September 25, 2017
MOVING TO FRONT FROM SEPTEMBER 21--UPDATED
Jonah Gelbach, a law & economics and empirical scholar at Penn, has now taken the time to set out in detail the problems with the silly op-ed. You can safely ignore the self-serving preface from the empty Jonathan Haidt, and just go straight to Gelbach's patient discussion. In the broader scope of things, it was surely not a good use of Professor Gelbach's time to have to write this in response to an opinion piece so slight, but given the controversy that has been generated, we should all be grateful that he did it.
I have no doubt that this won't stop Heather MacDonald and others from making absurd claims about Professor Wax's great wisdom and expertise, but at least those of us actually invested in the scholarly enterprise can learn something from Prof. Gelbach's analysis.
(Thanks to Jonathan Klick for the pointer.)
UPDATE: Haidt, given his great commitment to the free exchange of ideas and arguments, decided to edit out one part of Prof. Gelbach's original response to the Wax & Alexander op-ed, after Prof. Wax objected--apparently to Prof. Gelbach's devastating scrutiny of their lack of empirical evidence. In any case, Prof. Gelbach kindly offered to let me make available his actual, uncensored response, which is here: Download Facts v. Wax Part I.A - The Uncut Version. It begins with an explanation of what Haidt did and of his efforts to find out if there was, I fact, evidence for some of the curious claims in the op-ed.
It is often assumed that the only way to become a lawyer is to attend an ABA-approved law school. That is true in some states and, indeed, the ABA has at times expressed the view that it should be true in all states. But it is not the case in large jurisdictions such as New York or California, nor is it the case in the majority of jurisdictions. Claims that ABA-approved law school have a monopoly on entry into the legal profession are exaggerations. Rather, the most popular—and probably most likely—way to become a lawyer is to graduate from an ABA-approved institution.
In leading jurisdictions such as New York, California, and Virginia, an individual who wishes to become a lawyer may sit for the bar examination with between zero and 1 years of law school and between 3 and 4 years of apprenticeship and study under the supervision of a licensed attorney (this is also known as “law office study” or “reading for the bar”). In California, graduates of non-ABA-approved law schools are eligible to sit for the bar examination. This includes schools with extremely low-cost, technology-driven approaches to teaching, such as online and correspondence schools.
In fact, non-ABA law school graduates are eligible to sit for the bar examination in most jurisdictions (31 in total as of 2017) according to the National Conference of Bar Examiners.** This includes extremely large and important jurisdictions such as California, Florida, New York, Texas and Washington D.C. Graduates of online and correspondence law schools are eligible to sit for the bar examination in 4 jurisdictions.
Very few people choose the apprenticeship route, and only a minority opt for non-ABA law schools. Among those who do, relatively few successfully complete their courses of study or pass the bar examination. But those who do will have the same license to practice law as someone who graduates from an ABA-approved law school and successfully passes the bar examination.
Why then do so many prospective lawyers choose ABA-approved law schools?
The most likely explanation is that prospective lawyers choose ABA-approved law schools because those law schools provide a valuable and worthwhile service that supports a higher price point than other options.*
Many employers value legal education. That’s why they typically pay law school graduates tens of thousands of dollars more per year than they pay similar bachelor’s degree holders, even in occupations other than the practice of law. When law school graduating class sizes increase, and a lower proportion of graduates practice law, graduates don’t typically see a noticeable decline in their earnings premium.
In other words, the benefits of law school are versatile. Graduates of ABA-approved law schools also seem to be much more likely to complete their studies and pass the bar examination than students attending more lightly regulated and lower cost alternatives.
September 22, 2017
September 20, 2017
...for his abject failure of leadership in one of his central duties as head of an academic institution: to defend freedom of speech and inquiry by faculty and students on both scholarly matters and matters of public concern. It is not his role to express his own opinions about positions defended by his faculty, either in their scholarship or in their contributions to public debate. If he wants to express his own opinions, he should step down from the Deanship and rejoin the faculty. But as Dean, his job is to defend freedom of speech and inquiry, even when it is unpopular. He has failed.
USD Law professor Tom Smith has more, including a response from many of Larry Alexander's colleagues to the Dean's inappropriate public statement.
