Thursday, July 18, 2013
Following up on yesterday's post, What Is the Economic Value of a Law Degree -- $1 Million?: Michael Simkovic (Seton Hall), Brian Tamanaha Says We Should Look at the Below Average Outcomes (And We Did):
The study blends the winners and losers, to come up with its $1,000,000, earnings figure, but that misses the point of my book: which is that getting a law degree outside of top law school – and especially at bottom law schools –is a risky proposition . . . Nothing in the article refutes this point.
Professor Tamanaha is correct that the $1 million figure is an average, but we didn’t write a 70 page article with only one number in it. The Economic Value of a Law Degree not only reports the mean or average—it reports percentiles, or different points in the distribution. At the 75th percentile, the pre-tax lifetime value is $1.1 million – $100,000 more than at the mean. At the 50th percentile, the value is $600,000. At the 25th percentile, the value is $350,000. These points in the earnings distribution do better than breaking out returns by school—they allow that even some people at good schools have bad outcomes (and vice versa). Thus we capture, and at length, exactly the concern Tamanaha expresses.
... People with law degrees are not immune from risk. No one is. But the law degree reduces the risk of financial hardship. Law degree holders face significantly less risk of low earnings than those with bachelor’s degrees, and also face lower risk of unemployment. Increased earnings and reduced risk appear to more than offset the cost of the law degree for the overwhelming majority of law students.
Frank McIntyre and I did not miss the point of Brian Tamanaha’s Failing Law Schools. Rather, we disagree with his conclusions about the riskiness of a law degree because data on law degree holders does not support his conclusions. We discuss Tamanaha’s analysis on pages 20 to 24 of The Economic Value of a Law Degree.
We believe that Professor Tamanaha’s views deserve more attention than we could give them in The Economic Value of a Law Degree. Because of this, last Spring, we also wrote a book review of Failing Law Schools, pointing out both the strengths and weaknesses of his analysis. We will make the book review available on SSRN soon. If Professor Tamanaha disagrees with our estimates of the value of a law degree at the low end, we’re happy to hear it. But he should not say that we ignored the issue. We look forward to a productive exchange with him, on the merits.
Update #1: Brian Tamanaha (Washington U.) responds here:
I will make three points/questions in response. Against the argument in my book, you apparently believe that expensive low ranked law schools are not a risky financial proposition for students–that even most of the students who attend these schools will end up obtaining an earnings premium of hundreds of thousands of dollars. That is good news, if correct. But let’s use concrete examples to explore this (which is how my analysis was structured).
Thomas Jefferson Law School class of 2012 had average debt of $168,800–adding interest accrued and average undergraduate debt brings the total to $200,000 on graduation day. Only 29% had landed full-time jobs as lawyers nine months after graduation, the majority earning $60,000 or less. (Notice, by the way that the non-lawyer proportion of the class (7/10) is much higher than the pool you studied (3/5), which presumably will bring down the expected return of the group.)
Is it your contention that–when tuition, opportunity cost, and interest are subtracted–TJLS students will still earn hundreds of thousands (statistically speaking of course)? And the same goes for Cal Western, NYLS, Southwestern, Phoenix, etc, all with very high debt and poor job results.
Or put it more concretely, would you tell a friend that she will probably come out handily ahead even if she went to one of these law schools at full price? (I use “she” because I would like to hear an answer for a female student as well as male.)
Ken’s question (above) cannot be severed from the answer to my question. My book is an examination of the current situation for students and prospective students, whereas your analysis extrapolates from the results of the past generation. Not only has tuition nearly doubled in the past dozen years at private law schools (and debt with it), we are now in the worst market for legal jobs in decades (according to NALP). The legal job market appears to be firming up, recent layoffs aside, but there is nigh universal agreement that the heady days of the mid-2000s are gone for good (NALP has repeated this).
You argue that this is merely a cyclical down turn (not structural) and things will soon return to the historical norm you claim exists. Let’s hope so. But if you are wrong, then isn’t it true that your economic return figures are overly optimistic for current and future students? (Economist say that people who enter job markets during recessions can expect reduced earnings over their careers–which I assume applies to a downward structural adjustment in a given field.)
Finally, your claim about the earnings premium from a JD attributes that premium to the skills and knowledge students obtain while in law school. As I argue in my book, law students are typically a smart and motivated bunch, and would have obtained above average earnings in other fields with their talents had they not gone to law school. You claim that you statistically show that the additional earnings obtained by non-lawyers are from the JD degree, not from their personal abilities. Please tell us how confident you are in this conclusion. (Your analysis appears to leave much leeway on this crucial point.) After all, if it is true that most of the premium you show is from their ability, not the JD, then the non-lawyers would have been far better off had they not gone to law school.
- NY Times, WaPo, Others Debate The $1 Million Value of a Law Degree (July 18, 2013)
- What Is the Economic Value of a Law Degree -- $1 Million or $100,000? (July 19, 2013)
- More on The $1 Million Value of a Law Degree (July 20, 2013)
- Merritt on The $1 Million Value of a Law Degree (July 21, 2013)
- Diamond on The $1 Million Value of a Law Degree (July 22, 2013)
- Tamanaha: How 'The Million Dollar Law Degree' Study Systematically Overstates Value (July 23, 2013)
- Tamanaha: How the 'Million Dollar Law Degree' Study Understates Risk (Part I) (July 24, 2013)
- Tamanaha: Why the “Million Dollar Law Degree” Study Fails (Final Post) (July 25, 2013)
- Rasmusen: Critics of The Economic Value of a Law Degree Are Making the Paper Better (July 25, 2013)
- Pasquale and Simkovic Respond to Tamanaha (July 25, 2013)
- The American Lawyer: Paper on Law Degree's Economic Value a Non-Sequitur (July 26, 2013)
- Simkovic Responds to Tamanaha (Part 3) (July 26, 2013)
- Tamanaha: Short Term Versus Long Term Perspective (July 27, 2013)
- Harper, Diamond: The $1 Million Value of a Law Degree: Distraction, Astronomy, or Astrology? (July 28, 2013)
- Simkovic Responds to American Lawyer Op-Eds (July 29, 2013)
- Diamond Responds to Tamanaha (July 29, 2013)
- Rasmusen: The Economic Value of a Law Degree and the 'Typical' Law Student (July 29, 2013)
- Simkovic Responds to Tamanaha (Part 4) (July 30, 2013)