July 21, 2018
I recently pointed out some factual problems with claims by Northwestern lecturer Mark A. Cohen. Cohen, writing in Forbes, claimed that faculty terminations at Vermont Law School were proof that student debt was unsustainable, not only at Vermont, but at all law schools except for a handful of elite institutions.
Here’s the problem: When student debt levels are unsustainable, student default rates are high. But at Vermont--and at most law schools--default rates are low.
When Professor David Herzig pointed out some of the relevant literature to Mr. Cohen, Cohen responded with the following angry outburst on twitter:
“That "evidence" has been panned by every credible source I know. The methodology and premises upon which the conclusions were drawn are laughable and fly in the face of real studies. I was a bet-the-company trial lawyer for many years--the "study" you cite is 3rd rate fiction.”
Low student loan defaults for law graduates are consistent with the peer reviewed literature, such as The Economic Value of a Law Degree (final version here), Timing Law School (final version here), and related work by me and Frank McIntyre about the value of legal education. Law degrees generally provide benefits that are substantially greater than their costs, even toward the low end of the distribution, across race (final version here), sex and college major, both before and after the financial crisis, and including those who graduate during a recession. More than the top 75 percent of law graduates are getting good value relative to a terminal bachelor’s degree.
Strong student loan performance is also consistent with the After the JD study (compare waves I, II, and especially III), which showed rapid income growth for graduates of even low ranked ABA-approved law schools, and eventually, six-figure median full-time incomes.
Law students’ low default rates have featured in the business strategies of many student lenders, who are eager to refinance law student debt for interest rates substantially below those offered by the federal government.
Professor Herzig asked Mr. Cohen to be more specific about his sources and objections.
Mr. Cohen has yet to specify what he believes is wrong with the methodology in the studies—which were authored with a PhD labor economist, peer reviewed and carefully vetted, use high quality government data, use mainstream methods and assumptions that are well established in labor economics, and include sensitivity analyses and robustness checks. The results have been replicated by other researchers.
Mr. Cohen also has yet to specify which “real studies” he thinks use better data and more widely accepted methods, and why. He has yet to explain how his litigation experience qualifies him as a labor economist, statistician, and literary critic. Or why, as a seasoned litigator, he thinks so many of the lawsuits against law schools have been dismissed.
July 19, 2018
The trouble at Vermont Law School isn't due to "unsustainable" debt levels for students--but it might be because of unsustainable tuition discounting and underinvestment in outreach (Michael Simkovic)
Vermont Law School recently stripped many of its tenured faculty of tenure. A recent article in Forbes by Mark Cohen, a lecturer at Northwestern, claims that Vermont's financial problems are a sign that tuition is too high and student debt is unsustainable.
The data doesn't support his contention. When student debt levels are unsustainable, student default rates are high. But at Vermont--and at most law schools--default rates are low. Vermont Law School's 3-year cohort default rates over the last 3 years available (classes of 2012-2014) are between 0.3 and 1.2 percent, while the national average cohort default default rate across educational institutions is close to 11.5 percent. Nor are Vermont graduates defaulting in large numbers on their Perkins loans. The 2016 default rate, the most recent available, was 3.5 percent for Vermont, versus an average across all educational institutions of around 11.5 percent. Perkins loans are not eligible for Income Based Repayment, so Vermont's relatively strong performance is likely not due too a disproportionately large share of its graduates enrolling in IBR. (Not all Vermont grads will practice law in Vermont, but lawyers in Vermont are actually paid reasonably well--around 120,000 on average according to the BLS).
Vermont Law School's problem is not that tuition is so high that student debt levels are unsustainable relative to students' post graduation income and other financial resources. Rather, Vermont's problem seems to be that there are too few students, and because of aggressive tuition discounting intended to attract them, the students who matriculate are paying too little to make the school financially healthy. Vermont Law School's 2016 529 shows that around 90 percent of incoming students received some scholarship, and half of students receive half tuition scholarships or better.
Vermont Law School could try to respond by offering even more scholarship, but its competitors have deeper pockets, and can outspend Vermont until it runs out of room to maneuver. Escalating a price war that Vermont will surely lose would be foolish. Degrading the quality of its education by relying on more lecturers and adjuncts risks causing a death spiral in which quality, enrollments, reputation, and revenue per student all continue to drop.