The op-ed by Larry and Penn law professor Amy Wax that has generated all the controversy was rather feeble, confusing correlation and causation in ways that were, by my lights, embarrassing and strange. The piece has been subjected to sensible criticism from colleagues of Professor Wax. I make my opinion known about the merits only so we can be clear that mine is an objection based on a crucial principle: the job of academic administrators is to administer a university environment, which includes protecting the space for scholarly and political debate. An administrator can only do that if he or she does not enter that space and take sides against members of the faculty or the student body. Here is how the University of Chicago's 1967 Kalven Report (authored by famed First Amendment scholar Harry Kalven) puts it:
The mission of the university is the discovery, improvement, and dissemination of knowledge. Its domain of inquiry and scrutiny includes all aspects and all values of society. A university faithful to its mission will provide enduring challenges to social values, policies, practices, and institutions. By design and effect, it is the institution which creates discontent with the existing social arrangements and proposes new ones. In brief, a good university, like Socrates, will be upsetting.
The instrument of dissent and criticism is the individual faculty member or the individual student. The university is the home and sponsor of critics; it is not itself the critic.....To perform its mission in the society, a university must sustain an extraordinary environment of freedom of inquiry, and maintain an independence from political fashions, passions, and pressures. A university, if it is to be true to its faith in intellectual inquiry, must embrace, be hospitable to, and encourage the widest diversity of views within its own community....
Since the university is a community only for these limited and distinctive purposes, it is a community which cannot take collective action on the issues o fthe day without endangering the conditions for its existence and effectiveness.
The Dean speaks for that community, and the way Dean Ferruolo has spoken has now endangered the community he was charged with shepherding.
Up until this point, I had thought Dean Ferruolo had done rather well by USD, but he has failed, and failed mightily, here. His choices are clear: apologize for his failure in this instance, or resign.
Readers may be interested in my discussion of these issues in a column last Spring at CHE.
UPDATE: See also the discussion of the op-ed by Penn's Jonah Gelbach.
September 18, 2017
"Individuals who complete law school typically receive a large boost to their earnings compared to what they would likely have earned with a terminal bachelor’s degree. (Simkovic & McIntyre, 2014) The law earnings premium has exceeded the cost of law school by a wide margin, even toward the bottom of the earnings distribution, and even for graduates who enter the labor force during a recession or with an unusually large cohort of fellow law graduates. (McIntyre & Simkovic, 2017)
But is the value of a law degree predictably different depending on one’s race or ethnicity? Estimates by race or ethnicity could help prospective law students and law schools better predict variability in the potential financial benefits of law school, and could help inform outreach, admissions, academic support, and financial aid policies.
This article investigates differences in the law earnings premium by race and ethnicity. Compared to bachelor’s degree holders, a higher proportion of law graduates are white.
Studies of the returns to education at the college level or below have come to different conclusions about differences in benefits by race. Several studies have found lower earnings among black and Hispanic law graduates compared to non-Hispanic whites. The reasons for these differences are not fully understood and are hotly debated. . . .
Whatever the cause, among those with law degrees, there are differences in average earnings between different race or ethnic groups. However, the same pattern is present among bachelor’s degree holders. [Prior to this study it was] unknown whether there are similar differences in earnings premiums (i.e., the boost to earnings from the law degree), measured either on a percentage or dollar basis. . . .
[T]he National Longitudinal Bar Passage Study found that long-term bar passage rates were substantially lower for minorities than for whites. Thus a study of all law degree holders including those who did not pass a bar examination [such as this one using Census data] may find larger racial gaps in earnings [than previous studies that look only at bar-passers].
We find evidence that white graduates have a somewhat higher percentage boost in earnings compared to minorities, but when translated into dollar terms the law earnings premium is substantially higher for white graduates than for minorities. At the median and including law graduates who are not practicing law, the annual boost to earnings from a law degree is approximately $41,000 for whites, $34,000 for Asians, $33,000 for blacks, and $28,000 for Hispanics. The law earnings premium is also higher for whites than for minorities at the 75th percentile, the 25th percentile and the mean, and for samples that are exclusively male or female. . . .
