Brian Leiter's Law School Reports

On the importance of "replications"

Some apt remarks by law professor Holger Spamann (Harvard):

Replications aren't good for the replicator’s career. Replications take as much time as original research. But replications offer none of the rewards in terms of developing and publicizing one’s own ideas or gathering citations. It also risks upsetting the original researchers, which isn't fun unless you enjoy annoying other people (which I don't; otherwise, I could have earned a lot more money as a litigator). So why do I do it?

Because I want to stand on the shoulders of giants, not on a giant pile of manure. I can’t help it: I care about truth. That’s why I became an academic. What’s the point theorizing about a factoid that is likely just an error or randomness, intentional or not?

 

Pairwise comparison ranking of the "top 40" law schools in terms of faculty quality, 2023

I had to close the poll on Friday after Professor Kerr at Berkeley (innocently!) linked to it on Twitter; he has more than 100,000 Twitter followers, which would have brought in all kinds of random voters from cyberspace, which would undermine the scientific credibility of the results, needless to say.  Anywhere, here are the "top 40" according to some 400 voters and more than 50,000 comparisons.  Despite the dubious method, it's amazing how much more sensible this is than US News!  (The number in parentheses indicates how many comparisons out of 100 the school prevails in--understand comparisons like Harvard vs. Stanford turn up pretty rarely!)

1.  Harvard University (95)

2.  Yale University (91)

3.  University of Chicago (89)

4.  Stanford University (88)

5.  Columbia University (87)

5.  New York University (87)

7.  University of California, Berkeley (86)

8.  University of Pennsylvania (84)

9.  University of Michigan, Ann Arbor (83)

9.  University of Virginia (83)

11. Duke University (76)

12. Cornell University (74)

13. Georgetown University (73)

13. University of California, Los Angeles (73)

15. Northwestern University (72)

16. University of Texas, Austin (69)

17. Vanderbilt University (68)

18. University of Southern California (67)

Then there's a noticeable gap in scores after the top 18:

19.  Washington University, St. Louis (57)

20.  Boston University (56)

21.  University of California, Irvine (55)

21.  University of Minnesota, Minneapolis-St. Paul (55)

23.  Fordham University (54)

23.  George Washington University (54)

25.  Emory University (53)

26.  University of Notre Dame (51)

27.  University of Wisconsin, Madison (48)

28.  University of North Carolina, Chapel Hill (47)

29.  University of California, Davis (45)

30.  University of Illinois, Urbana-Champaign (44)

31.  Florida State University (43)

31.  University of Iowa (43)

33.  Boston College (42)

34.  College of William & Mary (41)

34.  Ohio State University (41)

36.  Cardozo Law School/Yeshiva University (39)

36.  University of Colorado, Boulder (39)

36.  University of San Diego (39)

39.  University of California, San Francisco (formerly Hastings) (37)

39.  University of Washington, Seattle (37)

Although this is more sensible than USNews.com, there are still some odd results.  Florida State, for example, has a very good faculty--it is one of those "regional" law schools with a national scholarly reputation--but it is not better than most of the other schools in the top 40.  NYU seems to me, pretty clearly, to have a stronger faculty than Stanford these days; Penn is very good, but not better than Virginia; Brooklyn and George Mason should have been in the top 40; and so on.  These are quibbles.  Certainly those seeking law teaching jobs can learn more about the scholarly caliber of the faculty they might join from these results than from USNews.com.

A Lightly Comedic Primer on Personal Finance for Law Professors (Michael Simkovic)

Many graduates of elite law schools work in large corporate law firms either initially or after a clerkship.  This requires law graduates to work closely with businesspeople, accountants, bankers, and other financial professionals.  Those who have expertise in finance or accounting are at an advantage.  Those who do not, but wish to succeed, quickly get up to speed.  Given this reality, surprisingly few law professors are financially sophisticated.  Some of them make suboptimal decisions, which over the course of a lifetime can cause them to end up hundreds of thousands or even millions of dollars poorer than they otherwise could have been. 

