In fact seven dental schools -- about 12% of the national total -- closed between 1986 and 2001, including schools at Georgetown, Northwestern, and Emory. A proportionate contraction in ABA law schools would require about 25 schools to close down. That analogy might sound a bit crisisish to people at law schools that don't have $1.7 billion endowments and 23 alumni currently serving on the Supreme Court.
As law students face a shrinking job market and mounting student loan debt, Cohen predicted that law schools may mimic a transformation which dental schools passed through about 15 years ago: a decrease in the number of institutions accompanied by “increased scholarly output of faculty that was closer to practice.”
At any rate, as Brian Tamanaha pointed out recently, "law schools" don't appear to be in a crisis at the present moment -- they're doing just fine. "The real crisis," Tamanaha reminds us (and to be fair it appears we require constant reminders), "is suffered by our recent graduates, who find themselves burdened by mountainous debt, with limited employment opportunities."
Just how bad is the law graduate employment and debt crisis getting? One reason it's difficult for legal academics to grasp the true nature of that crisis, besides the splendid isolation inherent to life within particularly well-appointed ivory towers, is that there's a lag effect between the economic consequences of the decisions law schools take, the effect of those decisions on graduates, and the percolation of that effect into the cultural conversation.
In other words, graduates of the law school class of 2010, for example, are just now -- after the clerkships and the internships and the churn and burn associate positions in five-person law firms, and the other essentially temporary post-graduation "legal jobs" are over or ending -- beginning to come to terms with their actual situation. And the eventual nature of that situation was determined in large part by decisions taken by law school and university administrators (and indirectly by faculty) about six to ten years ago, when the institutional budgets and tuition rates for the Class of 2010 were determined.
Because of this lag effect it makes sense to try to look at least a little way into the future when trying to answer questions regarding the extent to which there's a law school crisis. For instance, consider the situation that will be faced by the current 1L class when it graduates, and in the years immediately afterwards. How much educational debt will the current 1L class incur? It's not difficult to estimate this: average law school debt was about $100,000 for the class of 2011, and has been rising by around 6% per year. In addition, average undergraduate debt in the United States at graduation is currently about $24,000. While there are no figures on the undergraduate debt of law students in particular, we can take these numbers and, with some fairly conservative extrapolation, conclude that the 85% to 90% of current 1Ls who are incurring law school debt will graduate with about $150,000, on average, of total educational debt. Furthermore the average interest rate on that debt is going to be in the neighborhood of 7%.
What sort of income does someone have to make to service that level of debt at that interest rate in anything like a halfway comfortable fashion? A common estimate of such things suggests that anything higher than a 1 to 1.5 income to educational debt ratio becomes quite problematic. How many current 1Ls are going to be earning $100,000 or more upon graduation from law school? These things are not too difficult to estimate in a rough and ready fashion. The most recent NALP figures suggest that about 6,000 graduates of the Class of 2010, i.e., about 13.5% of all ABA law school graduates that year, were earning salaries of $100,000 or more nine months after graduation (of course a much lower percentage will keep those jobs long enough to pay down their educational debt adequately).
Now of course February 2011 is not February 2015, and it's possible that large law firm hiring, which accounts for essentially 100% of such salaries, will have returned to the historic highs it reached a half dozen years ago. Even if it were to do so, however, (and there are significant structural factors at work suggesting it won't) that would still leave about 80% of the Class of 2014 unable to secure employment that pays at a level that justifies what will be that class's average educational debt load. It's far more likely, in my view, that this percentage will be 90%. But ultimately what practical difference does it make? Either figure represents a fundamentally unsustainable business model for legal education, although again it takes years for information of this sort to trickle down into the cultural discourse.
The law school crisis, in 25 words or less: Half of all current law students aren't going to have real legal careers at all, and more than half of the remainder aren't going to make enough money as lawyers to justify the combination of educational debt and opportunity costs they incurred while becoming lawyers. (OK that's more than 25 words but still not bad for an academic).
Of course these extraordinarily grim figures will affect different law schools in very different ways: at the top schools "only" 20% to 30% of their graduates, perhaps, will end up in dire straits, while at the typical law school the figure will be more like 80%-90%. But it's already gotten bad enough that even the Harvards of the world are starting to notice. And that, in its own perverse way, is real progress.
It is a different situation, of course, but there is now a shortage of dentists and new schools are being opened.ReplyDelete
Half of all current law students aren't going to have real legal careers at all, and more than half of the remainder aren't going to make enough money as lawyers to justify the combination of educational debt and opportunity costs they incurred while becoming lawyers. (OK that's more than 25 words but still not bad for an academic).ReplyDelete
I really wish we had the transparency required to stop guessing at these numbers. I think you're overstating the success level of law graduates but I'm just speculating as are you.
The first step in transparency is to figure out what happens 9 months after graduation, but we can't even get this simple set of data - that the law schools have - except in a completely adulterated and misleading form.
The next step is to get the data 3-5 years after graduation.
On this note, the CFBP just last week started an initiative called "Know BEFORE you owe" which is essentially their request for transparency on the hidden traps of student loans. Two of the questions they want borrowers to ask is whether they will be able to pay their loans, and whether graduates of the school in general were able to pay their loans which is essentially another way of asking for transparency on job outcomes.
LawProf, Tamanaha has been a great voice of reason in this debate. His logic cuts through all the bull published by the law schools/diploma mills.ReplyDelete
The fact is that the schools are not in crisis; it is the students and recent graduates who will be burdened with repaying their student loans - while competing in a shrinking job market. Those two factors do not bode well for JDs and attorneys. (The fact that academic panels and forums are discussing whether the in$titution$ are in trouble, as opposed to the students or grads, shows once again that these "educators" do not give one damn about the students.)
MSNBC.com has now covered the lawsuits. Check out the following quote from a Crooklyn Law JD who is a plaintiff in the class action suit against the school:
“[Adam] Bevelacqua, who lives in Long Island, said he decided to join the lawsuit against Brooklyn Law in hopes of pushing the schools to provide more accurate data, especially as they continue to increase their tuitions and enrollments. The current tuition at Brooklyn Law, not including housing and living expenses, is more than $48,000 annually. “Schools won’t take people seriously unless there is an economic threat,” he said.”
In the final analysis, these business enterprises - whether they are "public," private, "non-profit" or for-profit - care about their reputation, the public's perception of "higher education" and MONEY!! The only thing these "educators" and administrators understand is revenue. This avenue must be pursued, for that very reason. It is the best chance to hold these confidence men accountable for their actions.
The 24k estimate for undergrad debt is bologna. Everyone that I know who graduated from my state university is 30k+. Remember, 24k is for all students including the the 1/3 that took out zero loans. A more interesting analysis is the average debt taken out by those 2/3 that required financial aid.ReplyDelete
You hit the nail on the head. Everybody knows how legal hiring works, but profs and admins act like a rising tide will lift all boats. "When the economy recovers, everybody will get jobs." But they know this isn't true. Firms are just going to move on.ReplyDelete
If you just finished your first semester of law school last semester, don't be tricked into thinking there's still two and a half years. Your future is now set. Unlike most experiences in life, law school is a sprint, and not a marathon.
