The most arresting thesis in Brian Tamanaha's forthcoming book is captured by this quote: "Law schools have raised their tuition to obscene levels because they can." What he means is that explanations for the rising cost of law school that focus on rising expenditures -- more and higher-paid faculty, more and much higher paid administrators, more staff, more clinics, fancier facilities, more skimming of revenue by central administration, more (cross-subsidized) "scholarships," and so forth, are confusing cause and effect. His argument is that to a great extent all these things have happened because tuition has gone up, not vice versa.
There's a lot to be said for this argument. Tuition has gone up for a bunch of reasons that have nothing to do with what law school deans like to refer to as "the inherent cost of a first-rate legal education" (Apparently a first-rate legal education was not obtainable in the United States when most law school faculty were receiving theirs. 30 years ago Yale Law School tuition was 30% of what it is today, in constant, inflation-adjusted dollars).
As Tamanaha argues, chief among these reasons is that the demand for legal education, especially for admittance to elite law schools, has been so strong that such schools could raise their tuition by much more than the rate of inflation year after year while seeing no meaningful decline in that demand. Since almost all law schools are part of non-profit universities, this flood of cash had to be spent on operations, rather than distributing some of it to the legal owners of these enterprises in the form of profit.
In short -- although I'm not sure Tamanaha would put it quite like this -- the cost of operating a law school has gone through the roof because in a sense it "had to."
Let's take a look at this line of thinking in the context of faculty salaries. (What follows is my extrapolation of Tamanaha's thesis. He is not, as they say in the acknowledgment section of academic monographs, responsible for this extrapolation). A generation ago, senior professors at elite law schools made about the same salary as federal judges. Indeed at Harvard, according to Richard Posner, this was an explicit if informal norm for determining what the salary of the faculty ought to be. Over the past three decades the salaries of federal judges have essentially kept pace with inflation, so that today they're about $170K-$180K (circuit court judges make $10K more than their district court counterparts. The Supremes make $209K).
Meanwhile, the salaries of law professors at top schools have essentially doubled in real terms. The highest-paid professors at such schools make $350K to $400K a year (not counting employer-paid pension contributions and other benefits, but counting summer "research support," which is essentially a salary supplement). This development led CJ John Roberts to submit a wheedling plea to Congress a couple of years ago, begging for raises for the federal judiciary, on the transparently ludicrous ground that it would soon be impossible to hire talented lawyers out of the private sector if judges had to continue to scrape by on such penurious wages. Apparently the implicit structure of Roberts' argument was that law schools had discovered that they "had" to pay their faculty one third the salaries being pulled down by partners at top firms, because paying them one sixth of that amount, i.e., what federal judges make, would make it impossible to lure "top talent" from fancy law firms to fancy law schools.
Posner, as is his wont, rather rudely demolished his administrative superior's argument, by pointing out that there wasn't any, you know, evidence for this claim, given the enormous non-pecuniary benefits enjoyed by federal judges (power, status, working conditions), as well as some pretty sweet monetized perks (federal judges can retire after 15 years on the bench at full pay), and especially given that federal judges leave the bench for private practice even less often than law professors argue that they're overpaid.
Anyway, Posner's point about federal judge compensation could be applied equally well to law faculty. Law professors have no real power to speak of, but their working conditions are far more favorable than those of even federal judges, and at least at elite law schools it's unclear who wins the status game as between, say, a tenured Columbia law prof and a federal district or appellate judge. So why is Columbia Law Prof getting paid twice as much as his or her Honor, when not that long ago they had the same salary?
The argument that you "have" to pay law professors at top schools $350K or they'll scuttle off to private practice is even more ludicrous than Roberts' argument that paying federal judges half that threatens to produce a constitutional crisis. Social science and humanities professors at those schools often make "even less" than federal judges, after all. Now it's true that such professors don't have the option of running off to Davis Polk if their interrogations of the cultural discourse are insufficiently appreciated by their administrative superiors. But guess what: neither (with rare exceptions) do law professors. Federal judges, after all, are actually engaged in their day to day work with one aspect of something related to one part of the actual practice of law. In other words, it's a lot easier to turn an ex-federal judge into, or back into, a real lawyer (many of whom of course were already real lawyers when they ascended to the bench) than to turn a law professor into one.
You could go back to paying law professors at top schools what federal judges make and, in the long run, the effect on the quality of legal education would be exactly zero. Does that sound improbable? Flip it around: if federal judges were making $350K a year would the quality of the work product coming from the federal bench be appreciably higher? You pretty much have to be a Randroid replicant to buy that one.
Columbia law profs get paid X because Harvard law profs get paid X. If Harvard law profs got paid X-1 that's what Columbia profs would be paid -- period, end of story. It has nothing to do with "retaining talent" within legal academia any more than the fact that CEOs in America are paid literally ten times more, in real dollars, than they were a generation ago has anything to do with "retaining talent" in corporate America. The CEO of Random Fortune 500 Firm is paid X because the CEO of Other Random Fortune 500 Firm is paid X. They pay themselves (essentially) these preposterous sums for the same reasons law schools raise tuition: because they can.