Author Page for Paul Campos

Law and Economics

The New York Times has a front-page story about the ongoing collapse in the number of people applying to law school (from 100,700 in 2004 down to about 54,000 this cycle, with a 38% total decline over the last three years alone). The story features some nice quotes from Brian Tamanaha and Bill Henderson regarding the dysfunctional economics of law school, which is important, because as any legal philosopher can tell you, in this culture the ontological status of an epistemological insight is greatly enhanced when it appears on the front page of the NYT. (“They wouldn’t print it if it wasn’t true.” F. Nietzsche, trans. J. Jackson.)

Oddly, the story fails to mention the crucial role the law school transparency movement, to which the Times gave such valuable attention in 2011 in a series of prominent stories, has had in all this. It’s hardly a coincidence that most of the collapse of the applicant pool has taken place over the last two years, which happens to be when something resembling accurate employment and salary statistics have been extracted from law schools via political pressure.

The story also features this strange claim:

“We have a significant mismatch between demand and supply,” said Gillian K. Hadfield, professor of law and economics at the University of Southern California. “It’s not a problem of producing too many lawyers. Actually, we have an exploding demand for both ordinary folk lawyers and big corporate ones.”

She said that, given the structure of the legal profession, it was hard to make a living dealing with matters like mortgage and divorce, and that big corporations were dissatisfied with what they see as the overly academic training at elite law schools.

This is a very peculiar use of the word “demand.” Big corporations have put the squeeze on BigLaw, because they’ve decided they will no longer subsidize the training of junior associates to do work people trained to be lawyers should do. Even more problematically for the Cravath model, they’ve also decided they won’t pay BigLaw rates any more for essentially clerical work. So firms can’t bill out a lot of what first and second year associates do, and a lot of other work that such people did is now outsourced to the document review mills and to non-lawyers.

In other words, client demand for various services that used to fatten the bottom lines of the big firms has imploded, not exploded, because it has been shifted to other service providers, or is no longer billable when performed by the firms themselves. This is a structural not a cyclical shift: it’s not as if GCs are going to decide that when and if more deals are being done it’ll be OK for firms to bill out monkey work at $300 an hour again.

The “overly academic training” at law schools has nothing to do with this. That’s an issue about failing to train people to do legal work. The collapse in demand from BigLaw clients is a product of the realization that a large amount of work traditionally done by lawyers can be done by non-lawyers with either no loss of quality, or not enough loss to make it worthwhile to pay the added cost of having lawyers do it.

The claim about “ordinary folk” is even stranger, but it’s one that’s being made a lot these days by legal academics desperately searching for a raison d’ paycheck. The argument goes something like this:

(1) Many people in this country who could benefit from legal services aren’t getting those services because they’re too expensive.

(2) Those services are too expensive because law school costs too much.

(3) If future lawyers could go to law school without incurring so much debt, they could afford to offer legal services at a price that far more people could afford to pay.

(1) is certainly true. (2) and (3) are just wrong, and obviously so.

The cost of legal services has almost nothing to do with the cost of law school. Why would it? No client cares about how much it cost you to get a law degree, which means that no client is willing to pay more for legal services because a lawyer has a lot of educational debt. This theoretical claim is confirmed by empirical observation: there are literally hundreds of thousands of lawyers in America who went to law school when it was radically cheaper than it is today, and it’s not as if they charge lower rates than recent law graduates (if anything they charge on average more more, because clients will to some extent pay for experience as a proxy for competence).

There are also hundreds of thousands of people with law licenses who are barely making a living by practicing law (A 2009 survey of Alabama lawyers found that 23% of the respondents with active law licenses had an income of less than $25,000 in the previous year). Such people are charging the absolute minimum they can charge while still maintaining an ongoing business.

The notion that the hundreds of thousands of lawyers in solo or very small practices in this country could somehow operate by billing out their services at X dollars per hour (with X being a figure that lots of “ordinary folk” currently priced out of the market for legal services could pay) if only law school didn’t cost so much is one of those ideas that sounds intuitively plausible until you actually think about it for three minutes, which is apparently why people in legal academia don’t.

