January 02, 2018
Jerry Organ (St. Thomas) collects the data. The decline in the applicant pool during this time has presumably put prospective students in a stronger negotiating position, which probably explains the decline in the offers of scholarships contingent on academic performance.
September 25, 2017
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.
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.
February 20, 2017
We noted awhile back Syracuse's impressive results on the July 2016 New York bar exam--a pass rate of 89%, fourth highest in the state, behind only Columbia, Cornell, and NYU, and ahead of Fordham, Cardozo, Brooklyn, Buffalo and others. I recently visited Syracuse, and talked with Professor Christian Day about the changes they made to achieve these results. He kindly gave me a written version to share; I'm sure this will be of interest to many schools. Professor Day writes:
In the later 1990s and early 2000s Syracuse had a terrible bar pass rate. One year it was dead last among the 15 New York law schools. A faculty ad hoc committee was created and it developed a program over several years.
Under Dean Hannah Arterian’s leadership the faculty adopted 1L and upper-class curves. The curves are centered on a low B (2.9-3.0) and approximately 8% of the 1L class is dismissed. Before the implementation of the curve, most of the students who were dismissed were re-admitted and placed on probation. But only 10% of that group passed the bar for the first time. With the new curve, a much smaller group of students is re-admitted and placed on probation. The Structured Curriculum, described below, and a comprehensive bar success program, which includes a staff member dedicated to the bar success effort have provided a foundation for achievement. We also inaugurated a comprehensive third year bar prep program. That program was mandatory for those on probation and voluntary for the balance of the student body.
A consultant worked with the College and confirmed that bar exam success was correlated to 1L class rank AND the number of so-called “bar courses” students had taken. Syracuse had a 90% pass rate for students in the upper 75-80% of the 1L class who had taken most of the bar courses for grade. Students who failed the exam took around four of those courses, often on a pass/fail basis. The faculty adopted the Structured Curriculum that requires all students on probation and those below a 2.50 average at the conclusion of the first year to take the following courses for grade: Commercial Transactions, New York Civil Procedure, Business Associations, Constitutional Criminal Procedure—Investigation and Adjudication, Wills and Trusts, Family Law, Evidence, and Foundational Skills for Professional Licensing (a bar prep course taught by faculty or staff that emphasizes exam prep and writing).
The efforts have borne fruit. In 2014 Syracuse and St. John’s tied for fourth place among the New York law schools. In 2016, with the adoption of the Uniform Bar Exam, Syracuse was again in fourth place behind NYU, Columbia and Cornell.
December 01, 2016
November 25, 2016
October 04, 2016
A clever and charming welcome to our new law students, with lots of good advice too!