Friday, August 19, 2011

Markets and failure: A response to Larry Ribstein

Larry Ribstein has posted a useful if somewhat querulous response to both this blog and Bruce MacEwen of Adam Smith, Esq.   Ribstein clearly doesn't like the tone of my criticisms, which is fine, but in regard to substance we mostly agree To the extent we don't this seems to be a product of our different levels of confidence regarding the general efficacy of markets, plus some over-interpretation on Ribstein's part of what I've actually said.

First, Ribstein's response makes clear that he agrees with MacEwen and I about what the biggest problem in legal education is today: that "the rising cost of legal education today is out of sync with its expected value."  We also agree that this market failure is at least to some extent a product of bad information, which in turn is a product of behavior on the part of law schools that ranges from  the disingenuous to outright fraud (as Ribstein puts it, "some law schools are lying and the rest are not being totally forthcoming.").

Ribstein argues that even much higher levels of transparency are not a complete panacea for what ails legal education, and I agree.  The problems go much deeper than that, although improving transparency regarding outputs is the cheapest and easiest solution to several of the system's worst features. It should give analysts of markets pause that information about law school outputs has been so bad for so long, and largely remains so, despite the fact that I have yet to encounter a single defender of, for example, the current employment status reporting system. In other words although "everyone" agrees much more transparency is absolutely imperative, no one in a position of power is engaging in any meaningful unilateral action to be more transparent about job numbers, or anything else -- such as for instance making a serious attempt to measure and report the extent to which law school actually adds value in regard to the ability to practice law. 

I also agree that an important part of the current crisis is the very bad overall job market, which reduces the immediate opportunity cost of going to law school.  As I mentioned in an earlier post, smarter and more cynical law professors realize that much of the leverage law schools maintain over their students is a product of how poor their alternatives are.  Ribstein suggests that the current structure of undergraduate education is also part of the overall problem, and I have no doubt it is.  Law schools are contributors to the general crisis in higher education, not the inventors of it.

Ribstein says he's not a big fan of behavioral economics. I am, and the scholarship he cites shows why: One big problem with theories that assume people are very good at rationally maximizing their utility is that they tend to be markedly over-optimistic about their own prospects, even when they have enough information to be quite realistic about the prospects of other similarly situated persons (This is the "90% of law students are sure they're going to finish in the top 10% of their class" problem).

Ribstein then asks why some law school doesn't take advantage of the dysfunctions of the USNWR ranking system and become a market leader? If a school ignores the ridiculous costs imposed on it by chasing rankings and instead invests in things that are bad for its ranking but good for its students' job prospects, won't students ignore the rankings and flock there?  Is there really a collective action problem after all? Ribstein answers his own question, although I think he hates the answer enough to not really believe it:

Maybe the argument is that law schools must bow to the ratings god because law firms bow too and will only hire from top ranked schools.  So US News has covered the eyes not only of law students but of savvy, market-conscious employers.  In other words, the “collective action problem” requires us to ignore the possibility of an efficient market where both buyers and sellers are sophisticated.  If this is realistic then capitalism and not just legal education is in trouble.

But of course there's a wealth of evidence that law firms are in fact just as much in thrall to the rankings as law schools. (In addition, the hypothesis that capitalism is in trouble does not, at the moment, seem particularly implausible).  The whole problem, on one level, is that law is an extremely hierarchical profession in which any deviation from what the authorities declare to be the legitimate hierarchy tends to be frowned on at best, if not treated with outright horror.  In other words, the power of the rankings is a product of the obsession with the rankings, rather than the other way around.

Ribstein goes on to note, correctly, that many of the dysfunctions of legal education are a product of cartel-maintaining regulations that constrain meaningful reform.  He suggests legal education should be unbundled in various ways, so that not everyone was required to purchase essentially the same three-year package of goods. Again I agree.  Ribstein then says:

Assuming legal education should be changed, what should law schools do now, or be allowed to do in a deregulated regime?  MacEwen and LawProf are both absolutely sure about the irrelevance of modern legal education to the job market.  Presumably they would want law schools to be more practice-oriented.  (emphasis added)
But MacEwen/LawProf are stunningly over-confident about their ability to see where legal education should go in a world in which the market for law-related jobs is rapidly and fundamentally changing.
I won't presume to speak for MacEwen, but Ribstein's presumption about my views is incorrect, which of course invalidates the assertion in his next paragraph that I'm supposedly stunningly over-confident about my ability to see where legal education should go (I also wouldn't assert that modern legal education is wholly irrelevant to the job market -- merely that its relevance is seriously sub-optimal.  Ribstein, like all of us, has difficulty resisting the pleasures of knocking down strawmen).  I certainly do not want legal education to become "more practice-oriented" as that phrase is currently understood in the legal academy, for, among other reasons, the very ones that Ribstein goes on to emphasize (the market for legal services is changing so rapidly that a "practice-oriented" legal education, as conventionally understood, is likely to soon be obsolete).