Prof. Campos, you should break it down for the 50% that won't be practicing law after obtaining their oversized JD. How many whole term life insurance policies must a law grad sell to pay off $120K at accruing interest rates of 6 to 8%? How many hours must that grad work at Home Depot, at $10/hr., to pay off that staggering debt? How many blowjobs must that grad give, (was it $50 per BJ that the lovely female attorney from IL was alleged to be charging?) to pay off that debt?ReplyDelete
I realize many law students want to take their chances because student loans are free money to them now. Besides, the rationalize that IBR will be plan B. Have these students become familiar with IBR? To me, IBR is akin to a healthcare insurance claim. The insurance company will place all these onerous conditions on you and still try to justify not paying the claim (Obamacare will make this worse with the medical review panels).
The phenomenon I am starting to see now is how the student loan lenders are aggressively going after co-signors (i.e., parents, relatives or any idiot that believed a law degree would be your ticket to riches). Once the student defaults, they will go after the working co-signor. Sallie Mae will intercept your tax refund, garnish your wages and maybe even put a lien on your property. This is no longer just the student's problem.
Then again, as taxpayers, we are all co-signors to this scam. Yes, law school is a scam, it always has been. The difference today is that it is a more expensive scam and the victims are coming under the spotlight. The law schools are not afraid. As long as they can cook their numbers and blame NALP or the ABA, they will continue to sell the "pie in the sky" scenario to prospective law students who will buy into this hook, line and sinker. Law schools will continue to raise tuition to build newer buildings, classrooms, moot court rooms, libraries, $6K lounge chairs all in order to game the worthless USNews &World Report rankings.
I still cannot believe college students treat the USNews &World Report rankings as gospel. Do they realize that relying on such rag is akin to consulting with Al Goldstein's Scew Magazine to pick your future wife?
It's funny how fraud pervades every aspect of numerical reporting these days. See e.g. Mr. Hope and Change's rapidly declining unemployment rate (dropping because when people stop getting unemployment checks, the method drops them out of the labor force and labels them as people who do not need jobs!)ReplyDelete
1.2 million people dropped out of the labor force last month.
How long until companies just start blatantly lying on their SEC filings? (without getting their asshole torn a new one, as did Enron)
P.S. I take that back. SEC filings will always be correct, because those are of interest to the nation's rich - who matter. Law school placement stats, unemployment rates and such are of interest to the nation's poor and middle class - who do not matter.ReplyDelete
Good post, but you need to fix this sentence ASAP: "That analogy might sound a bit crisisish to people at law schools that don't have $1.7 billion endowments and 23 alumni currently serving on the Supreme Court."
Even if all justices currently serving on the Supreme Court were HLS graduates, there could not be 23 of them!!!
Maybe he's counting the clerks and not only the justices.ReplyDelete
Just a guess, but maybe it's sarcasm??ReplyDelete
But related in the sense of whether law school is in crisis, or not.
This has come up before here, but I don't know if Prof has directly covered it.
CUNY Law School tuition is $13,800 per year.
Average law school tuition is probably around 40-45k per year.
This is difference of $30,000 per year, or $90,000 in three years.
If average tuition were at the CUNY Law School level of $13,800, would you consider there to be a law school crisis. If so, why? If not, why?
I would say no. $13,800 and living at home would mean you could get a law degree for $45,000 which, while still a lot of money, would probably assuage the feelings of being ripped off sufficient to remove the "scam" label.ReplyDelete
Of course you would still have the issue that law school is a mental illness factory, and the lack of jobs . . . actually I might want to take my earlier conclusion back.
Follow up: Can you explain why CUNY is cheaper within the same environment as the otehr law schools?ReplyDelete
It is difficult to tell on line, and, therefore, I apologize if you were simply being sarcastic: Are you saying that if the cost were significantly less, you would still consider there to be a crisis in education? Why exactly?ReplyDelete
bruh rabbit, city subsidies?ReplyDelete
10:49, if you buy a pizza for $15 and get toast dipped in some ragu and cheese powder, would that be a scam? "significantly less" has nothing to do with it. try not to ask stupid questions.
I find your post compelling, and I like your summary and analysis of the numbers.ReplyDelete
Nonetheless, at some point, the law school transparency movement is going to need to develop more accurate numbers on its own. Talking in generalities and extrapolating is only going to take it so far because even sympathetic, well-meaning people draw very different inferences from the available data. As just one example, I still believe that attendance at at T14 or even Tier 1 Law School is often a good investment for someone who has done research to determine that she wants to be a lawyer (i.e., talked to lots of lawyers, worked as a paralegal, etc.). I can see how others draw different inferences from the data, but if the Law School Transparency movement wants to convince people, it will need to collect better raw data. It is true that the schools SHOULD do so, that the ABA SHOULD do so, etc. But, if the movement wants to really succeed, it will probably have to raise the money and do the work to develop those numbers itself.
As just one more example, the data discussed in the post below pointed out that almost no new legal jobs opened up recently, but it didn't analyze how many old lawyers were leaving the profession (retirement, death, etc.). Without that information, it's hard to extrapolate from the total job numbers to the impact on recent grads.
So, cost has nothing to do with whether there is a crisis or not?ReplyDelete
Indeed, to ask about CUNY Law School (why is it 90k cheaper?) is a stupid.
I am sure everyone who has debt here would be interested to know that 90k of their debt is simply not a question we should entertain.
Do you agree Law Prof?
Nor do the explain why in some cases (the CUNY Law School example) tuition in a high loan environment has been kept down while in many others the cost of tuition has not.
If one is going to pursue the arguments being pursued, one needs to explain why the differences exists.
So far, I have been called an idiot and stupid for not getting the differences, or people try to a make jokes. Neither of which are serious responses.
For the record, I do think there is a law school, and, indeed, educational crisis in the U.S. The problem is going beyond the initial assumptions. For example, if a general rule like "tuition increases are caused by loans" is to be argued as truism, then one must to address the exceptions that do not follow the rule being postulated.
That's all I am really asking here. But, the point here seems to be to preach to the choir.
To answer the question of whether CUNY law is worth it, I would ask this query: Would you feel better paying $1.00 for a shit sandwich as opposed to $5.00? You are still getting shit any which way you look at it. A CUNY Law degree has almost as much stigma as a Cooley law degree.ReplyDelete
Is CUNY law school still located across the street from the Flushing Cemetery? I find it appropo that CUNY law school is next to a cemetery since many legal careers will be stillborn and burried. When the dean of that law school retires, they should call him/her Sepulcher Emeritus.
Our educational institutions (and our culture generally) also need to be more comfortable with accepting some level of failure, and if we want to avoid lots of people graduating who then can't practice law (or who do practice but are very bad), then we need to fail some people out of the process earlier. We also need to reform the Bar to take it off a curve and rather have it set a baseline of knowledge (and skills) that a person needs to have.ReplyDelete
In comparison, a lot of people who would like to be doctors never get accepted at medical schools because they can't meet the strict requirements (i.e., they are "failed out" of the medical school process). Law School isn't like that. Similarly, a medical student who failed to master the material in a core class would have to retake it or get failed out of the school. In Law School, it is can be very hard to fail a class, even if you do almost none of the work and don't understand the material, etc.