This article, which is intended for educational and entertainment purposes only, and not as individualized financial advice, may be of interest.  If you want individualized advice, talk to a licensed financial advisor who you pay in such a way that your incentives are well aligned. 

The goal of personal finance is to achieve the highest rate of return possible, on an after-tax, after-fee, after-inflation basis, without taking unacceptably high risks.  The higher the rate of return on investment, the less the investor needs to save now and the more the investor can consume later.  A “return” in this context, means the growth in the value of the investors’ assets or net-worth, both from asset price increases over time and from distributions of cash such as dividends, interest or rental income, which are often reinvested. 

Investments typically involve a trade-off between risk and return.  On average, over the long term, investments that are riskier—such as equities and real estate—offer a higher rate of return than investments that are safer, such as savings accounts, CDs, treasuries and highly rated corporate or municipal bonds. 

Investors can also arguably achieve a “free lunch”—reducing risk without sacrificing average returns much—through diversification within a risky asset class.  The easiest and simplest way to do this is to purchase a low-cost equity indexed mutual fund which tracks a broadly diversified portfolio of U.S. publicly traded firms, such as the S&P500, the Russell indexes, or the Wilshire 5000.  Within these broad indexes, when some stocks go down, others will go up, making overall returns smoother and less volatile.

Trigger Warning: Nerdy Jokes Appear after this Point.

Some investments, however, are over the long run, what is in technical finance jargon referred to as “what the heck were you thinking?” investments.  They carry both high risks and poor long-term returns.  These include, for example, commodities (gold; oil), cryptocurrencies, or your cousin’s idea to open a fine-dining restaurant in Patchogue.

There is considerable debate about the benefits of international diversification.  Historically, U.S. companies have produced higher returns than those in other countries, likely due in part to a system of corporate governance and securities regulation that is oriented towards protecting investors and promoting shareholder wealth maximization, as well as to a broader political and legal system that is very hospitable towards business and investors.  Many European stock indexes have performed reasonably well after accounting for the higher rates of dividends and lower rates of automatic reinvestment.  Asian indexes, especially those in Japan, have generally performed poorly—in spite of the fact that Japan has many world-beating companies that produce fantastic products—likely because of differences in business norms and legal systems which tend to favor priorities other than maximizing shareholder profits.  Emerging markets are—in my view—not appropriate for many unsophisticated index investors.

A broadly diversified portfolio of U.S. equities has historically produced better unlevered long-term returns than almost any other asset class.

U.S. equities, especially those in the S&P 500 index, are also generally highly liquid, meaning it is inexpensive to buy and sell them and we have a very good sense of what they are worth because of frequent market transactions.  This means that even an unsophisticated investor can typically get good returns buying into an index fund at random at market prices.

There is substantial debate about whether it is advisable to try to “time” the market by buying fewer equities when the stock market seems to be relatively expensive, or whether the opportunity cost of this strategy makes it self-defeating. 

Those who are interested in these issues might wish to start by reading Robert Shiller’s books and papers on the CAPE index and on the Excess Cape Yield as well as work by Wharton Professor Jeremy Siegel, starting with the latest edition of Stocks for the Long Run.  The work of Jack Bogle, and the Bogleheads blog and forum, is also helpful.

The finance literature tends to be skeptical of actively managed mutual funds, often finding that they rarely do well enough to justify their higher fees and higher tax liability for their investors.  It is also difficult to reliably and consistently identify the mutual funds that will perform well in the future.

Equity returns can be further amplified through the use of modest amounts of leverage.  Too much leverage will dramatically increase risks and increase the chances of the portfolio being wiped out.  Beginners may be better off avoiding the use of leverage at all.  Leverage here means borrowed money or something similar.  For example, when you buy a house with 20 percent down and borrow 80 percent of the purchase price, you are using leverage. (Such a high level of leverage would be very risky with stocks).  An excellent treatment of leveraged investing in equities appears in Yale professors Ian Ayres and Barry Nalebuffs’ book, Lifecycle Investing, based on their article, Diversification Across Time.

