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Sunday, April 7, 2013

Posner: The Real Problem With Law Schools (They Train Too Many Lawyers)

Slate:  The Real Problem With Law Schools: They Train Too Many Lawyers, by Eric Posner (Chicago):

A crisis is looming in legal education. Last month, a notable group of legal educators who call themselves the Coalition of Concerned Colleagues released a letter declaring that law schools have spewed forth more graduates than the legal market can absorb, resulting in rising unemployment among young lawyers, who cannot pay off colossal student loans. As the New York Times recently reported, applications are plummeting, and a movement is on to reduce law school educations from three to two years—advocated in the New York Times by law professor Samuel Estreicher and law dean Daniel Rodriguez. The CCC letter similarly argues that legal education should be less expensive and less uniform, which sounds fine in the abstract. But in the details, the proposed fixes will make the crisis worse than ever.

The figures are grim, and the human cost is real. Ninety-two percent of 2007 law school graduates found jobs after graduation, with 77 percent employed in a position requiring them to pass the bar. For the class of 2011 (the latest class for which there are data), the employment figure is 86 percent—with only 65 percent employed in a position that required bar passage. Preliminary employment figures for the class of 2012 are even worse. The median starting salary has declined from $72,000 in 2009 to $60,000 in 2012. A while back, the Bureau of Labor Statistics estimated that 218,800 new legal jobs would be created between 2010 and 2020. As law professor Paul Campos points out, because law schools graduate more than 40,000 students per year, those jobs should be snapped up by 2015—leaving only normal attrition and retirement spots left for the classes of 2016 to 2020. Meanwhile, tuition has increased dramatically over the last several decades. Students who graduate from law school today with $100,000 or more in debt will default on their loans if they cannot get high-paying work in the law.

The crisis could have been predicted. Demand for legal services boomed in the 1990s and 2000s. College graduates, drawn by skyrocketing pay and subsidized by government-guaranteed loans, flocked to law school in ever greater numbers. Law schools, rational market actors that they are, hiked tuition. The higher prices people were willing to pay for legal education encouraged universities to enlarge classes and open additional law schools. Not surprisingly, supply overtook demand. The mismatch is now exacerbated by the development of technological substitutes for some legal work, including online services that enable people to fill out legal forms, and a weak economy. ...

The “crisis,” then, is just part of the normal cycle of the economy—familiar to anyone who has held a job as construction worker, software engineer, salesman, or journalist. And the market is reacting in a predictable way. Fewer people are applying to law schools; class sizes are shrinking; some law schools may shut down. The excess supply of lawyers will reduce the price of legal services—a boon for everyone outside the legal sector—and so some lawyers will leave the profession for early retirement or more lucrative pursuits. (We seem to have forgotten the usual complaint about lawyers that they charge too much, not too little.) Demand and supply will eventually equilibrate, and the legal services market will look something like it did 10 or 15 years ago.

None of the proposals for reform advocated by CCC make sense in light of the group’s diagnosis of the problems lawyers face. ...

[Y]ou can’t blame government subsidies for the plight of young lawyers. Government guarantees lower the cost for lawyers to obtain training. If the subsidies create a larger supply of lawyers, it should also create a greater demand for their services, by reducing the costs that they pass on to clients. Depriving students of government-guaranteed loans is hardly a solution to the problem that legal education is too expensive. ...

The only realistic way to help lawyers today is to increase the demand for legal services—somehow convincing governments, for example, to pay for adequate representation of indigent defendants—but in the long term, greater demand will create the expectation of yet more job growth, and that could lead to another bust. The critics seem to think the legal profession can escape the logic of the market. It can’t.

Matt Leichter, "The Real Problem With Law Schools” Real Problem Is Poor Research, Flawed Reasoning:

Posner believes that the group of law school professors from mostly prestigious universities who sent a letter to the ABA calling themselves the “Coalition of Concerned Colleagues” “will make the crisis worse than ever.”

If you think that handing vouchers to everyone 18 years and up to attend law school at full cost to the government plus living expenses would be the only way things could get worse than ever (if people still even bother to apply at that), you obviously don’t know economics. ... The worst thing anyone can say about the “Coalition of Concerned Colleagues’” letter to the ABA is that it was too cautious re. the Direct Loan Program, which isn’t even worth a comment on a scamblog. Rather, Posner’s argumentum ad econ one-o-oneum is the only kind of logic we really need to escape from.

