Wednesday, April 8, 2015
Opportunity costs and tradeoffs are foundational principles of micro-economics. Comparison between earnings with a law degree and earnings with likely alternatives to law school is the core of The Economic Value of a Law Degree.
In her recent post, Professor Merritt raises interesting questions about whether some students who now go to law school could have had more success elsewhere if they had majored in a STEM (Science Technology Engineering & Math) field rather than humanities or social sciences.
These questions, however, don’t invalidate our analysis. A percentage of those who major in STEM fields of course go on to law school, and our data suggest that they also receive a large boost to their earnings compared to a bachelor’s degree. Some studies suggest that among those who go to law school, the STEM and economics majors earn more than the rest.
Research on college major selection reveals that many more individuals intend to major in STEM fields than ultimately complete those majors. STEM/Econ majors who persist have higher standardized test scores than humanities/social science majors at the same institution and also higher scores than those who switch from STEM/Econ to humanities or social science. Those who switch out of STEM received lower grades in their STEM classes than those who persist. Compared to Humanities and Social Science majors, the STEM majors spend more time studying, receive lower grades, and take longer to complete their majors.
In other words, many of the individuals who end up majoring in the humanities and social sciences may have attempted, unsuccessfully, to major in STEM fields. (For a review of the literature, see Risk Based Student Loans and The Knowledge Tax).
In The Economic Value of a Law Degree, Frank McIntyre and I investigated whether the subset of humanities majors who go to law school had unusually high earning potential and found no evidence suggesting this. The humanities majors who attend law school are about as much above the average humanities major in terms of earning potential as the STEM majors who attend law school are above the average STEM major.
In her recent post, Professor Merritt does not suggest alternatives to law school. Instead she selectively discusses occupations other than being a lawyer. These are generally very highly paid and desirable occupations, such as senior managerial roles, and many individuals who pursue such jobs will be unable to obtain them. In other words, these high paid jobs cited by Professor Merritt are not the likely alternative outcome for most of those who now go to law school if they chose another path. (Indeed, given the high earnings premium to law school including the 40 percent of graduates who do not practice law, a law degree probably increases the likelihood of obtaining highly paid jobs other than practicing law).
Occupations are outcomes. Education is a treatment. Students choose education programs (subject to restrictive admissions policies and challenges of completing different programs), but have more limited control over their ultimate occupation. Comparing occupations as if they were purely choices would be an error. Not every MBA who sets out to be a Human Resources Manager will land that job, just as not every law school graduate will become a lawyer at a big firm. Analysis of nationally representative data from the U.S. Census Bureau using standard statistical techniques from labor economics to consider realistic earnings opportunities--rather than selective focus on the very highest paid occupations tracked by the BLS--suggests that most of the folks who go to law school would be in much less attractive positions if they had stuck with a bachelor’s degree.
Frank McIntyre and I have previously noted the importance of additional research into how the value of a law degree varies by college major, and how the causal effect of different kinds of graduate degrees varies for different sorts of people.
We appreciate Professor Merritt’s interest in these issues and look forward to discussing them in the future when more methodologically rigorous research becomes available. Professor Merritt raises some interesting ancillary issues about response rates, but discussion of those issues will have to wait for a future post.