Silly Irrational Rich People

In today's episode of "non-profit" capitalism, I have a strong negative reaction to this article.

Hofstra University School of Law will be renamed in honor of a graduate who has agreed to donate $20 million to the Long Island school, the school announced yesterday.

It will become the Maurice A. Deane School of Law at Hofstra University in recognition of a wealthy retired pharmaceutical executive who enrolled in the school at age 50 and was the valedictorian in the class of 1981, receiving awards for both constitutional law and evidence.
...
The school said that for 30 years Mr. Deane, now in his mid-80s, has been an adviser and benefactor of the university and its law school. He served on the university's board of trustees from 1982 to 2007 and was the board's chair from 1989 to 1991. In 2008, he was named chair emeritus.
...
Mr. Deane passed the bar in 1982. Though he did not practice after graduation, he thinks his legal education "really served him well," Ms. Demleitner said.

Mr. Deane is "exceptionally fond of the law school," she said, adding that a condition of the donation was that it exclusively benefit the law school.

And the answer is "yes," you can be technically magnanimous and a complete turd at the same time.

I'm sure some of this money will trickle into scholarships and reduce someone's tuition. But if a game is rigged, it's hardly moral to bankroll the organizers. I'd almost rather the wealthy spend their money on hookers and blow, or buy some crappy artwork or something. At least then they're not supporting a fundamentally broken system that's a detriment to a field they never had any serious involvement with or dependence on.

Univ. of Illinois May Have Reported False Information

From Law.com:

The University of Illinois has launched an investigation into the accuracy of information about the median grade point average and LSAT scores disseminated by the College of Law about its incoming class.

According to a statement released by the university on Sept. 11, ethics officials on Aug. 26 received "credible information" that the law school might have reported inaccurate data regarding the class of 2014 on its Web site and in promotional materials.

Not much comment required here, but:

1. If the allegations prove true, U.S. News should immediately drop Illinois to the third tier to retain any credibility. The absurdity, theoretical and otherwise, of the U.S. News Rankings is, and always will be, a flawed driving force behind these shenanigans. Unless U.S. News actually has some type of penalty for blunt lying, the rankings' sponsor would only prove again how worthless they are.

2. If the allegations prove true, the ABA should immediately pronounce a rule allowing it to audit these institutions at will, if it doesn't already have one. Actually, the ABA should do it anyway.

3. If the University of Illinois - a school whose reputation would keep it in the top 35 regardless of a 2-3 point drop in LSAT score - has to fudge its numbers, how can anyone's numbers be taken at face value without scrutiny?

4. Undergrad stats are stupendously easy to keep track of for an admissions office. The students all wrote them on their applications, and I imagine most schools use a sort of spreadsheet/database-style calculator to ring these numbers up. If schools can't even get those numbers right, how in the firecrackin' hell are they getting the post-graduate numbers even close? A common defense to the post-graduate numbers is that they're accurate when taken with the disclaimers. Can we eve say that? Really?

See additional coverage here.

This Problem is Your Problem is Our Problem

In 2005-2007, I imagine a lot of people had a caveat emptor that's-what-you-get attitude towards people who failed in their housing ventures. I imagine that upon hearing about someone overpaying for a "flipping" property and then failing to sell it, failing to make the monthly mortgage payments, etc., that there was a lot of shadenfreude, remarks about irrational greed ("You paid $300k for a house in the ghetto?"), and such. TV shows used to show the foibles - and often failures - of those trying to flip properties to take advantage of irrational home prices. Real estate exuberance, it seemed, was a public spectacle, like a boxing match. You could participate or not, but there wasn't a sense of connection between person x's failure and the failure of the economic system.

I bring this to mind after reviewing the comments on articles like this and this. It seems there are a lot of idiots in this country who view the fraudulent nature of higher education - law school in particular - as an individual problem, one we should welcome if our attitudes towards greedy lawyers is one of antipathy, one in which we should find head-slapping entertainment if our political views prefer robust, responsible individualism and abhor people exercising their legal rights or exposing flawed systems.