The reason ordinary folk don’t pay for legal services even when in theory they could benefit from them is exactly the same reason they don’t pay for a lot of things they could in theory benefit from: because they don’t have any money for those things after paying for more pressing needs like food, shelter, clothing, medical expenses, transportation to work, etc.

Comments such as Hadfield’s indicate the lengths that legal academics will go to in order to talk themselves into believing that the basic problem isn’t really the basic problem. And that problem is that the economic demand in this country for people with law degrees will employ (at best) half the people who are paying us to grant them law degrees.

Law and empathy

I have a piece in Time about Sonia Sotomayor’s recent comments regarding what a privilege it is to practice law, and how lawyers who are unhappy “need to go back to square one.”

A couple of additional thoughts:

(1) Sotomayor’s comments illustrate how thoroughly people get de-classed when they rise in the American social system. After all, it’s not as if Sotomayor’s remarks illustrate her lack of up to date knowledge regarding political corruption in Bhutan or something. She’s talking about her very own profession, and yet it seems clear she (like John Roberts) has managed to avoid finding out what’s actually going on in that profession.

This in turn suggests that the new federal law requiring all SCOTUS justices to attend both Princeton and Yale may not be encouraging the most important kinds of diversity.

(2) Few things are more annoying than high-status quasi-lawyers (as I point out in the piece judges and law professors don’t practice law) burbling on about how being a lawyer is a particularly public-regarding occupation. Sure, part of a lawyer’s job involves helping people. But:

(a) You can say this about any service profession, including the guy who brings you a cheeseburger with a side of fries.

(b) Another part of the job involves hurting people, which is a lot easier to forget if you don’t actually do the job, hence the blovations of judges and law profs.

Math problem

Suppose a basketball team goes into a game making 37% of its field goal attempts. What are the odds that, during any 29-shot sequence, the team will go 0 for 29 in that sequence?

I’m coming up with 659,638 to 1.

John Roberts’ summer vacation

“Debts that can’t be repaid won’t be.”

Michael Hudson

Diamondbacks trade prime young talent for gritty gutty lunchbucket gamers

This should work out well.

Kirk Gibson likes toughness, but then again Kirk spent half his career on the DL.

The secret agenda of law school critics

Upper class white guy with a six-figure psuedo-job from which he can never be fired says: If you think law schools shouldn’t be allowed to charge whatever cost of attendance they want, while requiring the federal government to loan that entire amount in the form of non-dischargeable high interest loans subject to no actuarial controls to anyone law schools choose to admit, then you are (“objectively” as the Marxists used to say) in favor of the following things:

The revival of Jim Crow.

The destruction of both academic freedom and the Rule of Law.

Racism, sexism, and classism.

Cruel but fair comment over at my other place:

To paraphrase Allen Iverson…We’re not even talking about a real law school here. We’re talking Santa Clara. Not Yale. Not Georgetown. Not a good state school. Santa Clara. Santa Clara law school man. Fucking Santa Clara law professor talking like he’s taking on the power structure, like he’s training the next Bayard Rustin over there at his useless diploma mill.

Update: Diamond appears to have locked his blog, so it can no longer be accessed without a password.

The real problem with legal academia

This guy just won’t stop pontificating about something that he well and truly doesn’t know anything about.

The versatile law degree, University of Wisconsin edition

Guns don’t cause crime, student loans do:

A man who wore a three-dimensional Bucky Badger hat when he allegedly robbed an East Side credit union last week told police that he wants to go to prison and needed the money because he has $250,000 in student debt.

Randall H. Hubatch, 49, of Madison, was charged Friday with armed robbery for the Jan. 11 robbery of the Summit Credit Union, 1799 Thierer Road. What stood out about the robbery was Hubatch’s choice of apparel, which included the Bucky Badger hat.

