The Faculty Lounge

Cunningham's Contest For Contracts in the Real World 2nd ed

Larry Cunningham of George Washington Law School is preparing the second edition of Contracts in the Real World.  The book is outstanding and a great idea -- and I imagine it should be replicated for a bunch of the courses in the curriculum.  I'm thinking wills and trusts in the real world would be a big hit!

Anyway, Larry is turning to the market to get ideas for the next edition.  Via his twitter feed, I see that he's offering a copy of Contracts in the Real World to those who suggest a story that is chosen for inclusion in the next edition.  More details on the book are at Cambridge University's webpage.

Heat vs. Light IV: On Conditional Law-School Scholarships and Judging Conduct “Good” or “Bad,” Broadway and Hollywood Edition

The texts for today’s homily are from Guys and Dolls and The Little Mermaid.  Our first subject is Big Jule (alternatively pronounced, depending on the production, "jool" or "julie"), the enormous and imposing gangster from Chicago.  Big Jule has come to town, flush, looking for a high-stakes crap game.  Near the end of the musical, that game comes to a climax in the local sewer.  After some unfortunate early losses, Big Jule has removed his coat and, with his revolver gleaming in plain view in his shoulder holster, pulls from his pocket his special “lucky dice.”  These dice appear to everyone else to have blank faces because, Big Jule reveals, they have spots that only he can see.  Miraculously, Big Jule’s luck turns, and he wins several big bets. When some of the other gamblers complain, Harry the Horse helpfully explains that “Big Jule cannot win if he plays with honest dice.”

Later that evening, disarmed and on the losing end of an unconventional bet with Sky Masterson, Big Jule finds himself obligated to attend a revival meeting at the Save A Soul Mission.  Compelled by his bet to participate in the meeting and confess his sins, Big Jule makes a clean breast of it:  “I used to be bad when I was a kid.  But ever since then I gone straight, as I can prove by my record — 33 arrests and no convictions.”  The prayer meeting is, improbably, a success; lovers are united; and everyone lives happily ever after.  Big Jule presumably returns to Chicago to resume his blameless life.   

I hope you’re smiling.  Now I’m going to ruin everything by explaining why this wonderful story is funny.  (A quick editorial aside before we begin:  Guys and Dolls is not timeless in every respect, of course.  It includes gender stereotyping and other cultural assumptions that, from our 21^st-Century vantage, seem not-all-that-quaintly anachronistic.  But the features of the story that I have excerpted above seem sufficiently salient to the matter at hand that I think we can make good use of them here.)  Once again, the heavy lifting begins after the jump.

Heat vs. Light III: A Call for Some Clear Thinking and Clear Talk About Law-Graduate Employment Reporting

When I wrote my most recent post in this series, I thought its subjects—“what [law-graduate] employment and earnings data ought generally to be presented, and whether the way such data are generally understood makes their presentation subject to misinterpretation”—were settled, and peripheral to the broader topic of the series.  (Those keeping score at home will recall that the broader topic of the series is the importance and limitations of Mike Simkovic’s and Frank McIntyre’s recent scholarship on the value and purpose of legal education.  The first post is here; the second and more recent one is here.)  Unfortunately and surprisingly, my previous post has proved much more contentious than I anticipated, spawning dozens of Comments here and at least two posts on other blogs (Mike Simkovic on the Leiter blog here, and Brian Galle on Prawfsblawg here). 

As is so often the case, the contention seems to spring from a few basic but important confusions.   Actual common ground having proved too scarce to hope for, in the interest of mutual comprehension I attempt here to untangle the skeins that the combatants seem to be throwing past one another.  I hope to clarify where and how we disagree, and why I hold the views I do.  If you agree with me, that’s nice too.  If you disagree, I invite you to explain clearly how and why.

Advance warning:  This post is a bit longer than usual (around 2,800 words).  The public discourse on these issues is so mixed up that it takes some doing to untangle it.  I beg your indulgence, and thank those who make it to the end for their dedication and patience.   The heavy lifting begins after the jump.

Heat vs. Light II: It Matters Who Counts and Who Cares

This is the second in what I intend to be a short series of posts on the importance and limitations of Mike Simkovic’s and Frank McIntyre’s recent contributions to the literature on the purpose and value of a legal education.  (The first is here.)

I’ll devote this post to setting aside what I think is a peripheral issue that has occupied some of the resurgent debate spawned by Mike Simkovic’s series of posts on Brian Leiter’s blog.  In recent exchanges, this issue has emerged as a series of accusations and assumptions about what employment and earnings data ought generally to be presented, and whether the way such data are generally understood makes their presentation subject to misinterpretation.  A lot of the recent controversy has focused on whether, when a law school reports its graduates’ employment numbers, “employed” should or should not include part-time, short-term or non-law-related employment; and whether “unemployed” should include only those actively seeking work, excluding the category the ABA collects as “unemployed—not seeking.”  Similar disagreements persist over how to count school-funded positions, and what qualifies as law-related employment, though these are not front-and-center in the recent exchanges I’m writing about here.

Mike’s recent posts have taken the strong and categorical view that law schools, NALP and the ABA ought to report law-graduate employment the same way the U.S. government reports on employment generally, and that any other view is ignorant or misinformed.  Board of Labor Statistics and Census data (among others) report people as “employed” if they have any kind of work at all, including work that is part-time, short-term, or (in the case of law-school graduates) entirely unrelated to their legal education; and as "unemployed" only those who are actively looking for work.  The widely articulated criticism “that law schools behaved unethically or even committed fraud . . . by presenting their employment statistics in a misleading way,” says Simkovic, “comes down to this:  The law schools used the same standard method of reporting data as the U.S. Government.”  Any contrary view, he argues, is “based on an incorrect belief that law school only benefits the subset of graduates who practice law . . . ,” a point he not infrequently expresses as an impatience for those who would be influenced by near-term results resembling the ones they might desire for themselves rather than more dispassionately considering lifelong outcomes of the JD population as a whole to assess their prospects.

Not so fast.  It matters who counts, and who cares.  As for who counts, there is a very significant issue in equating the accuracy and reliability of statistics gathered and disseminated by disinterested government employees with those gathered and disseminated by self-reporting law schools, especially in an environment in which both rankings and prospective law student decisions essential to the welfare of the reporting school are often based on what it reports.   I have no doubt that many schools are meticulous and unstintingly honest in their self-reporting.  But we already have several documented incidents of motivated or flatly dishonest reporting, and my regretful suspicion is that such discrepancies will prove to be more common than anyone would hope as the ABA starts auditing.

As for who cares, my modest proposal is that people should get the information they want in the terms they are most likely to understand.  I would guess that a libertarian economist like my friend Mike Simkovic agrees, in which case his arguments on these issues don’t square with our apparently shared principles in at least two important respects. 

First, with respect to the proposition that people should get information in the form they are most likely to understand:  It is demeaning and more importantly inaccurate to argue that everyone understands—or any “reasonable” person should—that law schools reported employment statistics the same way the government does.  In fact many if not most people relying on US News rankings and law-school statistics (among others, tens of thousands of prospective law students and their families each year) didn’t understand that at all, which is why the ABA stepped in to change the reporting requirements in 2010.  I personally was stunned when I first learned that law schools’ “employment” rates reported before 2011 included part-time, short-term and non-law-related work.  I am not, as I have previously cautioned all of you, a social scientist, but I daresay I’m no more stupid or ignorant than the next guy.  Countless others have expressed the same surprise, and even greater surprise at the discrepancies between “employment” as reported before 2011 and the more granular information reported afterwards.  We needed more detailed and explicit reporting for the same reason that just about every state has consumer-protection legislation governing the form and content of disclosures regarding common consumer transactions:  You take your audience as you find them. 

Second, with respect to giving people the information they want:  Simkovic and McIntyre are free to argue (as they do) that any prospective law student’s interest in the nature or duration of near-term post-graduate employment is “based on an incorrect belief that law school only benefits the subset of graduates who practice law . . . .” And they have in fact presented significant empirical evidence suggesting that it is possible for some people to overemphasize these near-term details at the expense of best-informed decisionmaking.  As I will discuss in future posts, that doesn’t mean that these conclusions should immediately be uncritically accepted as immutable laws of the universe, and it especially doesn’t mean that they are true for all of the people all of the time.  And I assume that, even if they are fully convinced of the truth and immutability of their conclusions (a conviction I suggest is premature), they are not arguing we should withhold information from people so that they can make decisions that the authors consider “better.”