One consequence is that almost nobody gets "failed out" before they've put down the three-years worth of tuition and racked up the debt. Then, there's way too many JDs trying to fill way too few jobs, AND the acquisition of a JD doesn't actually signal an ability to be a lawyer.
I also know that "failed out" language is harsh, but I stick with it because there's some truth to it. Personally, it was very hard for me to accept that I would never be very successful in certain fields because I just didn't have the right mix of aptitudes, skills, etc. But, I am very glad that I did realize that earlier in my life, and part of that was getting very harsh grades or being informed that my work was not going to be good enough to really succeed in certain disciplines. Now, in real life interactions, one doesn't need to use the word "fail," but it is important to send the message that a person should pursue something else. And, educational institutions should set certain bars that foreclose people without the right mix of aptitudes from proceeding, preferably EARLIER rather than LATER.
You can be as insulting as you like, but it is still a valid question. A lot of schools with low rankings charge more. Quality does not seem to be the determining factor in setting tuition.ReplyDelete
The coming crunchReplyDelete
I predict that ultimately some 50% of law schools may close and legal education capacity may fall by more. I have been a GC in large companies doing layoffs (and it sucked) and cost cutting and I have represented others. But those companies did not have the tenure problem and could make real choices about how to cut costs to align with revenue and build a way back to growth.
Universities do not have that choice. Tenured professors are not employed "at will," rather, absent (a) incompetence, (b) failure to fulfil the job requirements (i.e., not teaching as required), (c) improper conduct (moral turpitude), they cannot be easily dismissed. Caselaw that says that the very tenure decision, arrived at after a deliberative process, amounts to a recognition of competence. Financial distress can only permit layoffs if “an imminent financial crisis that threatens the survival of the institution as a whole and that cannot be alleviated by less drastic means.”
Even if layoffs are feasible, in almost all universities and colleges faculty are laid off in the sequence from junior to senior. To quote from a typical agreement:
"(a) non-tenure-track faculty by rank and (within rank) by length of service at the University,
(b) untenured faculty on tenure track by rank and (within rank) by length of service at the University,
(c) tenured faculty by rank and (within rank) by length of service at the University."
However, in law schools typically the most senior faculty have the lightest teaching loads, and the ABA accreditation rules pretty well require tenured faculty loads to be low. Those rules are effectively set by the 1st tier law professors (who have the most influence) and especially the T14 - who are the least threatened by cost pressure.
There is only one easy way around the layoff rules - which is what happened in dentistry, close the whole school/department. Law schools are right now cash cows for universities, with many "raking off" 25-40% of revenue. If and when the law-school requires a subsidy, expect the colleges and universities to demand that the law school get its fiscal house in order. This is where school runs into the tenure problem - it cannot easily cut the most expensive senior tenured law professors, it can't make them work harder, and it can't easily cut their pay.
Pretty soon a lot of law schools are going to have to face a hard reality, they cannot charge tuition of $30-47,000 a year, they cannot even have real increases in tuition to support the COLA pay increases the faculty and administrators will demand. Indeed second, third and fourth tier schools will have to offer a legal education for something like $15-23,000 per year, so as to align with the majority of their students potential earnings as lawyers (sub-$100,000). But they will not be able to do that, because of the tenure problem - then comes the hard choice, closing the school.
The result of this is that there is no easy way to cut law school costs to match income.
Now maybe, when the first ten or so schools close there will be a mass "wake up" by faculty. But even junior law professors are very well paid - around about $150k or more. Most though have pretty near zero experience practicing law (despite ranting "think like a lawyer" at their students) and could expect to make substantially less in private practice, but work much harder for it. Nonetheless, one hopes none are as out of touch as the professor in the Doonesbury cartoon dacades ago, observing to the President of Walden College (to my best recollection) when discussing cost cuts:
"I might just resign and go to industry"
"But you are a professor of ancient Greek"
"Yes, they'd snap me up!"
(a) You strike me as middle class. I did not grow up in the middle class. I grew up poor. Supposedly, I am the "pulled myself up by my bootstraps" type.ReplyDelete
No indoor toilets poor. You worry about things like image. That's something I got over quick in between being hungry. I learned to focus on risk management in a very real way.
So, "stigma," rather than "am I going to be saddled with a risk that's greater than it should be" is your definition of "crisis."
This is a problem. You are really talking about different things than I am. Your definition of crisis,"stigma," ain't my definition of crisis. Crisis to me is "how do I avoid or reduce or mitigate" my risks. That's why I asked the question. To ask about risk reduction and mitigation so that anyone making the mistake of buying the shit sandwich can still recover from it to buy another meal.
(b) What do I care if CUNY is a shit sandwich if it costs me $1 dollar versus $5? Well, its more likely that I can throw away that $1 shit sandwich, and can take the remaining $4 to buy me something else. That's why it matters. If that doesn't matter to you, then this is not a rational discussion.
I agree quality does not factor into cost. I also am questioning as I think about the CUNY example of why it is cheaper than other low ranked schools given they could easily do the same thing as the other low ranked schools with loans? This is why I am asking what is the crisis?
The Coming Crunch. Now that was a very interesting content driven comment. William OckhamReplyDelete
9:49 ... Facepalm.ReplyDelete
While this is starting to fade, I'm constantly amazed that people like Prof. Cohen and the ABA president seem to admit that there are limited job opportunities for graduates, but the job placement stats still show north of 90% employment 9 months after graduation and average salaries in the 6 figures.ReplyDelete
These two things can't exist together. I mean, hell, this is like an LSAT question of some sort. There is no crises if the employment numbers are accurate. But if they are false, then there's a more fundamental problem with the reliability of the stats and the trustworthiness of the people pulling these numbers together.
Bar Character & Fitness gestapo: WHERE ARE YOU WHEN THE LAW SCHOOL ADMINISTRATORS LIE????
“increased scholarly output of faculty that was closer to practice.”ReplyDelete
When I was at Touro law School in the last century, I took a Jurisprudence class that incorporated material about witchcraft.
Oh well. Easy money Student Loans funded the whole thing.
Whoo Hoo! and Yee Haw!
The Wild West of Scholarship.
If the law school reform leads to the dental school solution -- limit access and thereby tighten the power of the entrenched professional cartel -- it will be a failure.ReplyDelete
Any solution to the legal education problem has to recognize the fact that the two pronged distribution of lawyer income represents a two pronged distribution of the complexity of what it is lawyers actually do. While the high end of the legal profession involves extremely skilled and specialized practitioners handling very complex legal matters for very high stakes much of what constitutes the "practice of law," and is therefore monopolized by lawyers, is not very complicated.
Review the docket of any local state court and you will notice that much of what constitutes "civil litigation" involves adjusting routine bodily injury claims against liability insurance policies. This does not require three years of post graduate education. Indeed, aside from basic tort law, evidence, civil procedure and perhaps a basic advocacy class, very few of the skills tort lawyers use (And they are quite skilled.) are acquired in law school. (For that matter, very few of the skills biglaw partners are paid immense sums to exercise are learned in law school.)
