Sunday, November 20, 2011

Skin in the game

Akhil Amar and Ian Ayres have a piece in Slate that features an ingenious scheme for requiring law schools to tie their own financial welfare more closely to that of their graduates.  Amar and Ayres insist that if law schools want to continue to fund their operations via federal loan money, they should have to disclose the professional and economic status of their graduates -- and not merely after graduation, but for a decade afterwards.

The latter point is becoming more important all the time, as it becomes increasingly the case that even those "lucky" graduates (perhaps 15% of all law school grads) who acquire high-paying big firm jobs at graduation find themselves scrambling for much-lower paying and less glamorous positions a few years later, while still carrying educational debt loads that can no longer be managed on the salaries they'll now be making. (This assumes -- and with every passing year it becomes a more problematic assumption -- that laid-off big firm associates go on to get other legal jobs).

The authors also make an excellent point when they argue that schools should have to dis-aggregate graduate information in a way that would allow prospective students and people completing their first year to consider the long-term outcomes of graduates with records similar to their own (It's one thing to think you'll be the exception to the rule when you're making that bet in a relative informational vacuum: it's quite another when you realize before you enroll or after your first year that literally no graduate from your law school with your credentials is making as much as $60,000 per year three years after graduation).

But Amar and Ayres are well aware that greatly increased transparency only begins to address what they with refreshing straightforwardness call "the crisis facing legal education."  Their analysis recognizes that better information about employment and debt ties the financial fortunes of law schools to those of their graduates only indirectly.  Further, as long as law schools don't pay any collective price for the lottery ticket mentality of their more irrationally optimistic students, they'll have no self-interested reasons not to continue to cultivate that mentality.  Hence what's needed is a device that will both help more students sober up before tossing good money after bad, and hit law schools in their pocketbooks when students who should drop out are given some powerful incentive to do so.

Amar's and Ayres' refund proposal -- which would require law schools to give back half a student's first-year tuition if the student drops out -- does just this.  It's of course not the only way to force law schools to put more of their own skin in the game, but it's a thoughtful attempt to grapple with what is perhaps the most fundamental financial problem with the current structure of legal education: that the rewards that flow from the billions of dollars in federal government loans taken out by law students every year are front-loaded onto the current bottom lines of law schools, while the risks of those loans are back-loaded onto students and (eventually) taxpayers.

I'm also glad to see the authors deal head on with the question of a potential conflict of interest:

In making this proposal, we might be accused of having an institutional conflict of interest.  We’re pretty confident that few students at Yale (like few employees at Zappos) would take the bribe to quit early. But if we’re right, this is something about which to be proud. If 20 percent of the students at another school took the offer, applicants might think twice before enrolling. And if the percentage taking the rebate becomes too large, government should think twice before lending.
 Precisely. No one (as far as I'm aware) has yet argued that a JD from Yale Law School is, all things considered, a bad bargain.  On one level, the whole problem with contemporary legal education is that 199 other law schools are to greater and lesser extents trying to be Yale Law School, when it makes sense for perhaps five or ten of them to engage in that particular enterprise.  The Yale model appears to work, by and large, for Yale graduates.  A cheap knockoff (although cheap is hardly the right word) of the Yale model doesn't work -- in either academic or economic terms -- for the vast majority of law students who are subjected to it.

This article is a very encouraging sign that people at the top of the legal academic hierarchy are coming to grips with the extent to which the basic economics of law school no longer make sense. Even more encouraging is Amar's and Ayres' recognition that what they quite properly call the crisis of contemporary American legal education requires a much more creative response than the kind of mildly reformist tweaking almost always advocated by people at the top of the social heap.  That two people at the top of our particular heap have come up with such a response is very good news indeed.


  1. I have posted many times on this site about how transparency is not the answer and abolishing the Federal Guarantee is the only solution. I have also mentioned that poor and middle class kids should pursue blue collar careers as a worthy alternative to higher education. Many posters have accused me of being crazy, short-sighted, and/or being someone else.