Just as importantly, Simkovic and McIntyre’s studies attempt to quantify the effect of a JD degree on career earnings, and offer suggested courses of action some might choose to take if their goal is to make as much money as they can over a lifetime.  No one could claim that this is an irrelevant perspective, but it is hardly the only one we see:  While it certainly isn’t true of everyone, many people actually go to law school because they want to be lawyers.  Some crave the drama of the courtroom; some have specific social or political purposes in mind; some (and there is at least one study suggesting that this may be particularly true of some who attend lower-ranked law schools with less robust employment prospects and are among the first in their families to seek higher education) enjoy satisfaction from the prestige of being a professional.  Even the most doctrinaire neoclassical economist would not presume to argue with a consumer’s utility preferences—which is just econo-speak for there’s no accounting for taste.  For the population—and I will suggest that it is a significant one—that specifically wants to be lawyers, statistics about any old job held by JDs are not very helpful. And if you’re still thinking that this doesn’t reflect the real thoughts of real people in the real world, consult the recent exhortation posted by the dean of Cooley Law School—an institution that, with all respect, has an uninspiring recent track record in placing its graduates in lawyer jobs—proclaiming “Now Is the Time to Fulfill Your Dream of Becoming a Lawyer!”

So let’s talk about what information people might want, and let’s talk about how they ought to consider using it.  I think Mike Simkovic’s recent posts on the Leiter Blog focus predominantly on just that, and hats off to him for doing so.  Let the discussion continue. 

But I do want to close by taking issue with one of those posts, which I view as a cautionary tale about the temptations of partisanship.  On March 31, a Berkeley Law professor published an op-ed in the New York Times entitled “Law Schools and Industry Show Signs of Life, Despite Forecasts of Doom.”  The first paragraph poses the question “is now a good time to go to law school?” and the balance of the op-ed argues hell yes, focusing on (among other things) the employment prospects of recent graduates of Georgetown Law, and on the growth of “quite profitable” large law firms and in-house law departments to argue future need for “lawyers, and plenty of them.”  Kyle McEntee (of Law School Transparency) and Steven Harper (of Belly of the Beast) both took strong issue with these arguments on a number of grounds, principally that they were inexcusably sloppy and cherry-picked statistics misleadingly—for example choosing one of the top law schools’ employment outcomes for an example when scores of them have much worse results; suggesting that large firms are hiring aggressively when in fact they are hiring about 30% fewer new lawyers than they did seven years ago; and using part-time, short-term and non-law-related employment outcomes to argue that we could anticipate lots of future demand for lawyers.

One of Mike’s posts not only defended the op-ed uncritically, but did so in terms and in tone that (I hope he’ll forgive me for saying) fall well below the standards I have come to know him for.  “Mr. McEntee’s problem,” Mike wrote, “is not that The New York Times got the facts wrong.  His problem is that The New York Times got too many of the facts right.  Mr. McEntee simply dislikes the facts.”  With all respect to Mike Simkovic, that’s really quite unfair.  In my own view, McEntee and Harper both nailed it.  The op-ed author used cherry-picked statistics including non-lawyer employment and lawyer underemployment to predict (among other things) the future demand for lawyers.  That’s misleading.  And the entire thrust of the op-ed—“is now a good time to go to law school?” and can those who apply to law school now expect to work as lawyers?—is antithetical to Simkovic’s and McIntyre’s hypotheses, which are that it’s a bad idea to ask whether now is a good time to go to law school (because you can’t know, and any one time is as a matter of prediction as good as any other), and an even worse idea to worry about whether you’re going to be a lawyer when you’re done (because that could distract you from the long-term earnings enhancements that they believe JDs offer most comers).  Mike should have lambasted the editorial for citing his work while missing his point.

Next time we’ll talk more about Mike’s points, including both their valuable insights, and those insights’ potential limits.

--Bernie

 

Much Heat, Some Light in Resurgent Law-School Eschatology Debate

There has been a flareup in the debate over the purpose and value of law school.  The new discussion has been prompted by a series of posts by Michael Simkovic on Brian Leiter’s Law School Reports in which he summarizes and elaborates on his work with Frank McIntyre in two recent articles, “The Economic Value of a Law Degree” and “Timing Law School.”  (You can get Mike’s complete set of posts—there are, by my count, 14—on Leiter’s blog by starting here (posted March 19) and scrolling up.  Paul Caron has collected links to commentary on the commentary from both sides of the debate here, not all of which are subject to the objection I register below.)

Full disclosure at the outset:  Mike Simkovic visited with us here at UNC last term, where he proved himself an excellent teacher and an engaging colleague.  I consider him a friend.  Of course, I don’t always agree with my friends on everything (maybe that’s why I have so few), and as you’ll see I don’t agree with Mike about everything he’s written.  (Editorial Aside:  I recognize that there may be no intrinsic reason why anyone should care whether I agree with Mike or not.  But since you’re reading this, I’ll indulge the fantasy that you’re a little bit curious, if not about whether then at least about why.)  All that said, anyone with any intellectual honesty must appreciate the importance of Mike Simkovic’s recent contributions to the ongoing public discussion on the purpose and value of legal education.  His work (and let’s just agree that from here on “he” stands for both Mike and his co-author) is by my lights the first serious, empirically grounded, methodologically thoughtful showing that things—at least some things for at least some people—may not be quite as bad as some of us have feared.

Predictably, extremists on both sides of this longstanding debate have popped up to demonize or deify Prof. Simkovic and his work, vilifying or vaunting his motives and methods in sweeping and categorical terms.  I have only one request of all of you—please stop.  Stop the toxic name-calling.  Stop erecting effigies of your adversaries’ graves so you can dance on them.  The subject is much too important to be obscured in petty rivalries.  You’re not enlightening anyone, and it’s way too early to claim a victory lap, let alone drag your enemy in circles at the back of your chariot for the next nine days.  (I, at least, perceive Mike as having managed to hold himself mostly above the fray thus far, with only an occasional descent into the snippy or snide when goaded a bit too much.  But that happens to all of us now and then—not least, I regret to say, your not altogether gentle scribe.  I hope we’ll both try harder from here on out.)

In order to keep length manageable, I propose to share several posts over the next couple of weeks with some thoughts on Mike Simkovic’s important contributions.  I’ll try to point out some of the questions I think his work addresses, and the questions we still need to explore.  Like it or not, this kind of discussion tends to crowd out those prone to announcing that each new datum proves them right about everything all over again.

I’ll conclude this post and set the table for future ones by summarizing Mike’s principal conclusions in broad strokes.  “The Economic Value of a Law Degree” uses some accepted techniques of labor econometrics and a federal government dataset to compare the earnings differential over an entire career of people who get a law degree compared with people who end their higher education with a bachelor’s degree.  The paper concludes that, whether or not the JDs work as lawyers (and taking into account the costs of law school), a significant majority of them earn appreciably more over their careers than the BAs do.  “Timing Law School” builds on these conclusions, and determines that it is not possible to predict a better or worse time to attend law school in order to maximize your lifetime earnings.  That is in part because, the study finds, while those who graduate law school into a bad economy suffer some early hits to their earnings and their earnings advantages over BAs, and those who graduate law school into a booming economy enjoy some corresponding early advantages, these differences tend to moderate and then disappear over the longer run of a full career—again, whether or not the JD practices law.  (It’s also because it proves to be just as hard to time the labor market as it is to time the stock market; that is, to the extent starting your law career in a better or worse economy affects your overall lifetime earnings, there’s no point in trying to take advantage of it, because you can’t reliably predict at the time you apply to law school what the economy is going to be like when you’re done.)

Again, I take issue with these conclusions in some respects regarding (among other things) their breadth and predictive value for reasons I hope to explain in coming posts.  But now you have the big picture.

Stay tuned. 

--Bernie

Duke Law Students At FT Alphaville

Hooray for Duke Law Students Sriram Giridharan, Martin De Jong, Barret Jackson Nye, Brandon Rice, and Melinda Goralczyk, whose proposal to restructure Ukrainian debt is featured in depth over at FT Alphaville!!

 As someone who has tried for years – unsuccessfully – to grab some attention from Alphaville’s savvy writers, I can say that this is quite a feat.  Alphaville’s readership is highly sophisticated, especially on issues of sovereign debt, which are featured regularly, so this is a real vote of confidence for the students’ knowledge and creativity in coming up with this proposal. 

I have it on good authority that this is a truly exceptional group of students, so congratulations to them on a job well done, just as the semester is wrapping up. 

