogow is both a Fellow of the American College of Trial Lawyers and the American Academy of
Appellate Lawyers, a dual recognition accorded to only a small number of lawyers in the United
States. For years he has been named by Florida Trend as one of Florida’s “Legal Elite.”
Mr. Rogow’s clients in 2007-2008 included Morgan Stanley (he reversed a $1.8 billion dollar
judgment against the company); Merrill Lynch; Richard Scrushy (Former HealthSouth CEO); the
Mayor of West Palm Beach, Florida; the cities of Doral, Miami Lakes, Hialeah and Pinecrest,
Florida; all the parimutuels in Broward and Dade Counties Florida; Donald Trump; Don King (the
boxing promoter); David Koch (Koch Industries); and in the Supreme Court of Florida he recently
represented appellate court Judge Michael Allen and Joe Anderson (Florida’s largest road
contractor). Mr. Rogow was appointed in 2007 by the Supreme Court of Florida to represent two
indigent prisoners, winning both cases. In 2007-2008 he argued 6 cases in the Supreme Court of
Florida. Former clients have included F. Lee Bailey, Wyeth Corporation, the Seminole Tribe of
Florida, Seminole Management Associates, and numerous lawyers and law firms, including Florida
tobacco lawyers in their tobacco litigation fees claims that ultimately resulted in fees of nearly two
billion dollars.

Rogow has been a “full-time” member of Nova’s law faculty since 1974, even though for much of that time he has also apparently been operating what may be Florida’s most profitable solo law practice. It’s unclear as to what “full-time” employment on the law faculty means for him; a check of Nova’s current web site and cached copies of it indicates that he taught two classes in the 2014 winter semester, and none in either the fall of 2013 or 2012. (I wasn’t able to find the winter 2013 schedule). And while one shouldn’t put much weight on sites like Rate My Professors, the evaluations of his teaching there suggest that their pedagogic value is perhaps questionable:

Brilliant attorney, terrible professor. I only went to his class four times and never opened my text book. He gives a review the last class before the final…and if you study that, you’ll do fine. One of my best grades in Law School. And he invites you to dinner at his place! Would take again!

I wish commenters would stop being coy and just come out with it. Rogow didn’t take attendance and didn’t know/care who anyone was or whether they came to class or not. The entire semester was basically story time featuring him. The last 2 classes were a review session where he told us EXACTLY what we needed to know to succeed on the final.

Etc.

As for “scholarship,” it hardly comes as a surprise that a search of Google Scholar indicates Rogow has published almost nothing over the course of his 40+ years in legal academia, or at least anything anyone has ever cited.

So how much are Nova students paying for having a big name lawyer who is apparently a glorified adjunct on their faculty? To its credit, Nova responded last year to SALT’s annual survey of law faculty salaries, which revealed that the median salary for a tenured Nova law professor was just under $155,000 (Plus a $12,000 summer research stipend. Do appellate briefs count I wonder?). Given Rogow’s fame and seniority, he could easily be pulling down well north of $200,000 for what sounds like about five hours a week of work, amortized over a 47-week work year (let’s assume French vacation schedules just for the heck of it).

Of course all this is ridiculous from any perspective that sees law schools as something other than extraordinarily successful rent-seeking operations. Surely Nova can (and does) pay successful practitioners a few thousand dollars per class to share war stories and advocacy tips with their students. Or if for some reason Nova wanted to transform itself to a genuine graduate department in legal studies, it could pay actual academics what it pays its faculty in its humanities and social science departments (around $80,000 per year, per this less than scientific survey).

Instead it charges students more than $35,000 per year — and last year 71.3% of its students paid full boat sticker price — for this nonsensical arrangement.

Admittedly, having Rogow teach Civil Procedure isn’t as absurd as handing that job over to somebody with a doctorate in philosophy, who has only seen the inside of a court room on TV, (this is not, needless to say, a hypothetical situation in the context of the contemporary American law school), but still . . .

Do or should universities have fiduciary obligations toward their students?