September 13, 2017
CORRECTION: The Center will not, contrary to the NLJ headline, shut down entirely, but it has been stripped of one of its previous academic functions. (Thanks to several readers who wrote to me about this.)
September 12, 2017
Lots of gems, as one might expect. On his approach to judging and some of his critics:
“I pay very little attention to legal rules, statutes, constitutional provisions,” Judge Posner said. “A case is just a dispute. The first thing you do is ask yourself — forget about the law — what is a sensible resolution of this dispute?”
The next thing, he said, was to see if a recent Supreme Court precedent or some other legal obstacle stood in the way of ruling in favor of that sensible resolution. “And the answer is that’s actually rarely the case,” he said. “When you have a Supreme Court case or something similar, they’re often extremely easy to get around.”
I asked him about his critics, and he said they fell into two camps....
He said he had less sympathy for the second camp. “There are others who are just, you know, reactionary beasts,” he said. “They’re reactionary beasts because they want to manipulate the statutes and the Constitution in their own way.”
And on his immediate reason for retiring:
He had become concerned with the plight of litigants who represented themselves in civil cases, often filing handwritten appeals. Their grievances were real, he said, but the legal system was treating them impatiently, dismissing their cases over technical matters.
“These were almost always people of poor education and often of quite low level of intelligence,” he said. “I gradually began to realize that this wasn’t right, what we were doing.”
In the Seventh Circuit, Judge Posner said, staff lawyers rather than judges assessed appeals from such litigants, and the court generally rubber-stamped the lawyers’ recommendations.
Judge Posner offered to help. “I wanted to review all the staff attorney memos before they went to the panel of judges,” he said. “I’d sit down with the staff attorney, go over his memo. I’d make whatever editorial suggestions — or editorial commands — that I thought necessary. It would be good education for staff attorneys, and it would be very good” for the litigants without lawyers.
“I had the approval of the director of the staff attorney program,” Judge Posner said, “but the judges, my colleagues, all 11 of them, turned it down and refused to give me any significant role. I was very frustrated by that.”
His new book, he said, would have added to the tension: “If I were still on the court, it would be particularly awkward because, implicitly or explicitly, I’m criticizing the other judges.”
Judge Posner said he hoped to work with groups concerned with prisoners’ rights, with a law school clinic and with law firms, to bring attention and aid to people too poor to afford lawyers.
September 09, 2017
New American Foundation fires a prominent researcher who criticized one of its largest donors (Michael Simkovic)
The powerful Washington D.C. think tank New America Foundation, which has ties to the technology, finance, and aerospace industries, recently fired a researcher within days after the researcher praised the European Union for fining Google for antitrust violations. Google and its CEO are among the largest donors to New America Foundation, as well as other think tanks. The head of New America Foundation claims the firing was for a lack of collegiality, but declined to discuss specifics.
The firing echoes similar incidents at other think tanks, including the American Enterprise Institute and Brookings Institute, where researchers have been fired shortly after offending other important donors or political patrons.
As the Economist magazine explains:
[Think tanks suffer from] a fundamental flaw. Unlike other institutions designed to promote free inquiry, such as universities or some publications, think-tanks do not enjoy large endowments, researcher tenure or subscription revenue to insulate thinkers from paymasters. And thinking costs a lot.
The New America Foundation has played a prominent role in efforts to privatize student loans by making the terms of federal student loans less attractive and making the loans less widely available.
September 01, 2017
We are looking forward to seeing more of him around the Law School!
For the story of his appointment by President Reagan and confirmation in 1981, see pages 1614-1615 of this article. President Reagan, who probably would be expelled for insufficient "conservativism" (whatever that is anymore) from today's Republican Party, surely did not know the legal force of nature he had unleashed when he appointed Posner.
On Judge Posner's jurisprudential significance, readers might also find this essay relevant.
And back in 2005, Judge Posner was a guest-blogger at my philosophy blog!
Dick Posner has always embodied the intellectual ideal of academic life at the University of Chicago: always willing to engage all views, unforgiving in argument, and never confusing intellectual warfare with personal animosity. It will be nice to see more of him.
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.