Chapter 10 of Brian Tamanaha's Failing Law Schools explains why law school tuition throughout the rankings has risen to its current levels. After reciting the usual litany of causes -- ABA accreditation standards, faculty size and workload, faculty salaries -- he makes an important point: "[W]e must be careful not to misapprehend effect for cause -- mistaking what law schools have spent their stream of tuition dollars on for the reasons tuition rose." (p. 128) That is, while law schools have chosen to spend their revenue in certain ways, the price of law school is set by market demand and not the accounting cost of those choices. Market demand, in turn, is determined by willingness and ability to pay, and with the aid of student loans, law school applicants have been willing and able to pay rising tuition costs. In short, law schools have raised tuition because they can. (p. 132)
Tamanaha next discusses why law school tuition has risen to the precise level that it has over the last two decades. He pins the cause on elite law schools like Harvard, Yale, and Columbia that, due to their prestige and position as market leaders, charge the top tuition prices. Once the elite law schools set their tuition, all other law schools price in relation to the market leaders depending on their relative prestige and location (i.e., proximity to desirable job markets). Consequently, one can see law school tuition grouped in stepped intervals down the rankings.
The implication of Tamanaha's account is that a law school's tuition revenue is determined by the number of students that it can attract at the tuition it can charge given its market position. (Overall revenue would also include income from endowment and other income sources such as continuing legal education fees.) As noted above, however, the market does not dictate how law schools choose to spend that revenue. And the ABA accreditation standards leave law schools much flexibility in structuring their operations, so meeting those standards still leaves much revenue to allocate at the law school's discretion. Indeed, it would be the purest of coincidences that the cost of an ABA-approved legal education just so happens to equal the amount of revenue that a law school generates in the current market. (That ABA accreditation standards do not drive tuition levels to their current heights is discussed here and here.)
So, law schools generate the revenue that the market allows them, and the revenue is more than needed to operate in a way that meets accreditation standards. What, then, determines the other items on which a law school spends its tuition? Well, to answer that question, we should ask who determines these other expenditures. And the answer to that question is the administrators, faculty, and staff who run the law school. In other words, the personal, professional, and institutional preferences and incentives of those decision makers dictates the choices that shape of the modern law school. So, the following allocations of law school revenue, all of which Tamanaha criticizes in Chapter 4, are all determined by law school administrators, faculty, and staff:
- Law school salaries
- Faculty teaching loads
- Faculty hiring
- Faculty travel and research budgets
- Faculty research stipends
Note that Tamanaha writes that he reduced or eliminated many of these items in his short stint as interim dean, and so his criticisms are backed up by his actions. (p. 7)
The above leaves me with two take aways. First, the cost of legal education is set by the willingness and ability to pay law school tuition. Consequently, the cost of legal education bears no necessary connection to what it would cost to provide a quality legal education in an efficient manner. Second, those responsible for running law schools have allocated tuition revenue in ways that are open to question. As tuition revenue decreases due to slackened demand for legal education, we will see how these same decision makers re-allocate scarce resources among competing wants and needs. I will look forward to reading the book that tells the story of this next chapter for legal education. But for now, I need to get back to living it.