BC vs. Fordham - IP Law, both sticker Forum

[dingbat]

Statwise - are you above the 75th percentile?

As for cost of tuition, you have to remember that a law school is a business. As long as customers keep paying, there's no need to lower prices.

On a related note, you say that all a law school is good for us employment placement, yet you advocate letting good professors go. That's incompatible. If the good professors leave and the quality of the education drops, employment placement will get worse.

Your argument is misdirected. There is a great demand for a law school education, which is a requirement to work as a lawyer. Because there is a large demand, tuition is high.
However, the supply of lawyers far outstrips the demand for lawyers. The problem isn't so much with the schools (I know, I know) but with the fact that almost twice as many people try to enter the profession as there are spots.
The problem lies with us, the consumers of law school and aspirant attorneys.
It could be worse, I believe the ratio of asirant actors to working actors is far worse. Fortunately for them, they didn't need to spend a small fortune just to be able to audition.

[manofjustice]

As for cost of tuition, you have to remember that a law school is a business. As long as customers keep paying, there's no need to lower prices.

On a related note, you say that all a law school is good for us employment placement, yet you advocate letting good professors go. That's incompatible. If the good professors leave and the quality of the education drops, employment placement will get worse.

Statwise I was competitive.

Law school is not a business and should not be a business. It has never been a business before. It has no shareholders. It sells no stock. It does not invest in anything but legal education, regardless of the state of other markets. The only relation law school bears upon business is that its principals are greedy.

If good professors go, the "quality of the education," in one sense, will drop. However, a) good professors are not the highest paid professors (the most published are), and b) the "quality of the education," in the sense here, is almost certainly not why Big Law recruits from the best schools. Rather, the "quality of the education" Big Law seeks is stellar performance against qualified competitors. Again, all a law professor needs to do to provide such quality is find himself at a school with competitive students and properly grade their exams.

Otherwise, we must assume that the "quality of the education" at law schools has drastically increased over the last decade as law professors' salaries have inflated, and we would have to suppose law firms have found their costs to train new associates fall (as a better education has lead to a better associate). But we know neither is the case.

[rickgrimes69]

A law school is people in a box. It requires almost no capital investment. A law school doesn't even need desks: students can answer all the socratic inquires they'll ever need to standing up. The reason Fordham can't spend any money on students is because they spend too much building brand new over-priced and unnecessary buildings, and lavishing over-priced and unnecessary salaries.

The costs of law school have gone up across the board. Hence why schools like New yYork Law School cost as much as New York University Law School.

In this day and age, no student will pay a law school to attend classes standing up. Not only that, students take notes on laptops these days and being able to plug your computer in so you don't have to rely on batteries is the new standard. To my knowledge the building was not overpriced; whether necessary is open to debate.

The doubling of tuition was necessary to maintain the same level of education - if Fordham didn't increase its expenses while Cardozo did, then the faculty would go elsewhere.
If the rankings drop (e.g. because part of US News rankings is spending per student) then less (qualified) students will go to Fordham

The reason there isn't any other Fordham-like school in NYC is because attending a Fordham-like school in NYC isn't very profitable (for students). That translates into a tuition that should be lower.

It is far better than many of their competitors. (there are 7 law schools in NYC and a few more just outside)
You're getting causation backwards.
Prices shouldn't come down just because value (in your opinion) isn't there
If people stop going, prices will come down.
(econ 101)

A person who wants NYC Big Law has at least just as good of a shot at BU/BC as they do at Fordham. Why? Because BU/BC has slightly better Big Law placement #s in general. Just because BU/BC place more in MA doesn't mean BU/BC is at a disadvantage in NYC: it means a lot of self-selectors for the (equally well-paying) Boston market go to BU/BC. That Fordham places so much into NYC is cause for concern, not celebration: it's worse than a regional school, it's a city school.

This is impossible to debate based on the limited data we have (how many at Fordham self-select into NY? How many at BU/BC tried to get NY but didn't?)

Fordham's unwillingness to offer scholarships has nothing to do with donors.

Fordham does give out scholarships, but not to everyone. Maybe you just weren't good enough?
(what are your GPA/LSAT scores?)

This is very credited.

[dingbat]

As for cost of tuition, you have to remember that a law school is a business. As long as customers keep paying, there's no need to lower prices.

On a related note, you say that all a law school is good for us employment placement, yet you advocate letting good professors go. That's incompatible. If the good professors leave and the quality of the education drops, employment placement will get worse.