In short, although I suspect I have a good deal less faith in the ultimate rationality and socially beneficial effects of markets than Ribstein does, we agree more than we disagree about the current state of legal education. As to what specific reforms law schools ought to undertake, I've begun to discuss that, and will explore the topic in much more detail in future posts.


  1. Law firms rely on rankings not because the schools are so good, but, as Justice Scalia said about his own clerk hiring, "you can't turn a silk purse into a sow's ear."

    Firms rely on top law schools to sort candidates for them, not to add value. Firms don't have the time or resources to evaluate 45,000 applicants, so they let the admissions committees of 200 schools do most of the work.

    LSAT and GPA aren't perfect indicators of intelligence, or even your aptitude in the legal profession, but it's hard to imagine a viable alternative. There are some false positives getting in to top schools and some false negatives getting rejected, but I think they get it right most of the time.

  2. BL1Y, while I agree firms rely on top law schools to sort candidates rather than to add value, and that this reliance makes a certain degree of sense, I think there's evidence that the level of reliance leads to some pretty large inefficiencies and inequities. Is the 50th or 100th-best student at Harvard Law School really a better bet to be an excellent lawyer than a top ten student at a middling law school? It seems to be unlikely that this is so, given that many top students at middling schools are very talented people who are where they are because of personal circumstances, scholarship money, etc.

    The over-reliance on hierarchy in legal education and law in general is in my view pernicious. We see it everywhere: the assumption that an article in the Stanford Law Review is almost automatically better than one in the Boston College Law Review, the limiting of faculty hiring to people who went to top ten or even top five schools, the fact that the whole SCOTUS is now made up of people who went to HLS and YLS, and so on.

  3. Firms also rely on the rankings for their own prestige. They much prefer Harvard grads to number 30 grads, all other things equal, both to impress their clients and for their own psychic satisfaction.

  4. I am amazed at how many people can't put themselves back inside the head of their 22 year old, fresh out of college self. 22 years old and fresh out of college, you have never worked for a living. You have been a student your entire life, living off of other people's money. You know nothing about careers, job markets, recessions, debt, salary, benefits, etc. You have yet to experience any of this. And yet somehow you're expected to be capable of executing some sort of cost/benefit analysis of law school where both the costs and benefits are things you know nothing about. Ribstein's suggestion that the law school applicants "know what they are doing" is preposterous.

  5. The least plausible justification for elitism within the legal profession is that "we need to hire top graduates to impress our clients." I have never once in my Biglaw career had a client express any concern about where I or any of my colleagues went to law school. Indeed I can count on one hand the number of times I have been asked. Moreover, if you look at the resumes of the businesspeople that employ lawyers the vast majority of them did not go to "top" schools. The entry barriers in the business world are much lower than in law and people rise to the top on personality and merit, i.e. how they actually perform on the job. But lawyers like to pretend that they are aristocrats, and like the bluebloods of old must justify their social hierarchy somehow. Judging the worth of a mid-career professional based on their academic performance as an 18-year-old makes almost as much sense as the divine right of kings.

  6. LP: Definitely agree that firms overvalue the bottom of top schools, and undervalue top students at middle-ranked schools.

    Grades are a mix of smarts and work ethic, and it's that mix that's necessary for legal work. Undergrad GPA and LSAT can be gotten by either smarts OR work ethic, but you don't need both (172/4.0 and I was a drunken bum).

    I think the reason they still stick to the top schools so much is that you're basing the decision on only 6-8 grades, depending on if research/writing is graded. Unless you have a ton of As, or a few Cs and Ds, the numbers aren't statistically significant.

    There's also an increased cost in recruiting at more schools. Going from the top 15 to the top 50 increases your pool by more than 200%, and a bigger geographical area. Getting one marginally better candidate might not be worth the expense.

    I agree with @2:40 that firms aren't hiring to impress clients. Clients don't care what school you went to, and often don't even know the name of the junior associate doing the leg work. Partners hire associates based on who they think will be willing to put in long hours without screwing up or needing babysitting.

    The only people I can reasonably see being concerned with prestige are the law firm partners themselves. Upper management may want to recruit from the top schools as a signal to the rest of the partners of the firm's strength. If you go from hiring from Columbia to picking up students from Fordham, partners may grow worried and start looking for exit options.

