Tamanaha: Short Term Versus Long Term Perspective

Brian Tamanaha (Washington U.), Short Term Versus Long Term Perspective:

I fear my criticisms of Simkovic and McIntyre's million dollar law degree study, and their responses [links below], have produced more heat than light. No doubt I bear substantial responsibility for this because I have been in attack mode throughout. Perhaps I can bring this debate to a more useful level by indicating how my position can be reconciled with theirs.

We use different frameworks of analysis. My analysis in Failing Law Schools was avowedly short term (I said next 5 to 10 years) and focused on the financial risk of attending particular bands of law schools (especially expensive law schools with poor employment results). Their analysis is long term (looking at the return over an entire career) and covers the entire pool of law grads.

Their study has convinced me that I was wrong to exclusively focus on the short term--the long term return at the 25th percentile is better than I would have guessed (assuming the validity of their numbers for the sake of this discussion, although the doubts I raised remain). For two reasons, however, I continue to believe my short term analysis is more appropriate. First, the legal employment market remains very poor (even as the general economy has improved), and economists agree that people who enter job markets during down times suffer lower lifetime earnings. No one knows when the turn-around will happen and how strong the recovery will be--the people who entered law school in 2009 and 2010 betting that the job market would improve are now struggling. Second, as Simkovic and MacIntyre acknowledge, the risks differ by individual school. They suggest that IBR helps mitigates this risk for those grads who cannot manage the debt, and I agree; yet IBR cannot be considered entirely positive (20 years on a debt relief program with a potentially large tax hit at the end). Both considerations reduce the chance that students who enter particularly risky law schools today will achieve the lifetime earnings value found in their study at the 25th percentile (I care only about the bottom, where the risk of a negative return is greatest).

So perhaps our fundamental difference comes down to this question: When thinking about the risks and returns of attending law school today, is the short term or the long term perspective more illuminating? Of course both should be kept in mind (ignoring the long term was my error), but which one counts for more?

[Cross-posted at Balkinization.]  Prior TaxProf Blog coverage:

• What Is the Economic Value of a Law Degree -- $1 Million? (July 17, 2013)
• More on The $1 Million Value of a Law Degree (July 18, 2013)
• 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)

Update:

• 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)