Statewise I was competitive.

Law school is not a business and should not be a business. It has never been a business before. It has no shareholders. It sells no stock. It does not invest in anything but legal education, regardless of the state of other markets. The only relation law school bears upon business is that its principals are greedy.

If good professors go, the "quality of the education," in one sense, will drop. However, a) good professors are not the highest paid professors (the most published are), and b) the "quality of the education," in the sense here, is almost certainly not why Big Law recruits from the best schools. Rather, the "quality of the education" Big Law seeks is stellar performance against qualified competitors. Again, all a law professor needs to do to provide such quality is find himself at a school with competitive students and properly grade their exams.

Otherwise, we must assume that the "quality of the education" at law schools has drastically increased over the last decade as law professors' salaries have inflated, and we would have to suppose law firms have found their costs to train new associates fall (as a better education has lead to a better associate). But we know neither is the case.

Increase in cost is unrelated to increase in quality (like movie tickets); apply some reasoning.

As for the business part of it: sure it is. They take a fee to provide a service. That's a business.
Having shareholders and issuing stick would make it a corporation, which is a structure that a business can be. (including educational institutions)
Many law schools are non-profit, meaning that they have no shareholders and cannot distribute a profit. Instead of a board of directors, they have a board of trustees. Still a business.

[manofjustice]

As for cost of tuition, you have to remember that a law school is a business. As long as customers keep paying, there's no need to lower prices.

On a related note, you say that all a law school is good for us employment placement, yet you advocate letting good professors go. That's incompatible. If the good professors leave and the quality of the education drops, employment placement will get worse.

Statewise I was competitive.

Law school is not a business and should not be a business. It has never been a business before. It has no shareholders. It sells no stock. It does not invest in anything but legal education, regardless of the state of other markets. The only relation law school bears upon business is that its principals are greedy.

If good professors go, the "quality of the education," in one sense, will drop. However, a) good professors are not the highest paid professors (the most published are), and b) the "quality of the education," in the sense here, is almost certainly not why Big Law recruits from the best schools. Rather, the "quality of the education" Big Law seeks is stellar performance against qualified competitors. Again, all a law professor needs to do to provide such quality is find himself at a school with competitive students and properly grade their exams.

Otherwise, we must assume that the "quality of the education" at law schools has drastically increased over the last decade as law professors' salaries have inflated, and we would have to suppose law firms have found their costs to train new associates fall (as a better education has lead to a better associate). But we know neither is the case.

Increase in cost is unrelated to increase in quality (like movie tickets); apply some reasoning.

As for the business part of it: sure it is. They take a fee to provide a service. That's a business.
Having shareholders and issuing stick would make it a corporation, which is a structure that a business can be. (including educational institutions)
Many law schools are non-profit, meaning that they have no shareholders and cannot distribute a profit. Instead of a board of directors, they have a board of trustees. Still a business.

An increase in cost can be unrelated to quality. Obviously. Instead of movie tickets, let's look at Fordham's tuition. This is what I've been saying...so what's your point? Because the costs have gone up, the costs should go up? Tell me your point is not that the costs should go up because the costs have gone up? I get sea sick. I can't go around and around with your circular reasoning for so long.

The market for legal education has gotten out of whack and a correction is on its way. Apply some reasoning.

[dingbat]

An increase in cost can be unrelated to quality. Obviously. Instead of movie tickets, let's look at Fordham's tuition. This is what I've been saying...so what's your point? Because the costs have gone up, the costs should go up? Tell me your point is not that the costs should go up because the costs have gone up? I get sea sick. I can't go around and around with your circular reasoning for so long.

The market for legal education has gotten out of whack and a correction is on its way. Apply some reasoning.

costs for the school gave gone up, so revenue has gone up. Happens in business all the time.
More importantly, the price is at the level that the market can bear. Top schools could probably raise tuition and would still have to turn applicants away.

The market for legal education has not gotten out of whack - while it's true that thè number of applicants has dropped two years in a row, there are still significantly more law school applicants than there are places. Yes, there are a handful of law schools that are having trouble filling their classes, but not many. As a matter of fact, there are more potential law schools about to open up than there are law schools at risk of closing down

You ate conflating two separate and distinct markets:
1) law schools (which sell JD degrees)
2) legal market (which hires lawyers)

The number of people who want to obtain a JD (clients of law schools) has nothing to do with the number of legal jobs there are.