Similarly, while real estate law is a tangle of modern land use, enviornmental and other regulation layered on a series of legal doctrines that date back to the Norman conquest the purchase and sale of a single family home or condominium has been routinized and standardized to the point that it is, as a legal matter, relatively simple.
Reform must begin by finding a shorter, cheaper and simpler way of supplying the basic qualifications to practice law. One model is a bachelors program with two years basic liberal arts education and two years concentrated legal study followeded by an apprenticeship. No doubt there are other good ideas involving some compination of study in the liberal ares or sciences and study in law school. This could be combined with a system of graduate legal education available to those who need or want to acquire specialized skills and knowledge. The current law school does neither.
Firms will always want law schools to perform the sorting function they now perform. You cannot take them seriously when they say they want to hire graduates who have been "practically" trained. They say that and then go to hire at to schools that are not geared toward the practical. They want smart people they can train. They also want more mature people, which goes against the idea of pushing training back into the undergraduate years. TheReplyDelete
top law schools are shaping classes with more people who have taken time between college and law school. It may well be that we go to a system that formalizes a two tier profession as they have in England.
You want to bifurcate the practice of law so that the people most in need of qualified representation have poor representation, while those least in need, have the benefit of well qualified representation?
How would you know which situation requires which training? Class of the client?
Are you serious?
You assume you know before hand what route needs to be taken, but the ability to know which routes needs to be taken is actually the part that's the hardest with law. Your answer certainly would serve corporate interests. An untrained non-lawyer against a well trained corporate lawyer.
For the record, many cases may indeed be simple. The problem is knowing which is which. You seem to think that's easy, or the client can tell just based on who is cheapest.
If you want to make the law better, make education cheaper rather than trying to divide the system into haves and have nots. Its already like that now. You would only make it worse by legalizing the class divide.
The system in England is not a two tier class system as is being promoted here.ReplyDelete
Being a barrister is more prestigious than being a solicitor. While just over half of solicitors come out of Oxbridge, over 82% of barristers are Oxbridge graduates.ReplyDelete
The difference is not one of class as you are promoting here. Here's the classification:ReplyDelete
"A barrister is a member of one of the two classes of lawyer found in many common law jurisdictions with split legal professions. Barristers specialise in courtroom advocacy, drafting legal pleadings and giving expert legal opinions. They can be contrasted with solicitors — the other class of lawyer in split professions — who have more direct access with clients, and may do transactional-type legal work. Barristers are rarely hired by clients directly but instead are retained (or instructed) by solicitors to act on behalf of clients.
A barrister is not an attorney and is usually forbidden, either by law or professional rules or both, from "conducting" litigation. This means that while the barrister speaks on the client's behalf in court, he or she can do so only when instructed by a solicitor or certain other qualified professional clients, such as patent agents."
It is not based on class as is implicit in your argument.
Everyone is talking about the need for better numbers, and here is a partial solution:ReplyDelete
In New York, all lawyers must register and list an address with the state bar, which is publicly available at http://iapps.courts.state.ny.us/attorney/AttorneySearch. People generally list their work address, unless of course they have none, in which case they list no address or a residential address.
So someone interested could get a graduation program from a New York law school for, say, the class of 2010, and run each name, to see what percentage show a real business address, instead of no address or home address. (Ignore any name that has no listing, as they should be assumed to have been licensed in a different state). This would give some picture of how many attorneys are not employed in permanent jobs.
FYI: I've been continuously employed as a lawyer since I graduated law school five years ago, and I've always listed my residential address with my state bar (not NY). So, I don't think you can assume that people who don't list their business addresses are not barred.
Sorry, edit "not barred" should be "not employed"ReplyDelete
I know what barristers and solicitors do, and how they differ from what American lawyers do. But if we go to the system suggested above--some law schools are geared toward training people for "small law" and other schools follow the traditional method of sorting people for "big law" , the system will result in a bi-furcated system. There is a class component in legal training in England--82% Oxbridge grads as barristers?--and attention is now being paid to it.ReplyDelete
So, your advocacy here is to approach the law from the conservative argument of let's institutionalize a class divide? Yes, we know class differences exist. Its just amazing to me that any American would be advocating institutionalizing them. That the "solution" to the overall problem of education cost in America is not cheaper education for all but to further increase the disparities between the classes.ReplyDelete
This is 4:10. No, that is not what I want at all. I was just saying that this may be what it comes to.ReplyDelete
The problems if others: http://www.salon.com/2012/02/04/the_architecture_meltdown/singleton/?mobile.htmlReplyDelete
The description of England is not accurate - if anything it is a three or four class parallel system.ReplyDelete
Taking first the solicitors - there is the Magic Circle - that is to say the very big "City Firms" that specialise in corporate law. Most have been dumping their specialty practices - Intellectual Property, HR, commercial, property to focus on the lucrative City Work (they call the partners in specialty practices "service partners") because these lack leverage and are less profitable - until finance and M&A dries up; Next you have the big regionals with a London presence - like say Eversheds; next you have the mid size and largish firms (20-30); you also have the high end boutiques; then you have the high street practices that do wills, estates, small cases, small commercial. The Magic Circle is heavily dominated by graduates of Oxbridge and a few other colleges, and then as you go down the line there are more tiers. There is an oversupply in the UK, but not as severe because solicitors need to get a training contract at a firm for 2 years to qualify and this acts as a constraint on numbers. This means though that a lot of kids get law degrees but cannot get a training contract and so cannot become lawyers.
The barristers form another group. There are various chambers - known as sets - and some are more prestigious than others - and they tend to specialise. There you have QCs known as Silks, Juniors and Senior-Juniors. A lot of barristers don't make it at the bar, maybe 90% or so after training - they to go through an apprenticeship system known as pupilage.
At the very bottom you have "legal consultants." These are essentially unlicensed lawyers. To explain, to be a solicitor or barrister you need to pay various charges (somewhere over $2000 a year for a practicing certificate) and for a solicitor to get your practicing certificate you also need to be insured. It used to be that you could pay the law society for insurance, but the big firms decided to arrange their own cover and the law society was persuaded to get out of the insurance business because the insurers said they would never turn anyone down - and strictly they don't - they just make "fuck off quotes" of say £150k to anyone trying to set up a new firm... which is more or less the same thing. In any event legal consultants are generally solicitors or barristers who cannot afford to maintain a law license and so call themselves "legal consultants" but claim not to be lawyers.... and get away with it. Some of the advice they give is very dangerous and they are unregulated.
Finally you have a bunch of companies setting up to be "claims managers" and "conveyancers" or do other legalish stuff at bargain prices. The legal profession is unhappy with this and it may lead to some of the complaints that you hear of incompetence, missing money, etc. though I have to say a lot of these types are pretty dodgy and I would not recommend them. Lately they have set up their own quasi-professional bodies but they are completely unregulated (as are the bodies - if they get kicked out of one they sometimes set up their own.) I heard a pretty nasty story about someone persuaded to sign a contingency fee agreement with a claims manager for a child who had been severely injured at a 50% of recovery (with long term care costs) - where there was no real issue about liability - subsequently a solicitor took the case, got damages plus costs (under the English rule) with essentially no work by the claims manager - who then claimed 50% of the damages, and the contract was upheld - claims manager was not a lawyer so no restrictions on fees.
