Why Are Law Schools Expensive

There has been a lot of concern of late in the law school world over falling numbers of applicants, poor employment opportunities for graduates, high debt loads, and associated problems. I recently came across a post on another blog discussing the question, and decided that a post here would be more appropriate than a very long comment there.

From the standpoint of potential law school applicants, there are two problems—a shortage of jobs for lawyers, relative to the number of graduates, and the high cost of law school. The current administration will probably help with the former problem, since an increase in the size and intrusiveness of government is likely to lead to an increased demand for lawyers. The purpose of this post is to discuss the latter.

The fundamental problem, as I see it, is with the incentives facing the schools. Law schools are heavily dependent on their reputation to attract students. The two biggest sources of information available to the students are the American Bar Association, which accredits law schools, and the annual U.S. News and World Report ranking. Both of those are based mainly on measures of inputs, not outputs. Thus, for example, the ABA recommends a student to faculty ratio of no more than twenty and takes a ratio of thirty or more as presumptive evidence that the school does not meet the standards for accreditation. Its rules for calculating the ratio count one adjunct as one fifth of a tenure-track professor and it requires that "substantially all" of the first third of a student's coursework be taught by the full-time faculty. The standards include a lengthy list of what must be in a law school library—almost all of which is material currently available to both faculty and students online.

So a school that chose to spend less on its library, have a higher student to teacher ratio, use more inexpensive adjuncts and fewer tenure-track professors, do a variety of other things to cut costs, would risk losing its accreditation, whether or not it was doing a worse job of teaching its students. A school which provided its education in any form other than the conventional number of hours sitting in a classroom would lose its accreditation, since one of the ABA requirements is that:

 A law school shall require, as a condition for graduation, successful completion of a course of study in residence of not fewer than 58,000 minutes of instruction time, except as otherwise provided. At least 45,000 of these minutes shall be by attendance in regularly scheduled class sessions at the law school.

U.S. News and World Report does not publish the details of its ranking system, but a number of people have reverse engineered it. The four factors that together predict the ranking almost perfectly are peer reputation, fraction of graduates employed nine months after graduation, student-faculty ratio, and undergraduate GPA of the students.

The ABA includes in its requirements a measure of what fraction of students pass the bar. That, the USNWR employment measure, and the peer reputation measure, are output measures. Unfortunately, they are not very informative ones.

Start with peer reputation. A professor at one law school is unlikely to know much about how good a job other law schools do educating their students. What he is much more likely to know, and base his opinion on,  is what prominent scholars in his field are at which school—information almost entirely irrelevant to most students. And this criterion has the unfortunate side effect of giving each school an incentive to barrage faculty at all other schools with glossy pamphlets boasting the activities and accomplishments of their own faculty, an expense that does nothing to improve the education of their students.

Bar passage and (very imperfectly measured) employment rates are more relevant. The problem with both of those is that they depend on two different inputs—quality of instruction and quality of students. Top schools get very high bar passage rates not because they do a particularly good job of teaching the skills relevant to bar passage—most of their students take an additional bar preparation course before taking the exam—but because they admit only smart students.

In an old post, I proposed a simple solution to this problem. Schools should report their bar passage rates as a function of some measure of student quality such as LSAT or undergraduate GPA. That would provide the potential applicant with the information that matters to him—what the chance is that a student of his ability who goes to that school will pass the bar. A similar approach could be used for employment statistics.

There are two possible approaches to reforming legal education to lower its cost. One is to recommend specific changes, such as Judge Posner's old proposal to make the third year of law school optional. The other is to recommend changes in the incentive structure that currently prevents such specific changes from being in the interest of law schools to make. At the level of the individual law school, the first is all that can be done—but, short of crisis, mostly will not be, because it is not in the interest of law schools to do a better job for their students at the cost of risking their ABA accreditation and USNWR ranking. 

At the level of the legal education profession, I think the second approach makes more sense. It too, however, faces incentive problems. One effect of the current ABA standards is to increase law school demand for tenure-track faculty, and tenure track faculty have a substantial influence over those standards.

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P.S. The post that inspired this one has a delightful comment by a law school student about to take his last exam, detailing what is really need to teach law. His bare bones law school ("Perhaps you feel that your students cannot survive without a cafe? Build/rent your school next to a Panera") would cost students about $10,000 a year. Combine that with Posner's proposal for a two year degree and you have the cost of legal education down to $20,000.

But I don't think the ABA would accredit it.