[manofjustice]

An increase in cost can be unrelated to quality. Obviously. Instead of movie tickets, let's look at Fordham's tuition. This is what I've been saying...so what's your point? Because the costs have gone up, the costs should go up? Tell me your point is not that the costs should go up because the costs have gone up? I get sea sick. I can't go around and around with your circular reasoning for so long.

The market for legal education has gotten out of whack and a correction is on its way. Apply some reasoning.

costs for the school gave gone up, so revenue has gone up. Happens in business all the time.
More importantly, the price is at the level that the market can bear. Top schools could probably raise tuition and would still have to turn applicants away.

The market for legal education has not gotten out of whack - while it's true that thè number of applicants has dropped two years in a row, there are still significantly more law school applicants than there are places. Yes, there are a handful of law schools that are having trouble filling their classes, but not many. As a matter of fact, there are more potential law schools about to open up than there are law schools at risk of closing down

You ate conflating two separate and distinct markets:
1) law schools (which sell JD degrees)
2) legal market (which hires lawyers)

The number of people who want to obtain a JD (clients of law schools) has nothing to do with the number of legal jobs there are.

Stop it. Just stop it. We all know there are a surfeit of dump prospective law students willing to overpay to go to law school. I am not debating that.

Your argument is so supremely uninteresting. It is tantamount to: "but, look, it's happening."

By examining (or as you put it, conflating) the actual employment placement value-added of legal education, I am suggesting that the price of legal education is inflated.

You keep on saying "but it isn't because, look, it's happening--people are paying" and that is annoying.

Like I said, econ 202: markets get out of whack all the time, usually because of the "irrationally exuberant" behavior of market participants. I am arguing that the OP be rational. You are apparently arguing the opposite.

Markets get out of whack also because of collusion. That's a fair explanation too: tuition seems to increase in tandem across all private schools.

Your defense, which is essentially a defense of not having a defense, is not compelling. Law schools need to lower their tuition.

[dingbat]

the "quality of the education" Big Law seeks is stellar performance against qualified competitors. ... we would have to suppose law firms have found their costs to train new associates fall (as a better education has lead to a better associate). But we know neither is the case.

We both know it for different reasons - you seem to have a few fundamental misunderstandings about biglaw.

[manofjustice]

the "quality of the education" Big Law seeks is stellar performance against qualified competitors. ... we would have to suppose law firms have found their costs to train new associates fall (as a better education has lead to a better associate). But we know neither is the case.

We both know it for different reasons - you seem to have a few fundamental misunderstandings about biglaw.

Come on dingbat. You'll feel a lot better when you get the truth off your chest. The quality of legal education has not improved along with its skyrocketing cost over the last decade... Come on. Let it go.

[dingbat]

Law schools need to lower their tuition.

why? Most law schools are turning down applicants. In what world does a business sonin demand that it is turning down prospective customers need to lower their price?

You have offered not one reason for why law schools should lower prices.
you have given reasons for why students should not pay said prices, but attributed that rationale to the schools charging said price rather than the students who ate paying that price

[dingbat]

the "quality of the education" Big Law seeks is stellar performance against qualified competitors. ... we would have to suppose law firms have found their costs to train new associates fall (as a better education has lead to a better associate). But we know neither is the case.

We both know it for different reasons - you seem to have a few fundamental misunderstandings about biglaw.

Come on dingbat. You'll feel a lot better when you get the truth off your chest. The quality of legal education has not improved along with its skyrocketing cost over the last decade... Come on. Let it go.

I never said it did.
I don't think the quality of gas at the pump has gotten any better along with its skyrocketing cost over the last decade

[manofjustice]

Law schools need to lower their tuition.

why? Most law schools are turning down applicants. In what world does a business sonin demand that it is turning down prospective customers need to lower their price?

You have offered not one reason for why law schools should lower prices.
you have given reasons for why students should not pay said prices, but attributed that rationale to the schools charging said price rather than the students who ate paying that price

Law schools should lower prices because law students should pay lower prices.

To excuse law schools because they're a "business" is odd. In your sense, a law school is a "business" like Goldman Sachs: putting together a portfolio of bad loans so Paulson can go short, and then selling the portfolio long to unsuspecting retail investors. That's a "business" that seeks, as you put it, to "burden the market with as much as it can bear." That's a business that, as I put it, exploits the bad decisions of unsuspecting couterparties (the retail investors of Goldman Sachs, like the students of law schools).