    Nevethless, after reading this post, I have to say, I am VERY impressed. This solution hits all the problems. This seems to be a good solution to the problem with a very nice blend of transparency and risk-shifting. I like it, and I congratulate the authors for writing it and Professor Campos for bringing it to light.

    I am always weary that the Federal Government will be captured by those it seeks to regulate, and so I am still not sure whether this is better than abolishing the Federal Guarantee outright, BUT I am certain that if the government is going to get involved in education, then this is the way.
    I am always weary

  2. Fella, I know this is your thing, but when people go around telling me that they have the "only solution" to a very complex problem, I tend not to listen any further. Also, I believe you mean "wary", not "weary". Sorry for the snark, but you repeatedly attack anyone that disagrees with you in the least and even those who see your views as valuable, but not the end of the discussion. Please throttle back on the vitriol.


  4. @ 11:50,

    Yes, I am sorry that I misspelled the word, but I am busy and was in a rush (also, the last “I am weary” is entirely misplaced). If you read, the rest of my post, you will see that I think the ideas in the post are very good, (actually excellent). The authors of the article, and Professor Campos, in this post, are advocating for a very sensible alternative to the current system, one that blends extensive transparency with risk-shifting. I like this idea very much, and if we are going to have the Government involved in education, a scheme like this is necessary.

    I don’t see any vitriol in my post, and I will not apologize to you for my views, (nor will I hide the fact that I am, to some extent, upset and angry with the current system), whether you are an opportunistic member of the academy, an opportunistic LS administrator, an egotistical lemming that lost the LS game, or an egotistical practitioner that won the LS game, and likes the current zero-sum nature of the game. I will not back down from my position that limited transparency, i.e. what happens to students at graduation, and shortly-thereafter, will not accomplish much. In fact, extensive transparency that is not coupled with something else will probably fail.

    I believe the authors of the article, one of whom is one of the most accomplished legal scholars in the country, expressly state this, and that is why they advocate for extensive transparency coupled with other mechanisms, including risk shifting.

    Having said all that, my closing remarks were directed to the very real fact that many Federal agencies, including the ABA, are captured by the industries they are supposed to regulate. I am just highlighting that concern with that statement.

    If you do not like my views, too bad, you can continue to be a dick, but I think my opinions raise very valid concerns.

    Professor Campos, thank you very much for your efforts, for posting this article, and for considering all aspects of the problem at hand.

  5. Actually, I am an unemployed attorney and recent graduate who did well at a respectable school and did not win any employment lotteries. My continuing point is that there is no single answer to the problem and that we should encourage a wide-ranging discussion to develop multiple policy solutions. I agree that transparency alone will not solve all the long-term employment issues of our profession and student loan reform should be a major leg of any future changes, although I'd prefer something other than outright abolition of the program.

    Thank you for providing evidence of my earlier point about vitriol, unless you consider calling others in our little community "dicks" polite discourse. My friendly advice to you is that your rhetoric distracts from your arguments and you are failing to reach many in our audience who are just as angry as you and also seek real, systemic reform that leads to better employment for graduates who are better prepared for actual practice.

  6. @ 2:33,

    The first time I have used profanity on this blog against another poster is today. Despite the fact that I capitalize my letters, I never called any other poster a name, except today because this is at least the second or third time someone, I am assuming its you every time, has accused me of sounding vitriolic and/or being someone else. The only rational response under such circumstances, after you have been insulted on more than one occasion by someone that appears to be the same person, and despite the fact that you have not used any ad hominem attacks yourself, is to say something along the lines of “you are acting like a dick” to that person.

    Please go to my initial post, and identify where I said anything vitriolic and/or attacked anyone. I stated by general preference, and expressed my total approval of the ideas identified in this post, (which are contrary to my stated general preference, but excellent nonetheless).