“If the district attorney agrees to send me to prison for a long time, then I will confess and plead guilty,” Hubatch told Madison police Detective Tom Helgren after his arrest on Monday, according to a criminal complaint. “Otherwise, I have nothing else to say, and if released I will do it again.”

Hubatch told police he is “slightly autistic” and diabetic and can’t afford his prescribed medication.

An online UW-Madison directory lists Hubatch as a lead custodian at Union South on the UW-Madison campus. University spokesman John Lucas said Hubatch is not a current student but earned a bachelor’s in English in 1998 and a law degree in 2004.

When Hubatch was arrested he was wearing the Bucky Badger hat. Police said they found a bus receipt in the motel room where Hubatch was staying and a ticket in his pocket indicating that he was at the Field Museum in Chicago on Sunday.

According to the complaint:

With a plastic Star Wars toy gun in his pocket, Hubatch told police, he wrote a note demanding $500 and told a teller not to stall because he didn’t want to hurt anyone. He said he also wrote that he would shoot anyone who followed him to his car, noting to Helgren that he put in the reference to the car to throw people off because he doesn’t have a car.

He told Helgren he has $250,000 in student loans that he can’t pay. He said he asked for $500 because he thought Summit would not care about $500 and would simply give it to him.

Can you wear a Bucky Badger hat that has more (or less) than three dimensions?

. . . I should emphasize that there’s a temptation to minimize this kind of thing by assuming that this person is “crazy.” While no doubt his behavior and statements both give evidence of a crumbling mental world, we shouldn’t underestimate the extent to which the experience of graduating from a fairly high-ranked law school (after graduating from an excellent undergraduate university) only to find oneself a few years later working as a janitor with no way of paying a quarter million dollars in non-dischargeable debt creates the kind of deep desperation that in turn leads to what we label as madness.

More comedy stylings from Prof. Steve Diamond

Updated below

Compare this with this.

Steve Diamond links to a 2010 employment report (describing outcomes for the class of 2008 as of February 2009) that any ordinary reader would understand to be reporting a 99% employment rate for graduates of the law school at which he teaches, in order to argue that Santa Clara wasn’t posting misleading 90%+ employment figures even before the law school transparency movement started demanding a little transparency.

His rationale for this amazing rhetorical feat is this:

Here is what SCU posted in the Fall of 2008 about employment. If one compares it with what we now post, in response to the new ABA guidelines, it seems to me there is not a dramatic difference. The much vaunted “bi-modal” distribution is clearly visible as is the fact that only about half the class reported salaries (from which any rational individual could conclude that that only half had employment at that point).

This is so nonsensical it’s hard to know where to begin. The first linked set of statistics gives no indication that it isn’t a comprehensive account of what the class of 2008 is doing nine months after graduation. There’s no category for unemployed graduates; indeed there’s no way to tell from this data how many SCU graduates are unemployed, how many are in short-term or part-time jobs, or how many are in jobs that require bar admission.

By contrast the second linked set of stats, which SCU was reluctantly forced to cough up by the equally reluctant Section of Legal Education of the ABA in the wake of pressure from the transparency movement, reveals that 24% of the 2011 SCU class is completely unemployed, although supposedly two-thirds of these people– 47 graduates out of 296! — aren’t actually seeking jobs (the latter purported “fact” is the kind of thing that ought to be of intense interest to potential plaintiffs’ attorneys).

Update: SCU’s reported number of 47 graduates not seeking employment was by far the highest of any law school for the class of 2011. For all schools, the mean number of graduates purportedly not seeking employment was five, and only two other schools had even half as many graduates listed as unemployed not seeking as SCU. Last year US News started counting graduates listed as unemployed not seeking as simply unemployed, because of widespread suspicions that a few schools were manipulating the category to produce a better putative employment rate for their graduates).