There is substantial debate about whether hedge funds and private equity funds on average produce high enough risk-adjusted returns to justify their risks and fees and associated tax liability.  There is also considerable debate about whether it is possible to pick only the “good funds.”  Most Law Professors won’t have the ability to invest in these assets, so I will skip this debate and assume that only equities, real estate, and fixed income are on the table.

Real estate is not a terrible investment, but it has historically on average performed worse than the U.S. stock market, is less diversified, and is much less liquid. 

Between the costs of showing a house, leaving it on the market, and paying a real estate broker, a house might cost 7 to 10 percent of its value to sell.  In contrast, S&P500 index ETFs typically have bid ask spreads that are much less than one-half of one-percent of the value and can be sold within seconds at the push of a button.  Mutual funds can typically be liquidated essentially for free within one business-trading day. 

Real estate is also subject to property taxes and requires active management—that is, it takes up the investor’s time and energy and it requires that cash be put into it.

And whereas most people can only buy one or two houses in one or two geographies, most people can get exposure to hundreds or even thousands of different companies with index funds that will only charge them a few one-hundredths of a percent per year.

Moreover, a primary residence is not a pure investment.  It is a mix of consumption and investment because an owner living in it is consuming much of the return—the rental income they would have earned if they had rented the house out to someone else.

Real estate is typically only justifiable as an investment because of tax advantages, the ready availability of oodles of leverage, or because of superior knowledge or complimentary skills (for example for someone who works in construction or a trade or is a real estate broker) that allow for better than average returns.  There might be some benefits of increased diversification if real estate is added to a mostly equity portfolio.  But real estate is so expensive in large cities, relative to law professor pay, that it is difficult to own it directly without overdoing it.

For many law professors, real estate will not be as good an investment as a modestly leveraged portfolio of equities.  Think of your house as money you are spending to enjoy life, not as an investment. 

Fixed income investments—cash, bank accounts, CDs, bonds, loans— carry returns that are often poor over the long term.  They are also often bad for tax reasons.  See Stocks for the Long Run by Jeremy Siegel.

The reason to hold fixed income investments is to reduce risks in the short run.  The stock market can drop a lot very suddenly—as much as 60 percent a year within the last 15 years, and as much as 90 percent from peak to trough going back to the 1929 to 1930s crash.  If a drop of that size would create problems for an investor, the investor needs to have a reserve of cash or other safe assets just in case.

In recent years, the stock market has recovered quickly, typically overtaking fixed income investments within 10 years of a crash, often within 5 years.  However, during the great crash in the late 1920s and early 1930s, it took roughly 23 years for the stock market to overtake the bond market, assuming the investor only bought in in one lump sum at the start of the worst possible year.

The stock market can also in theory go to zero, as it did in Russia and China after their communist revolutions, or in Germany after the devastation of WWII.  Very bad things could also happen in the United States or other economically linked regions, which could make equity returns bad in the future. 

Tenured law professors are generally in a unique position to take greater risks with their portfolios than the average investors, because tenured professors have unusually high levels of job security and because their incomes typically don’t go up and down very much with the stock market.

In my conversations with tenured law professors at elite institutions who teach business law subjects, most of them keep between 90 and 100 percent of their investable assets in a diversified portfolio of equities, and some of them use modest amounts of leverage.

I’ve experimented with leverage.  It can be scary.  But the math and the data suggests that using a little leverage (but not too much) can be much better over the long run than using none at all.  How much leverage should someone use?  See Ayres and Nalebuff.

Leverage can also be very attractive for tax reasons.  For more details, see the work of Ed McCaffery, who coined the brilliant phrase “Buy, Borrow, Die.”

Another excellent strategy for minimizing taxes and increasing after-tax returns is tax loss harvesting.  If you don’t know what that means or how to do it, talk to the members of your faculty who teach tax or corporate finance. 