Aside from material misrepresentation (which is what Goldman Sachs got in trouble for), I suggest law schools, as educators of youth and the beneficiaries of federally subsidized loans, have a duty to act in the likely best interests of their students.

It's not unreasonable: the legal profession requires its members adhere to ethical standards that impose sweeping restrictions on the extent to which lawyers can seek solely to maximize their profit. Why would not law schools, the barriers to entry into such a profession, be held to the same standards?

And about that material misrepresentation: law schools have done plenty of that too.

[dingbat]

Law schools need to lower their tuition.

why? Most law schools are turning down applicants. In what world does a business sonin demand that it is turning down prospective customers need to lower their price?

You have offered not one reason for why law schools should lower prices.
you have given reasons for why students should not pay said prices, but attributed that rationale to the schools charging said price rather than the students who ate paying that price

Law schools should lower prices because law students should pay lower prices.

To excuse law schools because they're a "business" is odd. In your sense, a law school is a "business" like Goldman Sachs: putting together a portfolio of bad loans so Paulson can go short, and then selling the portfolio long to unsuspecting retail investors. That's a "business" that seeks, as you put it, to "burden the market with as much as it can bear." That's a business that, as I put it, exploits the bad decisions of unsuspecting couterparties (the retail investors of Goldman Sachs, like the students of law schools).

Aside from material misrepresentation (which is what Goldman Sachs got in trouble for), I suggest law schools, as educators of youth and the beneficiaries of federally subsidized loans, have a duty to act in the likely best interests of their students.

It's not unreasonable: the legal profession requires its members adhere to ethical standards that impose sweeping restrictions on the extent to which lawyers can seek solely to maximize their profit. Why would not law schools, the barriers to entry into such a profession, be held to the same standards?

And about that material misrepresentation: law schools have done plenty of that too.

A should X because B should X is flawed logic

As for the ethical consideration, I neither agree nor disagree. Yes, some schools have been unethical and some have at the very least straddled the border of material misrepresentation (I'm being conservative here), but not every school is guilty just because some are.

As educators of the youth leads to a debate about what youth is. However, a school's primary duty, as an educationsl institution, is and always has been to educate. Helping its students find jobs has been a gradually increasing secondary service. A school is not an employment agency.
As fit being the recipient if government funding, there are plenty of other recipients of government funding that are not held to that standard - why are graduate schools different?

[manofjustice]

Law schools need to lower their tuition.

why? Most law schools are turning down applicants. In what world does a business sonin demand that it is turning down prospective customers need to lower their price?

You have offered not one reason for why law schools should lower prices.
you have given reasons for why students should not pay said prices, but attributed that rationale to the schools charging said price rather than the students who ate paying that price

Law schools should lower prices because law students should pay lower prices.

To excuse law schools because they're a "business" is odd. In your sense, a law school is a "business" like Goldman Sachs: putting together a portfolio of bad loans so Paulson can go short, and then selling the portfolio long to unsuspecting retail investors. That's a "business" that seeks, as you put it, to "burden the market with as much as it can bear." That's a business that, as I put it, exploits the bad decisions of unsuspecting couterparties (the retail investors of Goldman Sachs, like the students of law schools).

Aside from material misrepresentation (which is what Goldman Sachs got in trouble for), I suggest law schools, as educators of youth and the beneficiaries of federally subsidized loans, have a duty to act in the likely best interests of their students.

It's not unreasonable: the legal profession requires its members adhere to ethical standards that impose sweeping restrictions on the extent to which lawyers can seek solely to maximize their profit. Why would not law schools, the barriers to entry into such a profession, be held to the same standards?

And about that material misrepresentation: law schools have done plenty of that too.

A should X because B should X is flawed logic

As for the ethical consideration, I neither agree nor disagree. Yes, some schools have been unethical and some have at the very least straddled the border of material misrepresentation (I'm being conservative here), but not every school is guilty just because some are.

As educators of the youth leads to a debate about what youth is. However, a school's primary duty, as an educationsl institution, is and always has been to educate. Helping its students find jobs has been a gradually increasing secondary service. A school is not an employment agency.
As fit being the recipient if government funding, there are plenty of other recipients of government funding that are not held to that standard - why are graduate schools different?

