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Thursday, November 8, 2018

The Economics Of Law School: Employment Prospects And Market Inefficiencies

Samuel P. Engel, The Economics of Law School: Employment Prospects and Market Inefficiencies, 87 Miss. L.J. 501 (2018):

Using recent data from the American Bar Association and the National Association for Law Placement, as well as proprietary data and modeling, this Article constructs an economic model that indicates that, in many situations, there is remarkably a negative correlation between law school prestige and economic outcome, after controlling for LSAT scores. The Article utilizes six main variables in the construction of the model: (1) cost of tuition; (2) financial aid packages; (3) cost of living; (4) LSAT scores; (5) type of legal employment secured; and (6) the relationship between LSAT score and law school performance. The resulting data provides a detailed breakdown regarding the economic outcomes of attending a specific law school, after adjusting for important factors such as the quality of competition, the cost of living in nearby markets, and the cost of attendance. The Article also briefly discusses the secondary effects and characteristics of this market inefficiency, including its tendency to: (1) resist natural correction by the legal market; (2) accelerate grade inflation; (3) constrain upward mobility, thereby limiting diversity; and (4) reduce the number and quality of law students.

Part I of this Article provides a brief introduction. Part II provides an account of the methodology and summarizes the data utilized. Part III applies the economic model to a half-dozen hypothetical law school applicants to illustrate the existing market inefficiency. Part IV briefly discusses the secondary effects and characteristics of the market inefficiency. And Part V provides a concise summary of this Article's results and their impact. The Appendices provide extensive quantitative information related to this Article's findings, and also provide a more detailed description of the methodology employed.

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Comments

This is a thing so obvious that only law professors (nearly half of whom hail from just two law school alma maters) could disbelieve it.

Posted by: Unemployed Northeastern | Nov 8, 2018 9:18:06 AM

I think getting rid of government-sponsored student loans would go a long way to correcting the market inefficiency.

Posted by: brad | Nov 10, 2018 4:59:51 PM

@Brad,

Sadly this is disproven just by looking at the state of law school tuition the year before GradPLUS loans were introduced; a time when law students could only borrow $20,500 per year from the feds. What was the state of law school tuition? Private law schools cost far in excess of that threshold, including fourth-tier institutions; if memory serves, New York Law School charged $36,000 in tuition alone that year, to say nothing of living expenses. So how did law students make up that shortfall?


The "free" market. "Free" here meaning nondischargeable, securitized private student loans, doled out by the same entities that having been furiously lobbying Congress for the last two years to get rid of GradPLUS loans, as the GOP-sponsored PROSPER Act would have done.


What would happen if federal student loans were curtailed or yanked would be that law students would have to borrow the shortfall, whether $10k or $100k, from a private bank, as was the case before 2006. And since those private loans are, by definition, not eligible for federal income repayment plans, future students would face much larger repayments. And tuition would not go down a cent. Really, just look at the history of law school tuition from the mid-1980s through the mid-2000s: capped federal student loans, continued and persistent tuition growth far beyond those caps.

Posted by: Unemployed Northeastern | Nov 13, 2018 8:41:12 AM

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