[ 133 ] April 12, 2014 |

Scott has already pointed out that Lisa McElroy seems to be arguing for the vigorous application of the doctrine of caveat emptor to transactions between prospective law students and law schools. Caveat emptor is a common law legal doctrine which asserts that the only duty sellers have to buyers is not to engage in affirmative misrepresentation, or fraudulent concealment of latent defects. Example: if you’re selling a house with a roof that leaks, you can’t lie if a prospective buyer asks you if the roof leaks, but if the buyer doesn’t ask, and you don’t do something to cover up the leak from discovery by a prudent inspection, then you have no liability to the buyer after the closing in regard to the condition of the roof.

Caveat emptor is (or was) applied traditionally to so-called “arm’s length” business transactions, in which the parties had no special duties toward each other.

At the other end of the spectrum, in law-talking terms, we have the fiduciary relationship, which is a catch-all term for situations in which parties to a transaction do have such duties, legally speaking. For example, if I have a great idea for a book and tell my friend, I have no legal recourse if my friend goes off and writes a book based on that idea (Legally speaking, I have no proprietary right in an idea for a book unless and until I actually turn it into a copyrightable entity, that is, an actual book). On the other hand, if I tell my agent this great idea and he turns around and pitches it to another one of his clients, Famous Author, who then writes up a proposal that the agent sells to a publisher, I can sue my agent for breaching his fiduciary duty to me, since we’re in a special legal relationship, i.e., one of agent and principal.

Note that the legalities of this situation don’t track most peoples’ sense of the moral obligations of the parties: Morally speaking, my friend’s betrayal of our friendship is worse than my agent’s breach of his legal duty to me, even though it’s not legally actionable (in part because I actually have legal recourse against the agent, but primarily because breaching obligations created by a business relationship is generally not as deplorable as betraying a friend).

So when we ask if schools have fiduciary obligations toward their students, we can be asking a narrowly legal question (“is a school a legal fiduciary in relation to the interest of its students?”), or a broader moral one (“is adopting the doctrine of caveat emptor a morally dubious or bankrupt thing to do in this particular social context, without regard to the legalities of the matter?”).

Although I’m no expert on the question, a cursory investigation suggests that there’s surprisingly — surprising to me that is –little formal legal support for the the claim that universities have fiduciary obligations toward their students, even though universities are usually organized as non-profit, quasi-charitable entities, that get all sorts of tax breaks and other benefits for being “eleemosynary” (law talk for public-regarding) institutions.

That of course is or should be to be a separate question from the question of how universities, colleges, law schools etc., ought to behave toward their students, regardless of the formal legalities. (Obviously the two are related, however. If law schools, for example, are taking the view that the only thing that matters in this world is to get someone to sign on the loan document line that is dotted, it becomes hard to see why they should be tax-exempt entities, why graduates should give them money after they’ve graduated, or why, for that matter, they should be viewed as more exalted social entities than car dealerships).

Anyway I do think educators in particular ought to consider themselves to have special obligations to their students, going beyond those created by a normal business transaction, for at least a couple of reasons:

(1) Generally speaking, students are young and naive, while teachers are older, and, if not wiser, at least warier. This obviously applies to traditional undergraduates, but it’s also true for a large percentage of law students, who are only formally adults, and — this is crucial — who have been brought up to think of institutions of higher learning as places that are doing something other than trying to figure out how to pass out the Glengarry leads to their best earners.

All of us are prone to optimism bias, confirmation bias, and the sunk cost fallacy, but, again generally speaking, the younger we are the more vulnerable we remain to these factors, which, because of the special cultural prestige institutions of higher learning possess, such institutions are especially able to exploit, should they choose to do so. That potential for exploitation means we can’t or shouldn’t always be closing, no matter how profitable it may be for the non-profit entities in which we operate for us to take this view of our present and future students.

(2) The entire economic justification (there are of course other justifications, but here we’re speaking of the dollars and the cents) for the considerable present costs of higher education is what economists refer to as “enhancing human capital.” We’re not just supposed to be providing a social signaling mechanism regarding the preexisting abilities of our students, which could obviously be provided at a vastly lower cost: we’re supposed to be enhancing those abilities from what they would otherwise be.

Law schools in particular like to plume themselves on the idea that we’re imbuing all sorts of valuable critical thinking skills to our charges. The irony here is that, if we’re actually performing this function at all effectively (assume the necessary can openers for the purposes of argument), we cannot at the same time adopt caveat emptor as the appropriate attitude toward our students, even as a practical — let alone an ethical — matter.