    If you are in fact unemployed, you may want to examine your own experiences, i.e. you went and finished law school despite all the negativity you saw (as I did, so that’s not a personal slight against you), as reasons that someone like me takes such a strong position against limited transparency. Although my solution may not be perfect because it’s too extreme, and something like what is advocated in this post may work better, focusing on limited transparency accomplishes very little. People will always think they can beat the odds, as the distinguished Yale law professor expressly acknowledges.

    In relation to the proposed solution in this post, my only hesitation to abandon my strong solution of abolition of the Federal student loan program in favor for something like this is how does one stop that regulatory arm of the government from being captured, (like the ABA and the majority of the Federal Government). If someone can answer that, then I will totally abandon my former position in favor of what’s in this post.

  7. I'm not going to ruin my perfectly wonderful Sunday by going into details, but the very notion that folks like Amar and Ayres are part of the solution is laughable. Gosh, were to start with that one.

  8. Although the Dean of Stanford obviously stands in stark contrast, I would think that the professors and deans of elite schools would have an easier time admitting the truth about law school, exactly because it doesn't really apply to them. Yale is not scamming its students, they are getting their money's worth. Likewise for a number of other top schools. The scam critique is, as Lawprof says, most applicable to the wannabes (example: Ohio State). Those are the schools that have to get defensive and justify their actions. I would love to see more people from the elite schools come out to publicly shame the wannabes.

  9. Why would they do that...come out and shame people?

  10. FYI
    NYTimes November 19, 2011
    What They Don’t Teach Law Students: Lawyering

  11. @2:39 - You're exactly right...don't have time to go into my analysis but of you examine how congressional acts like McCain-Feingold and Dodd-Frank have been leaked of their effectiveness one can see where transparency will quickly go.

    @2:33 will now start yelling about us being the same person and how we back the ABA. 2:33 you are a pathetic "dick" who is too stupid to understand nuance or that we are all on the same side....except that your ideas are just as stupid as your decision to go to law school.

  12. Anonymous: How many different commenters are part of the anonymous cat fight that seems to regularly take place? How about choosing a name? I believe Dick and Troll are still available.

  13. It's just one person who makes it hard to read and comment in the the blog anymore. I'd like to say he works for the PR firm hired by Cooley and his job is to make the board unusable while promoting Cooley's position on the lawsuits, but that gives him too much credit. The far more likely explanation is that he is simply mentally ill. Regardless, his incoherent thoughts and his conversations with himself give me a creepy feeling whenever I visit this site.

  14. Getting back to the Amar and Ayres article, I appreciate their ideas but their article reminds me of Warren Buffet's explanation for why academics will always fail at real world tasks - academia rewards complex and unrealistic solutions to simple problems. Akil's and Ayres's ideas about long term transparency, tuition refunds and all that are certainly interesting. But if we can't get schools to be honest about what happened to a few hundred graduates last year, what are the chances of getting them to be honest about what happens to students over ten years?

    The solution is very simple - we need honest job placement statistics now. No more turning an effective 25-50% employment rate into a 99% employment rate, and no more biased sampling when calculating median salary figures. This can be implement this cycle when the schools release their 9 month employment data for 2011 graduates, but the criminals at the ABA did the exact opposite. Per the ABA ruling of a few months ago (enacted by a committee dominated by TTT deans), this cycle schools will provide less transparency because they will no longer distinguish between full vs. part time jobs and legal vs. non-legal jobs. So not only will you have the fraud of previous years, but now the numbers will be even more misleading. The ABA enaced this change precisely to help the schools attract students by hiding the truth during an especially bad job market.

    How do we get transparency this cycle?
    1. LawProf started a petition. How is that going?
    2. What happened to picking one school and auditing their data? Expose one school by showing that their fraudulent 99% employment rate is really a 25% employment rate and you've exposed the entire industry.
    3. The Senate Hearings, that will hopefully happen, could lubricate the above and more.
    4. If the lawsuits can get to at least discovery, they could lead to greater transparency this year.

