Friday, May 17, 2013

Judge Posner says law schools will have trouble downsizing because of the USNWR rankings system

Essentially it's because downsizing signals trouble which would hurt the reputational component of the school's USNWR ranking and thus no school wants to make that first move even though  reducing the cost of the faculty through downsizing or salary cuts would might significantly help students by enhancing the economic viability of a law degree.   From the Becker-Posner Blog:

Some Economics of Higher Education—Posner

. . . .

If legal education were an entirely private activity, neither regulated nor subsidized by government, an economist would describe the situation as one in which a fall in demand required sellers to move down their maginal cost curve in order to charge a price that covered their marginal cost; that is, their demand curve would intersect their marginal cost curve at a lower point, implying a lower price (and also lower output). The demand for legal education is a derived demand from the demand for lawyers; if the demand for lawyers drops, so does the demand for legal education. If law schools fail to make a price adjustment, applications will plummet. 

But they can lower price only if they reduce their costs. The problem is that by reducing costs, they reduce demand, because the perceived (though not real) value of a legal education is dependent on those costs as refracted through the lens of U.S. News & World Reports, which publishes a highly influential ranking of law schools. That magazine gives weight in its rankings to factors that actually bear no relation to the quality of a legal education, including the faculty-student ratio (important in some types of education but not in legal education) and the law school’s expenditures per student. In addition, accreditation of a law school depends on such additionally irrelevant factors as the size of a law school’s library even though all research relevant to the study of law by students can be conducted online.

. . . .

The obvious solution for the law schools is to reduce the size of their faculties and/or reduce faculty salaries. Although most law faculty are tenured, and so their salaries cannot be reduced, they can be laid off for economic reasons and, in lieu of being laid off, can agree to a salary cut. Law professors tend to be paid very generous salaries, especially relative to the amount of work demanded of them compared to the sweatshop hours of practicing lawyers and the intense competitiveness and resulting employment uncertainty in the law firm market nowadays. And law professors derive greater utility from their academic careers, quite apart from working conditios, than they would as practicing lawyers. 

If law schools were permitted to cartelize, they might well embrace the downsizing that I have described as a solution to their economic dilemma. But they are not permitted to cartelize, and this creates hesitancy. The first law school to downsize will attract unwanted attention and, if none or only a few follow suit within a short time, its rankings in U.S. News and World Reports will nosedive. Law schools also have to worry about the possible adverse reactions of the accreditation authorities. Then too there is the hope that if enough law schools do take substantial measures to balance supply and demand, the law schools that do not will benefit, for example in being able to attract more of the affluent applicants to law school plus the applicants (often the same people as the affluent) who by virtue of native ability or a superior college education are likely to do well even in a very challenging legal marketplace.

Read Judge Posner's entire essay here.


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