Brian Leiter's Law School Reports

Hoxby (Stanford): Economic benefits of online education may not cover the cost (Michael Simkovic)

A recent working paper by Caroline Hoxby (Stanford) suggests that the economic returns to online education (measured in terms of wage growth) may be too low to recoup the costs of these programs, especially as administered at for-profit institutions.  Hoxby used a fixed effects approach, measuring earnings before and after online education compared to likely earnings without online education.  She found that online education does not boost earnings by very much, and it does not do much to move students into more lucrative industries or occupations.  Hoxby found evidence that most students pursuing exclusively online degrees lived within commuting distance of brick-and-mortar institutions that likely offered higher quality education with better returns.

Hoxby's observational results are consistent with experimental studies that have found worse outcomes for students randomly assigned to online education compared to traditional education.

In previous research, Hoxby warned that the spread of online education could undermine highly selective institutions' ability to finance original research and teaching innovations.  Hoxby wrote: "selective] institutions weaken rather than strengthen their market power in research and original content creation when they increase their exposure on the internet."

Hoxby's working paper has been criticized by groups advocating partnerships between for-profit technology companies and educational institutions to spread online education to non-profit and public institutions.  For-profits have been online education's earliest and most enthusiastic adopters, while private non-profit and public institutions have generally taken a more conservative approach.  The strongest of the critiques of Hoxby's paper is that it looked at returns over the course of 10 years rather than a lifetime.  The present value of lifetime earnings premiums is a more appropriate measure of the returns to education.  

Related coverage: Should online education come with an asterisk? 

Think tanks, CBO dramatically overestimated the direct budgetary costs of Public Service Loan Forgiveness (Michael Simkovic)

I've previously noted some of the outrageously implausible assumptions used by organizations with links to private student lenders (such as the New American Foundation, AEI, Brookings, Manhattan Institute, and Barclays) in an apparent effort to portray federal student loans as a threat to the public fisc. Such studies have been used to justify increases in federal student loan interest rates, credit rationing (borrowing caps), and a less accommodative policy with respect to income based loan forgiveness.  

A new government report suggests that these groups may have also over-estimated the costs of Public Service Loan Forgiveness (PSLF).  PSLF is distinct from income-base repayment programs (IBR).  Whereas IBR is intended as insurance for student loan borrowers against relatively low earnings persisting over the course of a 20 year period, PSLF is intended as a wage subsidy to encourage highly educated skilled workers to accept public sector and non-profit jobs and continue to work in them for at least 10 years.  

Early estimates had wildly exaggerated the cost of PSLF, assuming that 25 percent of student loans would be discharged through these programs within 10 years, since at any one time around 25 percent of the workforce works in the public sector.

There are numerous problems with this estimate: graduates transition in and out of the workforce; graduates move between the private and public sectors; not all public sector work qualifies for PSLF. It will therefore take far more than 10 years after graduation for many borrowers to accumulate a sufficient period of time working in qualifying public sector jobs before they can earn forgiveness.  During this time period, borrowers continue to make student loan payments, decreasing the budgetary costs of eventual debt forgiveness.  The eligibility and documentation requirements for PSLF are also stringent, further disqualifying many applicants.

According to the government report noted above, in the first year in which graduates could potentially qualify, only 28,000 borrowers applied and only 96 (less than 0.5%) qualified for forgiveness.  28 percent of applications were disqualified for missing information, while over 70 percent were disqualified because they had not yet met the program eligibility requirements.

The total balance forgiven in the first half of 2018 was $5.52 million dollars. The CBO, relying in part on assumptions advocated by think thanks, had estimated that the program would cost $425 million in 2018, and nearly $24 billion within 10 years. 

While qualifying applications are likely to grow in the coming years, the contrast between the high estimated cost and the low actual cost thus far is striking.

Should Online Education Come with an Asterisk on Transcripts? (Michael Simkovic)

The ABA recently voted to permit a dramatic expansion of online legal education.

Online education is controversial in higher education.  It is even more controversial in legal education, which relies more on classroom interaction and less on lectures than most forms of higher education. 

Widespread perceptions that online education is lower quality than live instruction in general—and may be particularly disadvantageous in legal education—are backed by numerous peer-reviewed empirical studies.[1] 

Proponents of online education argue that it is more convenient because students and faculty do not have to commute, or because students can learn at their own pace.  They argue that it is potentially more cost effective, either because physical facilities need not be used, or because it is scalable, or because an artisanal model of teaching through knowledgeable faculty can be replaced with a less expensive, industrial model of low-skill specialized workers who each handle particular aspects of course development and teaching.  Some argue that technology can be used to closely monitor and track students, and that the information gathered can be used to improve the quality of education. 