  7. LawProf-

    Please please please do not start writing about the same esoteric garbage so many academics do on this subject. Stick to the real issues:

    1) Cheap government money = catalyst for perverse incentives and fraud

    2) Law professors, deans, and the legal education industry at large are sustaining themselves via the endless creation of debt slaves.

    3) Students are seeking deferred gratification by pursuing education at a ridiculous premium. Tenured professors suffer from serious entitlement issues and have 100% job security as most people suffer from the continued credit crunch. At worst, they are parasitic leeches. At best, they are lucky and should kiss every students' ass for supporting their jobs.

    4) Law professors actions should set the highest ethical standards as legal educators. Continued willful ignorance of the current predatory system is deplorable.

  8. "the rising cost of legal education today is out of sync with its expected value."

    Mine's worth zero dollars.

    So, you're wrong. Problem isn't the rising cost. It's not as if everyone and their cousin is getting a job but just can't crack $25K or something. The problem is that its a complete waste of time for like 50% of graduates at this point - it's a complete pointlessness.

  9. Chief Justice Warren BurgerAugust 19, 2011 at 7:35 PM

    Ah, the good old days when you could go to the crap St. Paul College of Law and rely on good old-fashioned political cronyism to be appointed Chief Justice of the Supreme Court of the United States...

    These days, I'd have a hard time getting a temporary document review job.

  10. It is extremely, completely, absolutely simple - and the only reason law professors deny the simplicity is because they want to obfuscate the issue and avoid the simple solution.

    The solution is honest, complete, granular disclosure of the kinds of jobs a law school's graduates get. Law School Transparency has a system that achieves this goal, yet not one school. Not Mr. Ribstein's, not Mr. Leiter's, not Mr. LawProf's, not one school has agreed to comply.

  11. P.S. Thanks to Mr. Ribstein for writing about the problem, if you're reading these comments. Like LawProf I mostly agree with you.

  12. Take away the unlimited credit/money provided by the Government in the form of student loans, and the "high cost of legal education" problem goes away in no time.

  13. Don't let those greedy scammers aka law "professors" intimidate you into silence. Of course they want you to be quiet. Their deep six figure salaries are dependant on the current model of legal education, propped up by easy loan cash and fabricated salary+employment statistics.

    Make no mistake, despite their vacuous speeches about pro bono and "giving back," they are a money-hungry lot. They will gladly throw you under the bus to keep the money flowing. It's one thing for a TTT washout like me to complain, but for an actual law professor to come out and say: "yes law school is a scam," That is a threat to the scammers plush and easy lifestyle, funded off the backs of heavily-indebted law students.

    Please don't give up lawprof. There are many who support you.

  14. BL1Y wrote, "172/4.0 and I was a drunken bum"

    Glad you know yourself. You epitomize why there are plenty of horrible employees from top schools and why the vast majority of first year top school associates do not make it to senior associate.

  15. There are alot of label whores in Cravath and in MickyDs. A snarky truth.

  16. I think None is right that when you look at the skewed cost/benefit ratio, problem is more on the benefit side.

    If it really opened up a lot of doors and qualified you for a number of interesting, fulfilling careers, and you got to spend 30-40 years of your life doing something meaningful, then even a $200-250k education would become worthwhile. But, it doesn't. The only door it opens up is the lawyer door, and it doesn't even open that one all of the time.

    @11:13: Unless you're doing a hard science degree, graduating from college with a high GPA isn't tough. I doubled in English and Philosophy, and minored in Chinese, and got my paper in just 3 years. Then, you have 1L year, which actually is a lot of work...for 9 months. After that, you're in class maybe 5 hours a week, and preparing for class another 5-10 hours, and that's how you spend 2L and 3L years.

    Going from a 10-15 hour work week to being expected to work a 60-80 hour week at a law firm? It's not a recipe for success. In fact, it makes me wonder what sort of personality disorders people have to suffer from in order to seamlessly make that switch.

  17. Re the question if a mediocre Harvard student is better than a top 10 student at a lower ranked school... Yes the Harvard student is better. I speak based on my experience with our summer law students. The high ranked lower school students are very hard working "joes". They can be trained to produce high quality reliable work, but trust me-- they lack that intellectual spark. Not much originality or fireworks in their thinking. The Harvard and Yale law types have their own problems. Many do not really want to practice law and are easily distracted or constantly angling for consulting, banking, or sexier opportunities. But if you catch even a medicre Harvard student on the right day, they can run circles around the lower ranked student.


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