January 04, 2017

Should Venture Capitalists Compete with Law Firm Partners and Judges? (Michael Simkovic)

A partner in a prominent San-Francisco-Bay-area venture capital firm recently told me, “The tech sector is eating the world.  The menu is full of inefficient legacy industries.” 

The thesis of USC Professor Gillian Hadfield’s new book, Rules for a Flat World, is that the legal profession should be near the top of the menu.  Hadfield argues that law is overly complicated, expensive and inefficient.  This is because lawyers have monopolized the practice of law, locking out more efficient, technologically empowered, venture-capital backed competitors.  These competitors—software engineers backed by venture capital money, perhaps in cooperation with lawyers and paralegals—could hopefully improve quality, reduce costs, and generally run circles around overly conservative law firms and inefficiently subscale solo practitioners.

This book will engage venture capitalists and entrepreneurs, established legal technology companies, individuals interested in regulation of the legal profession, and more broadly, those who study privatization and deregulation.

She raises important questions about which regulations of the legal profession protect consumers or serve other legitimate public policy goals and which might be merely protectionist.  She targets prohibitions on practice of law within a corporation and prohibitions on profit-sharing with non-lawyers.  Without such regulations, it would be easier for non-lawyers to invest in and make high level decisions for legal services providers.  Non-lawyers might place more trust in technology than lawyers and might be more open to new business models.

Hadfield’s analysis focuses on the aspects of law that are an economic service (she describes it as “economic infrastructure”). Hadfield is primarily focused on commercial and corporate law.  Hadfield notes that while criminal law may be more salient in popular culture, since the time of Hammurabi, most law has been about money, property rights, risk allocation, and supporting business activity.

Hadfield argues that if companies such as Westlaw, Lexis and Legal Zoom could hire lawyers to provide customer support directly to end-users, these companies could improve the appeal of their offerings and more easily compete with small and solo-practitioners.  Moreover, these companies would have economies of scale and efficiencies that solo practitioners cannot readily match.  Because of these efficiencies and expansion of the legal market to under-served populations, lawyers working for incorporated legal services providers would not necessarily earn less than solo practitioners currently earn, although lawyer-employees would have substantially less autonomy than lawyer-owners.   

Continue reading


January 4, 2017 in Guest Blogger: Michael Simkovic, Law in Cyberspace, Legal Profession, Web/Tech | Permalink

February 09, 2016

Law School Bloggers' Latest Unscientific Fad: BLS Job Openings Projections (Michael Simkovic)

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. 

 

BLS projected openings vs. NALP

(For more on the limitations of initial outcome data, see here, here, here, and here).


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 02, 2015

Developer of Law School Admission Test (LSAT) Disputes Advocacy Group's Bar Exam Claims (Michael Simkovic)

The Law School Admission Council (LSAC)--the non-profit organization which develops and administers the Law School Admission Test (LSAT)--recently issued a press release disputing claims by the advocacy group "Law School Transparency" about the relationship between LSAT scores and bar passage rates.  "Law School Transparency," headed by Kyle McEntee, prominently cited the LSAC National Longitudinal Bar Passage Study (1998) as a key source for "Law School Transparency's" claims that many law schools are admitting students who are unlikely to pass the bar exam based largely on their LSAT scores.  McEntee's group's claims of bar passage risk were widely disseminated by the national press.

However, according to LSAC, the Longitudinal Bar Passage Study does not provide much support for "Law School Transparency's" claims.  Moreover, "Law School Transparency's" focus on first time bar passage rates is potentially misleading:

"The LSAC [National Longitudinal Bar Passage] study did state that 'from the perspective of entry to the profession, the eventual pass rate is a far more important outcome than first-time pass rate.' This statement is as true today as it was 25 years ago. As noted by LST, the LSAC study participants who scored below the (then) average LSAT score had an eventual bar passage rate of over 90 percent.