Law School Value: Initial Outcomes, Lifetime Outcomes, and Competition

For those not already following Michael Simkovic's posts at Leiter's Law Reports, I suggest you do so if you are at all interested in the question of how we should measure law school outcomes. I realize that there are a subset of people who will simply never give any credence to labor economics methods. I, for one, have found it helpful to see how we can use data to make decisions, and depending on the decisions we might need to make, the data might differ.

For example, do we want to use data to compare law schools to each other, or against the next best outcome? Here, I think that Simkovic and McIntyre have the upper hand. I have yet to see a rebuttal that uses solid evidence to refute their data or their methods. It's true that they've got some uncertainty after the end date of their data, but employment numbers seem to be going up, not down. Our Full-Time bar pass/JD Advantage jumped 14% this year, and 90% of our grads had some job 10 months out. While the jury is technically out, Simkovic points to other data in his blog posts that imply that the gap between law school and college hasn't changed after the end point of their last data. I've seen many intuitive attacks, but Simkovic parries each one with data. I, for one, favor that approach. And when there is contrary data, I'll be interested in seeing that.

But I also think there is a fairness/consumer protection part of the story that Simkovic doesn't handle as well, in my opinion, and maybe that's why some folks continue to criticize. More specifically, when we are comparing between law schools, there's something to be said about presenting the data in a way that fairly describes employment outcomes. It's fundamentally unfair to allow one school to game the system against all others, and it's even worse to allow all the schools to game the data. And it's unfair to students, because they can't fairly judge between law schools.

Thus, I think there should be room for both worlds, and I think the shrillness of the debate is just missing this. We should be judging law schools on lifetime outcomes, as the evidence is pretty clear that law graduates do better than college graduates of any discipline. But we should also consider accurate (and precise) initial outcomes because a) people tend to more highly value stuff that happens sooner rather than later, b) initial outcomes can affect final career trajectory and thus we should try to maximize options even if not everyone can do what they dreamed of, and c) there is an important market regulation function of short term data.

CFP: Third Annual Workshop For Corporate & Securities Litigation

Third Annual Workshop for Corporate & Securities Litigation

Boston University Law School
October 2-3, 2015

This annual workshop brings together scholars focused on corporate and securities litigation to present their works-in-progress. The papers may address any aspect of corporate and securities litigation or enforcement, including but not limited to securities class actions, fiduciary duty litigation, or comparative approaches to business litigation. We welcome scholars working in a variety of methodologies, including empirical analysis, law and economics or other fields, and traditional doctrinal analysis. Participants will generally be expected to have drafts completed by the fall, although work in a more formative stage may also be included. Each author will provide a brief introduction, but most of the time in each session will be devoted to collective discussion of the paper.

Submission Procedure
If you are interested in participating in the conference, which will be held at Boston University Law School on October 2-3, 2015, please send an abstract or draft of the paper you would like to present tocorpandseclitigation@gmail.com no later than May 29, 2015. Please include your name, current position, and contact information in the e-mail accompanying the submission. Authors of accepted papers will be notified by June 30, 2015.

Questions

Any questions concerning the workshop should be directed to the organizers: Professor David Webber (dhwebber@bu.edu), Professor Jessica Erickson (jerickso@richmond.edu) and Professor Verity Winship (vwinship@illinois.edu).

Inequality and the Workplace: Stetson Law Review Symposium on March 6th.

On Friday, March 6^th, the Stetson Law Review will host a daylong symposium titled:  Inequality, Opportunity, and the Law of the Workplace.  The symposium will explore the relationship between growing economic inequality and the regulation of labor and employment in the United States.  What are the driving forces responsible for widening income or wealth inequality?  Should labor or employment laws be used to counteract income or wealth inequality?  What types of inequality can or should employment laws address?  Can labor or employment laws be effective in reducing inequality, given structural impediments such as globalization and the corporate form’s division of capital from labor?  Panelists will also explore some underappreciated practical and legal limitations on improving the economic mobility of low wage workers, including garnishment laws and the First Amendment’s impact on unionization. 

Wilma Liebman, former Chair of the National Labor Relations Board, is the keynote speaker.  Featured speakers include Timothy Noah, Politico’s Labor and Employment Editor and author of The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It, and CATO Institute Senior Fellow Michael Tanner.  David Cay Johnston (Syracuse), a Pulitzer-Prize winning journalist and the editor of Divided: The Perils of Our Growing Inequality, will serve as the moderator for a series of panels, which will including Samuel Bagenstos (University of Michigan), Matthew Bodie (Saint Louis University), Charlotte Garden (Seattle University), Dr. Larry Mishel (President, Economic Policy Institute), Paul Sonn (General Counsel/Program Director, National Employment Law Project), Katherine Stone (UCLA), Steven Willborn (Nebraska), and Michael Zimmer (Loyola-Chicago).  Written articles and essays will be published in the Stetson Law Review.   

Kudos to the Law Review and my colleague Jason Bent for putting together such a stellar group.  The entire symposium is available for viewing via live webcast.  For registration or more information about the symposium, go here. 

Dacheng Dentons Is A Big Deal, But Is It A Big Deal?

Commanding the headlines in the legal press for the last week or two is the tie-up between the Chinese law firm Dacheng and the international law firm Dentons.  As law-firm deals go, this is a very big one by any measure.  Dacheng is the largest domestic law firm in China, with several thousand lawyers.  Dentons is one of the UK-US leviathans, a product on the model of DLA Piper and Hogan Lovells of a US conglomerate centered on what was once Chicago-based Sonnenschein Nath & Rosenthal and the UK snowball known as Dentons.  The resulting combination will boast nearly 6,600 lawyers, well over half again as large as what had been the biggest nongovernmental law firm in the world, Baker & McKenzie, with a mere 4,100 or so.

So Dacheng Dentons is a big deal.  But is it a Big Deal?  Is it transformative, an augury of things to come in BigLaw?  Some consultants and commentators seem to think so.  A recent report (link to Lexis) cites various “experts” opining that the combination “mark[s] a new age of megafirms that may leave the legal industry with only firms that are tiny or enormous.”  I think that’s (to put it charitably) doubtful, the vision of naturalists who see a whale and predict that everything in the sea will eventually either become just like it or never outgrow a minnow. 

There are at least three reasons to doubt Dacheng Dentons as a Template for Everything.  The first one is that there’s a lot to consider about how the combination is going to turn out.  Dentons  is a recognizable type in Global BigLaw—as described above, a US-UK combination of high-end international firms whose business model is centered on charging premium rates for complex, multijurisdictional work this class of firms claims is best performed by a single organization with integrated local and international expertise in many places at once.  Dacheng is reportedly something very different, a huge but decentralized network of domestic lawyers that has grown by what one student of China’s legal markets (link to Lexis) calls a “franchise” approach—“Dacheng goes to a province, looks for a local firm, negotiates with them, and then tells them ‘You can use our name.’” 

It is hardly an original observation that the success of a law-firm combination depends on full and effective integration of the constituents' cultures, networks, and economics.  Otherwise all you get is something that is a lot bigger with a lot more overhead and no profitable synergies—something consultants who have not recovered from business school call a lose-lose.  It is also commonplace to observe that differing structures and cultures challenge productive integration.  Dacheng’s “franchise” structure is radically different from, and not easily reconciled with, Dentons' aspirations to be a well-oiled, fully integrated international juggernaut.  Who’s in charge, and how do you draw these thousands of loosely affiliated lawyers scattered across an enormous country into something much more coordinated than they may be accustomed to? 

The economics of the two models are drastically different as well.  Dacheng reportedly generates revenue per lawyer of $78,000 among its 4,000 or so Chinese lawyers—less than one-tenth the revenue per lawyer at Dentons and firms like it.  Do these practices fit together at all?  Remember that Dentons already has traditional foreign-firm offices in China, with partners making traditional seven-figure foreign-partner incomes, and associates paid traditional six-figure US-UK salaries.  The New York Times reports Dentons Chair Joseph Andrews as saying that “the new venture would be more integrated than most, with a unified compensation system across its network of partnerships.”  How are all these people and their practices going to fit together when they are housed in the same offices under the same management?  Which clients get charged according to which constituent’s rate structure?

