Brian Leiter's Law School Reports

Tucker Carlson and I discuss the benefits of Higher Education and Student Loans (Michael Simkovic)

Last night I was invited to appear on Tucker Carlson’s show on Fox News.  For the last two nights, Mr. Carlson has been inveighing against higher education and federal student loans.  Mr. Carlson has been promoting a private-student-lender supported plan to tax higher education institutions that accept federal student loans. Similar plans to tax educational institutions were previously backed by both Senator Hillary Clinton and President Trump, with the support of several Wall Street connected think tanks.[1]   

Mr. Carlson and I spoke via a remote uplink from a Fox News affiliate in Los Angeles (Fox News’ headquarters is in midtown Manhattan, near Rockefeller Plaza).  The video appears here or here.  (There was a bit of a delay in the audio relay, so we sometimes speak at the same time).

Although my time was severely limited, and Mr. Carlson frequently spoke over me, I did manage to make a few key points:

 

• Higher education boosts earnings and employment by more than the education costs, to the benefit of both students and governments (see also here and here).

 

• The increase in earnings and employment is largely caused by the education.
  • (see also here, here and here for a review of the extensive empirical literature, including identical twin studies, instrumental variables studies, field experiments, quasi-experimental designs, OLS regression studies, fixed effects studies, and basically studies using every technique of causal inference know to professional labor economists)
  • We are about as sure that education increases earnings as we can be sure of anything in social science—the evidence is solid

 

• The federal government benefits more from higher education than universities do.
  • The increase in payroll and income tax revenue to the government from education is greater than the cost of tuition
  • Education also reduces costs to the government such as unemployment and disability insurance

 

• With symmetrical risk sharing (of both upside and downside) universities would be paid more by the government for providing education, not less.

 

• If the government invested more in education, the economy would grow faster and we would have more innovation, less unemployment, and a lower debt to GDP ratio.

 

• Student loan debt is actually too small relative to other assets and as a share of the economy to cause big problems--$1.5 trillion in student loan debt outstanding versus $104 trillion in household net worth; $200 trillion in present value of future government spending, and $1,000 trillion in present value of future US GDP.

 

• Federal student loans generally perform well. Federal student loan 3-year cohort default rates are only around 6 to 7 percent at 4-year-and-above non-profit and public institutions.  These default figures include students who start at such institutions but do not complete their degrees.  Recovery rates on defaulted loans are close to 80 percent.  (Defaults and problematic practices tend to be concentrated at for-profit universities, which Republicans have recently moved to deregulate). 

 

• Education boosts net worth in the long run, even after accounting for debt. People who are more highly educated not only have higher incomes, they also have higher savings rates and higher net worth. Among households headed by someone age 40 or older, those with professional degrees have median net-worth of $700,000 compared to only $100,000 for those with a high school diploma.  More highly educated heads of household also have significantly less debt relative to their assets.

 

• We are underinvesting in education. Increases in the costs of education pay for themselves in higher quality.

 

• University administrators are not overpaid.
  • There’s a market for executive talent in which universities must compete.
  • Many private industries pay managers more than universities and have a higher concentration of managers than universities
  • Universities pay their top executive leaders less than private sector companies pay senior executives (at the top, around $5 million at universities versus around $150 million at publicly traded corporations). Pay is lower for top executives in academe even after accounting for institution size. 
  • For example, Fox News, with only around $2.7 billion in revenue, recently paid its chief executive $21 million dollars in total compensation.  NYU, the largest private, non-religiously affiliated university in the United States recently paid its president $1.5 million.  NYU has $10 billion in operating revenue. Scaled by revenue, NYU pays its chief executive only 2 percent as much as Fox News pays its chief executive (i.e., Fox News pays its chief executive 50 times as much per dollar of revenue as NYU pays its chief executive).
  • NYU's business--which includes hospitals, biomedical research, and scientific and engineering labs--is far more complicated and far more socially valuable than Fox News' entertainment business.  Fox News has never saved anyone's life. NYU Medical Centers and other university based medical facilities have. Fox News has never trained anyone to become a doctor, lawyer, or engineer.  NYU and other universities have.