Kyle McEntee and David Frakt responded to some of LSAC's critiques--partly on substance by pointing out disclaimers in the full version of "Law School Transparency's" claims, partly by smearing the technical experts at LSAC as shills for law school--but notably did not explain why "Law School Transparency" chose to focus on first time bar passage rates rather than seemingly more important--and much higher--eventual bar passage rates. 

Eventual bar passage rates were the focus of the National Longitudinal Bar Passage Study.  The LSAC study's executive summary highlights eventual bar passage rates and detailed data is presented on page 32 and 33.  Even among graduates of the lowest "cluster" of law schools, around 80 percent eventually passed the bar exam.

According to LSAC:

"The LSAC National Longitudinal Bar Passage Study was undertaken primarily in response to rumors and anecdotal reports suggesting that bar passage rates were so low among examinees of color that potential applicants were questioning the wisdom of investing the time and resources necessary to obtain a legal education."

"Law School Transparency" has revived similar concerns, but without a specific focus on racial minorities.*

There may be legitimate concerns about long term eventual bar passage rates for some law students.  However, "Law School Transparency's" back-of-the-envelope effort, focused on short term outcomes, does not provide much insight into long-term questions.  The most rigorous study of this issue to date--the LSAC National Longitudinal Bar Passage Study--concluded that "A demographic profile that could distinguish first-time passing examinees from eventual-passing or never-passing examinees did not emerge from these data. . . . Although students of color entered law school with academic credentials, as measured by UGPA and LSAT scores, that were significantly lower than those of white students, their eventual bar passage rates justified admission practices that look beyond those measures."

Unfortunately, some newspapers reported "Law School Transparency's" bar passage risk claims in ways that suggested the claims were blessed by LSAC, or even originated from LSAC.  For example, one prominent newspaper's editorial board wrote that "In 2013, the median LSAT score of students admitted to [one law school] was in the bottom quarter of all test-takers nationwide. According to the test’s administrators, students with scores this low are unlikely to ever pass the bar exam."
 
Journalists should not have uncritically reported (or exaggerated) "Law School Transparency's" claims without consulting experts at LSAC, and certainly should not have attributed those claims to LSAC.
 
 
* Many law schools that serve students with low LSAT scores have racially diverse classes. Thus, denying admission to students with low LSAT scores could  affect racial minorities as well as other students.


December 2, 2015 in Guest Blogger: Michael Simkovic, Law in Cyberspace, Legal Profession, Of Academic Interest, Science, Web/Tech, Weblogs | Permalink

November 12, 2015

New America Foundation versus College (Michael Simkovic)

In the Los Angeles Review of Books, Frank Pasquale reviews "The End of College" by Kevin Carey of the New America Foundation:

"Tax-cutting, budget-slashing politicos are always eager to hear that education could be much, much cheaper. . . . “disrupting education” mobilizes investors and excites startups. Kevin Carey’s The End of College is the latest book to seize the imagination of disrupters. It touts massive changes for post-secondary education. . . .

 

[Carey] believes things need to change drastically in higher ed, and that they will change. But bridging the gap between “is” and “ought” is a formidable task — one Carey tries to solve by muckraking indictments of universities on the one hand and encomia to tech firms on the other. . . .  In The End of College, Silicon Valley thought leaders are as pragmatic, nimble, and public-spirited as university administrators are doctrinaire, ossified, and avaricious. . . . They’ve devised methods of teaching and evaluating students that solve (or will soon solve — Carey vacillates here) all the old problems of distance education.

 

Online learning at the University of Everywhere could eventually improve outcomes — or degenerate into an uncanny hybrid of Black Mirror and Minority Report. Big data surveillance will track the work students do, ostensibly in order to customize learning. . . . Want to prove you aren’t faking exams? Just let cameras record your every move and keystroke — perhaps your eye movements and facial expressions, too. . . . Certainly we can trust Silicon Valley to respect our privacy and do nothing untoward with the data! . . . 

 

Silicon Valley has even lured universities into giving away lectures for free. The colleges think they’re establishing good karma with the public, but disrupters hope for a more chaotic endgame: students deciding to watch free courses, then proving their credentials to certifiers who give out “badges” to signify competence in a skill set. . . . It could be a very profitable business. As students pay less for actual instruction by experts, they have more money to spend on badges. . . . 