In other words, the UK system is a mess and just as tiered if not more tiered than the US.
Oh one more thing - Barristers are all technically self employed - and they need to get briefs from solicitors to get started. The client does not pay the barrister, the solicitor does.ReplyDelete
I had not even gotten to the point of the abuse issue that MacK raises, but yes, having read a little about it, I don't think this is path Americans would want even if it wasn't institutionalizing class differences. Those advocating these sorts of systems in general (rather than specific to this board) often are pushing for them to reduce their liability for screwing up the interests of the client rather than to protect those interests. In short,t hey don't want less regulation because of cost. They won't less regulation because they don't want to be responsible if something goes wrong.ReplyDelete
Yes, of course it is tiered. There is also talk about reforming the system, as they are in parts of the continent. It seems that no one is satisfied with their system of legal education.ReplyDelete
And, the calls for "unbundling" will necessarily formalize tiers within the profession. They exist now, but they will become more fixed. If that leads to lower cost alternatives for law school, will that be bad?ReplyDelete
Will that be all bad, I mean.ReplyDelete
"I would say no. $13,800 and living at home would mean you could get a law degree for $45,000 which, while still a lot of money, would probably assuage the feelings of being ripped off sufficient to remove the "scam" label."ReplyDelete
That pretty much describes law school in the early-to-mid '90s. The job market was bad (not as bad as in the post-2008 economy, but probably worse than it was anytime between 1997 and 2007), but at least the debt levels weren't life-crushing.
"There is also talk about reforming the system, as they are in parts of the continent."ReplyDelete
As in "Fog in Channel, Continent cut off."
Of course there is a lot of tiers in almost every county on the European mainland - for instance Advocates verses Notaries - while in a lot of countries, say Spain and Italy effective entry to the profession is largely hereditary - that is to say that you can qualify as a lawyer, but getting very far in practice usually means joining a family law firm. Germany too has layers of lawyers from the top firms like Gleiss Lutz to much smaller firms - ditto the Netherlands with the or four top firms - Stibbe, deBrauw, etc. and almost everyone else smaller. Ireland has Goodbodys, MOPs, Arthur Cox and maybe one or two more dividing the top work.
Of course the mainland systems still have a lot of scale fees set by the bars and the courts.
5:23 - most of the advocates of adopting the UK system in the US are US based economists who frankly have no idea what they are talking about.ReplyDelete
For that matter a lot is currently written in the Economist on the subject - and much of what it says about the law, antitrust, intellectual property, etc. is right wing piffle rarely filtered through a factual screen. John Micklethwait is really a terrible editor ... very ideological, not a good fact checker ... standards have slid badly since he took over.
Well that is what unbundling would mean. People would go to the schools that would be suited to their professional trajectories.ReplyDelete
The tier solution is not really going to lower the cost of education.ReplyDelete
Its going to lower the quality of services for the most needy while
leaving the trajectory of educational cost increase unchanged. In
other words, its going to give a serious advantage to the higher
classes over the lower classes even greater than they already have in
this country. Remember, this problem of greater than inflation
educational cost in the U.S. is not unique to law schools. So, you
aren't addressing that problem at all.
Its the same question I raised with asking about why is CUNY Law
School cheap at the start of this thread. I don't question whether
there is a crisis. I question the solutions. So, the question to the
law school deans was wrong. They were asked the wrong question.
The question is not, if there is a problem, but how to solve it if the
problem is conceded as existing? If CUNY exists in this environment,
that means other CUNYs can exist. So, why don't they? That's the
question the Deans should have been asked. If they believe law school
is necessary, why are they making it so expensive to attend since we
know from the existence of CUNY that its possible to have a much lower
cost law school education in this country? In a high cost metropolitan
area I might add.
What's really leading to the cost increase? Why assume that the only
solutions are essentially to accept the right wing arguments that the
choices are increased class structures, decreasing education for the
middle class and poor, and other similar arguments?
Why not reduced or mitigated risk? A cheaper education is a mitigation
of risk. If you go to law school, and it doesn't work out, it should
not be a life damaging event. If law school terms out to b a shit
sandwich as a bet, then the shit sandwich should cost you $1 rather
than $4 or 5. Again, this follows from asking "How is it that CUNY
I don't buy the crisis as a basis for why the solutions are
necessary. The UK is facing similar attempts despite the lower cost of
education there to push for "reforms" that actually are not going to
reform the system, but make it more like ours in terms of shifting the
cost to students while pushing for "reforms" that in terms of legal
representation make it worst for the average consumer, not better.
Its the same approach being repeated in different countries. I don't
buy that its necessary in the way that they claim, because even if
countries where education is free or cheap, they still are making
these arguments for right wing solutions.
So, I need an explanation of why pain for the middle class and poor
are necessary beyond what has been written here so far.
The point is that the middle class and poor should have a choice
without that choice either destroying the services or requiring
indentured servitude from those who take the risk of getting a JD. Its
not impossible as the example illustrates.
Or as someone else just wrote, "The job market was bad (not as bad as
in the post-2008 economy, but probably worse than it was anytime
between 1997 and 2007), but at least the debt levels weren't
The debt level is life crushing for more reasons than just student loans even if they do need reform and change.
sorry for the spacing problem. Bruh RabbitReplyDelete
EDUCATION SHOULD BE CLOSE TO FREE, BECAUSE IT DOESN'T TEACH YOU SHIT.ReplyDelete
LIFE IS WHERE A REAL MAN LEARNS, AND THAT'S THE BOTTOM LINE.
The argument is that costs will be lower in schools geared toward teaching, rather than scholarship and teachIng. There is no reason to assume that those schools will not train people well. People who want a broader education will pay more.ReplyDelete
I WARNED YOU!ReplyDelete
*DOES THE STUNNER*
The Bureau of Labor Statistics is actually projecting a growth of over 100,000 jobs in "legal occupations" through 2020. (Employment Projections 2010-2020)ReplyDelete
Maybe the BLS should start reading this blog to get a sense what the legal job market is really like.
The BLS are just a bunch of shitty government workers.ReplyDelete
Given that there are about 46,000 law graduates a year and about 760,000 lawyers in the US (according to the BLS) - so maybe 12,000 a year retiring over that period (demographics skew younger because of 80-mid-noughties growth) this means that there will be for 414,000 JDs for 208,000 jobs - and that assumed the BLS is correct.ReplyDelete
The trouble is that the BLS is projecting based on the decades 1990-2010 and assuming that the economy will grow 2011-2020 by 2-3% per annum, that in theory would add to demand for lawyers - 100,000 would on that basis be a reasonable number for 9 years starting at 8-900,000. The assumption is off for reasons many of us know, bit it is not totally crazy.
Still the BLS statistics are well worth looking at because they have an engine that can let you compare average lawyer incomes by metropolitan area. It is pretty easy to compare the BLS results with say Washington DC, San Francisco, New York, Chicago, etc. and ask - how is it that so many graduates of law schools in those areas earn so much higher incomes than the average for lawyers in each area? One also has to assume that the lawyers the BLS reports on are more experienced?
I would not deride the BLS numbers - they are well worth looking at.
