Monday, November 4, 2013
Thursday, October 31, 2013
Blog Emperor Caron has links to the latest news. (He also includes links to a chart about which majors do best on the LSAT--because they lump Philosophy with Theology, I'm sure that depresses the result for Philosophy majors, since those two majors are VERY different.) [UPDATE: Professor Filler's post and mine crossed paths in cyber-time!]
A couple of thoughts on this:
1. People who don't get a JD still have to do something professionally. What are they doing instead? Getting an MBA? Just entering the workforce in some other capacity? Entering PhD programs? We don't really know yet, and given the Simkovic & McIntyre research, it is likely that at least some of those not going to law school are making serious mistakes economically (if not professionally or personally).
2. The likelihood that the 10%+ decline in LSAT takers will translate in to 10% fewer applicants is, of course, very high. One things that means for those thinking about law teaching is that next year on the law teaching market will be as tight as this year, and this year is very tight indeed. An uptick in applicants this year would have increased the likelihood of law schools waivering on whether to hire to jump into the market, but this newest development probably means that schools uncertain about tuition revenue and their budgets will err on the side of not hiring.
3. While some schools are undergoing major contractions (e.g., the recent New England story), the reality is that lots of teaching positions for which schools have genuine needs are going unfilled currently due to budgetary uncertainties (schools are relying on adjuncts, short-term visitors, existing faculty teaching overloads or teaching outside their areas, etc.). When the situation stabilizes in the next year or two (barring another economic collapse, of course), I expect we will see a dramatic uptick in academic hiring as schools try to meet the unfilled needs.
UPDATE: I can not vouch that this comment is an accurate summary of Dean (soon-to-be President) Syverud's remarks, but the analysis sounds credible, and more-or-less consistent with what I've heard (though I can not vouch for the 175 number, below):
LSAC provided a graph showing that we have had similar cycles since the mid-1960s. This one is a bit more dramatic because we came off all-time highs in hiring and applicants in 2007.
The Dean of Wash U Law School, Kent Syverud, gave a very compelling speech. He says 175 of 202 law schools are operating at a substantial deficit, and the pain is being felt across the board, not just at so-called "marginal" law schools. Applicant numbers, by LSAT score, support that comment.
He also says law schools will cut costs in the following ways (any errors in this summary or mine):
- Private universities may shut down associated law schools, as they did dental schools in an earlier era;
- Schools have let hiring of new faculty grind to a halt [BL COMMENT: there were about 70 law schools at this year's hiring convention, less than half the number from two years ago; not all which attended will necessarily hire];
- Schools will not replace, with a tenure-track faculty member, any faculty member who successfully moves laterally or retires;
- Schools will cut tenured faculty via buy-outs, etc., and use instead much more affordable adjuncts; Skills teachers could be especially hard-hit even at a time when the ABA and the profession are emphasizing skill development;
- Schools will cut staff;
- Schools will consolidate law libraries into main campus libraries;
- Schools will merge (like Texas Wesleyan); or
- Schools will sell out (like Charleston.
LSAC reports that the number of people who sat for the October 2013 LSAT s was down 10.9% compared to October 2012. The number of first time takers was down roughly 13% from last October. This is consistent with the decline in attendance at LSAC sponsored law school fairs - ranging from a dip of 15% in Houston to a drop of 47% at the Boston fair.
Wednesday, October 30, 2013
...this time from the Boston Business Journal: up to 20 faculty may receive buy-out offers, and the Dean will take a 25% pay cut (but still earn over 600K, which is more than almost all of the Deans of the richest law schools in the country make).
...and while this new one is not as off-kilter as the absurd National Jurist effort noted earlier this year, it is still ill-conceived and worthless. Most remarkably, it includes a factor that U.S. News correctly discarded years ago: namely, median starting salaries without any adjustment for differences in cost-of-living. What that means is: any schools whose graduates primarily go to high cost-of-living cities which pay the highest salaries (namely, New York, DC, San Francisco, and LA) get a huge boost. (It gets even weirder than that, since it appears the real driving force here is the median public interest salaries, but with no indication how many graduates are actually in the pool.) Anyway, it's quite an achievement to rank schools based on factors that even U.S. News realized were not meaningful or comparable! On top of that, 50% of the score is based on "student quality," but that turns out to mean not student quality, but acceptance rate (25%) and median LSAT (25%). GPA? Major? PhDs in the incoming class? That has nothing to do with student quality in this never-never land (at least U.S. News considers GPA). Acceptance rate is, of course, a function of local competition: so, e.g., Stanford's only local competition is Berkeley, while Yale, Harvard, Columbia, NYU and Penn are all battling it out in the Northeast corridor.
I would have let this meaningless excercise pass in silence, but since the Blog Emperor, in keeping with his unfortunate policy of linking to anything without regard for its content, has put it in circulation, I thought I should point out the obvious deficiencies, so as to save others the trouble of having to look at the "methodology" [sic] and the rather childish effort at rationalizing it.