 

Carey implies that faculty opposition to MOOCs is simply a matter of self-interest. His concerns about greed, so prominent when he discusses universities, fade away when he rhapsodizes about ed tech’s “disruptive innovators.” . . . One of Carey’s heroes . . . had a no-bid contract to MOOCify San Jose State University math instruction, only to see the partnership pause after “no more than 51 percent of Udacity students passed any of the three courses” (while “74 percent or more of the students in traditional classes passed”). . . .

 

Traditional college education endures — and even those who dismiss it rarely, if ever, try to dissuade their own children from attending a university. If colleges were really so terrible at preparing the workforce, the college earnings premium would have disappeared long ago. . . . [E]mployers are unlikely to subscribe to Carey’s [alternatives to college].

 

So why bother reading Carey? Because, like Donald Trump blustering his way to the top of the Republican field by popping off shocking sentences, Carey’s rhetoric has political heft. To the extent it gains traction among education policy staffers (and the student loan companies that love to hire them), it changes the debate. The End of College is a master class in translating an elite project of privatization and austerity into bite-sized populist insults, even as it sings the praises of powerful corporations.

 

Carey claims he wants dramatically better educational opportunities for all. But that goal will require more public support . . .  Many millionaires and billionaires want to see their taxes go down . . . Before touting D.C. researchers’ “findings” and “big idea books,” the media and indeed all of us should look closely at exactly what interests are funding the think tanks behind them."


November 12, 2015 in Guest Blogger: Michael Simkovic, Law in Cyberspace, Of Academic Interest, Web/Tech, Weblogs | Permalink

August 07, 2015

“Risk Sharing” Bill is a Covert Tax on Higher Education (Michael Simkovic)

Higher education provides massive benefits to the public fisc.  These benefits come in the form of additional payroll and income tax revenue, less dependence on social welfare, and student lending profits.*  Based on tax revenue alone, the government’s “cut” of the higher education earnings premium is typically far larger than tuition collected by the college that provides the education. 

While there’s a lot of talk about the government subsidizing education, it’s actually the other way around.  The public return on investment in higher education helps sustain the government’s expenditures in other areas that are unlikely to provide much of a financial return, like military spending (roughly 25 percent of the federal budget, including veterans' benefits).  Even taking into account public subsidies to higher education, the federal government already taxes higher education far more heavily than many other investments.

Two Senators, Jeanne Shaheen and Orrin Hatch, want to tax higher education even more, although they euphemistically call their new tax “risk sharing.”   Under their proposal, the federal government would shift some of the downside risk of education investment—delays in loan repayment by some student borrowers**—to colleges, but would not share the upside.***

Risk typically comes with rewards.  If the government would like to “share the risk” of education investment with institutions of higher learning—like a corporation offering restricted shares to its employees—then along with student loan losses, why not offer colleges a proportionate share of the student loan profits and marginal increases in tax revenue ? 

Real risk sharing—on both the upside and downside—would mean a massive increase in public investment in education, not additional taxes on this already overly-taxed sector of the economy.

 

* Because of progressive income taxes and payroll taxes, the federal government keeps approximately 40 cents of every extra dollar earned because the workforce is more educated.  Federal student loan programs are profitable under conventional methods of accounting because the repayments the government receives exceed financing and administrative costs.  Some have claimed that federal student loans are not profitable by arguing that if the government charges less than private lenders would charge, the government is still “losing” money it could be making.  This calculus typically ignores the effects of lower pricing on boosting enrollment, increasing the volume of lending, and increasing tax revenue.  This argument is the essence of controversial “fair-value accounting” claims, although the argument is typically framed in terms of cost of capital considerations.

** These charges for delayed repayment are not necessarily compensation for losses, but rather an estimate based on non-repayment of loans in the first few years after studies end. This estimate could enable the government to double-dip, charging institutions for delayed repayment in early years while recovering accrued interest, principal and collections costs from student borrowers in later years when their incomes are higher and their employment is more stable.  