They should not be derided, particularly when I suspect that if they projected there would be a negative growth rate in legal jobs over the next decades, some people on this site would be very happy to say they were experts. Like any entity that does projections, the BLS will not always get it right. But there is no reason to think they care one way or another about the fortunes of any one group of people in the labor force. And I am sure they have reasons for their assumptions that are based on the decades they have spent gathering material about the labor force in the midst of recessions and rebounds. They may not turn out to be right. But I don't think we can say flat out, from the positions we are in and the information we have, that they are plain wrong.ReplyDelete
People here want to think it is "realistic" to say that things will keep getting worse and worse, when we are really talking about cyles.
I do have a problem with the BLS like I had a problem with the Congressional Budget Office's numbers during both the health care debt and the deficit debate. The Congressional Budget Office is another political numbers game organization in which unfortunately people look at them uncritically without examining their assumptions. The assumptions is the problem with any analysis. If you don't poke around and test those assumptions, you don't understand whether they are (a)correct and (b) of any real use. A lot of the CBOs assumptions are political. As are the numbers regarding employment. That being said, if one understands the assumptions, tests them, determines they are not only correct and accurate, but also of use, then one can use the data in that context.ReplyDelete
10:09 - Indeed they should not. If the BLS is right the legal education system has, right now, about 50% overcapacity as against the next decade's demand for new lawyers. That is pretty much in line with the mainstream view on this blog. I think the BLS projection is not pessimistic enough ... but it is pretty bad in light of the number of law schools in operation and their class sizes.ReplyDelete
10:36 - do you have an objective criticism to make of the BLS numbers other than a vague conspiracy claim ... I mean "political numbers game organization" is an analysis similar to those provided by Orly Taiz - point out an objective fault or accept that the BLS is not spinning the numbers.ReplyDelete
Not pessimistic enough.ReplyDelete
People here want to think it is "realistic" to say that things will keep getting worse and worse, when we are really talking about cycles.ReplyDelete
Beepers are just in a down-cycle. That's why I am advising 21 year old college students to take out 150,000 of non-dischargable debt to learn how to operate and own a beeper retailer.
A large number of the legal jobs in the country are going and they ain't coming back. How many hours did it take to pull an obscure filing twenty years ago? How many seconds does it take now?
This is an industry that willfully crushes a quantifiable percentage of it's participants as a matter of course. I can see how it would now be blind to the facts on the ground.ReplyDelete
From what I have seen, most law schools have an first-year rate of attrition, across the board T1 to TTTT, of 10%. This is simply excepted as the inevitable few students who suddenly discover the law just wasn't for them. The third and fourth tier schools commonly fail out 25-40% of the student body at the end of the fist year because of the grade curve (and to protect the bar passage rate of the institution). All of these kids have either one of two semesters worth of non-dischargeale debt in the $15-30,000 range depending on the schoool and level of support "scholarship" extended to the student. And, those in the lower caste of legal education then fail out another 10-15% between 2L and 3L (because of the curve). And, again, two years worth of non-dischargeable debt - for credits that cannot be applied to any other program of study or employment.
Now, for those that are not ground into pieces by the gears of legal academia, the requisite bar exam then fails an average of 30% of fist time applicants. Some jurisdiction have a far lower pass rate, more along the lines of one half fail.
All of these JD's have non-discharageable debt for a degree they cannot possibly utilize to earn a living because they are not yet a member of the state bar. Do you think the lender cares about that particular fact? No. The lender wants their money.
Thus, there are thousands and thousands of young people, each and every year, who are incapable of succeeding in this rigged game of filtering out the "smart ones" from the rest.
And now we expect the same folks who stand at the helm of this relentless machine to realize that even the "winners" are really losers too? Well, they don't. Because their paycheck depends upon them feeding more into the machine, collateral damage be damned.
I hate everything about this.
Yes, lawyers are the same as beepers... Some jobs have gone, and others will come in different areas. But this is nothing like what has happened to beepers. The American regulatory state (which with health care is going to get bigger), the criminal justice state, business will always need lawyers.ReplyDelete
...to continue... maybe not as many, but we cannot say right now how many.ReplyDelete
I used beepers to prove a 30 rock referenced point. Not all things are cyclical. Sometimes the market doesn't come back.ReplyDelete
"But we can't say right now"?
I can tell you that the job situation is right now horrible.
It is telling that the best argument for optimism is ignorance.
Yes, I do have a specific criticism. Take the numbers for unemployment, they often driven by the need to suggest rosy scenarios. They are often, once the press is not watching, revised downward. The choice of numbers that are focused on are the most rosy number possible. That's the politics of the situation. There's no political conspiracy about it. Its what happens in politics in the U.S.
The same game happens with the CBO. For example, when there was a debate over the Public Option (Something I support and know quite a bit about) in the health care debate, the numbers were often massaged to use the most conservative assumptions possible to decrease the value of the Public Option. I know this because one could see a much stronger sense of what the value might have been in private sector projections of the time. But, because there was a strong push in Washington against the Public Option despite the public push for it, the numbers were constantly understated.
So, the politics game with numbers happens at multiple levels. Both in the assumptions behind the numbers, and in their reporting, and in what's spun. This is not something that's a conspiracy. Its just what's done. I didn't realize you did not realize this.
I used beepers to prove a 30 rock referenced point. Not all things are cyclical. Sometimes the market doesn't come back.ReplyDelete
"But we can't say right now"?
I can tell you that the job situation is right now horrible.
It is telling that the best argument for optimism is ignorance.
The market does not come back for things that become obsolete. The boom time for lawyers was an anomaly. People were foolishly optimistic that it would last forever. This is the correction. Many of the jobs will go, but law as a profession will not disappear like beepers.ReplyDelete
A word of caution, be very skeptical when using BLS numbers. Here's a quick example why. The BLS reported last week that the unemployment rate fell 0.2% to 8.3%. This reflects an additional 243,000 jobs gained in January. Unconsidered in this calculation are the 1,200,000 workers that the BLS reported elsewhere had "disappeared" from the job market that same month. Had they been included the unemployment rate in January would have increased 0.8% to 9.3%. What we are dealing with here are political numbers not economic numbers. William OckhamReplyDelete
@ TM---I'm neither optimistic nor pessimistic. I still think if the BLS were giving numbers that many people on this site want to hear-- stats that indicated that laywering will disappear as a profession in the near future--the stats would be hailed. There is politics in the reception of these numbers, too.ReplyDelete
I don't think the profession is going away completely. But shrinking is a stronger argument than bouncing.ReplyDelete
Many lawyers/legal staff are beepers. When they exit the workforce no-one will replace them. The doc review puppy mills aren't going to last. 25$ an hour to hit F5. Same goes for many paralegal tasks.
I'm not a real lawyer, but I have Microsoft office, Lexis, Bloomberg, three screens, a laptop, and a blackberry. God help the admins if I get siri on my blackberry. The world is getting leaner, and the legal industry has fat to trim.
What's going to happen when much of this make work mindless stuff doesn't go to young marginally employed law school grads. Are they all going to go solo?