Regardless of where your politics swing, the problem of young people being sucked into the educational-student loan vortex is absolutely a nationwide problem, bigger than abortion, bigger than gun control, bigger than 95% of the issues that the vacuous ruffle their feathers over. It will likely come to rival the mortgage meltdown in impact on the economy. And one of the biggest culprits is higher's education's absolute rejection of transparency, refusal - in spite of its philosophical mission statements - to present an objectively-honest self portrait, and its warm embrace of shyster marketing techniques.

According to the Census Bureau, almost 70% of our high school graduates enroll in post-secondary education. Many more attend school later on in life. In any given year, there's about 3 million who graduate high school, so in excess of 2 million enter into post-secondary education. Around 20 million are in post-secondary education at any given time, with 4-year colleges taking double the number of students at 2-year schools.

The average annual tuition at a 4-year school (public and private both) is around 21,000. Three years ago, the average debt for undergraduates was in excess of $27,000 and around 2/3 of those at 4-year schools took out undergraduate loans.

Using some very crude math and ignoring attrition, we're talking about almost a million every single year taking on almost $30,000 in non-dischargable debt. And for what purpose? The vast majority wind up moving back home. Millions wind up working in jobs that require the skill-set of a 16-year-old.

While the $30,000 figure may seem modest: 1) it's increasing every year; 2) it's above what the federal government advises for a rational student loan debt load, given the employment prospects; 3) 80+% of the time it's a wasted expenditure.

And make no mistake: many of the people borrowing these loans are among the more sophisticated people in the society. The ones that "should" go to college, but have the audacity to come from lower- and middle-class backgrounds. Each one of those one million has to service that $30,000 debt (which becomes $40,000 over a 10-year repayment) instead of buying a car, spending money on entertainment, investing, or otherwise contributing to the economy. Instead, the debt is used to support the bloated and cost-inefficient university system now.

Even at such "minimal" debt levels, the student has a $350 a month handcuff placed on them. And if the student doesn't take the debt, someone else often winds up paying the deficiency. If mom and dad pay for your education, kids, it wasn't free. Absurdly high tuition is a serious economic problem precisely because it diverts resources away from productive uses of capital and towards non-productive ones (debt service and "research" by 3rd-tier anthropologists).

In ten years, there will be millions upon millions of our most education citizens who will be unable to purchase homes or new automobiles precisely because of the debilitating effect of student loans that were thrown on, in part, by a perpetuation of fraud. How can you not see the long-term systemic effect of this?

For law school students, the picture is about five times more dire. Most have undergraduate debt, and then are forced to expend between of $100,000 to 200,000 more to gain a law degree. If $350 a month is nothing to sneeze at, what is $1000 a month like? Because of the fraud of law school admissions departments, these students grossly overpaid for tuition. There are maybe 10% of law students who will achieve salaries capable of paying off these debt levels with ease. For the remainder - approximately 35,000 per year - the high debt will crush their finances and prevent them from having meaningful participation in the economic society.

Say what you will about law students, but 1) most are among the top 10% of the society in terms of intelligence and work ethic; and 2) most never would have gone to law school if they knew the reality of post-graduate employment. Do you think anyone really wants to desperately be a lawyer? Maybe like 15%, tops, have a Perry Mason boner.

The schools deliberately obfuscated the post-graduate employment situation for years. They induced - and still induce - people to pay high tuition amounts to support building projects, professor salaries, faculty retreats, swank soirées, and absurd marketing ventures. As a result of their huckster tactics, tens of thousands will see their discretionary income slashed to almost nothing.

As victimized consumers, graduates are using one of the few weapons in their arsenal that's useful against multimillion-dollar corporations. They're suing. This is one of the few ways to correct the Grand Systemic Flaw, and yet you fucking morons act like it's the students who have a problem. Fuck you; you're as blind as the mortgage lenders circa 2005. In your mania of "personal responsibility" and staring at the trees instead of the forest, you can't see the system imperiled right in front of you.