Critics of online education argue that it is lower quality, that most students learn and absorb less, and that the social dynamic of the classroom and learning from one’s peers and interacting with alumni is a critical part of education.  (In addition to multiple peer-reviewed studies, they point to recent examples of “online education” such as self-paced workplace training modules as examples of the low quality that can be expected.) 

Critics point to the failure of MOOCS—which have extremely low completion rates (see also here)—as evidence of the limits of scalability.  They point to the pricing and cost experience of most universities, which have seen high costs of developing and maintaining online courses and additional software licensing fees which have prevented them from charging much less for online classes than for those taught in person.  And they point to a rash of cheating and distracted learning, which anecdotally seem to be more prevalent online than in person.

Perhaps the most empirically rigorous (and recent) study of online education to date—which relied on an experimental design with random assignment of students to different versions of the same introductory economics course—found evidence that “live-only instruction dominates internet instruction . . . particularly . . . for Hispanic students, male students, and lower-achieving students.”  An earlier study which also used a quasi-experimental approach, found similar results, especially for complex conceptual learning:

“We find that the students in the virtual classes, while having better characteristics, performed significantly worse on the examinations than the live students. This difference was most pronounced for exam questions that tapped the students' ability to apply basic concepts in more sophisticated ways, and least pronounced for basic learning tasks such as knowing definitions or recognizing important concepts . . .

Choosing a completely online course carries a penalty that would need to be offset by significant advantages in convenience or other factors important to the student. . . . Doing as well in an online course as in the live alternative seems to require extra work or discipline beyond that demonstrated by our students, especially when it comes to learning the more difficult concepts.”

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NALP data: When there are fewer law school graduates, there are fewer law school graduates with jobs (Michael Simkovic)

NALP entry level starting salaries and employment don't predict much of anything about what will happen three to four years from now when those currently contemplating going to law school will, if they choose to attend, graduate into a quite possibly very different economy.  Nor is NALP data directionally very different from overall economic data like the employment population ratio  which is released sooner.¹    And while those graduating into a stronger economy do earn more (at least for the first few years), these cohort effects fade over time, those who graduate in a recession still benefit from their educations, and attempting to time law school is a money-losing proposition because of the opportunity costs of delay.

Nevertheless, every year NALP data on last year's graduating class is released with great fanfare, including a press release.  In news that will surprise no one who has tracked the rise in the overall employment population ratio, it turns out that the class of 2017 had better employment outcomes than other classes since the recession. Or as NALP sexes it up for journalists, "Class of 2017 Notched Best Employment Outcomes Since Recession." (88.6% employed 9 months after graduation for the class for 2017, compared with 87.5% for the Class of 2016).

But, NALP unhelpfully informs us, there's a catch--the total number of law jobs for law graduates was lower even though the employment rate was higher.

This should not surprise anyone who is aware that the number of law school matriculants last peaked in 2010, and graduating class sizes have therefore been falling since 2013.  From 1994 through 2015, the correlation between annual % change in graduating class size and annual % change in number of law graduates with jobs has been 0.78 (i.e., class size explains 61 percent of the variation in number of law jobs for recent graduates.  (data here)  The correlation is even higher since 1999 when reporting started covering a higher percent of the class--0.91 correlation, meaning that class size explains 82% of the variation in the number of law graduates with jobs.

 

 

There aren't fewer jobs available for lawyers.  To the contrary, there are more lawyers working now than there were pre-recession according to both Bureau of Labor Statistics and Census Data (BLS OES, ACS, and CPS).  There are fewer recent law graduates working as lawyers because there are fewer recent law graduates.

The employment market for educated workers is large and the number of law graduates is small relative to this market.  Law schools are too small to move the market much on the supply side by admitting more or fewer students.  Just as the typical investor could sell all of his or her shares of Apple without moving the market for shares of Apple (much less the S&P 500), the typical law school can admit as many or as few students as it wants without changing the overall percent of law graduates who will find jobs.  (However, there’s some evidence that at the national level, the share of recent law graduates working as lawyers varies inversely with class size).

The usefulness of NALP data is questionable (at least for many of the uses to which it is often put), but NALP could help by limiting its reporting to employment rates and starting salaries.  Discussing changes in the absolute number of law graduates with jobs is simply a confusing ways of telling people that fewer people entered law school 4 years ago than 5 or 6 years ago. 

NALP should also contextualize its employment ratios by comparing them to the overall U.S. employment population ratio during the same time period (i.e, March of 2018), which was 60 percent overall, and and 79 percent for those age 25-54 according to BLS and the OECD, compared to 89 percent for recent law graduates, according to NALP.