 

For more information, see:

1. Michael Simkovic, The Knowledge Tax, 82 U. Chi. L. Rev. 1981 (2015).
2. Michael Simkovic, Risk-Based Student Loans, 70 Wash. & Lee L. Rev. 527 (2013).
3. Frank McIntyre & Michael Simkovic, Timing Law School, 14 J. Empirical Legal Stud. 258–300 (2017).
4. Michael Simkovic & Frank McIntyre, The Economic Value of a Law Degree, 43 J. Legal Stud. 249–289 (2014).
5. Michael Simkovic & Frank McIntyre, Populist Outrage, Reckless Empirics: A Review of Failing Law Schools, 108 Nw. U.L. Rev. Online 176–280 (2014).
6. Michael Simkovic, A Value-Added Perspective on Higher Education, U.C. Irvine L. Rev. (2016).

 

With the benefit of more time, I could have pointed out a few more things and corrected some more inaccuracies, described in greater detail below:

 

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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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Anti-university “free speech” legislation will divert education funds to demagogues and facilitate monitoring, intimidation, and harassment of academic communities (Michael Simkovic)

Part I: After demagogues hijack higher education funding and disrupt learning and research, Berkeley responds 

In the wake of disruptions surrounding the invitation to campus of provocative right wing speakers, the University of California at Berkeley recently released the Report of the Chancellor’s Commission on Free Speech. The members of the commission include the Chief of Police and the Law School Dean and constitutional law scholar Erwin Chemerinsky.[1]

The report notes that U.C. Berkeley “spent nearly $4 million—during a time of severe fiscal duress—on security costs for [disruptive speeches by far-right provocateurs in] September 2017 alone. . . . This is not sustainable [given Berkeley’s] $150+ million deficit.”

At current tuition prices, $4 million is the equivalent of more than 280 1-year full-tuition scholarships (or 70 four-year bachelor’s degrees). Given the tone and substance of the talks, it seems unlikely that California taxpayers or the Berkeley community got good value for their money. For example, that money could have been used to train engineers, scientists, and other educated professionals. The report included several sensible recommendations to try to contain costs and limit disruptions.

Unfortunately, many of these recommendations would be difficult—perhaps impossible—to implement if legislation backed by the Koch family, the Goldwater Institute, and some law professors goes into effect. (More on this in Part II below).

The report notes that a single speech by right wing culture-warrior Ben Shapiro cost U.C. Berkeley and California taxpayers $600,000 in security costs.[2]

Mr. Shapiro is known for comparing “debate” to a “bloodsport.” In “How to Debate a Leftist and Destroy Them,” Shapiro advises conservatives to “Hit first. Hit hard. Hit where it counts . . . convince [the audience] that your opposition is a liar and a hater.” Shapiro advises being even more aggressive when dealing with a liberal family member at family gatherings such as Thanksgiving. Shapiro advises conservatives to call a family member who does not share conservative political views a “jackass,” “ridiculous,” “irrational,” “buffoon,” “loser,” “fascist,” and a would-be baby-killer (for supporting abortion rights).  Shaprio’s speech at Berkeley was reportedly similarly “strong on insults . . . and light on [substance].”[3]

The Commission was even less impressed with other speakers:

“Many Commission members are skeptical of [Milo Yiannopoulos and Ann Coulter]’s commitment to anything other than the pursuit of wealth and fame through the instigation of anger, fear, and vengefulness in their hard-right constituency. Speech of this kind is hard to defend, especially in light of the acute distress it caused (and was intended to cause) to staff and students, many of whom felt threatened and targeted by the speakers and by the outside groups financing their appearances.”

The Commission concluded that excessive financial costs were imposed on U.C. Berkeley and the taxpayers of California by “very small groups of students working closely with outside organizations” as “part of a coordinated campaign to organize appearances on American campuses likely to incite a violent reaction, in order to advance a facile narrative that universities are not tolerant of conservative speech.”