Consider what it means, practically speaking, for a professor at an extremely expensive law school with terrible employment statistics to actually “enhance” the human capital that funds her paycheck. To put it bluntly, if a law professor at Drexel is doing her job, in terms of what the legal academy advertises that job to be, she is in many cases transforming her students into people who will come to understand that the doctrine of caveat emptor, as applied to law schools, has produced an institution in which they would never have enrolled in the first place, if their critical thinking skills had already been improved.

In other words, a law professor at a school like Drexel who successfully educates her students is performing the economic equivalent of mailing herself a letter bomb.

. . . MacK from comments on the special obligations of legal academics: (I should have noted in the original post that the lawyer-client relationship is the epitome of a fiduciary situation):

It would be helpful to point out that law schools exist in a special category – perhaps one to a degree also inhabited by medical schools – the law and regulation of lawyers specifically provided that lawyers have a very high level of fiduciary duty towards their clients and indeed certain third parties (as officers of the court for example.) Every law school has a mandatory course in legal ethics. Moreover, lawyers are covered by extraordinarily strict conflict of interest laws especially when it comes to handling and investing client money.

Yet, here you have organisations essentially of lawyers (most law professors are still legally trained and qualified) with what are effectively their clients – in the form of their students – and the administration of those law schools, and numerous professors ranging from the egregious Ms. McEvoy to the much more egregious Brian Leiter insisting that they should be allowed to behave in ways that would make a used car salesman – or indeed a pimp blush – and for the former would probably violate all sorts of consumer protection laws and consumer credit laws. You have deans of law schools engaging in chicanery vis-à-vis their students that would get a lawyer disbarred – and the state bars are not investigating? The ABA is silent – the very institution that required legal ethics courses for law students?

A brief comment on comment policies

[ 147 ] April 11, 2014 |

Updated below

Over at The Faculty Lounge, Steve Freedman, assistant dean of admissions at the University of Kansas Law School, announced a couple of days ago that he was going to offer a series of posts about why right now is a great time to go to law school. (The first two are here and here. TL;DR: Less law students means more jobs for law graduates.)

Freedman predictably got some push back regarding his thesis, with Brian Tamanaha providing the most trenchant criticism:

Please address the apparent contradiction in advice like this. Assuming no substantial change in the legal market (for better or worse), the job outlook for graduates stands to improve precisely because fewer students are enrolling in law school these days. But of course, if significant numbers of people take your advice and “enroll today” (thinking three years hence the oversupply of law grads will be eliminated by falling enrollment), then the job outlook will worsen as a consequence because the oversupply will not go down as much. So your prediction will bear out only if most people thinking about law school do not take your advice.

It’s notable that Freedman has already closed comments to his second post, even though none of the comments were inappropriate in tone or substance, unless of course harsh criticism of one’s arguments is considered inappropriate per se.

I’m not picking on Freedman in particular in this regard, as I’ve noticed there’s a strong tendency among legal academic bloggers to either not allow comments at all, or to cut them off for no apparent reason other than that they’re highly critical. This fact says something, I think, about the level of deference that legal academics become accustomed to from their usual audiences. Apparently failure to provide that deference can easily get interpreted as “lack of civility,” or “insolence,” or some other form of lese majeste.

This in turn probably helps explain why it took so comparatively long for the legal academy to notice the disaster that was overtaking so many of our graduates. Under the circumstances, developing something other than a flypaper-thin skin in regard to criticism might be in order (especially given that we’re supposed to be training future lawyers).

Update: In regard to Prof. Lisa McElroy’s comments in the closed thread, comments at JD Underground are most definitely not closed.

Economic possibilities for our future robot overlords

[ 256 ] April 11, 2014 |

Following up on Erik’s post about working hours in France, in 1939 John Maynard Keynes published what eventually became a famous essay, entitled “Economic Possibilities For Our Grandchildren,” in which he tried to predict what “the progressive countries” (what would now be called the developed world) would look like in 2030.

The essay makes two big predictions:

(1) By 2030 the developed world would be in per capita terms four to eight times wealthier than it was a century earlier.

(2) This explosion of wealth would produce a tremendous reduction of hours worked, as people chose leisure over yet more income.