To be successful and sustainable in the long run, Vermont may need to find a way to attract students--not just from Vermont, but from across the region--other than offering a cut-rate price. Rather than compete on price, Vermont should find a better way to reach out to those students who are most likely to find Vermont's offerings appealing.
May 26, 2018
Extremely conservative Stanford graduate complains that there aren’t enough extreme conservatives on campus (Michael Simkovic)
Few would consider Stanford University left-wing.
Stanford University hosts the controversial, conservative Hoover Institution. Stanford has raised more than $40 million from conservative donors. Stanford is a major military contractor. Stanford’s last acting president (and long-time provost) argued for affirmative action in hiring in favor of conservative faculty, deploying barely coded, neo-McCarthyist phrases like “the threat from within” to describe liberals on campus. One very prominent Hoover Institution faculty member took the suggestion to heart, asking students affiliated with the College Republicans and Turning Point USA (which maintains "watchlists" of liberal faculty) to help him dig up dirt on a 20 year old Stanford student who the Professor thought was too liberal. (The Professor wanted help "grinding [leftists] down" and wished to "intimidate them.") (See also here, here, here, and here).
Some conservatives want more.
A recent Stanford law graduate and self-described “hard man,” Martin J. Salvucci, writing in the National Review, recently compared Stanford to Czechoslovakia under Soviet domination. Czechoslovakia was invaded by 650,000 heavily armed soldiers from the Soviet Union and other Warsaw pact states in 1968 when Czechoslovakia sought to become Social Democratic rather than Communist (i.e., leftist, but not authoritarian).
The Stanford graduate—who recently worked at Skadden and Klee Tuchin—explains that from his perspective, attending Stanford entailed a level of suffering just like living in a totalitarian satellite state, except that he has “nicer stuff.”
The problem, apparently, is that there are not enough committed right wing ideologues on campus:
"An almost unspoken agreement seems to exist among many students that all of us will soon be fabulously successful, so long as everyone remains a “team player” and nobody rocks the boat too earnestly. Political, moral, and religious convictions are, for the most part, accessories best deployed for instrumental purposes, rather than values to be espoused or explored for their own sake."
If this description is accurate, then it sounds like Stanford law students are well prepared for the restraint and decorum that will be expected of them at the elite law firms, banks, and corporations where many of them aspire to work.
The recent graduate also complains that the Dean of Stanford, M. Elizabeth Magill, has not endorsed his view that there should be an increase in official efforts to promote conservative views on campus. Because of this, he accuses her of being a “gutless bureaucrat.”
Mr. Salvucci’s views highlight that ideology is a matter of perspective. For those who are sufficiently extreme, even a conservative, corporate institution in Silicon Valley, like Stanford, can seem as oppressive as life under Soviet rule.
Given the timing of Mr. Salvucci’s post—after graduation but before admission to the bar—Mr. Salvucci may be attempting to set up a test case to challenge California’s Bar’s character and fitness requirement, which mandates “fairness . . . and respect . . .”
I doubt that the bar will take the bait.
But Mr. Salvucci’s classmates and colleagues may enjoy ribbing him about this for years to come.
 Hoover is a think tank which selects and funds its research fellows based on their ideology and political experience. This is routine in the think tank world, but is widely condemned within academic institutions, which are supposed to select scholars based solely on the merits, regardless of politics.
 The Stanford professor rationalizes these activities by arguing that he was concerned about efforts to schedule counter-programming to compete with controversial political scientist Charles Murray's talk, which resulted in the talk being lightly attended. He goes on to argue that he was defending "free speech"--which to him apparently means shielding conservative speakers from competition for students' attention.
UPDATED 7/2/2018 to include Hoover faculty member Niall Ferguson's efforts to dig up opposition research on liberal students.