Every recipient of government funding is required to act in the public interest.

And both A and B should view law school as a means to enter the legal profession. Your legal education doesn't do you any good without a job.

You're like a student engineered to pay inflated tuition costs. I just hope more students are going to make better decisions, by either going to the schools that cost less, or by choosing to forgo law school altogether.

[dingbat]

Every recipient of government funding is required to act in the public interest.

really? interesting...

And both A and B should view law school as a means to enter the legal profession. Your legal education doesn't do you any good without a job.

You're like a student engineered to pay inflated tuition costs. I just hope more students are going to make better decisions, by either going to the schools that cost less, or by choosing to forgo law school altogether.

You know what, I'm going to agree with you:

Yes, in an ideal world, the number of law school graduates should not exceed the number of legal jobs available and the number of law school applicants should not exceed the number of law school places available.
In this same ideal world, the cost of tuition should be commensurate with the typical salary that said law student can expect, such that those expecting to get a biglaw job will be payout 3 times as much as their classmates expecting to work for the government, and those expecting to work for a non-profit will pay about half that amount.

In this same ideal world there will be no hunger, disease or war and when two people lay claim to the same plot of land they will miraculously both have access to it whenever they want and be able to do with it whatever they want.

The weather will always be perfect, unicorns will roam the streets and the sun will shine out of my ass.

[manofjustice]

Every recipient of government funding is required to act in the public interest.

really? interesting...

And both A and B should view law school as a means to enter the legal profession. Your legal education doesn't do you any good without a job.

You're like a student engineered to pay inflated tuition costs. I just hope more students are going to make better decisions, by either going to the schools that cost less, or by choosing to forgo law school altogether.

You know what, I'm going to agree with you:

Yes, in an ideal world, the number of law school graduates should not exceed the number of legal jobs available and the number of law school applicants should not exceed the number of law school places available.
In this same ideal world, the cost of tuition should be commensurate with the typical salary that said law student can expect, such that those expecting to get a biglaw job will be payout 3 times as much as their classmates expecting to work for the government, and those expecting to work for a non-profit will pay about half that amount.

In this same ideal world there will be no hunger, disease or war and when two people lay claim to the same plot of land they will miraculously both have access to it whenever they want and be able to do with it whatever they want.

The weather will always be perfect, unicorns will roam the streets and the sun will shine out of my ass.

So let me just get you on record saying this: the cost of a legal education has almost doubled in the last 15 years, in real dollars. And you think that that is okay. I think a while back you actually said the cost of a legal education at the top schools should probably increase.

If you say supply and demand one more time I am going to get on a flying unicorn and go to the moon. We are back to the "it's happening so it's okay" argument.

See above for my response. Anything that looks like an actual argument counts as my response to your inane "supply and demand" argument. There is no doubt your argument is correct: indeed tuition is what it is. You have made no argument that tuition should be at those levels, except to say that it is already. And around and around we go in your circular argument.

[dingbat]

So let me just get you on record saying this: the cost of a legal education has almost doubled in the last 15 years, in real dollars. And you think that that is okay. I think a while back you actually said the cost of a legal education at the top schools should probably increase.

Based on the economics of supply and demand, I see no reason why not. Don't get on your flying unicorn right now, there are dragons nearby.

You have made no argument that tuition should be at those levels, except to say that it is already. And around and around we go in your circular argument.

Based on NLJ250, 56.93% of UPENN class of 2011 is working at an NLJ250 firm. This is higher than the amount reported by the school. As such, let's take the school report for class of 2011 as being fairly accurate.

out of a class of 274:
12 did not report, which we shall assume are unemployed
19 in firms of less than 100, no salary reported, we shall assume they earn $0
14 in firms of 101-250 reported earning a median of $133,571
21 in firms of 251-500 reported earning a median of $151,400
125 in firms of 501+ reported earning a median of $154,837
18 in business reported a median of $83,300
41 clerkship, reported earning a median of $55,020
11 in gov/military reported a median of $55,421
10 in PI reported a median of $44,843
3 in academia, no salary reported; to be conservative, we'll call it $0

This gives a weighted average income of $106,632, in the first year.
Many clerks end up going into biglaw, and biglaw has lockstep salary increases, so in future years the weighted average income will probably increase. But, for argument's sake, let's not factor in any increase whatsoever
It appears to me that median income in the US is about $41k, but, for rounding purposes, let's call it $46,632

That means that the weighted average income of a Penn Law graduate is earning $60k/year more than a non Penn Law graduate.