    Transparency is a way we can have immediate impact by catching the schools red handed in a lie. That's what we should be focusing on, and we should focus on it this year so that the students enrolling to start in 2012 can be the first class to make an informed choice.

  15. What's funny about the nut who ruined the comments section is how sloppy he is. Not only does he have a very unique and disturbed writing style that gives his posts away, but then you have things like this:

    In his 2:39 post, he mislabels the 2:23's post as "@2:33."

    Having creeped the entire audience off the board, no one is replying to any of his posts. So he replies to himself, posting as "trff" in 8:24 where he praises his 2:39 post (calling it "@2:39" in his style). Then, like he did in his 2:39 post, he again mislabels 2:23 as "@2:33".

    Based on the writing style, he probably also wrote the 2:23 post.

  16. How wonderful would it be if A & A convince Yale to implement this program? it would free up precious Yale law spots when Yale 1Ls take the deal. it would push other schools to make the change. Harvard, Stanford, Columbia . . . but eventually you would reach a lower tier of law school who couldn't afford to do it. I doubt GW would make the change.

  17. @4:10 a.m.:

    Sure, but that 50%-of-1L-tuition-back guarantee could become to law schools what 100% availability of lifeboat seating to ocean liner passengers became after the Titanic sank: a signal about who's truly worth your business.

    It's a nice idea. I think that law schools will easily find ways of weaseling out of it ("We'd love to do this, but our budget has to be approved by the university chancellor, and despite our encouragement we are unable to fund such a program at this time due to law school revenues' use in other departments," etc., etc.), but it's a nice idea.

  18. Most people working at a large firm are easily able to pay off their loans within a few years. While there are issues with the law school model that isn't one of them.

  19. @5:49 a.m.:

    Admirably concise trolling.

  20. John,
    I think there's a lot of important issues out there and I think it detracts from them when the non-issues are blown out of proportion.

  21. Most (1) people working at a large firm are easily (2) able to pay off their loans within a few years. (3) While there are issues with the law school model that isn't one of them.

    (1) Citation needed
    (2) Citation needed
    (3) Citation needed

  22. "Most (1) people working at a large firm are easily (2) able to pay off their loans within a few years. (3) While there are issues with the law school model that isn't one of them.

    (1) Citation needed
    (2) Citation needed
    (3) Citation needed"

    Breezy, haven't you learned anything in law school yet? Pseudo-empirical generalizations put forth with maximum confidence and minimum (or as here no) data is pretty much SOP.

  23. What data do you need? Run the numbers, it's pretty simple math. Also, we had a lengthy discussion on this a few threads ago after the letter from the Univ. of Michigan guy.

  24. 7:48: Currently, how much educational debt does the average big firm associate have when he or she is asked to leave? It seems one would at a minimum have to have some idea of what that number is before claiming that "most people working at large firms are easily able to pay off their loans within a few years."

  25. "run the numbers" guy sound like the "what about compound interest" nut, who is also the "transparency doesn't matter" nut.

    There is one sick asshole who has made it his job to ruin the comments section.

  26. Pseudo-empirical generalizations put forth with maximum confidence and minimum (or as here no) data is pretty much SOP.

    People like to slam my home state (often rightly) for a whole host of defects, but I will say this about NJ - we've got a state Supreme Court that seems uniquely willing to render decisions based on hard, empirical facts on the ground, rather than legal formalisms and generalities (somewhat ironic given that we gave the world both Scalia and Alito).

  27. Most have the ability to pay it back. How they allocate their money is a completely different issue.
    Not compound interest guy, he rambles.

  28. @8:01 - all 3 of those guys are different ( I know - I schooled you on IBR and showed you how compound interest works). Go pick fights then get shown for the ass that you are and cry about it for the next 3 threads. Its called therapy. Use it.


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