I don't see how conjecture about people's reaction here is relevant to BLS assumptions. Even if you are right, it changes nothing about the need to question BLS assumptions. Are BLS assumptions going to be more right if people here are elated about them?ReplyDelete
That's not specific, that's just an opinion. Show some intentionally skewed data from the BLS. I would not accept what you said from an associate or opposing counsel and I would not plead it.
I have gone as far as I am going to with you on this sub issue. Either you get politics matters in this situation or you don't. I am certainly not going to play the I must meet MacK's shifting standards on what constitutes specific, especially when you start off with the heavily tilted view that there must be some great conspiracy for political pressure to exist.
The problem with your issue vis-a-vis the BLS numbers is that tehy did report the other "non-workers" elsewhere as you put it. The BLS is reporting hard numbers - for example for how many lawyers there are and how many there were 10 years ago.
Their prediction of 100,000 new job for lawyers over a decade - if one has even a basic assumption of a 2% real GDP growth rate or a 1% overall employment growth rate is not that far off - it amounts to essentially no real growth, or even negative growth in legal employment, as a function of the size of the workforce. That is why the BLS number is scary - the current capacity is for about 5-6% annual growth in legal employment - 46-50,000 JD graduate a year, but they predict over a decade or so that there will be no more than 10,000 legal jobs per annum - even if 10,000 leave the profession a year, that is twice as many as the profession can absorb.
Is there going to be an even greater drop in legal demand? Who knows - probably not despite all the stories, but a massive expansion seems unlikely and that is what the BLS number of 100,000 means. There is a real lack of numeracy in the profession I notice by the way.
ONLY 100,000 additional legal jobs by 2020 is an apocalypse for law schools when nearly 50,000 new lawyers are graduating per year. The BLS numbers are really scary!
By the way, I think the most correct answer for the legal market right now is no one has any idea what it might look like 10 or 15 years from now. There are too many unknown variables like will automation require more or less people? Don't assume less. Will outsourcing matter? Don't assume it will. By the same token, don't assume rosy outcomes either. When working with accountants, I often get best case scenarios, and worst case scenarios. That would be nice here to have those different risk assessments.ReplyDelete
@bruh rabbit. You don't see it, but I do. I didn't say that BLS's projections should not be questioned. But there is such a thing as good faith and bad faith. An earlier posted questioned the basic ocmpetence of those who work at BLS because he/she did not agree with their projectes. It is not likely that the commenter had studied the numbers or had access to all the data BLS considers. There is nothing wrong with questioning assumptions. But it is also right to consider the basis of the inquiry; does it grow out of superior knowledge or information that the entity in question did not have access to or can be shown to have ignored. Question away.ReplyDelete
"Poster questioned", " the basic competence" "agree with their projections"too small and awkward keyboard.ReplyDelete
All stats have shortcomings. For instance, undergraduate debt is estimated on finaid.org as 24k. But that data is based on 2007-2008 data (and yet its still regularly quoted even on this blog) Emphasis here: it does not include private school debt, such as for profit schools like the ones Tamanaha speaks of (culinary schools like Le Courdon Bleu, Career colleges of America, and the University of Phoenix) are not included in these figures! That's equivalent to ignoring schools like Thomas Jefferson School of Law when criticizing law schools. The other day, I met a girl here in the Los Angeles area that attends FIDM ( Fashion Institute of Design). She is taking out 30k in loans this year to pursue a degree in Jewlery Design. These loans are federally backed but it willl not be reported in the average undergraduate student debt figure.ReplyDelete
he other day, I met a girl here in the Los Angeles area that attends FIDM ( Fashion Institute of Design). She is taking out 30k in loans this year to pursue a degree in Jewlery Design.ReplyDelete
I am slowly coming to the conclusion that debt that no one can pay back is the only thing that is propping up this anemic economy.
As an example, Rochester NY's largest employer used to be Kodak. They're bankrupt. Now the largest employer in Rochester is the university of Rochester, which charges $35,000 per year for a two year low ranked MBA program (a personal friend attends, over my loud protests. I actually don't know if we're friends any longer). 70,000 dollars to get business contacts in the rust belt. This country is past the point of rescue.
Debt replaced stagnant wages (now declining wages) and cuts in middle class safety net infrastructure like the government providing low cost education. At the same time this has occurred, there's been a shift of the risk of any given transaction being shifted to the individual consumer. So, yes, debt is the engine that drives our economy not just now, but since the 1970s. Its also a byproduct of an increasingly regressive tax code that favors capital investment rather than wage earning.
Incidentally, this is the source of the disagreement between Law Prof and myself. It resulted in him writing an article about student loans the other day in response.
The disagreement comes down to the fact that he's focused on the debt rather than the forces necessitating the debt like (1) wage stagnation/deflation and (2) the destruction of the middle class safety net.
MacK@1:21 - You are right and I have no quibble with your numbers or the horror of only creating 10,000 aottorney jobs per year over the next decade. My point was to take the governments numbers with caution. This particularly so when they give out summations of their findings intended for use as advocacy talking points The BLS's take away message was that unemployment went down 0.2% last month to 8.3%. Where in fact it went up 0.8% to 9.3%. If you dig through the law schools salary and employment numbers somewhere in the details you can often find numbers that undercut their conclusions. This in no way excuses the "bold print" points that they offer in their headlines. The recent BLS press release on unemployment is no more descriptive of the actual situation that the law school and NALP statements. Just be careful. William OckhamReplyDelete
Example of risk shifting: Bankruptcy Act of 2005 that shifted risk to individual debtors rather than balancing between creditors and debtors. Denial of bankruptcy for student loans. Etc. Just in case people had not heard about risk shifting before.ReplyDelete
Here's some facts from someone 3-5 years out:ReplyDelete
Graduate in 08 of that other Colorado Law School.
On my second 6+month stint of unemployment since graduation.
Haven't made more than $100K total in 3 years.
Student loans have gone from 145K to 190K.
Nice ROI, yeah?
Thanks for the thoughtful response 334.ReplyDelete
Debt moves future consumption into the present. What concerns me is a consumer based economy where there is no longer the ability to consume because debt has swallowed our current consumption. I don't trust a rebound for many reasons, not the least of which is a lack of emphasis on the debt-load of the average consumer.
Specific to the law school scam, my debt service swallows almost all of my current income and therefore ability to consume. This impacts my ability to "form a household" and purchase goods and services from other parts of the economy. Basically, my law professors consumed my current labor in the past.