Update II: SCU’s extremely suspicious practice of categorizing a huge percentage of its graduates as unemployed not seeking was not a one-year thing, as it listed 55 members of the class of 2010 in this category. Again, as in 2011, this was by far the highest number of any law school (Second place went to Thomas M. Cooley, with 32. Cooley’s graduating class was three times larger than SCU’s however). All this suggests that perhaps Prof. Diamond could find a better example of law school transparency than his own institution.

Even more incredibly, Diamond’s rationalization for SCU failing to reveal any unemployment data for the class of 2008 as of February 2009 is that “only about half the class reported salaries (from which any rational individual could conclude that that only half had employment at that point).” Apparently “any rational individual” is a term of art for “someone who has no idea what he’s talking about,” i.e., the author, who hasn’t noticed that the percentage of the SCU class of 2008 which SCU reported to the ABA and NALP as being “employed” in February 2009 is readily available. That percentage is 92.6%.

In sum, despite Diamond’s assertion that he can’t find any evidence that SCU was publishing claims of 90+% employment rates for its graduates, the very evidence he cites for this assertion shows that in 2010 SCU appeared to claim a 99% employment rate on its web site. The school also reported a 92.6% “employment” rate to the regulatory authorities, which was then reprinted in US News. Lest we forget, even the marginally lower latter figure was almost wholly fictitious, as it:

(a) Excluded from the denominator graduates the school characterized as “unemployed not seeking” (a category which includes 16% of the 2011 class!);

(b) Excluded people pursuing further education; and, most crucially,

(c) Included every possible form of employment, from working at Latham & Watkins to working ten hours per week at Starbucks.

The long con

Thoughts on the nonsense of the moment.

Update: Journamalism from Pete Thamel, author of the now-infamous Sports Illustrated cover story. Short version: Te’o gave Thamel an enormous amount of information about his imaginary girlfriend and her family, none of which he was able to verify. So I guess the moral of the story is that fact-checking at SI only requires checking into purported facts, as opposed to actually verifying any of them, at least if the story is good enough.

I don’t think this is what Socrates had in mind

Everyone who writes knows that being misunderstood is inevitable. For example a couple of days ago, Bernie Burke, whose work on the law school crisis I generally admire, produced what seems to me an obvious misinterpretation of a quote from a magazine article, as evidence for the claim that I argue law degrees are worthless.

But there is an equally corrosive rhetoric at the other extreme in this discussion, and it is just as pernicious and misleading. For example, this recent quote from Paul Campos in Fortune: “[I]t’s like the subprime mortgage scandal without securitization. When people realize it’s a worthless degree, the system is going to collapse.”

Taken out of context (a context which includes this preceding sentence: “This isn’t sustainable,” warns Campos. “There is a zealous faith in American culture that higher education always pays for itself[.]“), and read as literally as possible, this could be read as a claim that a “law degree” is worthless. Now of course Burke knows, since he has read a lot of what I’ve written on this topic, that I don’t make such a wildly implausible claim anywhere (For instance in an academic article I just published on the topic, I estimate that 92.1% of the 2011 class of Stanford law school had positive outcomes relative to the costs of attending the school. More on Stanford shortly). I suppose Burke might claim sincerely that a casual reader, coming across this single quote, might misread it in this way. Still, all this smacks very much of tactical high Broderism (“Some say law school is a great investment in one’s future. Others say law degrees are worthless. The truth no doubt lies somewhere in the middle.”).

Burke’s rather perverse literal-mindedness in this context is merely mildly annoying, however (and in any case his head and his heart both appear to be in the right place on the more general issue). Steve Diamond’s libelous musings are another matter altogether:

After all we could very easily solve the so-called “oversupply” problem by returning to the days of The Paper Chase (“Loudly, Mr. Hart!”), where women, blacks and Hispanics were a “discrete and insular minority” among law students. Professor Campos of the University of Colorado, who maintains a website called Inside the Law School Scam, seemed to go so far as to endorse such an approach, at least with respect to women.