Aside from these questions about whether and how the combination will work, the second reason to doubt the coming primacy of this law-practice model is how competitive the model will actually prove to be.  Very big firms of this kind are predicated on the theory that a firm with established presence and expertise in a great many places will do a demonstrably superior job at serving global business concerns and handling complex multijurisdictional transactions, and that clients with this need will recognize the quality and efficiency of these services and gladly pay for them.  And that theory may prove out.  But it may not.  One thing we know for sure is that maintaining many offices in many places (Dacheng Dentons will reportedly have 120 offices in 50 nations), and building out the technological and management infrastructure necessary to coordinate meaningfully among them, is enormously expensive.  Less gargantuan international firms with an ability to find skilled lawyers in places where they are not themselves present to meet occasional need suffer far less of these diseconomies of scale.  And early reports of the performance of some of these agglomerations of acquaintances on the Dacheng Dentons model suggest that you don’t always get the best lawyer for every purpose in every market at a single firm, leading to uneven quality in the large international engagements that are precisely the ones in which consistently high quality through one-stop shopping is the signal selling point the huge firms claim to offer.  (For a characteristically thoughtful and vivid exposition of these points, see this essay by Mark Hermann.)

Third and finally, even if the combination works perfectly, and even if it proves to be a winner in the market for legal services, there is no rational reason why the market would force every law firm of any size to be either a Dacheng Dentons leviathan or a mom-and-pop minnow, as some “experts” seem eager to predict.  Law firms serve their clients.  Successful law firms know their clients and what those clients need in services and pricing.  No law firm, or at least no law firm I know of, considers itself all things for all people.  So unless you believe that every business in the world will eventually prove to be either a globe-bestriding colossus like Coca-Cola or Exxon-Mobil, or a corner bodega or hairdresser, you recognize that there is likely to be a very wide range of business sizes and geographical footprints for as far into the future as any of us could possibly see.  In fact, one of the most important developments in the legal services market over the last several years is the demonstrable trend among larger businesses with high-end needs traditionally served by the biggest and highest-priced firms to move significant amounts of premium-priced, complex work to less-large and less-sprawling firms willing and able to charge 10% to 30% less to do it.  In short, firms with different skill and service profiles at different price-points are going to prove more competitive in many sectors of a diversified 21^st-Century economy, both here and abroad, than any one model would prove across all.  And that’s particularly true for the super-premium-priced, super-high-overhead Dacheng Dentons model that is rationally constructed for a particular, relatively limited, category of legal work. 

So will Dacheng Dentons be a force to be reckoned with in the growing market for international legal services?  Maybe.  Is this the end of the world as we know it?  Nah. 

Bernie

A New Student Debt Ranking

By now, most Lounge readers are likely already familiar with SeekingArrangement, a website that connects sugar “babies” and “daddies.”  For those that aren’t, SeekingArrangement claims 3.6 million active members, 2.6 million of them babies and 1 million daddies (and, supposedly, mommas, though other references on the site are exclusively to daddies).

US Colleges With The Highest Number of Babies

According to the website, sugar daddies receive no strings attached relationships with attractive women. In exchange, sugar babies receive “shopping sprees, expensive dinners, and exotic travels,” a “mentor” who can provide “valuable guidance,” and the freedom to no longer worry about unpaid bills.

But that’s all old news. 

What is new news, according to the Atlantic, is the impact that the rising cost of student debt has had at SeekingArrangement.  Apparently, sugar daddies are rushing to the rescue at campuses across the country, volunteering to subsidize tuition costs:

What might have been little more than a nuisance in the past has turned into an outright hindrance to many students’ financial security: It takes about 14 years on average to pay off the debt. As a result, young women across the country are turning to sugar daddies in droves. Many of them use SeekingArrangement, which describes itself as "the world’s largest Sugar Daddy dating site." More than 1.4 million students have signed up as members, including nearly 1 million in the U.S., according to the company. The website claims that 42 percent of its members are students. . .

 

Colleges With The Highest "Babies" Growth (2014)

Georgia State, Arizona State and Kent State are all sugar baby hot spots.  But it is NYU, which charges $46,170 a student for tuition and fees, that this year became the first college ever to cross the "1000 sugar babies" threshold. 

(HT: Joan MacLeod Hemingway)

Diversity and the Professions at AEA Tomorrow

Having just finished up the Business Associations program on The Future of the Corporate Board this morning, I’m now off to Boston for a panel tomorrow at the American Economics Association Annual Meeting.  If any other law profs happen to be wandering the halls, definitely stop in to say “hello.”  I’ll be discussing my research on board diversity, and whatever lessons it may hold for diversity in the professions.  Other panelists will discuss the single woman penalty and diversity and the innovation economy.  Fellow law prof Laura Beny (Michigan) is moderating and will also discuss diversity and law firms. 

Unfortunately, the timing of the two conferences was such that I’m only able to attend the last day of AEA.  That’s too bad, as there were a number of sessions that I really wanted to attend.  Ah well. Can’t be everywhere at once. 

 

Jan 05, 2015 8:00 am, Boston Marriott Copley, New Hampshire

National Economic Association

Diversity and the Professions (J4)

 

Presiding: LAURA N. BENY (University of Michigan)

 

Diversity and the Innovation Economy

LISA D. COOK (Michigan State University)

 

Diversity and Performance of Elite United States Law Firms

LAURA N. BENY (University of Michigan)

 

Diversity and Talent at the Top: Lessons from the Boardroom

KIMBERLY KRAWIEC (Duke University)

 

Leadership and the Single Woman Penalty: A Role Expectations Account of Early Career Barriers to Promotion for Female MBAs

JENNIFER MERLUZZI (Tulane University)

DAMON PHILLIPS (Columbia University)

 

Discussants:

TERRY-ANN CRAIGIE (Connecticut College)

ROBYNN COX (Spelman College)

 

Risk Regulation Slides Are Posted

As I mentioned in an earlier post, the OECD Regulatory Policy Division, together with the International Risk Governance Council (IRGC) and the Rethinking Regulation program at Duke University recently held a conference on Improving Risk Regulation: From Crisis Response To Learning and Innovation at the OECD Conference Centre in Paris.  All of the slides from the conference, including mine, have now been posted online, and some of you may find some of the presentations useful. 

From the IRCG conference website:

New approaches to regulation may be stimulated by careful research and practical experience, but also spurred by crisis events that alter perceptions and spark demand for policy change.  What can we learn from these diverse sources of regulatory change? How can we do a better job in fostering constructive regulatory improvement?

The conference identified, evaluated and discussed the relevance and effectiveness of new approaches to improving risk governance, both as they result from responding to and learning from crises, and as deliberate innovations in how regulatory power is exercised and shared.  It built upon: 

• Work from the OECD Regulatory Policy Division about “Risk and Regulatory Policy – Improving the Governance of Risk” and recommendation about performance- and consumer-based regulation
• The project on “Recalibrating Risk: Crises, Perceptions and Regulatory Change,” of the Rethinking Regulation program at Duke University, which investigates how regulatory policies and institutions change in response to crisis events, and seeks lessons for the future
• IRGC’s work on the role of regulatory frameworks and institutional arrangements in the context of risk governance, including mechanisms for adaptive regulation that are able to update in response to new information and contexts.

The conference brought together practitioners of risk governance and regulation from private, public and academic organizations interested in sharing knowledge and enhancing their understanding of crisis and new forms of risk regulation. 

To download slide presentations, go to the agenda and click on the respective presentation. For a short summary of each section, click on “Highlights” next to the session title.

Meet me in Paris!

Dear colleagues,

We invite you to attend the conference on “Improving Risk Regulation:  From Crisis Response to Learning and Innovation,” to be held in Paris on 13-14 October. 

The latest conference agenda summary (version of 9 September) is accessible through the link at the bottom of this post.  

The agenda, further details, and links to register are at:  http://www.irgc.org/event/annual-conference-2014/ .

This conference is co-hosted by the IRGC (www.irgc.org ), the OECD Regulatory Policy Division ( http://www.oecd.org/regreform/regulatory-policy/ ), and the Duke University “Rethinking Regulation” program (http://kenan.ethics.duke.edu/regulation/  ). 

 

• The first day addresses how crisis events shape regulatory change and how regulatory institutions can learn from crises.  This is the theme of a research project we are leading at Duke University on “Recalibrating Risk: Crises, Perceptions and Regulatory Change” (book forthcoming in 2015). 

 

• The second day addresses how regulatory systems can be designed to learn and improve over time, both exhibiting adaptive policy innovation and stimulating technological innovation. 

 

• Case studies to be highlighted during the conference include the regulation of oil spills, nuclear accidents, financial crashes, pharmaceuticals, and chemicals; the use of behavioral insights and non-government networks in regulation; and more.

 

• Speakers will come from numerous countries, disciplines, and organizations.

 

We hope to see you there!

 

Best regards,

 

Ed Balleisen

Lori Bennear

Kim Krawiec

Jonathan Wiener

 

Duke University – “Rethinking Regulation” program

http://kenan.ethics.duke.edu/regulation/

in collaboration with

IRGC, www.irgc.org  

OECD Regulatory Policy Division,  http://www.oecd.org/regreform/regulatory-policy/

 

  Download Improving Risk Regulation - Summary Agenda v09Sept2014

Boosting Home Loan Activity: A Hidden Upside To Obamacare?