May 26, 2018 in Guest Blogger: Michael Simkovic, Law in Cyberspace, Legal Humor, Legal Profession, Ludicrous Hyperbole Watch, Of Academic Interest, Professional Advice, Student Advice, Weblogs | Permalink
August 21, 2017
Vanderbilt Tax Professor Herwig Schlunk wants the federal government to tax university endowments, preferably out of existence. He writes: “In the best of all possible worlds, the federal government could and probably should . . . confiscate[e] all private university endowments . . .”
Toward that end, Schlunk recycles arguments that were discredited years ago.
Professor Schlunk is famous for asserting that law school is a bad investment. Schlunk’s bold claim—based on back of the envelope calculations and highly unscientific website surveys—was popularized by the Wall Street Journal and echoed by sympathetic media outlets. Peer reviewed research by labor economist Frank McIntyre and me—using high quality nationally representative government data and well-established econometric techniques—subsequently demonstrated that Schlunk was mistaken. (See here and here).
This post critiques Schlunk’s recent work on endowments for misuse of discount rates, overlooking the importance of educational quality, mismeasuring student earnings and higher education expenditures, selectively targeting higher education, supporting policies that undermine economic growth, and overlooking stark differences between popular votes and political power.
Misuse of discount rates
To arrive at his headline-grabbing law school result, Schlunk relied on some spectacularly unrealistic assumptions. As Frank McIntyre and I explained four years ago:
“Professor Schlunk’s analysis assumes astronomical discount rates, low earnings growth rates, and zero inflation for thirty-five years. None of these assumptions are empirically or theoretically justifiable.
Most studies [of higher education] by economists have generally used a discount rate between 2.5% and 3%. . . . Compared with the 3% discount rates applied in labor market studies by economists and suggested by the real (net-inflation) costs of financing a law degree . . . Professor Schlunk applies real discount rates of between 8% and 27%.
If Professor Schlunk had used comparable assumptions about discount rates to evaluate the value of a college degree compared to a high school diploma, he would have reached the conclusion that few should go to college. Indeed, given a 30% nominal discount rate, whether it makes financial sense to complete high school might be debatable.”
Undeterred, Professor Schlunk once again relies on unrealistically high discount rates and overlooks differences in completion rates, this time to argue that private non-profit universities provide little value when compared to leanly funded, politically vulnerable public universities. Based on this analysis, he concludes that the federal government should tax universities more heavily than it already does. Higher discount rates mean that future cash flows have a lower present value. Thus the value of a lifetime of higher earnings from higher quality education is diminished by choosing a higher discount rate.
Schlunk’s justification for using such high discount rates is that higher education “puts me in mind of income streams I confronted when advising investors in the private equity sector [where] discount rates of as high as 30% were generally applied.”
For the record, peer reviewed research generally finds that private equity returns net of fees are close to or less than those that can be found in the stock market—not remotely close to the 30 percent returns assumed by Schlunk. (In addition, discount rates are supposed to reflect the weighted average cost of capital, NOT the (higher) returns to equity). If P.E. investors were applying high discount rates to cash flow projections, this likely means that investors believed that P.E. cash flow projections were over-optimistic.
Overlooking college completion rates
In his latest critique of higher education, Schlunk also overlooks large differences in completion rates. Four-year completion rates for bachelor’s degrees are almost twice as high at private non-profit universities as at their more leanly funded public counterparts. If one accepts Schlunk’s assumptions of extremely high discount rates, even a modest delay in completion would have a dramatic impact on value.
Overlooking effects of increased educational expenditures and educational quality
Peer reviewed studies that control for differences in student characteristics consistently find that higher expenditures per student lead to significant increases in student earnings and likely contribute to higher completion rates. (For brief reviews of the literature, see The Knowledge Tax and Populist Outrage, Reckless Empirics; See also here).
Professor Schlunk overlooks these studies.
Mis-measuring student earnings and educational expenditures
Schlunk overestimates the difference in expenditures and resources at elite public and private universities, which leads him to over-estimate the earnings premiums necessary for more resource-intensive private education to be worthwhile. Schlunk assumes incorrectly that all students at elite flagship state universities pay low in-state tuition, when many students at these institutions pay much higher out-of-state or international student tuition. He overlooks the extent to which expenditures per student at elite public universities exceed in-state tuition because of state subsidies and cross-subsidies from out-of-state students. He overlooks the extent to which differences in financial aid affect net-tuition—and therefore educational resources and expenditures—at different universities.