Education certainly has its normative values, and I'd be the last person to deny that there's a civic virtue in broad knowledge. But because of the high esteem education has, and its place in our democracy myth, the educational institutions have a responsibility not to abuse their station. Instead, they've pissed all over it in an orgy of unbridled greed, exorbitant consumption, and pretentious self-aggrandizement at the expense of tomorrow.

The "underwater" and fraudulently-incurred debts that will disable the next generation are not just the problems of the individual debt holders. They're our problem, all of us, and we should act now, not later. If you learned anything from the mortgage debacle, it should have been that individual problems can become systemic problems under the right conditions, when institutions have an incentive to act anti-socially, as schools have done.

My guess is that naive critics of lawsuits like these and those who robotically spout PERSONAL RESPONSIBILITY every chance they get are not quite "educated" enough to understand such complex problems. The present is the past is the future. My problem is your problem is our problem. C'est la vie.

Forget Nebraska, the Gold's in South Dakota

From the Wall-Street Journal:

There is at least one region of the country actively seeking more lawyers: rural South Dakota.

According to this piece in the Argus Leader, the State Bar of South Dakota is launching Project Rural Practice to try to lure more attorneys to the state’s less populated regions.

“A lot of our rural attorneys are nearing retirement and looking for someone to carry on the practice,” state bar president Pat Goetzinger told the Argus Leader.

Yee-haw.

Of course, the University of South Dakota still spits out eighty new lawyers every single year, and even though eighty plus people pass the bar every year, the state is only projected to have 53 openings per year 'til 2015.

And let's not forget that in South Dakota, wages are among the lowest in the country. It's fine, I suppose, if you went to a state school out there, but I wouldn't expect a William Mitchell, Hamline, or U. of Denver grad to service their private school debt on 29k a year.

And don't ignore that there are only two cities in the entire state above 30k in population. A town of 5,000 needs probably ten to fifteen attorneys, max. There might be a lot of older attorneys retiring in rural South Dakota, but my hunch is that many of them may supplement their income. You could probably fill all of rural South Dakota's needs with just the unemployed Cooley grads from 2010 alone.

Rural life actually appeals to a lot of people. It's safe, quiet, low-stress. In a rural county, you probably know the clerk and the judge personally and unless they hate you, your life should be easier. In many rural counties, they'll protect you and your clients from out-of-county forces if they can. Lot of perks, but I'm highly highly skeptical that the opportunity are really there, or that if they are, they're being sopped up immediately by the spillover from the (relatively) nearby law schools.

If there really are openings, there's no need to spend a dime. Just run a Symplicity advert for the twenty closest law schools. You'll have ten applications the next time you check your email, and at least five will be somewhat-impressive.

Ready for an Even Bigger Laugh?! Law Degrees Still Worth the Debt, Says Kiplingers

From Kiplingers' "5 Advanced Degrees Still Worth the Debt:"

Avg. annual tuition and fees, public in-state: $18,461

Avg. annual tuition and fees, private: $35,622

Avg. debt: $82,601

Avg. income (lawyer): $129,020

Monthly loan payment: $960 (10 years); $544 (30 years)

Hiring is down compared with prerecession levels, and competition for jobs will be fierce as law schools churn out more lawyers than the market can bear.

The biggest paydays now are at big private firms, where new lawyers earn a median annual salary of $160,000. Public-interest attorneys bring up the rear, with median starting salaries of $42,000.

There is so much wrong with this general entry, I wouldn't know where to start, save saying that the "competition is fierce" stuff is the only accurate portrayal.

A Labor Day Laugh from Fox News

In this article, entitled "Internet to Bring Down the Sky-High Cost of Higher Ed, Experts Say," Blake Snow ignores reality in a way I think Fox News is only capable of.

Similar to how media began “supplementing” printed newspapers in the 90s with free online editions -- which transformed business models and made the news largely “free” on the web for consumers -- free online courses might (perhaps unintentionally) ultimately force tuition closer to zero.

