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Consequences of the new gilded age: Law school edition

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I haven’t written anything about the economics of law school for awhile. Sometimes when you (or at least I) spend time away from a subject that you know well, returning to it with fresh eyes can be intellectually invigorating.

In less nuanced terms, WTF Leland Stanford and Condi Rice? (Condi was Stanford’s Provost in1997)

Stanford Law School Operating Budget, 1996-97:

Total Revenues: $20.8 million

Total Expenditures: $20.8 million

Adjusted for inflation: (January 1997 CPI to June 2022 CPI): $38.7 million

Stanford Law School Operating Budget, 2022-23:

Total Revenues: $119.7 million

Total Expenditures: $105.8 million

Now I don’t want to shock anybody, but if you were to magically go back in time to that lost Atlantis that was America in 1997, one of the things you would discover is that the Stanford Law School was doing pretty much exactly the same things to and for roughly the same number of students that it’s doing today. We’re not talking about moving from the abacus to the supercomputer in other words. (In case you’re wondering, tuition has gone up by “only” 59% in real terms during this same time frame, plus as of this year the five lower middle class/working class/poor kids who get into SLS every September don’t have to pay any tuition).

So how is it that expenditures have gone up by 173% in real terms, while revenues have more than tripled, again inflation-adjusted?

The precise answer to that question would require digging into the details of the respective budgets, which I’m not going to do right a this moment, but the general trend here is something like this:

Elite higher ed in the USA is one of the prime economic beneficiaries of the new gilded age (Approximately two thirds of SLS’s operating revenue is from gifts, i.e., its endowment and annual giving).

The perverse dynamics of the unending and ever-intensifying competition for status and prestige among the administrators who run elite higher ed institutions in the USA leads to continually higher levels of real spending, with those increases having little or no relationship to the pursuit of pedagogical or scholarly improvement. These people spend more money every year because they can, so they do. Asking why is like asking why a great white shark eats a seal. A great white shark is a seal-eating machine; an elite university upper administrator is a money-spending machine.

None of this would matter too much if these dynamics were somehow limited to such institutions. But what Stanford etc. do has enormously powerful ripple effects throughout higher education in America, as literally hundreds of institutions try to play exactly the same game that Stanford etc. play, although with shall we say somewhat more limited resources.

The result is a social disaster.

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