If you don’t have at least three tenured faculty who teach tax, hire a dozen of them immediately.  Promote the one with the straightest teeth who smiles at puppies and small children to be your next Dean.  Elevate the one with the most resplendent sartorial style and well-defined calf muscles to be your Associate Dean for Spreadsheets for the Betterment of Mankind and Pre-finals Pilates.  Recite four “Hail Marys”, five “Our Fathers”, fast from sun-up to sun-down, feed lightly seasoned breadcrumbs to a duck, a duck, and goose, and write on a chalkboard 50 times, “There is no basis like tax basis.” 

But please don’t poach Ed McCaffery.  We need him at USC.  Find your own tax genius who can charm the nut off a salty pistachio.  I’m warning you, Search Committees, if you so much as look at Ed’s CV funny, I will report you to our Title 26 office.

End of Trigger Warning.

I repeat, this is not personalized advice.  It is only for general education and entertainment. It may not be appropriate for your situation.  If you do something risky and you lose money, that’s on you, capisce? 

In Memoriam: JoAnne Epps (1951-2023)

A longtime law faculty member at Temple University--where she also served as Dean of the Law School, Provost, and, at the time of her death, Acting President--Professor Epps died suddenly and unexpectedly earlier this week.  The NYT story about this tragic turn of events is here. 

Which law school has the strongest scholarly faculty?

It's that time of year for another amusing Internet poll:  pairwise comparisons of the "top 40" law faculties.  More than 60 choices.  Have fun!

Former Idaho law professor settles discrimination suit against law school for $750,000

Details here, including the interesting structure of the payout from the settlement.

Is Politicization Endangering Higher Education? (Michael Simkovic)

In August I warned that a perennial anti-higher-education narrative that was resurfacing in the conservative press could soon go mainstream, as it did in the 2010s.  According to this narrative, too many colleges (and law schools) are focusing on left-wing political indoctrination while charging students too much money and providing too little value in terms of preparation for careers. The criticism also notes the challenging labor market and high costs of financing education.

My prediction has already proven correct.

The New York Times coverage is here.  The story notes Pew surveys finding increasing hostility and to and reduced trust in higher education in recent years, especially from conservatives who think that educational institutions are trying to impose a left-wing political orthodoxy on their students and employees.

Judging from history, this could be the start of a sustained, multi-year campaign of public criticism of higher education by the mainstream press which will erode support, reduce student demand, and make higher education politically vulnerable to hostile taxation or regulation.  From the perspective of the media, criticizing higher education often pays for itself,* while universities’ limited resources make it difficult for them to defend themselves.

There is already evidence that law schools are losing support, particularly from demographic groups that they are perceived to discriminate against in admissions and hiring, and increasingly in law review editorships and opportunities for publication.  Applications from white men, and possibly to a lesser extent, white women, have fallen in recent years, according to LSAC data (see here and here).  Applicants from other groups have generally declined by less, held steady, or increased by too little to offset the overall decline in interest in law schools.  In other words, while law schools may be gaining interest from some groups and losing interest from others, overall they are turning students off.

Students of all political persuasions, and all demographic backgrounds, should feel welcomed and treated fairly.  Law schools must take care that well-meaning efforts to make some students feel more welcomed do not inadvertently make other students feel discriminated against, targeted, or unfairly accused of wrongdoing.

Law Schools can protect themselves by taking criticisms seriously and focusing on preparing students for bar passage and career success—in curriculum and in hiring of faculty and administrators and in the budgeting of limited resources—while curtailing politicization and sermons from the top. 

When university leaders attempt to speak for a whole university with one voice, they should restrict themselves to defending objective scientific facts and the open, rigorous, and data-driven process of inquiry that leads to scientific progress and improvements in productivity and public health. Universities do have real technical and scientific expertise about things like the effects of Climate Change, vaccination, and added sugar in food.  University leaders can and should support university scientists against unfair smears and misinformation campaigns.

But when university leaders attempt to lecture on subjective moral or political issues, they risk undermining and squandering universities' limited credibility, which is based on technical knowledge, skepticism and critical thinking, and an openness to the possibility that they themselves might be in error.  This process facilitates a self-correcting process of scientific discovery.  Universities credibility also rests on their contributions to scientific and technological progress, health, and labor productivity--which can be undermined by excessive preachiness.  