*** Some indeterminate fraction of this tax revenue would be returned to colleges that serve low-income students through DOE grants.  However, those same institutions are the ones who are most likely to have students who struggle to repay their loans-and will therefore be the ones to pay the tax.  The grants awarded could be substantially lower than the taxes collected.  The bill is likely to be a drain on resources available for education, especially net of transactions and compliance cost.


August 7, 2015 in Guest Blogger: Michael Simkovic, Of Academic Interest, Student Advice, Web/Tech, Weblogs | Permalink

August 05, 2015

Do increases in the cost of college pay for themselves? (Michael Simkovic)

College costs more than it used to.  It's also worth a lot more than it used to be worth.  The increase in value of a college education exceeds the increase in the cost of a college education by a very wide margin.

How much has the cost of college actually increased?  It may be less than you think.   

According to the Department of Education and the National Center for Education Statistics, at 4 year institutions, average college tuition is up about $1,900 in real (inflation-adjusted) terms in the five years from 2008-09 ($21,996) to 2012-13 ($23,872).  This is an average increase of less than $500 per year. The real increase during this 5-year period has been higher at public colleges ($2,100) than at private non-profit and for-profit colleges ($1,400).  

That's before taking into account scholarships and grants.  

After subtracting scholarship and grants, according to the College Board, real net tuition and fees at 4 year private non-profit institutions have actually gone down.  Real net tuition and fees increased at 4-year public institutions over the last 6 years by about $1,000, or about $170 per year.

So how much would the value of higher education need to increase to justify this increase in cost?  The increases at public institutions come to around $5,000 more for a bachelor's degree.* 

That extra $5,000 will pay for itself if 4-year colleges spend the extra money in a way that boosts their former students' real annual earnings relative to high school graduates by $220.**  When we take into account increases in college completion rates over time and longer life expectancy, the required increase in annual earnings could be even lower.

So yes, improvements in the quality of education can easily pay for increases in the costs of education.   If the rising earnings premiums and increase in completion rates within race over the last three decades are caused by increased college expenditures, tens of thousands of dollars in increased expenditures per bachelor's degree have more than paid for themselves so far, and by a very wide margin.***

Slide1 Slide2

The labor economics literature generally suggests that the marginal rate of return to higher education is high, whether the "margin" is defined as upgrading individual education from high school to 4 years, from 2 years to a bachelor's, or from a bachelor's to an advanced degree.  Within a given level of education and category of institution, those with more resources can generally do more to boost their students' earnings.  A high marginal rate of return to education means we should invest more in higher education if we want the economy to grow faster, and invest less in things with lower marginal rates of return. (See here).

Investing more in education without increasing taxes means that tuition will likely increase.  When we consider the benefits education provides, more investment in education is a good thing.  When we consider our political system's allergic reaction to tax increases, increasing tuition may be the only realistic way to get there.  

* Multiplying $1,000 by 5 years (assuming it takes 5 years to complete a bachelor's degree), we get an increase of $5,000 at public 4-year institutions (and a decline in cost at private institutions).  For an individual, the aggregate increase in real net-tuition during 5 years of college might be less.  The idea of the estimate is to compare the aggregate cost of college for individuals who completed college 5 years apart.

** This assumes a 40 year career and nominal (real) discount rate of 6 (3) percent.  The $220 figure is before taxes and represents the aggregate social benefit to the government as tax collector and to the graduate, who will earn higher wages.  If the entire cost is placed on the student, assuming 35 percent tax rates on the earnings premium, real annual earnings premiums would need to increase by $340 to make the student better off after taxes.

*** The differences in earnings in the column charts are raw differences by level of education rather than estimates of causal differences.  However, the change in the raw differences over time may provide a good proxy for the change in the causal earnings premium over time.


