Calculating the return on an investment requires taking into account the cost of making the investment

Ilya Somin cites Aaron Taylor's recent column as evidence for the proposition that going to law school is still on the whole a good investment.  Taylor's argument relies on the BLS statistic that the nominal unemployment rate among lawyers in 2010 was 1.5%.   We can begin to get a sense of how far this statistic is removed from social reality by observing that around half of the people who received law degrees from ABA-accredited schools between 1974 and 2008 were not working as lawyers in 2008 (Note this statistic does not take into account the effects of the current recession, or the employment status of the 130,000+ graduates of ABA law schools over the past three years).  Obviously large numbers of these graduates left the practice of law more or less voluntarily. Just as obviously, the number who didn't is many orders of magnitude greater than 1.5% of all ABA law school graduates.

We should also note that, even if we take the highly problematic NALP data at face value, use a generous definition of what counts as a real legal job (one that includes temp work as well as permanent positions), and once again ignore the effects of the current recession, at least one third of law graduates between 2001 and 2007 did not obtain jobs as lawyers within nine months of graduation.  And Somin/Taylor's discussion of the salaries lawyers supposedly make is no more reliable than their glance at employment percentages.  (NALP entry-level salary data is nearly useless since it omits more than half of law school graduates; at many schools less than a quarter of graduates report any salary data).

Furthermore Somin's analysis assumes not only an increasing demand for legal services going forward, but an increasing demand for the legal services provided by graduates of ABA law schools.  These two things are hardly identical, as outsourcing, technology, and other economic factors have all made increasingly clear over the course of the last decade.

But what's most problematic about Somin's post is that it doesn't contain a word about the cost side of the cost-benefit equation.  Law school is, in real terms, several times more expensive than it was 25 years ago.  Getting a law degree now routinely costs hundreds of thousands of dollars in high-interest nondischargeable loan payments, without even taking into account opportunity costs.   It seems too obvious to point out out that a stock that might have been a bargain at $10 a share could be a terrible investment at $40 per share, yet it's not unusual to read legal academic discussions of whether law school is still a good investment that feature little, or as here, simply no discussion of the effect the skyrocketing cost of legal education has on its long-term economic value to potential law students.

I applaud Somin's willingness to consider questions such as whether ABA accreditation standards, bar passage requirements, and the like are creating major inefficiencies in the price of legal services. But what lies at the root of the current crisis is, above all, the amazing rise in the cost of legal education, which has risen four times faster than even the rapidly rising cost of an undergraduate degree.  No discussion of this general topic can afford (literally) to ignore the cost part of a cost-benefit equation.