Tuesday, July 19, 2011

Not Buying What You are Selling: Law School Economics

By now anyone reading this has probably read the piece in the Times on law school economics and featuring former UF law dean Rick Matasar. I though Rick was a good dean although deaning does seem to be a process that leads to a redefinition of what it means to be fair, honest, and ethical. I have not walked in those shoes and would like to think, but cannot know, if I too would "adjust." Probably I would as I have yet to discover any convincing evidence that I am sturdier morality-wise than the deans I have seen come and go.

I do not understand the expose-like nature of these articles when it comes to private schools. At this point anyone who does not know that law school does not mean a high paying job must be living in a bubble. And, at the tuition levels private schools often charge, I am sincerely puzzled. The same people would not pay $100,000 for a motor scooter; why do they become unstuck from reality when it comes to buying a legal education.

On the issue of public schools I feel differently. Supposedly public schools exist to provide something that would not be produced at sufficient levels in a market economy. They do this by forcing people other than the students to pay. There are two possibilities here:

1. More lawyers supposedly with the goal of forcing the cost of legal services down. If this is true, then the current rush to teach more skills makes sense. The problem with this goal, however, is that the market seems to be screaming "enough."

2. It could be that the "product" a more educated and analytic population. If this is the case, it seems like the skills courses, except for writing, should be deemphasized and law school should be more like graduate school with the whole operation greatly downsized. The problem here is that not too many people have the luxury of spending three years in school just to be more well rounded.

So, what is the current goal of public law schools? That actually is pretty easy. It is not about students or taxpayers. Right now it appears to be to preserve the institution, the jobs it provides for faculty, and the process of selling lottery tickets to students. If you think about it, many people still rode horses when they became obsolete. Many people refused to get a microwave oven. Unless public law schools figure out something to do, they may too be put out to pasture.


Alan said...

I think you're addressing two separate but related questions:

1) Why is there demand for law school?

2)Why is the supply for law school what it is?

I think that both these questions imply that law school education somehow resembles a market or is controlled by market forces. The opposite seems to be true. There are certainly buyers and sellers of legal education but the cues they follow have nothing to do with market forces. Students, consumers of legal education, don't treat law school like a businessman treats a piece of equipment he wants to purchase. Students don't normally investigate the utility of their "purchase", how they can amortize the costs or ask about a return policy in case the product they receive ends up not meeting their expectations. The UCC does not apply to consumption of law school education.

This is why I think it's almost silly to talk about certain things, like law school, in market terms. The consumption of law school education, as it turns out, is more often than not irrational from a cost/benefit standpoint. Yet students keep going, because cost/benefit analysis isn't what they're concerned with (or they fail to consider it altogether). Students go because they can, because the financing is out there, and the burden of repayment seems miles away. This is another reason the market analogy is silly. If a business secures financing for a venture and the venture goes belly up, the business can potentially discharge the loan and start fresh. This isn't the case for student loans. In other words, the consumption of law school education, because of the distortions federal policy has created, is nothing like a market. If students are going to be blamed for acting irrationally as consumers and not thinking through the long term repercussions of their decisions, shouldn't they at least have remedies under the same rules as other consumers? And if student debt is supposed to be toxic by design, shouldn't it come with a clear and manifest warning of its toxicity, like a pack of cigarettes?

And as for the sellers, well when there are buyers, market theory suggests that someone will be waiting attentively, ready to take the buyers' money. Can you blame them?

Jeffrey Harrison said...

Thanks Alan, I think you point out two of the biggest problems with the market analogy-- student loans and public subsidization. Both of these shelter students from the real cost of their investments. Take them away and the market would be more compelling. In fact, the idea of loaning money to a business likely to fail makes no sense. Why make loans to those who want to invest in what is increasingly like a losing business?

Nevertheless and despite your doubts, the market does appear to be working. Application rates are significantly down suggesting there is some market driven behavior out here. Plus, it takes the market time to work. When the market for Ph.D.s dried up you twenty or so years ago, it took several years for the sellers to leave the market or otherwise contract.