University leaders should assure the public that their resources will be used responsibly.  They should not attempt to impose a unitary political perspective that carries the implicit threat of punishment for heretical thoughts.  They should not engage in illegal discrimination, notwithstanding their personal views about the Supreme Court (which most of the public agrees with on racial preferences, notwithstanding the unpopularity of other recent decisions).  University leaders' sermonizing risks exposing them and their institutions to charges of hypocrisy for focusing on certain problems while arguably ignoring similar problems that are more pressing but would be more costly financially to address.**

While it may be tempting to use curricular mandates to try to change people’s minds about social issues, indoctrination tends to backfire more often than it succeeds.  In recent years, Churches that have attempted to impose controversial moral or political views on their members have seen precipitous declines in their membership.  Faiths that have eschewed efforts to establish a single creed or dogma regarding controversial social and political issues have fared better. 

Similarly, asset managers perceived to be too political have faced backlash and withdrawals of assets.  These asset managers successfully responded by passing through shareholder votes to dissident investors.  By avoiding imposing views on clients whom they are meant to serve, and by respecting the rights of clients to decide for themselves, asset managers kept their business.

 

 

* Media companies and their investors and advertisers often have strong financial ties to online education companies that provide an inferior product at a lower price point compared to traditional higher education, and to private student loan companies that want to scale back competition from federal student loans and other government financing.  Media companies can also extract advertising dollars from universities by targeting them for criticism.  Many studies find that media companies provide more positive news coverage of their sponsors and that industries respond to or deflect criticism by paying for advertising or providing other financial inducements.     

** For example, it is easy for critics to point out that many universities have benefited from donations by families that made their fortunes from slave labor and the Atlantic slave trade, appointed the scions of those slaveholding elites to University Boards of Trustees and admitted their children under relaxed academic standards--with no questions asked about the source of their wealth.  At the same time, universities have asked deeply invasive questions of prospective faculty and students and used the information gathered to discriminate against more recent immigrants, based on factors such as their race, sex or other prohibited characteristics.  Unlike elite universities, those that universities discriminate against in the name of remediating slavery have rarely inherited or been bequeathed any money from those who actually owned or traded slaves.  It is similarly easy to point out that many university leaders condemn police violence--and sometimes the police more generally--for targeting minorities, yet profit from allowing fast food, processed food, and beverage companies to advertise and sell addictive, slow-acting poison on campus that cuts down on people's life expectancy, especially the life expectancy of the poor and minorities, far more than the police ever have.   

Amy Wax, academic freedom and Penn, once again

As I've noted before (also here), most of Penn's case against Amy Wax involves trying to punish her for her lawful extramural speech, and is thus a flagrant violation of the University's contractual commitment to her academic freedom. 

But the student newspaper now reports that Professor Wax has once again invited Jared Taylor--an actual white supremacist, with no scholarly or intellectual merit--to speak in her class on conservative political and legal thought.   Whether this invitation is protected by academic freedom depends on whether scholarly experts in conservative political and legal thought would deem this an appropriate invitation (I very much doubt they would).  Academic freedom, recall, imposes significant limits on classroom conduct and choices, namely, those that are imposed by the standards of the discipline in question.  You can't invite a geocentric crank to lecture in your astronomy class, and it's arguable you can't invite a racist crank to lecture in any class, even one on "conservative political and legal thought."  Here Penn may be within its rights to act.

 

 

A student Law Review Comment that solves a standing puzzle in First Amendment doctrine

Richard Stillman, a 3L here (with a PhD in philosophy), has just published a quite ingenious solution to the puzzle of what the Court's test is for nonverbal "expressive" conduct, involving a judicious use of some philosophy of language.  Free speech scholars should read this!

Article on whether U.S. legal system is ready for "the challenges of AI to human values" includes citations that appear to have been made up by Chat GPT (link fixed)

Law professors may find this amusing. (Link fixed)