With their new study, “ The Economic Value of a Law Degree," a pair of university professors become the latest academics to try to
defend this country's troubled model of legal education. This particular attempt is especially disheartening because co-author Michael Simkovic spent the year before he joined Seton Hall University School of Law in 2010 as an associate at Davis, Polk & Wardwell. At some level, Simkovic must be aware of the difficulties confronting so many young law graduates.
Nevertheless, he and his co-author, Rutgers Business School assistant professor of finance and economics Frank McIntyre, “reject the claim that law degrees are priced above their value” (p. 41) and “estimate the mean pre-tax lifetime value of a law degree as approximately $1,000,000 (p. 1).”
As the academic debate over data and methodology continues, some professors are already relying on the study to resist necessary change. That’s bad enough. But my concern is for the most vulnerable potential victims caught in the crosshairs of the—to use a term taken from the article's original title—“Million Dollar Law Degree” headlines: today’s prelaw students. If these young people rely on an incomplete understanding of the study’s limitations to reinforce their own
confirmation bias in favor of pursuing a legal career primarily for financial reasons, they will be making a serious mistake.
The study targets respected academics (including Professors Herwig Schlunk, Bill Henderson, Jim Chen, Brian Tamanaha, and Paul Campos), along with “scambloggers” and anyone else arguing that legal education has become too expensive while failing to respond to a transformation of the profession that is reducing the value of young lawyers in particular. Professors Campos and Tamanaha have begun responses that are continuing. (Tamanaha's latest installment is here.) University of Chicago Law School Professor Brian Leiter’s blog, meanwhile, has become the vehicle for Simkovic’s answers.
One obvious problem with touting the $1 million average earnings figure is that, for the bimodal distribution of lawyer incomes, any average is meaningless. In a recent ebuttal to Campos that Simkovic endorsed, professor Stephen Diamond calculated the net lifetime premium at the median (midpoint) to be $330,000 over a 40-year career.
That might be closer to reality. But a degree that returns, at most, a lifetime average of $687 a month in added value for half of the people who get it isn’t much of an attention-getter. As noted below, even that number depends on some questionable assumptions and, when you get down to the 25th percentile, the economic prospects are far bleaker. ...
It doesn’t take a multiple regression analysis to see the problems
confronting the legal profession—but it can be used to obscure them.
There are a number of problems with your response to the work of
Professors Simkovic and McIntyre and I am sure the authors will reply as
they see fit.
However, I should point out that your understanding of the
implication of the valuation process is incorrect. A careful reading of
my posts on this matter should help clarify the problems. In a nutshell,
when faced with only two choices, it makes sense to choose the one with
relatively higher positive net present value. The magnitude of the
difference is irrelevant.
The challenge for an individual law student is to determine where
they are likely to fall along the distribution. I don’t think the
Simkovic/McIntyre paper was intended to be a calculator for prospective
law students and so criticizing them for that issue is unfair. However,
the paper does provide concrete evidence that such a distribution
actually exists and that for most points on the distribution the present
value of the earnings premium associated with a JD is positive.
This is the difference between engaging in “astrology” and
“astronomy” and it should and I think has shifted the debate away from
amateur stargazers. ...