Exhibit A is Stanford's new "Introduction to Artificial Intelligence” class. It’s entirely online. It’s free. And it even promises student feedback, in addition to an unaccredited but still résumé-worthy “Statement of Accomplishment.”

Resume-worthy? Uh...sure.

Does anyone in their right mind think that the private university system is going to move to low-cost model where current costs would have to be slashed? The analogy to the newspaper industry is dumb; newspapers are all genuinely for-profit, and the sole purpose of reading a newspaper was to learn what happened in the world. There's a prestige in reading The New York Times, I suppose, but it's not something you put on a resume and you get the exact same pseudo-intellectual cred by reading the online version.

In contrast, people don't take college classes to learn whatever is being taught. If that were the case, non-profit education would be dying simultaneously with the newspapers (if not sooner given the prevalence of libraries). But they're not. That's because people don't really go to college to learn. They go to be credentialed. You can learn whatever it is they teach in the Stanford English or Political Science departments for a very, very, very low cost. Yet people still pay tens of thousands so they can tell everyone they went to Stanford, that Stanford accepted them, and that Stanford put its silver sword on the student's shoulder.

That is the commodity, and until that is offered for free, there's no revolution forthcoming, and students will pay ever-more-insane prices for their "top-tier" degrees. It won't matter if hundreds of other colleges go to cheap online models and teach the same thing. If the only way to get the stamp is to attend the school (and there's no incentive for the elites to do otherwise), people will attend the school and pay out there nose, alternatives to the same practical end be damned.

The article seems to realize that these sorts of free online courses are nothing more than cheap marketing, and yet it retains this optimistic tone that soon our educational costs will be drastically cut by the internets. Bullshit. If that could change the current model, it would have changed 10 years ago. Places still offer actual credit classes online for identical tuition as their brick-and-mortar stuff. Why? Because they can, and no misreading of the economics at work will stop them.

Specifically to the case of law schools, all it takes is an accrediting organization to say "no" and any cost reduction by internet technology would be instantly nipped in the bud. Don't you think the same protectionist measures will surface the second any serious movement happens that threatens professor and administrator livelihood?

Egpytian Grads Should Just, Like, Network More

From Al-Masry Al-Youm, the leading independent newspaper of Egypt:

Dozens of law school graduates protested on Saturday at the Supreme Court demanding equality with chancellors' and judges' sons who have been appointed to the State Council and prosecution service. They called for putting an end to the practice of inheriting judicial posts.
...
“I received my bachelor degree with a ‘very good’ grade. Although my colleague got a pass grade, he was appointed at the State Council for being the son of a chancellor at the council,” said Ahmed Abdel Rahman...."

You mean people actually protest nepotist systems that expose the ruse of the meritocracy?

In America, these people would be called whiners with a sense of entitlement. Instead of complaining about an unjust system that screws the unconnected, they would be told to network better, so that they could be connected, so that someone else (preferably someone docile) could be screwed. Either that or they should "hang a shingle."

But I guess protesting at the Supreme Court is what happens is such a vulgar place where people actually complain about social injustice and absent-minded leadership. Thank goodness we respect civil democracy here.

Flooding the Market Will Not Lower Prices

Previously, I've advocated that there are benefits to taking a "free market" approach to legal education, i.e. reducing entry barriers and letting anyone practice law. And there are: the risk of a mis-allocation of labor and capital reduces significantly, people who might be excellent lawyers who would otherwise not go to law school might be enticed to practice, etc. etc.

But drastically reducing the cost of legal education and eradicating entry barriers will not reduce the high costs of sustained litigation, high-caliber representation, and other examples of lawyers costing oodles and oodles of money.

And yet three "economists" continue to spout the simplistic view that good ol' supply and demand will lower average attorney salaries and the cost of representation. From - of all places - the Economist:

In 2000 the average American law-firm lawyer made $191,000. Exactly comparable numbers are scarce, but the average salary for all lawyers in Canada in 2002 was just $64,000; in Australia in 2000 it was $90,000. American lawyers are clearly reaping some kind of premium, and the economists behind the Brookings study carefully control for a host of factors including long hours, areas of specialisation, and inherent talent. They reckon that of the $170 billion spent on lawyers every year in America, some $64 billion is a premium produced by market distortions....