The elite public universities that Schlunk presents as controls that he sees as similar to private universities, but without endowments, actually have larger endowments than many private universities.
April 02, 2017
New York Times Reporter Elizabeth Olson Claims That Professors Earning Less than First Year Associates are Paid like Law Firm Partners (Michael Simkovic)
New York Times reporter Elizabeth Olson recently complained that the Dean of the University of Cincinnati College of Law was suspended after attempting to slash faculty compensation (“Cincinnati Law Dean Is Put on Leave After Proposing Ways to Cut Budget”). According to Olson, “law schools like Cincinnati [pay hefty] six-figure professor salaries that are meant to match partner-level wages.”
Olson goes on to cite the compensation of the current and former Dean of the law school. This makes about as much sense as citing newspaper executive compensation in a discussion about reducing pay for beat reporters.
Data from 2015—the latest readily publicly available—shows that law professors at Cincinnati earned total compensation averaging $133,000. A few professors earned less than six figures. Only one faculty member—a former dean and one of the most senior members of the faculty—earned more than $180,000. Including only Full Professors—the most senior, accomplished faculty members who have obtained tenure and typically have between seven and forty years of work experience—brings average total compensation to $154,000 per year.
As Olson herself reported less than a year ago, first year associates at large law firms earn base salaries of $180,000 per year, not counting substantial bonuses and excellent benefits. With a few years of experience, elite law firm associates’ total compensation including bonus can exceed $300,000. Law firm partners at the largest 200 firms can earn hundreds of thousands to millions of dollars per year according to the American Lawyer, and often receive large pensions after retirement.
August 17, 2016
New York Times journalist Elizabeth Olson recently reported that the law school graduating class of 2015--which was very close to the size of the class of 1996--had about the same number of private sector jobs 9 months after graduation as the class of 1996. That's a pretty good outcome considering that the economy-wide employment population ratio in February 2016 was 3.6 points lower than in February 1997. Olson puts a negative spin on the non-story.
UPDATE: Casey Sullivan at Bloomberg provides more balanced coverage, noting the smaller class size at the outset of his story and focusing on overall earnings rather than job counts in one segment of the market.
For previous coverage, see
Timing Law School (forthcoming in JELS)
February 09, 2016
The latest unscientific fad among law school watchers is comparing job openings projections for lawyers from the Bureau of Labor Statistics* with the number of students expected to graduate from law school. Frank McIntyre and I tested this method of predicting earnings premiums--the financial benefits of a law degree--using all of the available historical projections from the BLS going back decades. This method of prediction does not perform any better than random chance.** Labor economists--including those working at the BLS--have explicitly stated that BLS projections should not be used to try to value particular courses of study. Instead, higher education should be valued based on earnings premiums.
Bloggers who report changes in BLS projections and compare projected job openings to the number of students entering law school might as well advise prospective law students to make important life decisions by flipping a coin.
Many law graduates won't practice law. Many engineering graduates won't become engineers. Many students in every field end up working jobs that are not directly related to what they studied. They still typically benefit financially from their degrees by using them in other occupations where additional education boosts earnings and likelihood of employment.
And if one's goal really is to practice law even if practicing law is not more lucrative than other opportunities opened by a law degree, then studying law may not be a guarantee, but it still dramatically improves the odds.
* BLS job opening projections--which are essentially worthless as predictors for higher education--should not be confused with BLS occupational employment statistics, which provide useful data about earnings and employment in many occupations, including for lawyers.
** There isn’t even strong evidence that changes in the ratio between BLS projected lawyer job openings and law class size predict changes in the percent of law graduates who will practice law, although the estimates are too noisy to be definitive. Historically, the ratio of BLS projected openings to law graduates (or first year enrollments 3 years prior) has systematically under-predicted by a wide margin the proportion of law graduates practicing law shortly after graduation, although it is clear that a large minority of law graduates do not practice law.