This morning I read, in the WSJ, that an astronomical 75 million people are struggling under unpaid medical debt.  "More than half of all debt-collection activity comes from medical bills, according to the Federal Reserve."  It's one factor that convinced Fair Isaac to announce a new model for credit scoring.  Fair Isaac has removed several types of late payment activities from the FICO calculus. 

Everyone is hoping that banks will now "be able" to issue more loans - and juice the economy - with these revised FICO numbers.  Maybe so, although I do have to wonder whether banks actually consider the newly deleted factors relevant to their loan activity.  If they don't, why have they been so reliant on FICO?  It seems to me that creating a FICO alternative can't be that difficult, given the existence of three competing credit agencies.  But in a similar vein, I wonder why banks would rely on the new FICO numbers of they DO care about late-paid bills.

I'm interested in something else, though.  These unpaid medical bills.  It sounds to me like one benefit to having more people insured is that this has the potential to free millions of people - or, prospectively, protect millions of others - from the vise of bad credit.  We've normally heard about the individual benefits of Obamacare, as well as the benefits to the medical industry.  Though I may have missed it, I haven't heard anyone link Obamacare to a boost in the housing industry and other are businesses dependent on freely available debt.  

I hope that FICO's tweak is helpful in making home loans more available to otherwise credit-worthy individuals.  But I'm even more hopeful that the ACA will yield this, and other not-yet-seen-benefits, by reducing the number of people strangled by medical debt.  

Still More Thoughts on Self-Delusion in the Legal Academy; Or, Accepting the Difference Between a Smokin’ Bucketful of Awesome and a Smoking Pile of Scrap

Recently I offered a post that tried to clarify some important misunderstandings of my earlier June 20 post.  The June 20 post had remarked on how the graduate academy in the liberal arts had fallen prey to the same motivated perception to which some in the legal academy have also succumbed—namely, that the tens of thousands of recent law grads unable to get a genuinely law-related job were just not making proper use of their law degrees (or alternatively really were making proper use of their degrees but didn’t know it).  The moral of the story, I suppose, is self-interest’s insidious power to quietly overwhelm any bulwark we try to erect against it, not least reason, good intentions, education, and most if not all of the Ten Commandments.

I explained in my last post that there are essentially three ways to think about the relationship between a course of graduate or professional study and any employment the prospective student may obtain after graduation.  One way is to posit that, for you, there is no relationship, and you are pursuing the course of study for its own sake without expectation of any practical benefit when you’re done beyond whatever enlightenment the education may confer.  This is perfectly valid, but highly personal and idiosyncratic, and not typical of the ordinary person.  The second way of thinking about the relationship between professional study and postgraduate employment is that there must be a relationship between the two such that the education is justified by the worldly benefits that it creates.  I suggested (based on analysis in my forthcoming empirical study of the job market for new lawyers) that this Practical Justification Test is met if either the postgraduate position requires the degree as a condition of employment, or the course of study provides dramatic and substantial advantages in obtaining or performing the job not more easily obtainable or substitutable (whether in nature or extent) another way.  If the job doesn’t meet this test, then there is a quicker or easier way to achieve the same or equivalent benefits, and the course of study wasn’t worth it. 

The third way of thinking about the relationship between graduate or professional study and postgraduate employment is, as I put it yesterday, that the course of study transforms you into such a Smokin’ Bucketful of Awesome that the degree alone routinely opens doors to countless jobs unrelated to the course of study that would otherwise be closed to you, or that you will be so much better at whatever you do that the degree is a Rocket to Success at almost anything.  That is a palpably unrealistic description of a law degree (or pretty much any other graduate or professional degree) that nevertheless can be heard among some law deans and admissions officers today.

In response to the post, I received a comment from an admissions officer at a good Midwestern law school that deserves serious consideration and a detailed response.  The admissions officer suggests, in addition to the three ways I advanced, “a fourth way to think about the relationship between seeking an advanced degree and the employment a student may obtain afterward”:

I think many students see the versatility of the law degree as a form of risk insurance. Their intent in attending law school may be to practice law and they'd be disappointed not to. But if they don't find “traditional” legal employment, they still might be able to make use of their law degree. It's common to run into law graduates who have ended up outside of traditional legal practice, but in a field for which the JD has some benefit. Is it wrong to point to such outcomes?  I think this could be valid in the PhD realm too. I think for most people it would be foolish to pursue a history PhD if their primary goal was to become a high school history teacher. But is it helpful for the candidate to know that if they can't find a tenure track position at a university, that PhD may still be useful for a high school teacher to land a position at a higher paying school district, or become department head ahead of other faculty?  So while it may be overselling to say that a PhD is perfect for someone seeking to become a high school teacher, or a JD is perfect for someone looking to do compliance, I think it's fair to point out to prospective students that these degrees might be beneficial in ways that are not obvious.  [Paragraph breaks omitted.]

Because this comment cogently describes a view not uncommon in the legal academy today, it deserves careful assessment.  Is this “fourth way” a constructive perspective on whether to pursue a law degree?  With all respect to everyone involved, as proposed above and typically presented it is an unacceptably incomplete and often misleading portrayal.

Let me explain why.  In broadest (dare I say philosophical) perspective, the path you walk from where you stand right now can go any number of different ways.  Having gone a ways down whatever path you choose, you will gain a perspective that you didn’t have at the time you chose the path that got you there.  Sometimes that perspective will be one you anticipated when you chose the path; sometimes it won’t.  This is really just another way of saying that most of us get wiser as we get older simply because we have the benefit of more experience over time. 

To be sure, some of us make better use of our experience than others, but pretty much no matter what path you choose, you will reach a vantage point for which you will discover uses that you might not have enjoyed if you had chosen a different path.  And this is true even if you make bad choices.  Our prisons contain fair numbers of people who, having made very bad choices, will tell you quite genuinely that they have learned a lot as a result (and I don’t mean this in any ironic or cynical sense; sometimes the lessons we are forced to learn the hard way are the ones that teach us the most).  This is not, of course, a reason for anyone to start committing felonies; it’s simply an illustration of the fact that it is quintessentially human to learn and grow.  Thus, for anyone open to the benefits of experience—and that describes most of us much of the time—even the worst life choices we make usually teach us lessons with real value.  Or as some of my older Yiddish-speaking relatives were prone to remark in times of failure or disappointment, “It shouldn’t be a total loss.”

Let’s apply this insight (assuming you can dignify it with that title) to the decision whether to buy a particular car, a decision many of us have faced at one time or another.  The used-car salesman is touting the value and utility of the car, assuring you it has everything you need to take you where you want to go.  You are understandably worried that the car may not live up to your needs.  One thing that the used-car salesman does not say is, “No worries, pal.  You should buy this car because, even if the engine implodes the minute you drive off the lot, the smoking pile of scrap that’s left will have measurable salvage value.”  We generally don’t buy cars for their salvage value, especially when any car you buy will have salvage value if it can’t serve the purpose you actually bought it for. 

I’m hoping an analogy to the decision whether to attend law school is emerging.  If you have your wits about you, you consider whether to go to law school taking into account the likelihood that the degree will take you where you want to go—at the very least, a job that justifies that course of study under the Practical Justification Test set out above (and that includes both Bar Passage Required and, properly defined, JD Advantaged jobs as far as I’m concerned).  But what if the car (degree) blows up the minute you drive it off the lot (graduate)?  And what if the car costs $150,000, and there’s a 50-50 chance (or worse) that’s it’s going to blow up as soon as you hit the open road?  What’s the value of what’s left?  Should you buy a law degree for its salvage value?  (And to anticipate an objection to the car-buying analogy, yes, we sometimes do consider resale rather than salvage value when we buy cars.  But when we do, we are assuming that the car under consideration, like the other cars we might buy instead, will serve its intended purpose and take us where we want to go for as long as we want to keep it, thus assuring that it actually has resale value.  When a law degree fails to get us a job that really meets the Practical Justification Test, that’s a car-wreck, and salvage value is all that’s available.  Put slightly differently, you can’t resell your law degree, though some have tried; if it fails of its essential purpose, all you can do is salvage your career.)

The more subtle student of the dismal science would point out that whether you buy a law degree for its salvage value should ultimately depend on (a) the likelihood the car will actually blow up when you leave the lot; and (b) what that salvage value is relative to the return you could get from investments of your time and money other than buying the car.  Fair enough.  There are some serious uncertainty and measurement problems in addressing these questions, but we do know something. 

