Thursday, March 19, 2015

For Law Schools: A Modest Proposal

American law schools suffer from two serious problems, one old, one new. The old problem is the inconsistency between their practice, driven by institutional self-interest, and the moral beliefs of their faculty. The new problem is how to deal with the sharp decline in law school applications over the past few years.

How many students are willing to come to a law school depends on its reputation. That reputation depends, in part, on the performance of its students, how many pass the state bar and how many get jobs, as reflected in the school's rating in the annual U.S. News and World Report rankings. Nobody in the law school business, at least nobody I have met, regards the ratings as a reliable measure of school quality, but everyone watches them. A further reason to care about the performance of the school's students is that if they perform well enough after graduation, they may make lots of money and donate some of it to the school.

The performance of students depends in part on how good a job the school does, in part on how able the students are. Thus every school has an incentive to try to attract good students in order to raise its ratings in order to get more students to apply in order to get the tuition revenue to pay the cost of operating the school. One way of attracting good students is by offering the best students scholarships that pay part or all of the cost of going to law school, and law schools routinely do so. The result is that the best students, the ones who are smart, hard working, and likely to end up with high paying jobs, are  subsidized at the expense of the students lower down in the class who are paying full tuition.

Most law professors have political views that favor benefiting poor people at the expense of rich people. The actual practice of the schools they teach in and help run has precisely the opposite effect. It subsidizes the future rich at the expense of the future poor, the students who, having spent three years and a lot of money getting a law degree, face very uncertain chances of being offered the sort of job that degree is supposed to qualify them for.

That is the old problem. Everyone in the law business knows it, although not everyone chooses to talk about it. 

The new problem is that law school applications have fallen sharply in the past few years, with the result that many law schools face serious budget problems. The only way they can keep enrollment up is by lowering their standards for admission, but lower standards for admission will eventually result in lower ratings, which will make it even harder to maintain enrollment. Schools can try to cut costs, but a large part of the cost is personnel, and a large and expensive part of that is for professors with tenure. It looks like a downward spiral to bankruptcy, at least until enough schools have shrunk or gone out of business to restore the balance between the number of students who want to enroll and the number of seats  law schools want to fill.

I have at least a partial solution to both problems:

Consider a school with a target enrollment of 200. It currently plans to set the lower limit for accepting applications at a level, defined mainly by LSAT score and undergraduate grade point average, that will result in accepting 400, half of whom it expects to enroll.

It instead lowers the cutoff far enough to get an entering class of 250. Fitting them in is no problem because it has sufficient classroom space and teaching staff for more than that, due to the decline in enrollment over the previous several years.

At the end of the first year it sends a message to the fifty students at the bottom of the first year class, warning them that on the basis of their grades so far they are at serious risk of failing to pass the bar. The school offers to refund their first year tuition in full if they choose to drop out. If only thirty accept the offer, a similar message goes to twenty more students. Once the process has been going for a year or two, the school should be able to make a better estimate of the acceptance rate for their offer and so reduce enrollment to 200 in one step.

What is the result?

1. The school ends up with the same revenue as if it followed its original plan and admitted 200 students. Costs are only increased by a little, because the school has excess resources, physical and human, due to past enrollment decline.

2. Since the students least likely to succeed have been warned and offered their money back, the professors may legitimately feel less guilty about taking the money of students who are ultimately not going to make it.

3. First year grades are a considerably better predictor of bar passage rates than the information available at admission, so the school's bar pass rate goes up.

4. In the long run, more students will be willing to apply, because they know if that if law school turns out to be too hard for them they will have an opportunity to leave and get their money back. 

In an earlier post I offered a different approach to the first problem.  


At 5:05 PM, March 19, 2015, Anonymous Anonymous said...

Or, they can ask the state for more money!!

At 8:19 PM, March 19, 2015, Blogger David Friedman said...

They can ask.

At 6:12 AM, March 20, 2015, Anonymous Anonymous said...


Just more information, if they have to move “telephone cable” “pipeline” “electrical lines” or water and sewer. You have more problems. I was involve in a telco cable move that took six months to get clearance from the end user. It took only a few days to put in a new cable but we could not cut their service for about six months to the new cable.

At 3:19 PM, March 22, 2015, Anonymous Bill Conerly said...

Potential moral hazard: talented students who simply change their minds about a legal profession would intentionally flunk finals. So in effect, it becomes a free trial (at least for 50 students).

Nonetheless I like the idea.

At 9:36 AM, March 23, 2015, Blogger David Friedman said...

Bill: I think that's a feature, not a bug. It's one of the reasons that applications might go up, allowing the school to be somewhat more selective.

At 5:17 PM, March 23, 2015, Blogger Andy Carr said...

David- Agree on stated benefits, but are you still going to provide merit scholarships? if you don't, you hurt your class quality. I couldn't tell if the 50 tuition refunds were to replace the cost of merit scholarships.

At 6:12 AM, March 27, 2015, Anonymous Anonymous said...

Given that law schools are simply producing far more law graduates than there is market demand for at a wage that justifies the tuition, isn't the conclusion that a lot of law schools just need to close down?

Alternatively, could the cost of law school be radically reduced if law professors were required to teach 40 hours/week for a salary in the $60-80k range, like, you know, some kind of job?

Are you worried?


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