February 9, 2016 in Guest Blogger: Michael Simkovic, Law in Cyberspace, Legal Profession, Ludicrous Hyperbole Watch, Of Academic Interest, Professional Advice, Science, Student Advice, Web/Tech, Weblogs | Permalink
December 07, 2015
Blog Emperor Caron appears to think so, though I'm a bit skeptical about his motives: since the "Instapundit" blog run by the right-wing Tennessee law professor Glenn Reynolds links to each day's posting about the alleged "scandal," the Blog Emperor has another incentive to keep this "hits" cow going! But what do readers think? We'll settle this scientifically:
UPDATE: Prior to the invasion of the Insta-ignorance readers, the normal intelligent readership was 30% in favor of the scandal-mongering, the rest against with about one quarter deeming the Blog Emperor's continued coverage the real scandal.
May 10, 2015
Competitive Scholarships, Mandatory Courses, and the Costs and Benefits of Disclosure (Michael Simkovic)
There is a wide range of views about the benefits, costs, and appropriate use of conditional merit scholarships—scholarships that under their terms, will only be retained after the first year of law school if students maintain a minimum GPA or minimum class rank (if there is a mandatory grading curve, a minimum GPA effectively is a class rank requirement). These questions implicate both broad value judgments and also very specific empirical questions to which we many not have clear answers.
1) Is competition for grades a help or a hindrance to learning?
2) Is competition, with greater rewards for winners than for losers, inherently moral or immoral?
- Does the answer depend on whether the outcome of the competition is driven by luck, skill, or effort?
- Does the answer depend on how large the differences in rewards are between winners and losers?
3) Does disclosure alter student decision-making?
- If so, how?
- Is this a good thing or a bad thing?
- If it is a good thing do the benefits of disclosure outweigh the costs of providing disclosure?
- Are some ways of providing disclosure clearer and more meaningful than others? Could too much disclosure be overwhelming?
Disclosures are sometimes very effective at improving market efficiency. Sometimes disclosures appear to have no effect. Sometimes they have the opposite of the intended or expected effect. For example, disclosure of compensation of high level corporate executives of publicly traded companies may have contributed to an increase in executive pay (see also here.)
In the case of conditional merit scholarships, the direct administrative costs of providing disclosure appear minimal. The effects of such disclosure, if any, remain unknown. I support access to greater information about conditional scholarship retention rates, not only for law schools but also for all educational institutions.
Scholarship retention rates at many undergraduate institutions under government-backed programs appear to be lower than scholarship retention rates at most law schools. Around half of Georgia Hope Scholarship recipients lost their scholarship after the first year. Around 25 to 30 percent of Georgia Hope Scholarship recipients retained their scholarships for all four years of college. Nevertheless, conditional merit scholarships can have positive effects on undergraduate enrollment and academic performance. A fascinating randomized experiment by Angrist, Lang and Oreopolous found that financial incentives improved grades for women but not for men. A recent experiment also found evidence that merit scholarships tied to grades can increase student effort and academic performance at community colleges.
Unfortunately, there is some evidence that the use of merit scholarships tied to GPA by undergraduate institutions—where grade distributions and course workload vary widely by major—can reduce the likelihood that students complete their studies in science technology engineering and math (STEM) fields. Students who major in STEM fields have a higher chance of losing their scholarships
In other words, if students can shop for “easy As” rather than study harder to improve their performance, they can reduce their own future earning prospects. The approach law schools take—merit scholarships tied to mandatory grading curves and a required curriculum—may be better for students in the long run. Indeed, law students might benefit financially if additional courses, such as instruction in financial literacy, were mandatory.*
Greater disclosure of grading distributions may exacerbate grade shopping and grade inflation, which can undermine student effort and learning. Some models suggest that grade inflation is contagious across institutions (see also here). (It should be possible to disclose scholarship retention rates without disclosing grade distributions).
In some contexts, such as securities regulation or pharmaceuticals, disclosure requirements tend to be high. In other areas, such as employment contracts, disclosure tends to be more limited. We may not always get the balance right. These questions have lead to a rich research literature in law, economics, and psychology (see Bainbridge, Lang, Mathios, Coffee, Kaplow, Easterbrook and Fischel, Romano, and Schwartz). In all cases, whether and how disclosures alter behavior is an empirical question. How the benefits compare to the costs are empirical questions mixed with subjective value judgments.