¹ (Similarities are greatest when one restricts it to those who are both young and well-educated using CPS data.

 

UPDATE: 8/3/2018  The correlations and r-squared were originally reported based on levels rather than % change from previous year. The numbers have been updated to reflect a model based on differencing (% change from prior year), which brings the explanatory power from 1999 forward down from 96 percent to 82 percent.

 

Northwestern Lecturer Mark A. Cohen’s Angry Outburst on Twitter (Michael Simkovic)

I recently pointed out some factual problems with claims by Northwestern lecturer Mark A. Cohen.  Cohen, writing in Forbes, claimed that faculty terminations at Vermont Law School were proof that student debt was unsustainable, not only at Vermont, but at all law schools except for a handful of elite institutions. 

Here’s the problem: When student debt levels are unsustainable, student default rates are high.  But at Vermont--and at most law schools--default rates are low.[1] 

When Professor David Herzig pointed out some of the relevant literature to Mr. Cohen, Cohen responded with the following angry outburst on twitter:

“That "evidence" has been panned by every credible source I know. The methodology and premises upon which the conclusions were drawn are laughable and fly in the face of real studies. I was a bet-the-company trial lawyer for many years--the "study" you cite is 3rd rate fiction.”

Low student loan defaults for law graduates are consistent with the peer reviewed literature, such as The Economic Value of a Law Degree (final version here), Timing Law School (final version here), and related work by me and Frank McIntyre about the value of legal education.  Law degrees generally provide benefits that are substantially greater than their costs, even toward the low end of the distribution, across race (final version here), sex and college major, both before and after the financial crisis, and including those who graduate during a recession.  More than the top 75 percent of law graduates are getting good value relative to a terminal bachelor’s degree.[2]

Strong student loan performance is also consistent with the After the JD study (compare waves I, II, and especially III), which showed rapid income growth for graduates of even low ranked ABA-approved law schools, and eventually, six-figure median full-time incomes. 

Law students’ low default rates have featured in the business strategies of many student lenders, who are eager to refinance law student debt for interest rates substantially below those offered by the federal government.

Professor Herzig asked Mr. Cohen to be more specific about his sources and objections.

Mr. Cohen has yet to specify what he believes is wrong with the methodology in the studies—which were authored with a PhD labor economist, peer reviewed and carefully vetted, use high quality government data, use mainstream methods and assumptions that are well established in labor economics, and include sensitivity analyses and robustness checks.  The results have been replicated by other researchers.

Mr. Cohen also has yet to specify which “real studies” he thinks use better data and more widely accepted methods, and why.  He has yet to explain how his litigation experience qualifies him as a labor economist, statistician, and literary critic.  Or why, as a seasoned litigator, he thinks so many of the lawsuits against law schools have been dismissed.

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New York Times contributors get an unpleasant surprise when they try to write about higher education without bashing it (Michael Simkovic)

Ellen Shell, a journalism professor at Boston University, recently wrote an article for the New York Times arguing that while higher education confers vitally important advantages in the labor market,[1] education alone is not enough to overcome the disadvantages of childhood poverty and to promote greater equality.[2]  The purpose of Shell’s article was apparently to advocate for more comprehensive efforts to overcome poverty, above and beyond greater investment in higher education.[3] 

In the hands of editors at the New York Times, the title of Professor Shell’s Op Ed became "College May Not Be Worth It Anymore."

Several readers who contacted me about this article assumed that Professor Shell was an elitist who believed that the poor did not deserve to be as well educated as her own children.[4]  Apparently so did the author of the study she cited.  He says that to the extent that Professor Shell may have intended to downplay the benefits of education to poor children, she misunderstood his work.[5] 

I contacted Professor Shell to ask about the discrepancy between the contents of her article and its title, and whether New York Times editors had changed her title.

She wrote back that she was surprised by the title, that it did not match the contents of her article, that it must have come from the editor, and that it did not endear her to the administration at her university.

I knew to ask Professor Shell before jumping to conclusions because I have also been surprised to find that New York Times editors attached inapposite, critical titles to my work.[6]  And I have repeatedly heard similar complaints from other professors who have written Op Eds for the New York Times and from sources who have been misquoted by the New York Times and had their professional reputations damaged as a result.

Most readers of newspapers assume that the writer listed in the byline of a newspaper article or Op Ed is responsible not only for the text of an article, essay or Op Ed, but also for the lead or title that appears at the top. 

At the New York Times, that is not the case.[7] 

Editors choose the titles of Op Eds or articles.  Because many readers only read the lead or title, and not the full article, this gives senior management at media companies an enormous amount of power.  This power comes without public scrutiny, since usually only the name of the “author” (and not the editor) appears in the byline of the article.  