This is consistent with my own findings about conservative provocateurs’ efforts on campus, although I focused on professors serving as speakers rather than the student groups that invited them.[4]

The Commission suggested that if the citizens of California are unwilling to pay higher taxes to sponsor events that enrich the likes of Milo Yiannopoulos, then U.C. Berkeley should consider capping the amount it will spend on security for speakers:[5]

“[T]he campus should not have to expend scarce resources to protect celebrity provocateurs seeking to promote their brand (and, in some cases, to cast aspersions on higher education) when so many essential needs go unfunded or underfunded.”

The report also recommends centralizing event planning, limiting disruptive events to locations where individuals who would rather focus on their studies or their work can more easily avoid being affected by them, and encouraging “constructive and thoughtful debate between passionate advocates for opposing points of view” on campus including conservatives, rather than “shock jock performance art.”

However, many of the Commission’s perfectly sensible recommendations would be outlawed by model legislation pushed by the Koch-funded Goldwater Institute and some allied law professors.[6]

 

Part II:  Anti-university “free speech” legislation will divert funds to demagogues and will facilitate monitoring, intimidation, and harassment of academic communities

The so-called “Campus Free Speech Act” prohibits universities from charging more for security for events that are likely to incite violence and that lack substance.[7] The Goldwater legislation requires universities to host any speaker, regardless of intellectual rigor or academic merit (even if quality standards are applied in a non-partisan manner), as long as a single student, student group, or faculty member has invited the speaker.[8] It denies universities control over which space is made available to which speakers.[9]  The Goldwater Legislation places burdens on public universities that its most ardent supporters would never place on businesses which own other platforms for speech such as newspapers or venues for conferences such as hotels.[10] There is a difference between protecting the academic freedom of highly-trained and carefully vetted faculty and transforming universities into dumping grounds for outside speakers of low-quality and high-cost.[11]

While universities would be denied editorial discretion, student groups could be as discriminatory or exclusionary as they please without losing any privileges.[12] Thus, a neo-Nazi student group could refuse to admit blacks, Jews, gays, Catholics, liberals, moderates, or conservatives who don’t subscribe to White Supremacy—or even those who do but refuse to march around wearing Swastikas—without losing any privileges, such as the right to bring speakers or host a rally on campus.

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Zephyr Teachout (Fordham): Congress let Facebook CEO off the hook too easily (Michael Simkovic)

In the Guardian, Fordham's Zephyr Teachout argues that members of Congress let the CEO of Facebook off easily and essentially treated his hearing as an opportunity to curry favor with him.  Teachout writes:

"It was designed to fail. It was a show designed to get Zuckerberg off the hook after only a few hours in Washington DC. It was a show that gave the pretense of a hearing without a real hearing. It was designed to deflect and confuse.

Each senator was given less than five minutes for questions. That meant that there was no room for follow-ups, no chance for big discoveries and many frustratingly half-developed ideas. Compare that to Bill Gates’ hearing on Microsoft, where he faced lawyers and staff for several days . . . By design, you can’t do a hearing of this magnitude in just a couple of hours.

The worst moments of the hearing for us, as citizens, were when senators asked if Zuckerberg would support legislation that would regulate Facebook. . . . By asking him if he would support legislation, the senators elevated him to a kind of co-equal philosopher king . . . 

Teachout goes on to argue that Facebook's wealth, power, disregard for individual privacy, ability to manipulate public perceptions and refusal to take responsibility for accuracy of the content it presents makes it a "danger to democracy."

"Facebook is a known behemoth corporate monopoly. It has exposed at least 87 million people’s data, enabled foreign propaganda and perpetuated discrimination. We shouldn’t be begging for Facebook’s endorsement of laws, or for Mark Zuckerberg’s promises of self-regulation. We should treat him as a danger to democracy and demand our senators get a real hearing. . . . 

Zuckerberg strikes me as reliably self-serving. That doesn’t make him that interesting as the CEO of a corporate monopoly; it makes him a run-of-the-mill robber baron. . . [Senators should not] treat[] him as a good-hearted actor with limited resources, instead of someone who is making monopoly margins and billions in profits."