Considering first the odds of an immediate car-wreck:  Based on the empirical analysis in my forthcoming article, the average student starting law school last fall has perhaps a 60% chance of getting any job upon graduation that meets the Practical Justification Test described above.  Of course, that chance varies quite substantially depending on the student:  A highly qualified student attending a highly prestigious institution has more than a 90% chance of getting a job that justifies the course of study.  A marginally qualified student at an unranked law school in a saturated market might have a 30% chance or less.  So a realistic assessment of your prospects—based on hard, objective evidence like the placement statistics at the school you’re considering, your LSAT, and your undergraduate GPA—is essential.  Law school is a much better bet for some than it is for others.

What about salvage value?  Here is where the wish is all too often father to the thought.  Law-school apologists assume very high salvage value for a law degree.  They express this assumption by positing both a broad range of non-law-related jobs for which the degree provides access not available without it, and a broad range of invaluable practical and performance-related benefits that the critical reasoning skills we teach in law school provide in almost any job.  Unfortunately, there is simply no empirical evidence that either of these assumed benefits exists for the typical person in any measure substantially greater than could be achieved by paths other than law school that require much less time and money.  If you’re going to be unemployed (as a double-digit percentage of recent law graduates are), you’re probably better off unemployed without three wasted years and $150,000 in debt.  If you get a job you could pretty much as likely have gotten without the law degree (high-school civics teacher; paralegal), you need to think about the difference between what you would learn in three years on that job without any education expense compared to where you are just starting that same job after a very expensive three years.

So does a law degree have any salvage value?  Undoubtedly.  Is that salvage value materially greater than what you could get (and the costs you could avoid) doing something else for three years instead of law school?  There’s no evidence that it is for many if not most people.  And to make things worse, it stands to reason that precisely those law graduates who are most likely to find their law degree failing its essential purpose (which is getting them genuinely law-related jobs) are least likely to achieve good salvage values.

But the key point here is that it’s not enough to say that a law degree has some salvage value.  You need to compare that salvage value with how well off you might be if you did something else, or nothing.  And that’s where the serious problem with our Midwestern admission officer’s justification emerges in high relief.  Slip a generic law-school admissions officer into our hypothetical in place of the used-car salesman.  One thing you won’t hear the admissions officer say is:

No worries, pal.  It’s true that, considering our school and your credentials, you have less than a 50% chance of obtaining a job for which your law degree will be a necessary or a very important and directly applicable qualification.  But you will learn things, and from time to time you’ll find some of those things relevant or even useful in some job unrelated to your education.  Of course, I can’t promise you that what you might learn doing something other than law school—something for which an employer might pay you instead of you paying us tuition—wouldn’t prove to be roughly as relevant or useful.  So are you in?

In other words, touting the salvage value of a law degree as “a form of risk insurance” without offering a clear-eyed assessment of how likely it is that the risk insurance will be needed, what its coverage limits are, and how cheaply you could get the same benefit another way is inexcusably incomplete.  It’s a failure to accept the difference between a Smokin’ Bucketful of Awesome and smoking pile of scrap.

 Bernie

More Thoughts on Self-Delusion in the Legal Academy, and an Effort to Engage the AALS

Last week, I posted a short essay here on the reaction of the Modern Language Association and the American Historical Association to recent doctoral recipients’ difficulties in securing the tenure-track academic jobs for which their programs specifically prepare them.  I noted that the graduate academy’s reaction was startlingly similar to what inexplicably remains a widespread belief in the similarly constrained legal academy—namely, that the advanced degrees we sell are not being overproduced, but rather “underused,” prompting a distinguished committee of language and literature scholars to recommend that prospective degree candidates be encouraged to devote a median nine years of their lives to a Ph.D. in language or literature in order to teach (among other things) high school.

Among the various reactions I received was a comment on PrawfsBlawg by Northwestern Law Dean and AALS President Dan Rodriguez.  Dean Rodriguez dismisses my observations as an “angry” effort to “channel[] the irritated folks who pepper this post with ‘stick it to the man’ comments in a redundant and wholly predictable way.”  (He also calls me “clever[],” but I have a feeling he didn’t mean it the way I might have liked.)  I don’t think that’s a fair characterization of the post, but I’ll leave that judgment to you.  Much more disappointing is his reduction of the post to the contention that “law profs and administrators who counsel students to pursue non-traditional jobs”—even really good jobs that fully capitalize on the law degree—“are engaging in subterfuge and worse,” when that badly misstates the point I was trying to make.  Since Dean Rodriguez is a distinguished scholar and teacher (and by all reports a very nice guy besides), I need to consider the possibility this disconnect resulted from my own failure of clarity.  Thus it seems incumbent on me to try again:

There are essentially three ways you can think about the relationship between obtaining an advanced degree and any employment you may obtain afterwards.  One is to hold that, for you at least, there is no relationship between the two at all—that you wish or wished to obtain the advanced degree for the love of the discipline rather than for any instrumental purpose, and that you feel your life will be or has been so enriched by the course of study alone that no more mundane resulting benefit is necessary to justify your choice.  This is undoubtedly the case for some devotees of the liberal arts, but their preferences and needs can fairly be described as idiosyncratic.  The typical person thinks about graduate or professional education as substantive preparation for a career.  (Someone who chooses to pursue an advanced degree usually anticipates enjoying the subject matter too, but that alone is not enough to justify the course of study for the ordinary person—the degree must lead to something more than enlightenment, as heady and transformative as enlightenment may be.)

So a second way of thinking about the relationship between seeking an advanced degree and the employment you may obtain afterwards is to consider whether, ex ante, an ordinary rational person would have planned to pursue the relevant graduate or professional degree to obtain the job.  To be clear, on this view it isn’t essential that you end up in the job you may have planned for at the outset, just that you end up in a job that it would have been rational to seek the degree to obtain if you had planned it that way.  I explore this view at length in my forthcoming article on the employment market for new lawyers and conclude that it is one effective way of determining whether a law-school graduate has obtained entry-level employment justifying the course of study.  This means as a practical matter that either the postgraduate position must require the degree as a condition of employment (the ABA calls this a “Bar Passage Required” job), or that the course of study provides dramatic and substantial advantages in obtaining or performing the job not more easily obtainable or substitutable (whether in nature or extent) another way (the ABA calls this a “JD Advantaged” job).  I will have more to say about this view and the kinds of jobs Dean Rodriguez and I each think it targets in a moment. 

A third way of thinking about the relationship between seeking an advanced degree and the employment you may obtain afterward is that the course of study transforms you into such a Smokin’ Bucketful of Awesome that the degree alone routinely opens doors to countless jobs unrelated to the course of study that would otherwise be closed to you, or that you will be so much better at whatever you do that the degree is a Rocket to Success at almost anything.  Both Dean Rodriguez and I think this is an obviously bad description of a law degree.  Here’s what he says:

One argument in [Burk’s] post is unassailably right and important to make:  Even if one supposes that a law graduate has succeeded in finding a position for which the JD degree provides a clear advantage in the work required, it does not follow that law school was the right educational path or, relatedly, that the benefits of this JD degree outweighed the costs.  Of course.  Point well taken.

In other words, even though you will probably be a better high-school English teacher if you have a Ph.D. in English, and even though you will probably be a better high-school civics teacher (or, say, paralegal or legal secretary) if you have a JD, it would be irrational for the ordinary person to pursue those degrees as a path to those jobs, and obtaining those jobs after graduation provides no adequate practical justification for having pursued those degrees. 

But even though Dean Rodriguez and I think this is obvious, a great many people who really ought to know better apparently don’t.  Thus, as my original post bemoaned, a committee of the Modern Language Association charged with assessing graduates’ job prospects recently asserted that a 60% employment rate for Ph.D.s in language and literature somehow did not mean that there were too many doctoral students, but only that prospective students should be encouraged to enroll in doctoral programs in order to obtain jobs teaching high school, or to “put[ their] skills to use in the private sector” in unspecified positions “far from literature.”  (Just to be clear, teaching high school is a deeply admirable endeavor and a good job.  But it is not a job you would get a Ph.D. to obtain.  There are much quicker and easier ways to get there.)  The American Historical Association recently delivered itself of the similar view that Ph.D.s in history are currently not “overproduced but underused.”

