Why isn't law school tuition more dispersed?

By Razib Khan | July 6, 2012 12:52 am

Update: OK, this commenter seems to have a pretty good answer to my question:

It’s really pretty simple. There is not a single market for law schools. The market for each applicant is made up solely of those law schools that will accept them.

No one who can get into Harvard would consider going to Whittier law school, whatever the price. But for someone whose LSAT scores place him in the bottow 40% of test takers, that may be the only option. The fact that there are better schools at the same price is completely irrelevant if they won’t accept him.

Similarly, Ohio Northern University has a tuition of ~$35,000 a year. Harvard is ~$38,000. In hindsight the answer is so obvious I’m either stupid or I hadn’t thought deeply about the issue.

End Update

After my last post on law school, one thing is nagging at me: how is it law school tuition isn’t more stretched out in its distribution? Below are the top 10 and bottom 10 in law related job placement, witfh tuition:


School Tuition in thousands Proportion in law related jobs after 1 year
VIRGINIA, UNIVERSITY OF 46 95%
COLUMBIA UNIVERSITY 51 94%
STANFORD UNIVERSITY 47 91%
NEW YORK UNIVERSITY 47 90%
HARVARD UNIVERSITY 46 90%
CHICAGO, UNIVERSITY OF 45 88%
YALE UNIVERSITY 51 88%
PENNSYLVANIA, UNIVERSITY OF 45 84%
DUKE UNIVERSITY 51 82%
GEORGE WASHINGTON UNIVERSITY 46 81%
AVE MARIA 35 33%
UNIVERSITY OF LA VERNE 38 33%
WESTERN STATE 35 32%
LIBERTY UNIVERSITY 27 31%
APPALACHIAN SCHOOL OF LAW 32 31%
WESTERN NEW ENGLAND UNIVERSITY 37 30%
THOMAS JEFFERSON SCHOOL OF LAW 41 27%
GOLDEN GATE UNIVERSITY 38 22%
DISTRICT OF COLUMBIA 31 21%
WHITTIER COLLEGE 38 17%
PUERTO RICO, UNIVERSITY OF 8 0%

The bottom 10 are cheaper, but not that much cheaper. How is it that Thomas Jefferson Law, an institution with a 48 percent bar passage rate, is 80% of the cost of Yale? Perhaps there are nuances I don’t understand. Here’s the dean of TJL in The Wall Street Journal:

“You can’t measure the value of a law degree in terms of what your employment number was nine months after graduation,” says Dean Rudy Hasl. A graduate who takes the California bar exam in July, he says, won’t get the results until late November. Many employers won’t even interview a graduate who hasn’t been licensed, Mr. Hasl says, adding that he advises prospective students to consider the law degree a long-term investment. “The law degree is something that allows you to move in so many directions,” he says.

Really? So many directions? The reality is that TJL is selling a law degree, for $41,000 a year (minus cost of living, etc.). Because a TJL law degree is sold, rather than earned (granted, by jumping through the GPA/LSAT hoops), it has low signalling value. If it’s a club anyone who can take out loans can buy their way into, why would you want to join?

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  • Chad

    At least in the Sciences we are typically paid for grad school.

    Although……I wonder if the shortage of Professorships and other Research jobs would be as bad as it is if someone in Life Sciences had to pay for their tuition. A lot fewer people would go to grad school……

  • http://sjespositoweblog.blogspot.com S.J. Esposito

    I have some acquaintances that are planning to go to law school, and nearly all of them are doing so for what I would consider the ‘wrong reasons’. I think–at least from what I can see–that a lot of undergrads use law school as some kind of failsafe. Too often I hear the phrase “…I’m just going to apply to law school” thrown around in conversation about post-grad life. The fact is, most people know that there are many law schools with low admissions requirements and justify paying for it by telling themselves that being a lawyer is still a prestigious career.

    Also at play is the parent factor. Our parents seem to think that law is a profession on par with medicine, and that anyone with a law degree will almost be guaranteed a job. Again, this is from what I can tell personally. Many of the people I know applying to law programs were encouraged to do so by their parents who feared a fate of unemployment for their children and sought a proactive remedy in a profession that was once good in terms of career placement. The same thing, though to a lesser extent, happens in IT related fields–parents think “anything with computers is good”, even though that’s really a mentality that was last valid in the early 2000s.

  • Raimo Kangasniemi

    Proportion in law related jobs after one year probably isn’t a good way of looking at this scene.

    The graduates of the famous universities, those institutions whose names signal privilege, will have an easier passage to their first job just based on where they studied. But it doesn’t mean that 94 percent of those Columbia graduates will end up making a career out of law. It’s far more easier for them to get their chance at a job which they are qualified, but it doesn’t guarantee success.

    You would have to look at the situation also after let’s say 5 and 10 years to be able to draw strong conclusions.

    Also, you would have to take in consideration that graduates from different institutions are unlikely to be on exactly the same job market. People from the less famous institutions are not really, to a large extent, after the same jobs as Harvard and Yale graduates after graduation. If you are looking at jobs at the grassroot level of law business or public law, the job market is different. It doesn’t mean that in the long run most of these people wouldn’t hold a some low or middle rung job connected to law. And at least with a college degree they are far more likely to be employed than people without one.