In fairness to Mr. Zuckerberg, traditional media organizations also often exhibit a disregard for privacy, manipulate public perceptions and refuse to take responsibility for the [in]accuracy of the information they publish and the harm it causes. Too many journalists and and editors invest the bare minimum in fact checking (often nothing), and prioritize entertainment value and "virality" over economic or political significance.  The established press too often write preconceived stories full of selective quotes or facts while disregarding contradictory information, refuse to print corrections, elevate the status of those willing to supply "helpful" quotes, and retaliate against those who point out their errors. 

This irresponsible behavior is made possible by defamation laws that make it virtually impossible for the press to incur liability unless it can be proved that they knowingly and intentionally lied with the specific goal of destroying an individual's reputation--which is virtually impossible.

Facebook may have contributed to the unexpected outcome of the last election, but so did other media organizations.  Mainstream media organizations gave one candidate billions of dollars of free publicity (hundreds of millions more than his rivals) mainly because his provocative statements--delivered with the practiced timing of a "reality" TV star--were entertaining and boosted their readership, and therefore their revenues.

This is what happens when competitive market pressures encourage media organizations to see their role as packaging advertising rather than as supplying accurate information.    Facebook may play the same game, only with better technology.

This does not mean that Facebook should get a free pass.  But we should not use Facebook as a scapegoat to avoid talking about problems with the media landscape that are systemic and that would persist even if Facebook disappeared tomorrow.

 

UPDATE: This article was corrected on 4/15/2018 to note that media organizations provided billions worth of free coverage, not just tens of millions.

Statistician Hans Rosling: The Press Does Not Understand the World (Michael Simkovic)

Statistician and data visualization expert Hans Rosling recently took the media to task for misleading readers and viewers using unrepresentative anecdotes and ignoring contradictory data.

Rosling says "You can't trust the news outlets if you want to understand the world.  You have to be educated and then research basic facts."

While journalists often depict the developing world as full of "wars, conflicts, chaos" Rosling says "That is wrong.  [The press] is completely wrong.. . . You can chose to only show my shoe, which is very ugly, but that is only a small part of me. . . . News outlets only care about a small part but [they] call it the world."

Rosling complains that the slow but steady march of progress is not considered news.

Rosling is famous for his data visualizations, especially this video briefly illustrating 200 years of global progress toward health and prosperity.  It's optimism for the data-driven set (and is a big hit in my business law classes).

  

BLS Employment Projections Are Unreliable (Michael Simkovic)

Labor economists have long cautioned against the misuse of Bureau of Labor Statistics (BLS) employment projections.

In 2004, Michael Horrigan at the BLS explained that the BLS projections should not be used to value education or to attempt to predict shortages or surpluses of educated labor.  Instead, the value of education should be measured based on earnings premiums—the measure used in The Economic Value of a Law Degree and Timing Law School. 

Horrigan wrote:

The general problem with addressing the question whether the U.S. labor market will have a shortage of workers in specific occupations over the next 10 years is the difficulty of projecting, for each detailed occupation, the dynamic labor market responses to shortage conditions. . . .  Since the late 1970s, average premiums paid by the labor markets to those with higher levels of education have increased.

 

It is the growing distance, on average, between those with more education, compared with those with less, that speaks to a general preference on the part of employers to hire those with skills associated with higher levels of education.

The BLS takes the same position in its FAQ.  The BLS does not project labor shortages or surpluses.

In 2006, Richard Freeman back-tested the BLS projections and found that “the projections of future demands for skills lack the reliability to guide policies on skill development.”

The BLS employment projections are not only unreliable.  Comparing occupation-specific employment projections to number of graduates in related fields systematically underestimates the value of higher education.

In 2011 David Neumark, Hans Johnson, & Marisol Cuellar Mejia wrote:

If there are positive returns to education levels above those indicated as the skill requirement for an occupation in the BLS data – and especially if these wage premia are similar to those in other occupations – then relying on the BLS skill requirements likely substantially understates projected skill demands.