I'd like to know how these "economists" factored in that they're comparing completely different legal systems - much less "inherent talent" - but in any event, they make some rather audacious claims:

[T]hose without the bar exam or law school under their belt could still, with training and experience, dispense routine guidance and offer legal services, such as drafting wills and arranging simple divorces, to poorer clients. Doing so today risks getting a false “lawyer” sent to prison.

What, exactly, does legalzoom do? What are legal aid facilities for? There are very, very few dirt-poor divorces and simple will needs going unmet, and flooding the market with new lawyers isn't going to lower the price of getting a simple will or a simple uncontested divorce. Why? Because there are tons of lawyers perfectly qualified to do this type of work who would probably do it for low flat fees who aren't running robust practices.

If there really were a demand for these sorts of services, there wouldn't be a 20k surplus of lawyers graduating every year. There would not be lawyers working at the Gap. There would not be lawyers toiling in doc review and taking part-time internships for free. Res ipsa fucking loquitur.

In any event, LSTB, as usual, has a much more detailed, statistically-based entry ripping these views to shreds. He, too, believes that there will be no substantial reduction in fees by flooding the market.

[F]irms are risk averse, valuing credentials over their cost. They’re cautious because their clients are. If clients believed they were overpaying for private school law grads, they’d demand firms hire from public schools, or they’d stop paying new associates’ exorbitant salaries. Oh wait, they’ve been claiming to do just that. If the legal labor market were this cartelized, no one would care about U.S. News’ rankings, and grads would have jobs at graduation, even in a period of high unemployment.
...
The high costs of legal services are due less to ABA accreditation requirements and more to hourly billing practices, poor price signaling, and risk aversion by purchasers of legal services.

And the authors seem to concede that there is a major flaw in their basic reasoning:

The Brookings authors acknowledge that the most complex matters will still go to the best-educated and qualified lawyers.

I write separately - a concurring opinion, if you will - to underscore the flaw and place it in precise terms.

First, I'd like to reiterate that there is very little "simple" business floating around out there waiting to be sopped up or have prices driven downward by people who aren't concerned with going to the "best-educated and qualified lawyers." Criminal defendants, injury victims, insurance companies: these people aren't going to avoid the most qualified lawyers and bargain hunt. If you were injured in a car wreck, would you go with the experienced p.i. shop offering a 15% contingency cut or the newbie with no experience offering a 9% cut? Unless you're a moron, you go with the former. It's not complex litigated, but you can bet your bottom dollar that the most-qualified lawyers will still soak up the best business.

That, in a nutshell, is the giant pink elephant in the theory. The major problem with these feel-good libertarian screeds about restricted markets in the legal profession is that lawyers are not, and never have been, fungible goods. For supply and demand to work - to even apply in the first place - the product at issue has to be fungible, which means more or less that the consumer wouldn't differentiate between different producers on any basis other than price. Oil, for example. Or sugar or cheapo utilitarian furniture or standard grade screws or 20 lb white paper.

Attorneys are not on that list. A new graduate is not fungible with an experienced litigator. Thus, no matter how many new graduates you pump into the market, no matter how lax the entry barriers become, the experienced litigator - be it p.i., civil rights, housing, workman's comp, divorce, etc. - will not feel any price pressure. For him to lower prices or his share of the pie, there'd need to be a flood of experienced similar litigators. That's unlikely to happen; even if you continually pump thousands upon thousands of new graduates into the market, only a few will ever become experienced personal injury litigators. Thanks to it being a pyramid system, the additional operation of any supply and demand would be negligible.

This seems self-evident, but people who argue from a juvenile supply-and-demand perspective constantly overlook it. There's no guarantee that a million more law graduates would ever produce any sort of drop in legal prices. The consumers just don't buy it. Filling out a securities filing is a fairly straightforward matter as far as things go. And yet the business goes to white shoe firms. As LSTB notes, it's risk aversion. It also proves that no supply and demand analysis will work.