The first prediction was almost uncannily accurate, while the second has turned out to be completely wrong in regard to the United States, and largely wrong about Europe. (I’m not familiar enough with the relevant statistics in regard to the emerging economies of Asia and Latin America to comment on the salience of Keynes’ second prediction to them).

Regarding the first prediction, U.S. per capita GDP was about 6.2 times higher at the end of 2013 than it was at the end of 1929 (it increased from just over $8000 to just under $50,000 in chained 2009 dollars). Extrapolating out, Keynes high end prediction appears to have been if anything slightly conservative. Keynes thought that such a trajectory would result in something like a 15-hour work week for most people who worked for income:

For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented. We shall do more things for ourselves than is usual with the rich to-day, only too glad to have small duties and tasks and routines. But beyond this, we shall endeavour to spread the bread thin on the butter-to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us!

At the time, this seemed like a reasonable projection, as work hours in the US and Europe had declined considerably over the previous half century, and Keynes assumed that the income effect — the declining marginal utility of income in relation to leisure — would cause this trend to continue. Since then, however, the decline in working hours has ceased almost completely in the US, and slowed down drastically in Europe (Europeans do work about 20% fewer hours than Americans however, which is not a trivial distinction).

Economics being a rather tautological discipline, there is of course a ready theoretical explanation for this as well: the substitution effect — i.e., to the extent that productivity increases are reflected in higher income per hour worked, each hour of forgone work in favor of leisure becomes more costly to the worker.

Of course this doesn’t explain why the substitution effect seems to have won out almost completely over the income effect in the US, and to a lesser extent in Europe. And here the biggest weakness of Keynes’ analysis in the essay — a surprising weakness given how relatively sensitive he was to sociological considerations — becomes obvious: there isn’t a word in the piece about distributional considerations.

Here are some numbers from the U.S. census bureau (all figures are in 2012 dollars):

Median household income in 1967: $42,323

Median household income in 2012: $51,017

Per capita GDP 1967: $21,893

Per capita GDP 2012: $49,231

In the late 1960s, median household income was nearly double per capita GDP, while today we have nearly a one to one relationship between the two metrics (Households are on average only slightly smaller today. I don’t have figures for 1967 handy, but in 1975 the average household included 2.89 people, while in 2012 it featured 2.54 persons). Or to put it another way, if over the past 45 years the nation’s increasing wealth as measured by output had ended up getting distributed equally across income groups as income, median household income in the US would be nearly $100,000 per year, rather than half that sum.

This helps explain, I think, why in the US in particular the substitution effect has been so much stronger than the income effect: it’s much harder to forgo additional income in favor of increased leisure when the relative wealth of those above you in the SES hierarchy is increasing faster than your own — especially in a culture obsessed with the conspicuous consumption of positional goods.

Hence:

A jesuitical interlude

[ 46 ] April 10, 2014 |

The ABA just published employment statistics for the class of 2013, based on reporting by law schools of the status of their graduates as of February 15, 2014, i.e., approximately nine months after graduation, and four to five months after bar results. On a national level, this year’s stats are pretty much identical to last year’s, with only 53% of graduates obtaining full-time long-term employment requiring bar admission (excluding law school funded “jobs” and putative sole practitioners).

Needless to say even these numbers ought to be treated with some skepticism, as schools are under tremendous pressure to gild the lily in all sorts of ways. (For example, by using favorable default assumptions regarding conditions of employment when, as is often the case, it’s not actually known if a position is full-time and/or long-term).

An amusing example of how “flexible” reporting standards can be is provided by Santa Clara University’s law school, home to Prof. Steve “People Who Criticize the Law School Status Quo Are Actually Trying to Bring Back Jim Crow” Diamond (see also). A little background: Until the spring of 2011, the US News rankings excluded graduates who schools listed as “Unemployed Not Seeking” from the denominator, when calculating graduate employment rates. This seemed like a reasonable choice, given that very occasionally graduates don’t happen to be seeking employment nine months after graduation. And most schools listed very few if any graduates in this category: the median percentage was below 2%, and the mode was zero, with nearly a quarter of schools not listing even one graduate as unemployed not seeking.