Diamond is referring to this post. I’ll leave it to readers to decide for themselves whether I’m suggesting that law schools ought to discriminate against women applicants, so that law can return to the genteel days of almost all-male classrooms, or indeed whether anyone could in good faith conclude the post is saying such a thing.

Since as Scott points out below Diamond also argues that a student accepted at both Stanford and Santa Clara “would most likely have very similar opportunities once [he or she] graduated,” it’s difficult to say exactly how preposterous an argument would have to get before Diamond wouldn’t make it.

This claim is plausible only if one assumes that someone who graduated in the middle of the class at Stanford would “most likely” finish at the very top — as in the top half dozen people — of his or her SCU class. Given that the correlation between combined admissions numbers (GPA/LSAT) and first year law school grades averages only .48, this is not exactly a plausible hypothesis. In addition, anyone who gets into Stanford can go to Berkeley with a big scholarship, or UCLA or USC for free, which is to say there’s almost no even theoretically conceivable circumstance in which it would make sense for someone who is admitted to Stanford Law School to enroll at Prof. Diamond’s institution instead.

Bust out

Following up on yesterday’s Boston Globe story regarding the situation at New England School of Law, here are some hard figures regarding exactly how this confidence scheme institution of higher learning is an almost completely taxpayer subsidized operation, on both the front end, in the form of federal loans, and the back end, in the form of what will surely be a very high rate of soft default and quasi-bankruptcy via Income Based Repayment:

Revenue, expenses and federal loan funding at New England School of Law, July 2010-June 2011

Nominal Tuition Collected: $41,546,619

Actual Tuition Collected (i.e., tuition minus “scholarships,” i.e, discounted tuition): $32,841,264

Total Nominal Revenue: $43,423,500

Total Real Revenue: $34,718,145 (Revenue minus tuition discounts)

Total Nominal Expenses: $33,945,288

Total Real Expenses: $25,239,933 (Tuition discounts are listed as expenses)

Net Real Revenue Over Real Expenses: 37.6%

Legally speaking, NESL is a “non-profit” institution, which means among other things that this surplus is not subject to federal or state taxes.

Federal Loans Disbursed to NESL Students, July 2010-June 2011

First Quarter:

Subsidized Staffords: $3,944,156

Unsubsidized Stafford: $5,515,978

GRADPLUS: $9,716,434

Second Quarter:

SS: $68,137

USS: $103,697

GRAD: $386,136

Third Quarter:

SS: $3,957,473

USS: $5,471,922

GRAD: Unreported, but since GRADPLUS originated $19,276,698 in loans during the first quarter destined for distribution to NESL students, and almost exactly half of that sum was distributed in that quarter, we can assume the remaining sum was distributed in the third quarter, i.e, $9,560,264

Fourth Quarter:

SS: $145,510

USS: $44,192

GRAD: $1,139,055 (The GRADPLUS loans distributed in the fourth quarter were used by students enrolled at least half time in summer school, or NESL’s summer abroad law program, which I’ll have more to say about soon).

Total federal loans distributed to NESL students in FY 2010-11: $40,052,965

A few additional points:

94.6% of NESL’s revenue comes from tuition.

NESL students took out 22% more in federal loans than NESL collected in tuition. Slightly more than half of those loans were GRADPLUS, which feature an interest rate of 7.9% and an origination fee of 4%.

NESL produced 308 graduates in 2011, of which 17 had jobs with law firms of more than ten attorneys nine months after graduation. Four of these people had jobs with law firms of more than 50 attorneys. 34% of the class was reported to have a full-time long-term job requiring bar admission. 14.2% of these positions were graduates who listed themselves as having begun a solo practice.

NESL tuition in 2004: $22,475

NESL tuition in 2012: $42,490

From Merriman-Webster:

Definition of BUSTOUT
slang
: a confidence scheme in which an established business is taken over, a large stock of merchandise is purchased on credit and quickly sold, and the business is then abandoned or bankruptcy is declared