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Apprenticeships and online education are not viable alternatives to ABA-approved law schools (Michael Simkovic)

Over the last several decades, both the cost and the quality of ABA approved law schools have increased. Faculty student ratios have fallen.  Completion rates have increased, even as diverse groups with historically lower completion rates have become a larger share of the student body.  Earnings premiums have increased, and racial disparities have narrowed.

Nevertheless, some critics of law school, concerned by the high cost, have suggested going back to the "good old days" of legal apprenticeships, or using technology to bring down costs.  The data does not support apprenticeships or less highly regulated (and less expensive) online or correspondence versions of law school as viable alternatives to ABA-approved law schools.

Several major legal markets (including New York and California) permit prospective lawyers to sit for the bar exam after 4 years of apprenticeship under a licensed lawyer (or 4 years combined law school and apprenticeship).  Very few people still try this approach. But for those who do, the bar passage rates are abysmal.

 

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How to become a better empiricist, or at least start using empirical methods (Michael Simkovic)

I recently wrote about the evolution of economics--and law & economics--from fields that focused on assumptions and priors to fields that emphasizes data, causal inference, and scientific objectivity.  Many law professors and aspiring academics share my enthusiasm for Albert Einstein's vision of universities as “Temples of Science”, but are unsure of how to acquire or sharpen the technical skills that will make them effective empiricists.

Bernard Black at Northwestern runs extremely helpful and practical summer workshops that I highly recommend. The quality of Professor Black's workshops easily justifies the cost.  (There are free law & economics workshops--and some that will even pay you a stipend to attend--but from what I have seen, these  tend to present non-empirical methods and political view points).

Details about Professor Black's workshop are available below the break.

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When do donor influence and ideology undermine academic integrity? (Michael Simkovic)

Key takeaways

• Universities face serious threats to academic freedom from outside pressure groups
• Some Donors have made demands that can undermine university provision of unbiased, high-quality research
• Accommodating ethically questionable Donor demands can undermine public confidence not only in individual researchers, but in entire institutions and even in the broader academic enterprise
• Stronger, more secure, and more stable funding for universities—without strings attached—would help insulate universities from undue pressure by outside groups
• Universities should work together to secure their financial and intellectual independence, articulate clear ethical standards, and enforce those standards

 

I recently documented efforts by a well-organized network of libertarian and conservative academics, advocacy groups, and media organizations to foster resentment toward universities and then gain control over them, under the pretense of supporting free speech.[1] These efforts continue a decades-long assault on higher education, and have been remarkably effective at tarnishing universities’ reputations. This has paved the way for legislation that further undermines universities’ intellectual and financial independence.[2]

A complementary threat to academic integrity comes from powerful outsiders exploiting universities’ financial needs to leverage relatively small donations into enduring influence over faculty, curriculum and student life. Such money-for-influence arrangements could alter what research gets produced, and by whom.

Outside funding can increase research output and impact in media and policy circles. It can fund great research that might not have been produced otherwise. But funding under inappropriate terms risks undermining the central and unique role that universities play in society as providers of high quality, reliable, and unbiased information. This could quickly destroy the goodwill and trust that universities painstakingly cultivated over decades (in some cases, for centuries).

This issue has come to a head recently with press coverage of some financial relationships and recently disclosed contracts between conservative and libertarian donors (including foundations and re-granting organizations funded by the prominent Koch family) and George Mason University.[3] Much of the controversy relates to a libertarian / free-market embedded think tank at George Mason, The Mercatus Center, which provides supplemental compensation and resources to GMU’s economics faculty and some law faculty members, as well as opportunities to produce commissioned research on timely policy issues. Through Mercatus, the university has received tens of millions of dollars in donations.

GMU faculty members’ chances of obtaining funding and resources apparently did not depend exclusively on an unbiased assessment of their intellectual rigor and academic contributions, but rather appear to have depended at least in part on the political implications of their research. In contravention of academic ethical norms, donors had substantial influence over which faculty members would receive compensation supplements known as “chairs” or “professorships.” Donors maintained control through representation on selection committees, evaluation committees, rights to recommend removal of chair holders, gift rescission rights, and key-man clauses for senior executives, including the dean of the law school.[4]

The language of several contracts suggested that only libertarian or economically conservative faculty members would be eligible to hold professorships or chairs. For example:

“The objective of the Professorship is to advance the . . . acceptance and practice of . . . free market processes and principles [as] promot[ing] individual freedom, opportunity, and prosperity . . . The occupant of the Professorship (“Professor”) shall . . . be qualified and committed to the forgoing principles.”