But in the spring of 2011, after schools had submitted their reports, US News decided that it would start including graduates listed as unemployed not seeking as unemployed, in part because of (well-warranted) suspicions that a few schools were manipulating the category, by for example using perverse default criteria, such as assuming that unemployed graduates who didn’t affirmatively indicate to their Career Services Office that they were looking for work weren’t actually looking for work (Many law students and graduates have very negative views of their CSOs, so assuming that an unemployed graduate who didn’t use the CSO’s services wasn’t looking for a job was a conveniently disingenuous way of radically understating a school’s true unemployment rate to US News, which at that time was the only entity publishing that information).

Which brings us back to Santa Clara. Behold Santa Clara’s unemployment statistics before and after US News started counting students categorized as “unemployed not seeking” as simply unemployed:

2010

Total graduates: 305
Unemployed Not Seeking: 55
Unemployed Seeking: 6
Reported unemployment rate to US News: 2.4%
True unemployment rate: 20%

2011

Total graduates: 297
Unemployed Not Seeking: 47
Unemployed Seeking: 24
Reported unemployment rate: 9.6%
True unemployment rate: 23.9%

2012

Total graduates: 298
Unemployed Not Seeking: 28 (9.4%)
Unemployed Seeking: 24
True unemployment rate: 17.5%

2013

Total graduates: 322
Unemployed Not Seeking: 1 (0.3%)
Unemployed Seeking: 57
True unemployment rate: 18%

Santa Clara experienced a 98.3% decline in the percentage of its graduating class that was unemployed but not seeking work, relative to the percentage of unemployed graduates seeking work, after the former category was no longer useful for disguising the school’s true unemployment rate.

I suppose it’s possible to deploy some legal academic casuistry — perhaps the doctrine of mental reservation as applied to the Public Good of the Rule of Law — to produce a benign explanation for this series of events.

Graduate student debt and the one percent

[ 94 ] April 8, 2014 |

The New America foundation has released a study of graduate and professional school debt, which features a bunch of interesting information. Unlike most reports regarding such debt, New America’s survey includes survey estimates of actual educational debt totals, not merely how much graduate and professional school students have borrowed while in post-undergrad programs (the latter figure excludes undergraduate debt and interest accrued on educational debt). It’s a longitudinal study, with numbers for 2004, 2008, and 2012 (all figures are reported in 2012 dollars).

Here are a few figures for the 50th and 75th percentiles of total educational debt in 2012 for students with debt (approximately 87% of all students):

MBA 50th: $42,000 75th: $69,906

Master of Arts: 50th: $58,539 75th: $90,892

Master of Science: 50th: $50,400 75th: $84,808

JD: 50th: $140,616 75th: $193,823

The comparatively modest MBA figures no doubt reflect that employers often pay for part or even all of the tuition costs incurred by MBA students. I don’t know what to make of the MA and MS figures (How marketable are masters degrees? Note that these figures don’t include education masters, which are often obtained by teachers who are increasing their salaries via further credentialing, and which are listed separately).

The law school figures are both shocking and unsurprising. When I attempted to calculate average total educational debt for law graduates in an academic article in 2012, I used what I took to be a conservative estimate of $10,000 of undergraduate debt among the 87% or so of law graduates with debt. New America calculates the true figure as being $16,660 at the 50th percentile, and more than $35,000 at the 75th.

It’s still common to read statements from (usually older) legal academics, lamenting that some graduates now incur “as much as” $150,000 in debt, when in fact this will probably be the average figure for next month’s graduating class.

What has produced such numbers, which require 25 years of four figure per month debt payments — essentially the equivalent of a mortgage? Obviously skyrocketing tuition has played the most crucial role, but here I want to note another factor, which has more to do with the structure of the American economy as a whole than with the specific behavior of law schools.

These graduate debt figures help highlight how expensive it is to get an advanced degree even without regard to the tuition costs incurred by students. And that non-tuition expense is, in many instances, a direct product of America’s increasing economic stratification.

Consider what it now costs to attend law school in New York, or Washington, or Boston, or San Francisco, or Los Angeles, or Chicago. Over the past generation, each of these cities has to a greater or lesser extent been transformed into a playpen for the one percenters. The result is that UC-Hastings (located in the scenic Tenderloin district of San Francisco) estimates that a reasonably frugal law student will incur $23,616 in living expenses over the nine-month academic year, while Brooklyn Law School (Brooklyn Heights) estimates that student will spend $28,225, and Whittier (Costa Mesa CA) calculates its nine month cost of attendance as $27,796.