 

For nearly every occupational grouping, wage returns are higher for more highly-educated workers even if the BLS says such high levels of education are not necessary. For example . . . for management occupations, the estimated coefficients for Master’s, professional, and doctoral degrees are all above the estimated coefficient for a Bachelor’s degree, which is the BLS required level. . . ..

 

If the BLS numbers are correct, we might expect to see higher unemployment and greater underemployment of more highly-educated workers in the United States.  As noted earlier, we do not find evidence of this kind of underemployment based on earnings data. Similarly, labor force participation rates are higher and unemployment rates are lower for more highly educated workers.

(note—above I link to and quote the 2013 published article; Neumark et al. said much the same thing in their 2011 working paper).

Neumark et. al. also noted that recent BLS projections appeared to be much too low for managerial and legal services occupations.

Starting around 2012 many law professors and pundits argued that the number of job openings for lawyers projected by the BLS relative to the number of expected law graduates suggested that too many students were attending law school and that they would not get much value out of their degrees.

In 2012, Deborah Merritt wrote:

The Bureau [of Labor Statistic]’s occupational employment projections . . . answer the very question that many law school applicants want to know: How many new lawyers will the economy be able to absorb this decade?

 

The Bureau currently estimates that the economy will create 218,800 job openings for lawyers and judicial law clerks during the decade stretching from 2010 through 2020. That number, unfortunately, falls far short of the number of aspiring lawyers that law schools are graduating.

 

The oversupply of entry-level lawyers deprives many graduates of any opportunity to practice law. At the same time, the lawyer surplus constrains entry-level salaries.

Merritt notes the possibility that law might be a versatile degree with value outside of legal practice.

In 2012, Paul Campos wrote:

Further evidence that law degrees are unlikely to become more valuable going forward can be found in the projections of the Bureau for Labor Statistics (BLS) . . . [which suggest many more law graduates than job openings].”

 In 2013, Brian Tamanaha wrote:

The U.S. Bureau of Labor Statistics estimates about 22,000 lawyer openings annually through 2020 (counting departures and newly created jobs). Yet law schools yearly turn out more than 40,000 graduates. This bleak job market coexists with astronomically high tuition.

Several and journalists also started comparing BLS projections and job openings to make much the same argument.

In 2013, unaware of the problems with job openings projections, I (Simkovic) suggested that projections might be used to make adjustments to more objective historical baselines for risk-based student loan pricing. 

On the chance that BLS projections that perform poorly in other contexts perform well in the legal education context, Frank McIntyre and I analyzed the extent to which BLS projections predict law graduate outcomes (earnings premiums).  The answer is: no better than random chance.  

As in other areas, BLS employment projections are not reliable or meaningful for predicting earnings premiums and are therefore not useful for valuing legal education.

But what about the number of job openings for lawyers?  Can BLS projections at least predict that reasonably well?

The answer appears to be “no.”  Recent analysis by the BLS suggests that their projection methods—the ones we analyze in Timing Law School—have systematically under-predicted job openings for lawyers.  

The BLS is considering changing its methodology to one that it believes will be more accurate.   Ted Seto has discussed this issue extensively. 

It is unclear at this point if the new job opening projections method will predict earnings premiums better than the old ones.  In any case, that was never their intended purpose, and it would be safer to predict earnings premiums and value education based on historical earnings premiums.

It remains likely that many law school graduates will not practice law.  Such has been the case in the past, and such is the case in other fields.   Many engineering, math and science graduates do not work as engineers, mathematicians or scientists in their fields of study.  Most fields of study do not have a one-to-one correspondence with a particular occupation, but are more broadly useful in the labor market, and law is no exception.  In spite of many individuals working outside their degree fields, higher education typically has been, and likely will remain, an investment with positive returns.

To best way to tell whether there is too much or too little investment in education is to consider relative returns that take into account risks and variability in employment.  Are the returns to education higher or lower than returns that can be had elsewhere with similar levels of risk?  The returns to education are generally much higher, and risk does not appear to explain this difference adequately.  The high relative returns to education suggest underinvestment in education.  

(A word of caution—BLS employment projections should not be confused with the BLS Occupational Employment Statistics (OES); the OES remains a useful and important, albeit imperfect, source of data).