Terry Malloy @8:06 "Debt moves future consumption into the present. What concerns me is a consumer based economy where there is no longer the ability to consume because debt has swallowed our current consumption. I don't trust a rebound ..." Very well thought and said. But if you really want a fright consider that whatever Keynes has done to dig us out of this recession he won't be around to bail us out of the next one. Our federal debt is 101% of our g.d.p. It has been rising at 6-8% per year. At current rates it will be at 120% of g.d.p. in three years. Italy's ratio is 120%, as was that of Greece in 2008. If you have any time, well make that if you have a whole lot of time, "This Time Is Different" by Carmen Reinhart and Kenneth Rogoff is a comprehensive treatment of the subject. Debt fear has been given a know nothing reputation by the dangerous lunacies of Ron Paul and the simplicities of the Tea Party. But this book was published by Princeton University Press and Rogoff is a Harvard professor and the former chief economist of the IMF. This isn't an economics blog so I wiil not take space to mention it again. William Ockham.ReplyDelete
The bigger problem is that excessive credit causes unwise spending and wealth destruction. This is for example the case with say the Irish property bubble - fuelled by easy lending - it drove up property prices that bore no rational relationship to the ability of the property to generate value - with the crash much of the wealth essentially evaporated.ReplyDelete
Student loans when granted too easily, and perhaps law student loans are an extreme example of wealth destruction. They persuade law students to pay excessive amounts for a commodity, their JD. They persuade individuals who are at the upper end of the ability spectrum to spend 3+ years engaging in a wasteful activity which will result in no more than 50% of them gaining an asset of any value to them, causing loss of income to the students and deadweight losses to the economy. In many instances they permanently divert from activities where they would be highly productive and indeed well paid the same individuals to long term tracks where they will be badly paid and underproductive.
But debt is neither good nor bad, nor is there something magical about a 100% debt to GDP ratio. The big question is for what is the debt being incurred. Student loans are an odd example of apparently virtuous debt - debt that should increase the number of skilled people in society - that should improve social mobility - that allows the main beneficiary of the investment, the student, to repay the cost of the investment - that through a better educated workforce should fuel growth - but through incredibly lax lending policies, no-risk structures for the lenders (no bankruptcy and a federal guarantee), and a conflict of interest on the part of key mediators (the financial aid offices of colleges), is driving an orgy of wealth destruction - combined with some wealth transfers (but transfers less than the actual amount of wealth destruction.)
In short a bad policy.
MacK - I am in complete agreement with what you said. But I was trying to make a separate but related point. The core proposition of Keynesianism is to use government debt through government spending to boost economic activity. And it worked. Magnificently. Fifty plus years of nearly uninterrupted prosperity. When we had contractions, debt stimulus quickly got us out of them. But spending borrowed money only works when you can borrow more money. In the last years of the Bush administration (tax cuts) and the first years of the Obama administration (stimulus spending) we borrowed and spent nearly $5 trillion dollars. We raised our debt/g.d.p. ratio from less than 70% to the current 101%. The debt/g.d.p. ratio is a rough expression of the ability of an economy to service debt. There are other factors - the percentage of debt owned by foreign creditors, the maturity profile of the debt, what percent of the debt is held by other government entities i.e. social security, the medicare trust fund, federal employee retirement plans. But should the debts of GSE's, Fannie Mae, Freddie Mac, the government student loan portfolio, be added in to calculate the federal debt? There is something magical about the ratio. At about 120% creditors start to question our ability to repay and become reluctant to buy our bonds. With 9% deficits and 2% growth we're over 120% debt/g.d.p. in 2015. Keynes also recommends cutting interest rates, but with 0% interest rates what's to cut. Come the next contraction (or if we still haven't solved this one) we're on our own. William OckhamReplyDelete
WO, I'm a financial industry guy. The language of sovereign debt is part of my lexicon (e.g., watch greece tomorrowReplyDelete
). Keynes. Sigh. In the long run we're all dead. Problem is, Bernakie and Geitner will be dead eventually, but I'll have to deal with the decisions they made while alive. Where this intersects with law school is debt: Easy money boom leads to a bust
MacK - Yes. Bad policy.
I am the guy who you thanked. Its unfortunate.
You are describing a rentiers economy, or a parasitic, or cleptocratic one, take your pick. They each come from different economic and political schools of thought, but they mean about the same thing. Private debt in a stagnant wage or deflationary wage economy becomes a tool for parasitic "growth." In this way, we really have no grown the U.S. economy in decades (depending on how you view things- since the 60s or 70s).
The main thrust is that this is occurring throughout the economy, not just in education.
You aren't going to get rid of such an economy by caps on student debt alone. The only solution is to take away the incentive to get into such high debt.
There are only 4 reasonable solutions to taking away the incentives for high debt:
(a) wage increases
(b) restoring the social safety net (including low cost education because that would eliminate the need for debt)
(c) risk shifting (restore bankruptcy protection, increased consumer protection in terms of contract language to prevent absurd contract provisions, etc.)
(d) Sustainable economics rather than conservative arguments over a continuing grow the pie through excessive risk taking economics.
Its probably not going to happen. This country is very conservative both generally, and due to political pressures of money in politics.
Which is probably why Law Prof focuses on the student loans since he's not apparently a conservative.
The problem with that is that it doesn't solve the cause of the parasitic relationship. It will just make people more desperate. Not less desperate because the parasitic relationship exists in every aspect of the economy.
Unless you get at the root, you are shifting the chairs around on the deck of the Titanic.
Private debt has nothing to do with government debt. Keynes did not argue that students should have to take out student loans. This is a conservative argument. Keynes would argue that the government should ensure that students do not have to get into the debt into the private the first place. The effect of government debt does not work the same way as private debt. Whenever i see people treating them the same, i instantly question their understanding of economics. The rules between countries in government debt are simply not the same as the rules between private creditors such as banks (which is how the government is acting here with student loans or the loans you take out from banks) have with you. If you conflate the two, it means you do not understand the debt issue. It would take quite a bit of time to even explain it to you here. I may come back later with some links.ReplyDelete
By the way, I really do not trust someone who claims to be in finance who calls student loans a Keynesian solution to college education. Keynes has nothing to do with private debt. Its about the government borrowing for covering public expenditures in the economy. You can debate whether that's a good idea or not, but it has nothing to do with the issue being discussed, which is individuals borrowing debt essentially on the private market whether they are purchasing it from the government as a pass through entity or a private bank. The approach is simply not Keynesian. The core argument there is not that the government is expending debt to drive up economic activity through the government's borrowing powers such as building roads, or, funding education directly after borrowing from another country, etc. It is setting up loans int he private sector way, with collection processes that are private sector collection processes. This is just too big a topic to ignore the misuse of language here.ReplyDelete
Just to be clear: A Keynesian argument would e that the government should forgive the student loan debt to stimulate the economy. It would not be "put students into student loan debt".ReplyDelete
Both in the public and private setting, easy credit distorts the market and causes a boom in bad investments. That's as far as I was taking the connection. Granted, I don't understand Keynes fully, but I've always considered my lack economics theory training an asset. Too much economics training makes you forget that when it rains people get wet.
I'd welcome the links though.
(a) You believe "know nothing" is a good thing in an economy run on caveat emptor? Yet, you are also arguing for efficient markets. Your argument contradictory.ReplyDelete
(b) I am not a Keynesian. Nor am I a free market fundamentalist. I think you are the later.. So, that may be the source of the probelm here.
Student loans are in fact a Neoliberal solution rather than a Keynesian one to the problem of how students can finance their education. The Keynesian answer would be to have the government cover the cost rather than passing it along to private-public hybrid solutions that saddle students with debt.
(c) Your discussion over market efficiency is absolutely strange in the context of wage stagnation and deflation. Capitalism here is working perfectly. Its reducing the cost of labor. The problem is that labor is also the consumer. The problem is not inefficient markets. Its the internal inconsistency of the argument that you can cut wages, and expect the wage earner to buy more, which capitalism requires in order to work.