Since full-time law students must normally take 36 months to cover the distance from the first day of classes until the bar exam two months after graduation, all these figures need to be multiplied by four to estimate student living expenses. In other words, students are incurring $100,000 or more in attendance costs without regard to tuition (sticker tuition price at these schools is over $50,000 per year at Brooklyn and Hastings, and a mere $41,460 at Whittier, where a total of 56 of 210 2013 graduates had full-time non-temp jobs requiring law degrees in February of this year, while more than 40% of the graduating class was completely unemployed nine months after graduation.)

Of course no-doc federal loans allow anybody these schools to enroll to borrow the full cost of attendance, most especially including the cost of living in places where people with household incomes of $400,000 per year consider themselves part of the struggling “upper middle class.”

The fact that the government will lend you the money to live in or perilously near an enclave of the hyper-wealthy for three years during which time you have taken yourself out of the paid labor force (law students at non-elite schools are expected to “intern,” aka, work for free, in order to get their feet inside rapidly slamming doors) doesn’t make it a good idea to borrow that money. In other words, a lot of law schools located in such places are no longer worth attending even for “free.”

McCutcheon and Capital in the 21st century

[ 130 ] April 2, 2014 |

Have a nice day!

An important new book by economist Thomas Piketty points to a pessimistic conclusion . . . Drawing on hundreds of years of economic data (some of which has only recently become available to researchers) Piketty reaches a simple but disturbing conclusion: in the long run, the return on capital tends to be greater than the growth rate of the economies in which that capital is located.

What this means is that in a modern market economy the increasing concentration of wealth in the hands of the already-rich is as natural as water flowing downhill, and can only be ameliorated by powerful political intervention, in the form of wealth redistribution via taxes, and to a lesser extent laws that systematically protect labor from capital. (Piketty argues that, because of historical circumstances which are unlikely to be repeated, this sort of intervention happened in the western world in general, and in America particular, between the first World War and the early 1970s).

Readers can already guess the dire conclusion that flows from combining Piketty’s theory with the plausible assumption that unregulated wealth leads to plutocracy: If the only way to avoid plutocracy would be to employ political processes that the plutocrats themselves will eventually buy lock, stock and barrel, then the only way to avoid being ruled by the Lords of Capital is to become one of them. This, in effect, is the contemporary GOP’s economic creed in a nutshell.

Why do professors take buyouts?

[ 72 ] April 1, 2014 |

Yesterday I noted that a bunch of law schools are pursuing aggressive buyout plans in regard to their senior faculty, that in some cases contemplate attempting to get half or more of the senior faculty to resign their positions, either immediately or over the next few years.

In comments, Warren Terra asks:

As I understand it, on paper these tenured professors have a guaranteed income of one year’s salary every year until they hit the mandatory retirement age – and they’ll give that up for two years’ income, possibly disbursed to them only over several years? How is that a good deal for them, unless they think they need to get out before their employer goes bust or does worse to them? And even then, why would they accept a plan for payment over several years? If you’re taking the money and running because you think the money won’t be there in the future, why agree to wait for the money?

Mandatory retirement ages are now largely illegal in the US (as a formal matter, of course: age discrimination against older at will employees is as a practical matter extremely difficult to combat), and have been explicitly illegal in regard to tenured faculty for the past 20 years. This presents some serious potential problems for the structure of higher education in general in this country; as is so often the case, law schools are merely the canary in this particular coal mine.

A few years ago Columbia professor Mark Taylor framed these problems sharply:

The growing tendency to defer retirement leads to both financial and intellectual difficulties. In almost all cases, the more senior the person, the higher the salary. This creates pressure on budgets that are already stretched to the limit. In some cases, the salary of one tenured professor could fund two non-tenured positions. There are intellectual problems, too. To be candid, on campuses, the best work of people in their late 60s and 70s is behind them. Though there are exceptions, many aging faculty members either rewrite previous books or produce nothing at all, and in the classroom they all too often recycle notes they have used for many years.