August 5, 2015 in Guest Blogger: Michael Simkovic, Of Academic Interest, Professional Advice, Science, Student Advice, Web/Tech, Weblogs | Permalink

July 31, 2015

What Deregulated Law Schools Really Look Like (Michael Simkovic)

One of the key claims of critics of legal education in general, and of ABA-approved law schools in particular, is that accreditation requirements drive up the costs of legal education without improving quality. If only we could deregulate law schools and unleash the creative power of free market competition and the awesome technological potential of online learning, legal education would become cheaper without any loss of quality.  Or so the story goes.

Fortunately, deregulated law schools exist alongside regulated law schools, so we can get a sense of what deregulation might look like.  And while unaccredited California law schools are less expensive than their accredited counterparts, their completion rates and bar passage rates are much lower than those for even the lowest ranked ABA approved law schools, as revealed by a recent Los Angeles Times investigation.

This is likely due at least in part to the incoming academic credentials and life circumstances of the students who enroll in unaccredited schools, and not simply due to differences in quality of education.  But there is no law preventing unaccredited law schools from competing with accredited law schools for the best students who want to stay in California, a large and prosperous state where many lawyers will spend their entire careers.  If accreditation is really an inefficient waste of time and resources, the unaccredited schools should have substantial advantages in the competition for students, and those students should have advantages in the competition for jobs.

At first glance, deregulation hardly looks like the panacea its advocates have made it out to be. ABA accreditation also looks pretty plausibly like standard consumer protection--a paternalistic attempt to eliminate low quality, low cost, and high-risk options--rather than a self-serving scheme to inflate prices. 

There are usually tradeoffs between cost and quality. It's not surprising that as goes the world, so goes legal education.  


July 31, 2015 in Guest Blogger: Michael Simkovic, Legal Profession, Of Academic Interest, Professional Advice, Science, Student Advice, Web/Tech, Weblogs | Permalink

June 16, 2015

Unpacking "over-education" claims (Michael Simkovic)

Tom Friedman's latest New York Times column uses the labor market for executive assistants and executive secretaries to illustrate dubious claims about credentialing and over-education.  Friedman argues that since most current executive assistants and executive secretaries don't have bachelor's degrees, employers should not try to upgrade the workforce by hiring new executive assistants and secretaries with bachelor's degrees.  After all, executive assistants without bachelor's degrees can do the job, so who needs a bachelor's degree?

The problems with this reasoning should be obvious.  

First, education is only one of many factors that are valued in the labor market.  Some individuals who are smart, hardworking, personable, physically attractive, or fortunate, but have limited education, will inevitably be as successful or more successful than other individuals who are highly educated but less gifted in other respects.  This does not in any way challenge the extremely strong evidence that a bachelor's degree can improve labor market outcomes.  It simply means that we are dealing with a heterogeneous population.  

If two homogenous groups who were initially equally strong on non-education factors were given different amounts of education, the more educated group would typically be more successful in the labor market.  Labor economists who have studied identical twins routinely find that twins with more education are more successful than their less educated counterparts.  When labor economists control for unobserved heterogeneity within education levels using fixed effects models rather than OLS regression, "over-education" effects on earnings diminish or disappear.  In other words, highly educated folks who are about as successful as those with less education--and end up in the same occupations as the less educated--tend to be weak on factors other than level of education.  But even within occupations that combine the worst of the more-educated with the best of the less-educated, those who are more educated still tend to earn more.  Since profit-maximizing employers are not in the habit of handing out money for nothing, this suggests that the more educated are better at their jobs.

In sum, education many not always be enough to make you more successful than your neighbor or coworker, but it can make you more successful than a less educated version of yourself.  

Second, the fact that something was "good enough" at some point in the past does not mean it is good enough today.  Rising standards typically involve both increases in quality and commensurate increases in cost.  In inflation adjusted terms, the average new car today costs about 10 times as much as a Ford Model-T in the late 1920s.  But the average new car is faster, safer, more reliable, and easier to operate. Similarly, as education increases, so does the productivity of labor and the cost of labor--wages or earnings.  Highly educated workers today are far more productive than their counterparts decades ago, and as a result, they earn more.