As always, the Internet remains the "nonsense and misinformation superhighway"!
Several critics of the Economic Value of a Law Degree have made mathematical errors or misunderstood the contents of the study. One example relates to a fundamental financial concept, net present value. The net present value is the value today of cash flows or payments that will be given or received in the future.
The psychological and financial costs to the recipient of delay in payment are already incorporated into present value—present value is the equivalent of an immediate lump sum payment with no delay.
The difference between present value and nominal future value can be large. For example, the value of a single $1,000,000 payment forty years from now is just over $97,200 today (assuming a 6 percent nominal discount rate). In other words, receiving $1,000,000 in forty years is financially and psychologically the same as receiving $97,200 today.
In The Economic Value of a Law Degree, Frank McIntyre and I describe the law degree earnings premium—the difference in earnings between law degree holders and similar bachelor’s degree holders—on both an annual basis and, for the lifetime value, in present value terms. In other words, we show what a lifetime of higher earnings is worth immediately, as of the start of law school, not spread out over the course of a lifetime.
The pre-tax, pre-tuition present value of a lifetime of higher earnings is approximately $1,000,000 at the mean and $600,000 at the median. This includes the opportunity costs of lower earnings while in school, and the cost of interest payments on student loans.
The law graduate will not get to keep the full present value. Approximately 30 percent will go to the government as income and payroll tax revenue, and some of the remainder will go to the law school to pay for the cost of the legal education.
One critic, Steven Harper, took an estimate of the after-tax, after tuition net present value at the median ($330,000) and erroneously claimed that this amount of money would be spread out over a 40-year career. Dividing by 40 years and again by 12 months, Harper claimed that the law graduate would receive “at most a lifetime average of $687 a month.” (Or $8,175 per year).
In other words, Harper conflated present value with future values and miscalculated the private return on a legal education. If cash flows were level during the 40 years after law school, it would take more than $25,000 per year in after tax, after debt-service payment, nominal dollars to equal a present value of $330,000 as of the start of law school. In 2012 inflation-adjusted dollars, it would require about $16,000 per year. Harper is off by a factor of about 2 or 3.
In practice, cash flows will not be level—they will be lower in the initial years and rise through middle age. The present value calculation already incorporates the cost of lower cash flows in the initial years. To the extent that cash flows in the initial yeasrs are a concern, some students may use debt repayment options with lower payments in the initial years. The costs of these programs are already incorporated into our present value calculations.
Tuesday, October 29, 2013
The three averages—means, medians, and modes—are basic mathematical concepts. Nevertheless, they seem to have generated an inordinate amount of confusion among some critics of the Economic Value of a Law Degree (see here, here, and here).
Some of the critics have emphasized modes and medians while downplaying the importance of means. Steven Harper, for example, has claimed that the mean is a “meaningless” statistic and we should instead focus on the medians and modes while ignoring the mean.
To understand his error, imagine two lecture halls, each with 100 seats. Underneath each of those seats is a suitcase full of cash. The individuals sitting in those seats will get to keep whatever cash they find when they open the suitcase.
In Lecture Hall A, every suitcase contains $600,000. $600,000 is the mean, median, and mode value.
In Lecture Hall B, 60 of the suitcases contain $600,000, but the remaining 40 suitcases each contain $1,600,000. The median and mode is exactly the same as in Lecture Hall A--$600,000. But the mean is much higher in Lecture Hall B—it is $1,000,000 instead of $600,000.
If you didn’t know how much money would be in your suitcase, but you could choose between sitting in Lecture Hall A and Lecture Hall B, which room would you choose?
You would be wise to choose Lecture Hall B. But the only reason to choose Lecture Hall B is because the mean (average) is higher in Lecture Hall B. The median and mode in both lecture halls is identical.
Now imagine a slightly different fact pattern. In Lecture Hall A there are three suitcases each containing $1.6 million, while the remaining 97 suitcases contain amounts that are close to $600,000 (i.e., a range from $599,950 to $600,050), with none of these 97 suitcases containing the exact same dollar value. The mode value in Lecture Hall A is $1.6 million, while the median is $600,000 and the mean is $630,000.
Lecture Hall B is the same as in the previous fact pattern—60 suitcases contain $600,000 while 40 suitcases contain $1.6 million. The mode value in Lecture Hall B is $600,000, while the mean is $1,000,000.
In other words, the mode is higher in Lecture Hall A, but the mean is higher in Lecture Hall B. The medians are identical.
Which room would you choose to sit in?
Once again, you would be wise to choose Lecture Hall B. This suggests that you believe that means (averages) are more important than modes.
The money at the top (or the bottom) matters. Means provide useful information that is not available from medians alone, and that is not reflected in modes. That’s why we provide both means and medians, as well as 75th percentile and 25th percentile values in Economic Value of a Law Degree.