Given the current limited state of knowledge, and good faith and understandable disagreements about subjective value differences, strident views on one side or another, and moral condemnations of those entertaining different viewpoints, are not appropriate.
Law professors have an obligation to teach students to think like lawyers, weigh evidence, and consider different arguments and different perspectives. We should not shut down discussion with swaggering declarations of the moral superiority of our own views or ad-hominem attacks against those with whom we disagree.
A recent post (in the comments) by Brian Tamanaha (or someone posting under his name and with a similar rhetorical style**) highlights the unfortunate tendency by some toward moral posturing. Tamanaha writes:
“[Those who condemn conditional scholarships are] speaking up for the integrity of legal academia. It is embarrassing that law professors would now rise up to defend employment reporting standards … criticized by outsiders (see New York Times "Bait and Switch" piece), practices which have since been repudiated and reformed by new ABA standards. I do not understand why Simkovic is re-raising these resolved issues, but it does not help us regain our collective credibility.
After reading these posts, I have begun to wonder whether a sense of professional responsibility is what separates the two sides in this discussion. It is not a coincidence that John Steele, [Bernard Burk], and others who strongly condemn these practices have taught legal ethics.”
In other words, if you question Brian Tamanaha’s reasoning and conclusions—as I have—then you have no integrity and dubious ethics, are irresponsible and unprofessional, and are an embarrassment to the legal academy.
Bernard Burk, though declaring his disdain for ad-hominem attacks, accuses those with whom he disagrees of being “partisan.” He compares competition for grades and scholarships to physically beating students. Burk compares law schools to gangsters and evil witches. He claims that the positive effects of conditional scholarships on student motivation and learning “smells of post-hoc rationalization.” (Most of the labor economics studies demonstrating positive effects of financial incentives on student performance were available before The New York Times and the law school critics targeted law school conditional scholarships; the critics overlooked the peer-reviewed literature).
Deborah Merritt, though generally providing an intelligent discussion of conditional scholarship issues, compares conditional scholarships in which adults who lose the competition for grades receive a free year of law school to the fictional “Hunger Games” in which children who lose a physical struggle are murdered. (Paul Caron repeats this unfortunate comparison when summarizing the debate; so does Bernard Burk).
Paul Campos compares those who disagree with him about data disclosure standards to “Holocaust deniers.”
Law school critics have not persisted through the force of argument or evidence, but rather through their ability to make an honest discussion of the issues so unpleasant that very few who disagree with them wish to engage. We should thank Professor Telman for his courage and for elevating the conversation from polemics to evidence-based inquiry. As more professors and journalists raise substantive questions about law school critics’ narrative, it will become increasingly difficult for the critics to foreclose factual and ethical inquiry through ad-hominem attacks and hyperbole.
* A recent survey by John Coates, Jessie Fried, and Kathryn Spier at Harvard suggests that large law firm employers believe instruction in certain technically challenging business electives, especially accounting, corporate finance, and corporations, is particularly valuable on the job. Data does not exist to evaluate whether enrollment in such courses actually boosts earnings or employment, or is even correlated with greater earnings or employment. However, one working hypothesis is that such courses might be the law school equivalent of undergraduate STEM or economics majors. A study of high school financial literacy mandates suggests positive long-term effects on enrollees’ financial well-being.
** The first and only time I met Brian Tamanaha in person was at the 2013 Law & Society meeting in Boston where he spoke on a panel. Professor Tamanaha shut down questions from the audience about whether his presentation of law school data was misleading by insisting that in our hearts surely we all knew he was right and that any question about whether he was wrong on the facts, and any attempt to rely on data rather than emotionally charged anecdotes, was a sign of flawed moral character.
May 10, 2015 in Guest Blogger: Michael Simkovic, Law in Cyberspace, Legal Profession, Ludicrous Hyperbole Watch, Of Academic Interest, Professional Advice, Science, Student Advice, Web/Tech, Weblogs | Permalink
March 18, 2014
...and eight accept, bringing the size of the full-time faculty from 48 down to 40. The school is also shrinking its class size slightly. Seems like sensible responses to the current economic climate for legal education.