It is interesting that Friedman chose executive assistants and executive secretaries--a field where most workers have less than a bachelor's degree--as an example of supposed "over-education."  According to the Bureau of Labor Statistics Occupational Employment Statistics, employment of executive assistants and executive secretaries is collapsing.  Employment fell by more than half between 2007 and 2014, from over 1,500,000 workers to barely more than 700,000.  In other words, the level of education that most executive assistants and secretaries had in 2007 was not enough to make it in the labor market of 2014.

Among secretaries, those with higher levels of education still earn more than their less educated counterparts after controlling for race.  Employer hiring priorities cited by Friedman suggest that those who are more educated are more likely to keep their jobs or find new ones.  

This is consistent with general trends in the labor market.  Low and middle skill workers with limited educations are the hardest hit by automation, outsourcing and layoffs, while their more educated counterparts are navigating the recession and changes in the labor market more successfully. (During the 2007-2014 period, employment of a group of highly educated workers, lawyers--supposedly the victims of job-destroying structural change--continued to grow faster than overall employment).  

For another angle on Friedman's column, readers may be interested in Frank Pasquale's critique. Pasquale discusses apparent bias in the New York Times' Higher Education coverage and argues that as newspapers struggle to adapt to a world replete with free online content and greater competition for advertising dollars, business priorities may be overriding traditional news values.  Given the nearly 20 percent decline in employment for reporters and correspondents between 2007 and 2014, journalism does appear to be under serious financial pressure.


June 16, 2015 in Guest Blogger: Michael Simkovic, Of Academic Interest, Professional Advice, Science, Student Advice, Web/Tech, Weblogs | Permalink

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?

  1. Does the answer depend on whether the outcome of the competition is driven by luck, skill, or effort?
  2. Does the answer depend on how large the differences in rewards are between winners and losers?

3)   Does disclosure alter student decision-making?  

  1. If so, how? 
  2. Is this a good thing or a bad thing?
  3. If it is a good thing do the benefits of disclosure outweigh the costs of providing disclosure?
  4. 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

May 05, 2015

A better grading system and double standards around occupational licensing

A better grading system

Professor Merritt argues that mandatory grading curves can be unfair when one class has stronger students than another.  I agree. 

Statistician Valen Johnson—whom I cite in my last post as an authority on grade inflation— has developed a clever solution to this problem which involves adjusting grading curves within each class based on the ability levels of the students.  A Johnson-inspired proposal was nearly adopted at Duke University in the late 1990s, but was blocked by departments that offered higher grades and attracted weaker students.

Most law schools try to balance their sections in term of student ability levels and overall quality of faculty.  Nevertheless, anomalies like a “smart section” (as Professor Merritt calls it) may occasionally occur.  Johnson’s proposal would be an excellent solution to this problem.

Occupational licensing

Professor Merritt asserts that there is some sort of problem with the market for lawyers and law graduates that makes competition and inequality uniquely bad in the context of law.  These assertions are implausible given the low barriers to entry for both law schools and lawyers, aggressive competition between law schools for students and between lawyers for clients, and widespread inequality outside of law school and legal practice.  Some form of regulation is the norm in many areas of employment and in many industries, and a licensing regime for lawyers and an accreditation system for law schools do not in any way make these occupations and institutions unique or unusual.  According to a recent study, nearly a third of U.S. workers are licensed, licensing is more common as education and skill levels increase, and licensing does not affect inequality among the licensed. 

As a general matter, deregulated market competition and greater inequality are a package deal.  Inequality can be reduced through regulation, taxation, and politicization of compensation through unionization or growth of public sector employment.

Professor Merritt’s critiques follow the standard playbook of law school critics—take something about law schools that is widespread and common out of context, claim that it is somehow unique to law schools when it is neither unique nor unusual, and then demonize it.

UPDATE:

Jeremy Telman responds.


May 5, 2015 in Guest Blogger: Michael Simkovic, Law in Cyberspace, Legal Profession, Of Academic Interest, Professional Advice, Rankings, Science, Student Advice, Web/Tech, Weblogs | Permalink