(Posted by Michael Simkovic)
Monday, October 28, 2013
So with 310 votes in our last poll, the results seem to actually reflect some attempt to answer the different question: namely, which schools have the "best faculties" in terms of scholarly distinction, compared to last time when we just asked for reader opinions of the "best schools." (I should emphasize that beyond the top 40-50, I wonder about a lot of the results (e.g., there were plenty of schools in the 50s, 60s etc. that seem to me [a moderately informed observer] as on a par with some of those in the top 50).
Harvard University (Not defeated in any contest vs. another choice)
Yale University (Not defeated in any contest vs. another choice)
|3. Stanford University, loses to Harvard University by 212–59|
|4. University of Chicago, loses to Stanford University by 148–121|
|5. Columbia University, loses to University of Chicago by 162–103|
|6. New York University, loses to Columbia University by 150–107|
|7. University of California, Berkeley, loses to New York University by 197–63|
|8. University of Michigan, Ann Arbor, loses to University of California, Berkeley by 160–96|
|9. University of Pennsylvania, loses to University of Michigan, Ann Arbor by 130–115|
|10. University of Virginia, loses to University of Pennsylvania by 119–118|
|11. Duke University, loses to University of Virginia by 187–64|
|12. Northwestern University, loses to Duke University by 130–121|
|13. Cornell University, loses to Northwestern University by 142–102|
|14. Georgetown University, loses to Cornell University by 137–107|
|15. University of California, Los Angeles, loses to Georgetown University by 143–100|
|16. University of Texas, Austin, loses to University of California, Los Angeles by 136–113|
|17. Vanderbilt University, loses to University of Texas, Austin by 170–66|
|18. University of Southern California, loses to Vanderbilt University by 124–87|
|19. Washington University, St. Louis, loses to University of Southern California by 144–68|
|20. George Washington University, loses to Washington University, St. Louis by 114–95|
|21. University of Minnesota, Minneapolis-St. Paul, loses to George Washington University by 109–92|
|22. Boston University, loses to University of Minnesota, Minneapolis-St. Paul by 112–82|
|23. Emory University, loses to Boston University by 102–90|
|24. University of Notre Dame, loses to Emory University by 103–93|
|25. University of California, Irvine, loses to University of Notre Dame by 95–93|
|26. University of Illinois, Urbana-Champaign, loses to University of California, Irvine by 95–82|
|27. Fordham University, loses to University of Illinois, Urbana-Champaign by 93–90|
|28. University of Wisconsin, Madison, loses to Fordham University by 92–87|
|29. Boston College, loses to University of Wisconsin, Madison by 91–83|
|30. College of William & Mary, loses to Boston College by 86–82|
|31. University of California, Davis, loses to College of William & Mary by 91–87|
|32. University of North Carolina, Chapel Hill, loses to University of California, Davis by 86–82|
|33. University of Iowa, loses to University of California, Davis by 91–77|
|34. Indiana University, Bloomington, loses to University of Iowa by 80–76|
|35. Washington & Lee University, loses to Indiana University, Bloomington by 83–66|
|36. George Mason University, loses to Washington & Lee University by 80–76|
|37. University of Alabama, loses to George Mason University by 78–73|
|38. Ohio State University, loses to George Mason University by 79–76|
|39. Florida State University, loses to Ohio State University by 78–73|
|40. University of San Diego, loses to Florida State University by 82–69|
|41. Cardozo Law School/Yeshiva University, loses to University of San Diego by 83–78|
|42. Arizona State University, loses to Cardozo Law School/Yeshiva University by 84–67|
|43. University of California, Hastings, loses to Arizona State University by 82–75|
|44. University of Washington, Seattle, loses to University of California, Hastings by 74–72|
|45. University of Arizona, loses to University of Washington, Seattle by 72–70|
|46. University of Colorado, Boulder, loses to University of Arizona by 79–59|
|47. University of Georgia, loses to University of Colorado, Boulder by 68–66|
|48. Brigham Young University, loses to University of Georgia by 81–47|
|49. Brooklyn Law School, loses to Brigham Young University by 69–67|
|50. Wake Forest University, loses to Brooklyn Law School by 68–67|
Harvard tied Yale, and, indeed, led Yale during large stretches of the voting. San Diego and Florida State, quite correctly, out-performed their US News rank by a substantial margin. UC Irvine, again correctly, made the top 25, despite not being ranked at all by US News. On the other hand, some results do seem to reflect the pernicious hold of US News. It's surely not plausible any longer that Columbia has a better faculty than NYU, or that Wash U/St. Louis has a stronger faculty than George Washington, Minnesota, or BU, or that Arizona State's faculty is stronger than Arizona's (though both are underranked, in my view). Colorado may be a special case: the faculty is ranked unreasonably low here, but one suspects this may be due to the notoriety of their albatross.
As the vote patterns make clear, the differences in ordinal rank do not always reflect substantial differences in votes. So we might regroup them in clusters, also creating more ties, with the number of votes separating the school from the next highest ranked one in parentheses:
Sunday, October 27, 2013