And countless law-school apologists are still flogging the Smokin’ Bucketful of Awesome theory of legal education (known in more polite circles as the purported “versatility” of the JD degree) like door-to-door encyclopedia salesmen.  So as to the point on which Dean Rodriguez and I apparently agree, and apparently agree emphatically, I would hope that the future holds more opportunities for Dean Rodriguez to exploit the bully pulpit of the AALS Presidency and encourage deans and admissions officers to cabin their marketing pitches within fair and realistic limits that today are all too regularly transgressed.

Dean Rodriguez also complains that my post eschews any “careful engagement with the point made by many, including [him], that there are positions which ought to count . . . although a credential as a lawyer is not formally required.”  Again I seem to have failed to express myself adequately.  Of course I think there is such a thing as a JD Advantaged job; I never said I didn’t.  My forthcoming 30-year empirical study of the job market for new lawyers, referred to above, devotes considerable effort to discerning how you might know such jobs when you see them.  (See the discussion in Part II.)  But I also think (and I’m joined here by plenty of sober and thoughtful observers of the profession, including quite possibly Dean Rodriguez himself, though I’ll leave that to him to say) that in current usage the JD Advantaged category is concealing a multitude of sins, and that a lot of law schools are using any connection they can imagine (however tenuous or incidental) between a job’s responsibilities and some broad notion of legal reasoning to categorize a job as JD Advantaged in order to enjoy the benefits in placement statistics and US News rankings this categorization carries with it.  As a result, a great many law schools are probably reporting a great many more placements as JD Advantaged than any sensible definition could justify.  I have more to say about why this is likely, but this post is already very long, so watch this space for more discussion of this important topic another day.

In the meantime, although he apparently didn’t realize it, Dean Rodriguez and I agree on something else:  One good way to understand what people are doing with their law degrees is to have accredited schools disclose in much more detail the nature and responsibilities of the jobs they are reporting as JD Advantaged.  Nearly 12% of the Northwestern Class of 2013 currently holds such jobs, so Dean Rodriguez could make a strong start on this transparency initiative himself. 

Quite frankly, I’d bet that a lot of the Northwestern graduates with nontraditional jobs recently reported as JD Advantaged are making valuable uses of their law degrees that justify the investment students made to obtain them.  What I don’t think is that graduates of Northwestern Law are good examples of the body of recent law graduates as a whole.  Northwestern, a top-ranked law school, has the luxury of selecting its students out of the top few percent of the most qualified candidates in the nation.  (Its Class of 2013’s median LSAT was 170, the 97.4^th percentile.)  Those students are as much any employer’s dream when they leave Northwestern as when they got there, and the options available to them are far broader than the much more numerous law grads in the thicker parts of the bell curve.  Northwestern doesn’t have to persuade 20^th percentile students with dubious bar-passage prospects to borrow $150,000 in order to keep its lights on.  Necessity being the mother that it is, I’d also bet that the schools admitting the 140/2.5s are reporting plenty of JD Advantaged jobs among their recent graduates that no rational person would plan to spend three years and six figures to obtain.  And those jobs are not the “management strategy, human resources, regulatory compliance, [and] entrepreneurship” positions at “the growing interface among law-business-technology” that Dean Rodriguez’s graduates may very well be occupying.  But he’s right—we won’t know for sure without a lot more transparency.  A formal call for this kind of disclosure from AALS would go a long way.

 Bernie

Self-Delusion Spreads from Professional to Graduate Education; Consternation Curiously Absent

I want to be clear at the outset:  I love literature.  I was an English major, and I’ve never regretted it for a moment.  I seriously considered pursuing a Ph.D. in English.  I could not have a deeper faith in the liberal arts as a path to the betterment of all mankind.

So imagine my dismay at some recent reportage in the Chronicle of Higher Education.  Graduate programs in languages and literature are suffering troubles all too familiar to the readers of these pages:  In these straitened times, the tenure-track academic appointments for which a doctoral degree is the traditional and necessary preparation are available for only about 60% of the recipients of doctorates in language or literature (a number chillingly reminiscent of the 56%-57% of the last two law-school graduating classes who managed to find a full-time, long-term job requiring a law license within 9-10 months of graduation, though when you exclude school-funded and self-employed positions as well as a few other confounders and irrelevancies, that number is closer to 53%).  The Modern Language Association (a trade group for college and graduate educators and scholars in language and literature analogous to AALS) recently released a report conceding “[w]e are faced with an unsustainable reality.”

The solution?  Simple—dismiss the “reality” as “wrong”:

"The discourse of Ph.D. overproduction is wrong," said Russell A. Berman, who led the task force that wrote the report and is a professor of comparative literature and German studies at Stanford University. "What we need instead is a broadened understanding of career paths.” 

As the Chronicle explains, the MLA believes that language and literature departments should urge upon students considering graduate degrees

what else they could do with a language or literature Ph.D.  Career options off the tenure track . . . include teaching at community colleges and high schools, working at cultural institutions such as heritage museums and libraries, and putting skills to use in the private sector.  "The subject matter may, in fact, be far from literature," Mr. Berman said, "but the rich professional formation acquired during the course of doctoral study can be put to good use.”

The Chronicle also reports that the MLA “is taking a stance similar to the American Historical Association, whose executive director has said that history Ph.D.’s are not being overproduced but underused.”

If you’re feeling a certain frisson of déjà vu, you don’t need a doctorate in French to understand why.  The MLA appears to be arguing that you should pursue a doctorate in language or literature (median time to completion nine years, by the way) because it will make you a better high school teacher.  If you think this is silly, you’re right.  If you think this is silly, but still believe that people unsure of their desire to practice law or do something clearly and directly law-related should attend law school because (as comp lit Prof. Berman put it to the Chronicle) “the rich professional formation acquired during the course of [law] study” is (as I lampooned it in a past post) “ideal preparation for any line of work, a thoughtful life, the vicissitudes of holy matrimony, Monty Python’s Argument Clinic, or the searching examination that can be expected from St. Peter when the matriculant finally reaches the pearly gates,” you are engaging in the kind of wishful thinking that would earn your contempt if you observed it in a colleague or a student.

We need to get a few things straight.  You can get a doctorate in English because you love English and have the time and money to devote yourself to what you love, regardless of what comes after your studies are done.  But once we start talking about education as preparation for a career, the argument changes:  Specialized professional and graduate education is supposed to prepare you for specialized lines of work.  There is no honest or sustainable basis for a view of specialized professional or graduate education as proper (let alone cost-justified) preparation for whatever job the market may eventually offer you.  The fact that a doctorate in English, or a law degree, will provide its holders with thoughts or perspectives on unrelated work uncommon for others without their benefit does not mean that someone would rationally pursue either (or both, given that they’re apparently both ideal preparation for everything) in order to secure work unrelated to the discipline studied. 

This is classic post-hoc fallacy:  If you want to consider whether education X is good preparation for job Y, imagine yourself planning a path to job Y, and think about whether you’d consider education X an essential, or at least a very important, step on that path.  The fact that you previously went to law school, and now have a nonpracticing position that many people would consider a good job (say as a high-school civics teacher, or as a paralegal), does not mean that the former was the cause of the latter.  Nor does it mean that the latter justifies the former in any meaningful sense.  Nor does it mean that whatever perceptual or perspectival advantages the former course of study lends to the later  work justifies the education as a sensible preparation for the job if you were thinking about it ex ante.

Put slightly differently, the fact that you get a job not requiring a law degree after you graduate from law school does not, without a great deal more, make that job “JD Advantaged.”  Law schools that are silently indulging that fallacy in their employment reporting should cut it out.  If the Section 509 compliance audits that the ABA announced last year to test the accuracy of law-school disclosures are to be worth a damn, they will focus relentlessly on this issue.

And how do we explain this spreading contagion of laughable illogic among America’s best-educated and most thoughtful?  I’m afraid we need look no further than Upton Sinclair’s well-worn observation that “it is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Bernie

What We Might Learn from the Indictment of Dewey & LeBoeuf’s Former Management

As the Capitol Steps liked to remark, everyone loves a skicious vandal.  Schadenfreude sprang up like mushrooms in that springtime many of us are still longing for, first as Dewey & LeBoeuf became the biggest law-firm failure ever; then when stories of secret salary guarantees to the Pigs Who Were More Equal Than Others began to proliferate; then when the firm’s bankruptcy spawned “clawback” claims and widespread settlements with former partners who the Trustee contended had received more than their fair share before they left, or had exposed themselves to “unfinished business” claims by taking work and clients with them to their new firms.  Rumors flew that various unhappy partners had taken their displeasures to the Manhattan District Attorney, who was investigating alleged financial improprieties. 