Rudy Fichtenbaum, president of the American Association of University Professors said “When you start getting into a study of free enterprise then you’re really, I think, stepping into a territory where you’re promoting a political agenda.”[5] Donors may specify a topic of study or type of expertise for a holder of a chair; but they should not specify the chair-holder’s politics.[6]

Critics say Mercatus’s ideologically based funding tips the playing field at GMU in favor of the production of economically right-wing scholarship and the retention of economically right-wing scholars and instructors. Neither Mercatus nor GMU appear to have imposed any limits on the fraction of a faculty member’s total annual compensation that could come from non-state sources such as Mercatus.[7] This is unusual—many funders and universities worry that too much outside funding creates the appearance of impropriety.[8] At least one prominent member of the GMU faculty with a Mercatus affiliation derived over 40 percent of his compensation in 2016 from “non-state” sources, according to public records.[9]

Without supplemental compensation from Mercatus, GMU faculty compensation appears to be uncompetitive with comparable institutions.[10] Thus, working at GMU may not have made sense financially for economists or law professors who were unlikely to obtain Mercatus compensation supplements—i.e., those whose scholarship might support increases in taxes, an expansion of public investment or social insurance, or more stringent regulations of business. At least one moderate economics faculty member says that she “carefully chose [her] research so it wouldn’t be objectionable” to her more conservative colleagues.[11]

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Paul Krugman explains how the war against taxes became a war against education (Michael Simkovic)

In today's New York Times, Professor Krugman writes about the war on education. Krugman's generally smart post overlooks an important part of the story.  Many wealthy Democratic Donors also want low taxes and are therefore also hostile toward teachers unions and increases in public funding for education.  Republicans are not the only ones's responsible for the current state of K-12 education, in which high preforming college graduates are fleeing teaching for better opportunities.  Krugman writes:

 

"State and local governments . . . are basically school districts with police departments. Education accounts for more than half the state and local work force; protective services like police and fire departments account for much of the rest.

 

. . . [W]hen hard-line conservatives take over a state. . . they almost invariably push through big tax cuts. Usually these tax cuts are sold with the promise that lower taxes will provide a huge boost to the state economy. . . . This promise is, however, never — and I mean never — fulfilled; the right’s continuing belief in the magical payoff from tax cuts represents the triumph of ideology over overwhelming negative evidence.

 

What tax cuts do, instead, is sharply reduce revenue, wreaking havoc with state finances. For a great majority of states are required by law to balance their budgets. This means that when tax receipts plunge, the conservatives running many states can’t do what Trump and his allies in Congress are doing at the federal level — simply let the budget deficit balloon. Instead, they have to cut spending.

 

And given the centrality of education to state and local budgets, that puts schoolteachers in the cross hairs. 

 

How, after all, can governments save money on education? They can reduce the number of teachers, but that means larger class sizes, which will outrage parents. They can and have cut programs for students with special needs, but cruelty aside, that can only save a bit of money at the margin. The same is true of cost-saving measures like neglecting school maintenance and scrimping on school supplies to the point that many teachers end up supplementing inadequate school budgets out of their own pockets.

 

So what conservative state governments have mainly done is squeeze teachers themselves.

 

Now, teaching kids was never a way to get rich. However, being a schoolteacher used to put you solidly in the middle class, with a decent income and benefits. In much of the country, however, that is no longer true.

 

At the national level, earnings of public-school teachers have fallen behind inflation since the mid-1990s, and have fallen even more behind the earnings of comparable workers. At this point, teachers earn 23 percent less than other college graduates. But this national average is a bit deceptive: Teacher pay is actually up in some big states like New York and California, but it’s way down in a number of right-leaning states.

 

Meanwhile, teachers’ benefits are also getting worse. In particular, teachers are having to pay a rising share of their health insurance premiums, a severe burden when their real earnings are declining at the same time.

 

So we’re left with a nation in which teachers, the people we count on to prepare our children for the future, are starting to feel like members of the working poor, unable to make ends meet unless they take second jobs. And they can’t take it anymore.

 

. . . [E]xtreme right-wing ideologues . . . really believed that they could usher in a low-tax, small-government, libertarian utopia.

 

Predictably, they couldn’t. For a while they were able to evade some of the consequences of their failure by pushing the costs off onto public sector employees, especially schoolteachers. But that strategy has reached its limits. Now what?

 

Well, some Republicans have actually proved willing to learn from experience, reverse tax cuts and restore education funding. But all too many are . . . lashing out, in increasingly unhinged ways, at the victims of their policies."