No matter how hard you try, you can't flood the market with high-caliber, prestigious law firms, or with experienced attorneys in subfield [x]. Prestige, experience, and expertise are valued (and reinforced by the court system in determining attorneys fees awards) across all fields. Thus, without a revolution in how consumers select attorneys or how attorney costs are approached by the courts, there is no possible way lower barriers of entry would really reduce the cost of 90% of legal representation. Other trends - increased efficiency or contracting business - might lower prices, but flooding the market with minimally-qualified participants will not.

Again, if it could happen this way, it would have already (as it has in areas like traffic ticket law). Three "economists" wasted a lot of time writing a book whose prime thesis can be killed on little effort.

US News Still Trying to Wash Its Hands

Want to see Bob Morse deflect whatever gets flung his way onto the ABA and cover the complete lack of a journalistic ethos at his organization?

Here you go.

The ABA's new placement questions are lagging on what is still needed, based on a July 27 ABA memo on Reporting Placement Data on Annual Questionnaire.

1. The ABA says it will not publish school specific salary data, but instead will publish salaries by state and region not linked to the performance of any school. These state and region results are not limited to the data from any particular law school. Prospective students want to know the average salaries [ed.: a "statistician" arguing for an average as a helpful indicator where there's a sharp bimodal distribution? Uh...okay...] of the graduates from each law school as part of being able to determine the economic viability of earning a J.D. degree from that school. The ABA should have the power to get law schools to report accurate salary data on a school-by-school basis and should trust law students to be able to understand the meaning and limits of such data.

2. In terms of employment data, the ABA is currently not asking law schools to report to them whether a graduate's job is full time or part time or whether a new J.D. graduate's job requires bar passage, whether a J.D. is preferred, or whether the job is a nonprofessional one. This is vital information that prospective students and current students need to be able to make a truly realistic assessment about the job prospects of graduates at each law school....

Emphasis mine. To be fair to Bob, he's right that more detailed information is better.

But therein we have a problem. For years, U.S. News has done little more than parrot the schools' numbers and serve as an advertising platform for flawed data. And even though Bob is clearly capable of reading a questionnaire and figuring out the deficiencies from the reader's perspective, his publication spent years (and may continue to spend years) obfuscating - not clarifying - the information available to the student by reprinting and reinforcing the schools' flawed data.

If information about whether a job is legal or nonprofessional is "vital" to making a "truly realistic assessment" among law schools, why was U.S. News so willing to ignore such niceties when republishing the schools' past employment rates during the past decade?

Here, Bob has basically admitted that the data published and implicitly endorsed by U.S. News in the past was flawed and failed to give students a helpful, realistic picture of their employment chances. Is there any other way of reading this? If student [x] can't make a "truly realistic assessment" without knowing a breakdown of legal/nonlegal jobs or more precise salaries, how could student [x] have possibly found previous editions of U.S. News helpful in forming a "truly realistic assessment" of whether law school makes a good investment?

Generally, when a journalistic enterprise screws something up bigtime, it issues a formal apology.

Has Morse/US News ever apologized? If not, when can the reading public expect it? And, better question, when can we expect Morse and US News to actually undertake some journalistic pursuit of the truth of law student graduate instead of merely profiting off a rankings-drunk public by blindly relaying whatever data the ABA (truly, an unbiased party) puts out?

In other news, California has just appointed a state supreme court justice who, as far as I can tell, has *zilcho* experience practicing in California. I get that Prof. Liu gets rave reviews from students and legal insiders, but in what way does that make one more qualified to interpret a state's rules, constitution, etc., than the numerous appellate judges and other legal figures already there? I suppose it's California's choice and not mine, but I suppose from my view, it's part of a general problem where we value pedigree, name, and legal scholarship over actual worthwhile experience that might prove necessary. It's not like this is a new phenomenon, but I think it's one that continues to be detrimental to the system on the aggregate.