Mandatory retirement would open up opportunities for younger people, who today spend as long as 10-12 years pursuing careers from which they are often blocked by senior faculty members who refuse to retire. This situation is not only tragic for many of our best and brightest young researchers and scholars but is also disastrous for the future of higher education.

Of course as Taylor notes, there are always individual exceptions to the rule: in the legal academy, it’s often noted that Arthur Corbin did much of his most influential work on contract law in his 70s and 80s (he was the primary author of the second Restatement of Contracts until failing eyesight led him to surrender this project at age 90). What’s less noted is that Corbin formally resigned from the Yale faculty at 68, and did this work while technically “retired.”

In any case, the problems created by combining a legal regime in which people can only be fired for cause — a privilege that almost no one in the US other than tenured faculty and the increasingly small percentage of workers who enjoy either civil service or union protection has — with the legal elimination of mandatory retirement ages, are considerable.

These problems are particularly acute in the legal academy, because of high salaries, low teaching loads, and a somewhat farcical publication system, in which publication in any of hundreds of student-edited non-peer reviewed legal journals counts as academic publication.

So Warren’s question is a very good one: Why would anybody who is getting paid $250,000 or more (a common compensation package for the most senior faculty at many even non-elite schools) to teach three classes per year, while perhaps cranking out a “law review article” now and then, forgo this exceedingly pleasant arrangement unless he — and of course for demographic reasons it is at this point still usually a he — thought the whole business was about to go bust?

After all, professional-class people usually retire because their jobs are burdensome: they would like to have time for the kinds of things that are difficult to pursue if one has to show up for work for nine hours a day 50 weeks every year, and/or they dislike their work for various reasons (needless to say people doing hard physical labor have far more compelling reasons to want to retire, but that’s a separate subject altogether).

But legal academics do not, to put it mildly, have burdensome jobs: they are required to show up at the office for just seven months out of the year, and 90% or more of the time they spend working — assuming they are working what could realistically be characterized as a full time job, which is the 500-pound can opener in this little conversation — can be spent on doing whatever work they actually want to do.

As one very professionally active professor in his late 60s put it to me recently, “I get paid to do exactly what I would be doing for free.” In his case he gets paid $350K per year, so while I don’t at all doubt that he would, like Prof. Corbin, literally write the same terrific books he writes now — and they are excellent — if he were working for free, on the whole he would understandably prefer to keep getting a $30,000 per month pay check. And who can blame him?

So why do people take buyouts? Obviously I’m speculating, but it’s speculation informed by anecdotal observation for what that’s worth:

(1) A sense of social responsibility and basic fairness. Law professors hired 40 years ago have piled up millions in their TIAA-CREF accounts, they bought houses for nothing, they got to go to both undergrad and law school for basically free in the 1960s/70s etc. (Harvard Law School tuition was $8000 per year in 2013 dollars in 1965, and public school tuition was nominal). And it apparently does occur to some people that if they would do this job for free, maybe they really should do it for free at some point. After all one of the many great things about being an academic is that you can often continue doing all the parts of the job any sane person would actually enjoy even after you formally retire. Those who still have a scholarly vocation can now spend literally all their work time on research and writing, while those who enjoy teaching will usually be accommodated by administrators who are more than happy to pay former full time faculty adjunct wages. Basically you can do much the same job you had before, minus committee work and faculty meetings (and, of course, the salary).

(2) A sense of shame. As Taylor points out, lots of academics are more or less burnt out after 30 or 40 years on the job. Unlike baseball players law professors don’t have batting averages, but people keep score anyway, both for themselves and others. John Updike on Ted Williams’ last at-bat:

One of the scholasticists behind me said, “Let’s go. We’ve seen everything. I don’t want to spoil it.” This seemed a sound aesthetic decision. Williams’ last word had been so exquisitely chosen, such a perfect fusion of expectation, intention, and execution, that already it felt a little unreal in my head, and I wanted to get out before the castle collapsed. But the game, though played by clumsy midgets under the feeble glow of the arc lights, began to tug at my attention, and I loitered in the runway until it was over. . . On the car radio as I drove home I heard that Williams had decided not to accompany the team to New York. So he knew how to do even that, the hardest thing. Quit.

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