And now the DA, having extracted guilty pleas and cooperation from half a dozen underlings, has indicted Dewey’s former Chair (managing partner), Steven Davis; his deputies, former Executive Director Stephen DiCarmine and former Chief Financial Officer Joel Sanders; and (somewhat puzzlingly) a 29-year-old former Client Relations Manager named Zachary Warren.  The charges include fraud, theft, falsifying business records and conspiracy. The SEC has filed its own civil complaint, naming Davis, DiCarmine and Sanders as well as former Finance Director Frank Canellas and former Controller Thomas Mullikan.  The New York Times’ coverage, with copies of the indictment and related SEC complaint, can be found here.

The widespread glee at the mighty fallen notwithstanding, we would all do well to remember that this is a genuine human tragedy.  Dewey employed over 1,000 lawyers and thousands more staff when it crashed.  All of them lost their jobs in the midst of the Great Recession.  While the legal press has chronicled the soft landings enjoyed by many of the more senior partners, many more were not so fortunate.

All of which should make us want to ask what we might learn here.  There will be the usual rash of sanctimony in the comments (you may consider your points made, and save them for another day), reducing the situation to the obvious, simplistic and therefore ineffectual admonition not to lie, cheat or steal.  These observations are usually coupled with the much less obvious but theologically entrenched creed that BigLawyers are all just Gordon Gekkos with bar cards, genetically predisposed to or trained from day one for greed, deceit and exploitation of their fellow man, so why is anyone surprised? 

Please.  There are hundreds of large law firms today, populated with well over 100,000 lawyers, that are not in bankruptcy, never will be, and are not (in the words by which one of the Dewey defendants allegedly described his activities to some of the others) cooking their books.  They may be more or less well-managed (a great many less, but that’s for another day), more or less forward-looking and responsive to their environments and clients (same comment), and more or less humane employers and community members, but they are not roiling dens of thieves.

So what was different about Dewey?  I want to suggest that, among the lawyers and law firms that have found themselves on the wrong end of criminal and SEC enforcement complaints, there are some unusual and noteworthy things about Dewey, things that illustrate some trends in this sector of the profession and offer a lesson or two more focused than a bare, if emphatic, rebuke of the deadly sins.

Set aside the regrettable population of those who become garden-variety criminals and happen to be licensed to practice.  Most lawyers who commit crimes and frauds as lawyers fall into two general categories:  Some steal from their clients—many by the simple expedient of taking client funds from their trust accounts, but some of the more ambitious and creative by kiting or otherwise perverting client trust accounts in Ponzi schemes and similar frauds.  Marc Dreier and Scott Rothstein are recent rather spectacular examples.  Others assist their clients in stealing from others—for example former Mayer Brown partner Joseph Collins, who is currently in federal prison for developing and implementing strategies allowing his client Refco to conceal devastating losses and omit them from a series of securities filings.  Neither happens all that much at large firms, not least because there is usually enough infrastructure and oversight to keep most rogue behavior in check.

But Dewey is neither of these.  The allegations of the New York indictment are that the defendants, all (except Warren) senior management of a billion-dollar professional firm, developed and implemented a scheme they portentously dubbed the “Master Plan” to manipulate the firm’s accounting records in order to be able to report to their banks and other lenders at a time when firm performance fell well below projections that were probably unrealistic to start with that they had met loan covenants or deserved additional extensions of credit.  The SEC complaint focuses on the alleged accounting fraud the firm, through its management, employed in violation of the securities laws to float a $150 million private debt offering to various institutional investors that supplemented the firm’s $100 million revolving bank line.  In short, Dewey & LeBoeuf defrauded its own lenders. 

This is an all too common story in the business world, but among law firms—whose members regularly rehearse and dispute the details of such stories in which their clients are involved, and put their shoulders to the shovels that excavate the wreckage—it is unusual.  I have little doubt that it has happened before, but it is nowhere near as common among lawyers’ frauds as fraud on their clients or on those with whom their clients are dealing.  And to the best of my knowledge it hasn’t ever happened with anything approaching the scale or dishonesty alleged here.

It’s often enlightening to look behind the fraud to see what the alleged fraudsters wanted the money for.  And that’s where Dewey stands apart from most other lawyer frauds.  As chronicled in the most detail by James Stewart in the New Yorker, management was so concerned about keeping old and recruiting new rainmakers that they gave many partners extravagant salary guarantees, guarantees that exceeded the revenue necessary to support them.  By definition, then, the firm overpaid many of those partners, and then borrowed to cover the difference between what it had promised them and what they generated.  And then allegedly lied to its lenders for the wherewithal to keep the spiral rising.  Some of the partners apparently knew about some of the salary guarantees, and some knew about more of them than others.  All of the partners knew about the shortfalls when year-end bonus time came, as the firm proved unable to meet most of the guarantees management had made, and then had very little left after other expenses to pay the partners not shrewd, or valuable, or (more to the point) institutionally indifferent enough to have extracted one.  How many of the partners appreciated how directly the borrowed money translated to borrowed time is unclear.  Though many were deeply sophisticated observers and analysts of business and finance, few seem to have known or guessed that someone might be lying to keep their own thing going well after the clock had actually run out. 

So what’s new and what’s different?  In an extended time of flat demand for complex legal services—the first in the experience of almost anyone living today—compounded by downward price pressure on the limited pool of available work from (among other things) increasing commodification of much such work in the eyes (and checkbooks) of increasingly sophisticated and aggressive general-counsel consumers, BigLaw managing partners must struggle harder and harder to live within their means.  As Dave McGowan and I noted several years ago (see here at pages 14-18, 70), and Bill Henderson argued more recently (see, e.g.,  here), many law-firm managers today stubbornly cling to the belief that they can somehow earn their way out of an increasingly competitive market by buying revenue (that is, bidding for lateral partners with portable business) for a price equal to or even greater than the profits that revenue will generate.  For an astonishingly long time, the limited efficacy of this strategy was masked by the inexorably rising tide of client demand, which lifted even the leakiest and most ill-skippered boats, and allowed the lucky to believe they were smart.  But in the current market, if you pay a million dollars for a million dollars in profit, you don’t make it up on volume.

Dewey indulged in the errors of the current age to a greater degree than most.  Management hired more laterals at higher prices, and then found themselves forced to overvalue complaining incumbents equally in order to retain them, compounding the problem.  They did so in an uncritical belief that the conditions that had generally prevailed from 1980-2007 would go on forever—after all, in the experience of the senior lawyers implementing what eventually devolved into the “Master Plan,” they effectively had—and allow them to earn their way out of any hole they could afford to dig.  When the music suddenly stopped, it is alleged that they chose to lie about how many chairs they had—imagining, I would guess, as many who maneuver themselves into this position do, that the band would strike up again momentarily, and no one would ever need to count the chairs.

The pattern is familiar to anyone who studies financial fraud.  Management robbed debt (the firm’s lenders) to pay equity (the partners); as owners themselves, management benefited too, though apparently not disproportionately more than their innocent (or ignorant) colleagues.  Ironically, the beneficiaries of the alleged fraud (Dewey’s partners) were among its victims.  Most of that can be said, to about the same degree, about any Ponzi scheme (though I am not suggesting that the Dewey fraud is a conventional Ponzi scheme, just that it shares the feature that its beneficiaries and its victims overlap significantly).  What is unusual here is that the fraud appears to have happened in a large and highly pedigreed New York law firm, the sort of institution people imagine steeped in prudence and restraint.  And it happened in the service of mismanagement of a kind that, while not at all uncommon among large law firms today, was uncommonly carried beyond the practical limits that constrain most firms by what is alleged to have been sustained and systematic dishonesty amounting to theft.

Bernie

Netting Out Law-School Funded Jobs

In Rankings and Employment Data, I noted that law-school funded jobs are included in the reported jobs in the Bar Passage Required, Full-time, Long-term category. In Law-School Funded Jobs, I discussed law-school funded jobs in general, but did not focus on the Bar Passage Required, Full-time, Long-term category. In New Law School Rankings: Employment Data Cleaned Of School Funded Jobs, Dan Filler netted out law-school funded jobs from that category, I thought I'd give you a little more information on the scope of law-school funding, and its affect on reported employment rates.

For the vast majority of law schools (86.3%), the school funding Bar Passage Required, Full-time, Long-term jobs is not a material issue. Over two-thirds (67.5%) of law schools did not fund any jobs in that category. For another 18.8% of law schools, such jobs added less than one percentage point to each school's total reported employment rate.

For the 27 schools that added at least one percentage point to their reported Bar Passage Required, Full-time, Long-term employment rate, the following table gives the percentage points added to the employment rate by law-school funded jobs.