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"The only realistic way to help lawyers today is to increase the demand for legal services—somehow convincing governments, for example, to pay for adequate representation of indigent defendants—but in the long term, greater demand will create the expectation of yet more job growth, and that could lead to another bust."

Posner makes an extremely important point here. There is no collective pool of resources to pay for legal services the way there is for medical services. Health professionals will always get paid because employers and the government have to pay massive sums of money to provide medical insurance for citizens/employees. If they did not, doctors and nurses would make a tiny fraction of their current salaries.

Why is that? Because nobody has any money! Everyone just blows their money the second the get it on vacations, cars, clothes and stuff for their house. Even rich people would go years without seeing a doctor if they had to pay out of pocket.

Yet, with the Government needing to cut back on medical entitlements, you can be sure they there is no chance that they will fund programs for people to obtain legal services now or anytime in the next 500 years.

Posted by: JM | Apr 7, 2013 2:40:05 PM

"The critics seem to think the legal profession can escape the logic of the market. It can’t."

Finally, someone goes there. Posner says outloud what every law professor who thinks about this issue must already know. Elite institutions are fine, lesser institutions are doomed. And of course, Posner is fine with this.

U Chicago law, where Posner teaches, sent a whopping 145/215 students into Biglaw jobs or federal clerkships. That's 67%! Only 1 graduate was unemployed and seeking, and only 5 were in anything less than long term/full time employment.

http://www.lstscorereports.com/?school=chicago&show=ABA

By contrast, Brooklyn Law School (USNews - 80) had 100/466 unemployed and seeking, and many more in some form of underemployment, while only placing 9% in Biglaw/Fed Clerkships.

http://www.lstscorereports.com/?school=brooklyn&show=ABA

Bottom line: UChicago is an economically sound decision at $80K/yr total budget, while Brooklyn is economically sound at maybe $25K/yr total budget (really just the cost of living).

With all of the heat that law schools are taking, doesn't it make sense for the Posners of the world to point this fact out early and often?

Posted by: JM | Apr 7, 2013 4:44:41 PM

Alas, someone entering the fray on reforming legal education that is not suggesting the slump in the legal labor market is cyclical or skills gap related. The ABA needs to step in--but given it is pleading impotence in policing law schools "offering misleading" employment statistics, I am not going to hold my breath.

Posted by: jurisdebtor | Apr 7, 2013 8:09:13 PM

The real problem is that Eric Posner is a serious scholars, while most of these fellows are essentially opportunists.

Posted by: michael livingston | Apr 8, 2013 5:57:26 AM

isn't the obvious answer to convert most law schools to BA degrees? Law is an excellent preMBA or preBarrister degree. A sound social science, with a focus on research and writing, plus a bit of practical philosophy. Plus, dual major with STEM degrees for a decent pre-Med set up.

I mean, can the rest of the jurisprudential world be that wrong?

Posted by: Homo Rechtsanwalt | Apr 8, 2013 10:42:14 AM

In a free enterprise system, one such as ours still pretends to be, a large proportion of enterprises are doomed to failure by the laws of the marketplace. Ought not this same principle apply to students, apprentices, and trainees of all stripes? If 86% of all 2011 law grads are employed after graduation, 65% in jobs requiring bar passage, this represents an extraordinarily high success rate. Put another way, what is essentially the bottom 35% of students is not employed in a profession in which they proved mediocre or less in their education/training efforts. Are we not better off as a society without the bottom 35% screwing up their clients' cases? In a professional field, this seems reasonable, unless we so flatter outselves as to think that everyone of our students or trainees is, upon completion of coursework, adequately trained to perform in their professional field. In the medical field, where 100% of all U.S. graduates find employment (along with a very hign percentage of foreign-educated MSs), which of you wants to be treated by the bottom 35%?

