Thursday, May 08, 2014

Fighting for Their Lives with Your Dough

Every  market indicator I know of says the market for law school grads is pretty lousy. When the demand drops for most other goods and services, firms diversify or reduce output. As the industry shrinks they battle it out to determine who will survive and who will have whatever share of the dwindling market. That is just the way things work. I am sure the horse drawn carriage industry fought like hell to keep up. The smart ones began putting engines in their carriages.

Evidently these same market realities apply to law schools.  Schools are now seeking to diversify by adding new programs -- undergraduate, 2 years programs, skills oriented programs -- as though this will delay the inevitable. The inevitable will be defined by the demand side of the market, not the supply. Still these supply side efforts make some sense if schools are encouraged to find better products where there is an existing and possibly unmet demand (as opposed to ones the School creates itself).

What about the demand side? Here things get sticky and the question is how much law schools should invest in fighting over the shrinking population of potential customers.  At worst one can imagine a state law school investing thousands of dollars of other peoples' money attempting to preserve itself when it was always intended to be a means to an end and nothing more.

On this theme of demand here are some of the ways it plays out --  nothing to be proud of.  As the demand for lawyers goes down so does the demand for law school. One way do deal with the demand side issue is to admit students who would not have been admitted 20 years ago. And, in the past 20 years since many schools have adopted a "no one fails policy" it means inviting a huge investment by students who may never pass a bar exam. But who cares as long as elitist law profs keep their jobs?

Or a school may address the demand issue by massively increasing its placement efforts. On one hand I applaud this but, let's face it, there are limited jobs and that means a zero sum game. If one school and its students win the zero sum game, others lose it. Is the industry really any better off. Is there really any justification for one person to have a job and another not to have one simply on the basis of how aggressive the placement efforts are?

Dwindling demand means all kinds of glossy publications and other the top web pages that are slightly toned down infomercials. All costly and, ironically, driving up the cost of the very thing for which there is limited demand.

Finally, there is the need/temptation to cheat on the USN&WR rankings. Certainly dwindling demand creates an incentive to innovate with respect to how placement figures, costs per student, and faculty per student are calculated. More time that administrators devote to preserving institutions that the market is saying is no longer needed.

What concerns me about the demand side of the equation is the massive expense that is incurred (and passed onto others) to maintain the status quo. To some extent this comes out of the hide of taxpayers and law students but the goal is to preserve the jobs of generally privileged people.


Anonymous said...

I completely agree. Take income based repayment(IBR) as an example. My stepson told me about a fraternity brother that was admitted to Georgetown Law School. His friend was concerned about the cost of law school and paying back his student loans, which he said could reach $250,000.

His undergraduate guidance counselor told him to not worry about the cost. He could go work for a non-profit and get it paid off by the government in ten years.

This is wrong in so many ways. Someone will have to pay those student loans(taxpayers). IBR insulates people from poor economic decisions. IBR is basically saying go chase an education that will not lead to a job that can actually pay for the cost of attaining that job. That is nuts! IBR creates demand that would not be there, driving up pricing power(tuition increases for everyone), and IBR discourages law schools from taking steps at cost containment. It is very similar to 100% loans during the real estate bubble.

IBR is really bad policy. IBR will lead to an ever expanding liability that was not planned. It will be a gigantic issue in the future, right now there is no limit to how much gets written off.

Fred said...

Are you expecting that demand for lawyers will dwindle to the extent that demand for carriages has? It can't be that bad.

Jeffrey Harrison said...

I don' t see that happening.