The Economics of Law School Admissions

The New York Law Journal reports on two NY law schools that plan to reduce admissions this year.  The dean of one of these schools, the Touro Law Center, explains his decision thus:

“It is the ethical and moral thing to do,” Touro Dean Lawrence Raful said in an interview. “I don’t think the [job] placement situation is going to turn around for a number of years and I think we are concerned about the ethics of turning out quite so many students in debt when we know that not everyone can get a job to pay off that debt.”

The decision to reduce the size of a law school class has little to do with morality (though it may have a lot to do with moralizing) and everything to do with economics.  Education is a product in the market, like any other.  The producers (law schools) sell a service (a legal education) at a price (tuition) to consumers (students).  If there is an oversupply of the product, or the demand falls, then the price should drop and eventually the quantity will fall until the market clears.  I don’t see anything so moral (or immoral) about it.

As the economy contracts, as it has, the economy’s demand for legal services will drop.  Fewer students will want to go to law school and will pursue other opportunities.  Not to be an elitist, but it is no surprise that lower ranked law schools will be the first ones which will experience the effects and will reduce the size of their classes, or reduce their tuitions, accordingly.  Students entering law school can make the judgment whether to take on debt that will be repaid by a higher-salary job; it should not be a decision unlike entering another graduate school, taking on a certain career, or buying a house.

The more interesting question, to me, is the behavior of the top 10 schools (of which there are about 15 if you ask the deans of those schools).  Generally, these schools have not increased the size of their student bodies for decades.  At Berkeley Law (or Boalt Hall, as it was once known), the student body has remained about 300 students per class ever since I first started teaching here 18 years ago.  The economy in 1993, in real 2000 dollars, created a GDP of $8.6 trillion.  At the end of 2010, GDP was about $13.3 trillion — slightly more than a 50 percent increase.  If the growth in legal service kept pace with the economy, then a shortage of top 10 law school educations developed (if it didn’t already exist).  Those schools probably had, and maybe still have, a fair amount of room to increase price since they refuse to increase supply.  I’ve always wondered why a school didn’t take the opposite approach, and expand to a college size, with a faculty of different departments, by keeping tuition fixed but expanding the student body.

  1. Good Berean

    It’s no wonder our society is in the shape it’s in when the Dean of a law school does not know the difference between morals and ethics.

  2. Ken Sweeney

    1) Scarcity (low supply) maintains prices through the value of a rare resource.  Why would you dilute the product by making more of them?  These are not iPods, but rather allegedly prestigious degrees that are difficult to possess.

    2) There are also stakeholders in alumni who would be less reticent to provide endowments and contributions if their degrees decreased in value.

    3) Competitors vying for the best candidates would not want to increase their class size and possibly damage the median student profile, making their program (product) “inferior” to those that did not increase class size.