Posted by: Publius Novus | Apr 8, 2013 11:23:54 AM

@JM,

At $80k per year for Chicago for three years, plus principalizing interest, bar expenses & average UG debt, you are looking at about $300,000 in outstanding student loans when you enter repayment. That is about $3450/month on a 10 year repayment, for an annual repayment of a shade of $41,000 after taxes. In an expensive, high tax locale like NYC, that is almost 50% of your takehome pay as a first-year attorney at a market rate firm. In other words, you will have to go on IBR/PAYE. In fact, according to http://www.finaid.org/calculators/scripts/loanpayments.cgi, your minimum AGI to NOT incur a partial economic hardship requiring IBR would be $291,000, nearly twice the market-rate salary in NYC. I would not call that a happy outcome, particularly if one considers the 80% attrition rate most large law firms have over a five-year period. Sure, you can extend repayment out to a 25-year plan, just like a mortgage, and knock the payment down to a mere $2,000/month, or $24k/year, but you will also end up paying about $325,000 in interest over that repayment period, for a grand total of about $624,000.

What I am getting at is that the extraordinary growth of law school tuition/expenses has outpaced the growth of law firm salaries to the extent that, given the high odds of being around long enough to make partner, no law school is worth the cost of 100% financing.

Posted by: Unemployed Northeastern | Apr 8, 2013 1:11:13 PM

This is becoming embarrassing. The fact is that those who somehow "just now" become aware that there are problems (in fact there are many) with American legal education have jumped on the rear of the "train" at best. Many people (including me) have been saying for two decades that there are serious issues. But US law schools buffered and enabled by their monopolies granted by the ABA and state supreme courts have refused to listen until the point that the dramatic changes are essentially fait accomplis. Fortunately or unfortunately the matter is being taken out of the hands of the institutions and people who heretofore have controlled the process. The dramatic decline in available "law jobs (defined in the traditional sense) coupled with information technologies, high levels of student debt, overpaid faculty and administrators as reckoned in the terms of the emerging market for legal services, and the de facto redefinition of who gets to "practice" law and what law consists of is irreversibly altering the context and culture. Bottom line is that "the center cannot hold" and "things fall apart". But what does this mean for US law schools?

First, the ABA and state bar strangleholds must be removed. They do little except maintain a rigid and very expensive system of education and erect barriers to market participation by many others interested in offering some form of education in some aspect of law. Second, education in law ought not be "generalized" but adjusted to specific activities such as real estate, tax, domestic relations, etc. Third, there is no "magic" in the three to four year formulaic structure of instruction that has emerged solely as the implementing byproduct of the ABA/state supreme court hegemony. There are many aspects to law practice. While some may well be generalists, in this society most are trained for specific tasks and functions. Law schools historically have done a mediocre to poor job at recognizing this fact.

Ultimately, therefore, law schools are teaching too many lawyers, graduating too many people who are focused almost solely on becoming practicing lawyers and simultaneously not actually doing it all that well. The need is for honesty and inventiveness, not for rigid repetition of the same. For many, but not all (Harvard, Yale and Chicago can do whatever they want) there needs to be some real innovation in method and function. Unfortunately, one of the main obstacles is faculty who are anchored to the dying model of legal education both through a sense of tradition and because the job of the American law professor is the best in the world. But change is now our only constant.

Posted by: David Barnhizer |

Posted by: David Barnhizer | Apr 8, 2013 2:52:41 PM

@ Unemployed Northeastern

Your figures are a bit exaggerated. Tuition and COA at U Chicago would be between 70-75K. You shouldn't be including undergrad loans (irrelevant) or bar fees (Firm will pay). You also neglect that the vast majority to students will get one, if not two summer associate positions, at approximately $35K per summer.

Even if we assume one SA position, you're still looking more in the neighborhood of $225K in total debt, even including the additional 3 month living costs and capitalizing interest during school.

Most U Chicago students can pay off this debt (~275 w/interst) in 5 years of Biglaw practice. And most of these students will have long careers in the law, if that is their desire.

I'd estimate that tuition would have to reach ~65K in order to make U Chicago non-viable economically. It may still be worth it if you anticipate making partner at a top firm, but most people won't want to be shackled to 300K debt for the first 10 years of their career.

Posted by: JM | Apr 9, 2013 8:50:25 AM