  • dcwarrior

    Also, is it surprising that prices are not normally distributed? I am sure the law schools look at each other for clues as to “pricing” and that, no, the decision to attend law school is not rationally (in the economic sense) made based on price vs. quality. In my experience (and yes, I am a lawyer) students tend to select the law school with the highest reputation that they can afford. I used “reputation” carefully – I am not sure that Harvard makes you a better lawyer but it is of top reputation.

    Also, a lower-ranked school cannot -as a general rule – attract more students by lowering its tuition. That would signal to many that it is in FACT a lower-ranked school. Even today, with a relative dearth of law school applicants, the schools are not simply lowering their tuition. Many are granting scholarships instead.

    And recall what goes into setting the tuition. The world of academic budgeting is incredibly arcane to begin with, and has as much to do with how much it costs to run the school, how much the school can use funds from relatively able-to-pay law students to subsidize other more costly (med schools) or less revenue-friendly (history departments) departments.

  • Finch

    High tuition is an important part of the signal. The law student is saying to prospective employers “I am making a $40k x 3 bet that I will be a successful lawyer.” The signal does not get better if you lower the tuition.

    There’s also opportunity cost to consider, and it presumably exceeds tuition even for the kind of people that go to law school. As far as science PhD programs go, opportunity cost dominates. The whole “but tuition is paid for!” argument doesn’t carry you very far when you’re forgoing $100k in salary for each of the seven years you spend in a program.

  • https://plus.google.com/109962494182694679780/posts Razib Khan

    The world of academic budgeting is incredibly arcane to begin with

    true. when i couldn’t find tuition on wikipedia i went to the law school websites. sometimes they try and confuse with by breaking it down by semester but being unclear!

    . The whole “but tuition is paid for!” argument doesn’t carry you very far when you’re forgoing $100k in salary for each of the seven years you spend in a program.

    yes, but most 25 year old phd students are not forgoing 100K when they are 25. granted, someone who is smart enough to get into a phd program can make more than the average college grad at 25.

  • Amy

    I actually have a friend that was a paid $15,000 a year as a journalist, go back to school to study computer science. She literally flunked out despite working extremely hard. I think she could have made it through law school without any trouble. I think the reason people go to law school and take on debt is because a lot of social studies/language arts people don’t have any other options other than a job in sales to make money. Going to law school and moving to some rural state with easier bar passage and making $30,o00 a year sounds great if you’re making $15,000 a year. And if law school doesn’t work out, I have meet several ex-attorneys working in sales for a pay raise and less stress.

    Law schools that have weak requirements should be required to flunk out half the class after only one semester. Math professors seem more than willing to flunk half the class. And for that matter I’ve met several engineers that make well into the 6 figures, that flunked calculus or physics at least one time. I’m all for giving people a second or a third chance, but we tend to give people too many chances in the United States. Three years of poor law school grades is too many second chances.

  • Ron Strong

    It’s really pretty simple. There is not a single market for law schools. The market for each applicant is made up solely of those law schools that will accept them.

    No one who can get into Harvard would consider going to Whittier law school, whatever the price. But for someone whose LSAT scores place him in the bottow 40% of test takers, that may be the only option. The fact that there are better schools at the same price is completely irrelevant if they won’t accept him.

  • http://dispatchesfromturtleisland.blogspot.com ohwilleke

    Also, almost all law schools are operated as non-profits and so base tuition more on cost than what the market will bear in excess of cost.

    The deep reasons why it generally makes sense to operate institutions where much of the value of admission froms from the elite status of one’s co-customers, rather than allowing a for profit firm owner to benefit from the value that the customer’s bring to the table, is discussed in Henry Hansmann, “Ownership of Enterprise” (2000).

  • Chad

    “The whole “but tuition is paid for!” argument doesn’t carry you very far when you’re forgoing $100k in salary for each of the seven years you spend in a program.”

    Whose making 100k in their mid twenties? Especially now. And who is spending 7 years in grad school. In the Life Sciences thats typically seen as long and an indication that something has gone wrong.

  • Finch

    > Whose making 100k in their mid twenties?

    I did. Admittedly my mid-twenties were around the year 2000 and I was an engineer, not a pure science major.

    The picture doesn’t change much if you say $75k.

  • Kevin Hill

    One factor you should consider in your analysis is that you aren’t dealing with real tuition numbers. Published tuition only covers those students that don’t receive scholarships. It a mythical figure. Some schools have fifty to sixty percent of their students on scholarship with scholarships going as high as 90 to 100%. The competition for students can be seen at the net tuition level. When Ohio Northern, for example, competes with Case Western Reserve or the University of Dayton, it does so with scholarship offers. But even with a 100% scholarship, it cannot compete with Harvard. A student who can get into Harvard would probably be offered a full tuition scholarship at most tier 3 or 4 schools. As a result, the comparison is between Harvard’s tuition at $38,000 and a zero tuition at less prestigious schools.

  • Douglas Knight

    You may be interested in the change over time of the bimodal distribution of first-year lawyer salaries.

    “Biglaw” associates used to make somewhat more than ordinary first-year lawyers. Kind of like a medical residency. But in 2006 they made 4x. I found that link a couple of years ago and my memory is that other posts on the blog compared the salary time series with the tuition time series. I think that the total cost of law school has always been about the salary of a first-year biglaw associate. So when the biglaw salary shot up, law school tuition shot up. But why didn’t this rather abrupt change break the linkage between the price of good and bad law schools? There are many gaps between good and bad law schools. Starker than the gap in getting law jobs or passing the bar is the gap in getting a biglaw job, yet those are what set tuition.

    One thing that confuses me is why associates’ salaries got bid up, and especially when. The blog post attributes it to the internet boom, which fits the timing. But I’d think these sectors would be competing for rather different people. Wall Street seems like a better candidate. Michael Lewis talks in his book of seeing in 1986 lawyers jump ship for Wall Street (specifically lawyers at firms hired by Wall Street). That makes more sense to me, but seem to predict an earlier shift in salaries. (Maybe the 1991 data, the earliest in the post, shows the trend already in motion.)

    The other thing that post says is that all biglaw firm pay the same salary. Even if the partners are making 2x at the 75th percentile as at the 25th percentile, the associates have identical salaries. I suspect this is a similar phenomenon to all law schools having the same tuition, or the fairly narrow spread of private undergrad tuition, though I don’t think I understand any of these phenomena.

  • http://lablemming.blogspot.com/ Lab Lemming

    Re: 8.
    If this is the case, then Harvard is pricing itself too low.

    To put in another way, high selectivity can be considered a proxy for insufficient price. If Harvard has to turn away 90% of their applicants at 40K per year, then they should be charging 100k, or 200k, or whatever drops their applicant pool down to the point where their admissions rate becomes average, and people do consider a ‘cheap’ degree at a lowly institution to be equal value for money.

    Alternatively, they are irrational, or not allowed to operate for profit.

  • Raimo Kangasniemi

    Harvard makes a lot of money other ways. It’s annual donations in the last decade have been between 602-651 million dollars per year.

    It would be interesting to compare the donations made by an average Harvard graduate during their lifetime to those made by a graduate of those “lowly” institutions.

    Harvard sells privilege, and getting part of that privilege seems to create a contract between the seller and the buyer that ties them together. The price of which are continued donations.

    I bet that most of those “lowly institutions” get little to nothing from most of their graduates and that Harvard gets something from most of it’s graduates.

    So, then the long term profit for Harvard per graduate would be well beyond the official price of tuition during the student years.

    It wouldn’t make sense to endanger these profits by rising the fees. If they would charge 100k or 200k, a lot of the graduates might think that they – or their parents – have paid enough. Keeping the tuition fees at reasonable levels probably is a safe business decision from Harvard’s part – and makes it look less elitistic.

  • http://dispatchesfromturtleisland.blogspot.com ohwilleke

    “Alternatively . . . not allowed to operate for profit.”

    Bingo.

  • Davis

    If Harvard has to turn away 90% of their applicants at 40K per year, then they should be charging 100k, or 200k, or whatever drops their applicant pool down to the point where their admissions rate becomes average, and people do consider a ‘cheap’ degree at a lowly institution to be equal value for money.

    This line of argument makes two false assumptions: (1) that the primary benefit a student obtains is a law degree, and (2) that the primary benefit the law school obtains is tuition money.

    (1) is incorrect as applied to elite institutions like Harvard because these places offer greater access to the sorts of positions that provide prestige but not necessarily economic rewards (e.g., Supreme Court and Courts of Appeals clerkships), and networking opportunities with alums who hold top positions in all sectors — legal, business, charity, etc. For students who want something more than a JD (which describes a large number of students at these schools), the lowly institutions simply do not provide an adequate substitute good at any price.

    Now of course, that means that the elite institutions could in theory raise tuition with near impunity, if that were their goal; however, (2) is similarly false. If Harvard raised tuition to $100K or even $200K, they would certainly still be able to fill their 1L classes. However, Harvard’s prestige is based in part on the non-JD factors mentioned above: they want the students most likely to continue the cycle of Harvard graduates holding prestigious positions, not the students most willing and able to pay. Switching to the high-tuition model would risk a downward spiral wherein the school loses its connections and access within a generation.

    In short, elite institutions’ behaviors can certainly be viewed as rational from an economic standpoint under #8′s theory, once you take into account the non-monetary factors.

    Bingo.

    @ohwilleke: Like most universities, Harvard voluntarily operates as a not-for-profit corporation. They could choose to operate as a for-profit institution (some universities do), they would simply have to forgo the benefits of not-for-profit corporation status (e.g., donors could no longer receive tax deductions for their gifts).

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About Razib Khan

I have degrees in biology and biochemistry, a passion for genetics, history, and philosophy, and shrimp is my favorite food. In relation to nationality I'm a American Northwesterner, in politics I'm a reactionary, and as for religion I have none (I'm an atheist). If you want to know more, see the links at http://www.razib.com

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