Now, let's assume that tuition is $50k per year, and that this is borrowed at 7.9%
Let's assume that the extra $60k is taxed at 45% (combined federal and state)
Let's also assume that the entire extra salary (after tax) is used to pay down the loan
After 10 years (3 law school, 7 earning just the additional $60k), the student will have earned an additional $259,123, for an IRR of 23.44%

But, you say, we should include total COA (even though said person would incur living costs regardless). OK, let's call COA $70k. Well, after 10 years, the increased earnings would be $227,289

But, now we're only talking 10 years, not lifelong.

Let's say that this same person earns the JD at age 30 and works until age 60, for a total of 30 years (most will work longer). I will ignore any potential raises, income during 1L and 2L summer, and any other fancy stuff
Lifetime increased earnings would be $887,290

If we were to raise the cost of tuition to $200k per year, lifetime earnings would be $590k higher

Or we can look at it in terms of IRR.
Let's assume no loans. Cash flow in law school is -$70k
Cash flow thereafter is $33k ($60k increase minus 45% tax rate)
after 5 years working, 8 total, the IRR is positive.
After 10 years total (7 years working) the IRR is 9.31%
After working 30 years, the IRR is 18.30%
that's a damn good investment.

The breakeven after 10 years (IRR=0) would require tuition of $77k; IRR after 30 years working would still be 12.27%

the breakeven point, where IRR after 30 years of work is 0% would be if Penn were to cost $330k per year.

ok, that's unrealistic. Treasuries currently yield 2.53%; let's add a risk factor of 1.47%, so that we would need to earn a return of 4.00% for the investment to be reasonable.
COA would then be $182,805

Not a big enough risk factor? OK, let's say we need to earn an 8.00% return
That would justify an annual cost of $144,435

note that I earlier said

Top schools could probably raise tuition and would still have to turn applicants away.

while I said this based on demand, you can see above that this can be justified by the results.
Now, obviously this is for Penn, and not for Fordham, but the statement was "top schools"

Fordham has not yet posted their class of 2011 data. When they do, I can provide the same analysis for them, if you wish.

[dingbat]

If you want to be real hardcore about it, you could even say that the true cost of attendance is not only Tuition + cost of living, but that it also should include foregone salary. It's late, I'm not gonna run the numbers, but it wouldn't change the conclusion (as total cost would still be significantly lower than $144k, so the return would be higher than 8%)

[manofjustice]

So let me just get you on record saying this: the cost of a legal education has almost doubled in the last 15 years, in real dollars. And you think that that is okay. I think a while back you actually said the cost of a legal education at the top schools should probably increase.

Based on the economics of supply and demand, I see no reason why not. Don't get on your flying unicorn right now, there are dragons nearby.

You have made no argument that tuition should be at those levels, except to say that it is already. And around and around we go in your circular argument.

This gives a weighted average income of $106,632, in the first year.

But, for argument's sake, let's not factor in any increase whatsoever

It appears to me that median income in the US is about $41k, but, for rounding purposes, let's call it $46,632

Lifetime increased earnings would be $887,290

If we were to raise the cost of tuition to $200k per year, lifetime earnings would be $590k higher

Or we can look at it in terms of IRR.
Let's assume no loans.
After working 30 years, the IRR is 18.30%

The breakeven after 10 years (IRR=0) would require tuition of $77k; IRR after 30 years working would still be 12.27%

the breakeven point, where IRR after 30 years of work is 0% would be if Penn were to cost $330k per year.

Not a big enough risk factor? OK, let's say we need to earn an 8.00% return

That would justify an annual cost of $144,435

Good stuff. Finally we've broken from the circle.

Read this: http://en.wikipedia.org/wiki/Rent-seeking "A famous example of rent-seeking is the limiting of access to lucrative occupations."

Rent seeking is economically unproductive and is bad because it displaces other potentially economically productive employments of a society's wealth, and it decouples the return of work from its value (your law school doesn't make your extra earnings over your lifetime: you do), disincentivising value-creation. That is not the purpose of capitalism: rent seeking is a market distortion that our government typically addresses through legislation. In theory, if everyone earned their living by rent seeking, the economy would completely collapse and GDP would be 0.

Your "how much can a lifetime bear in tuition costs" analysis is a description the rent-seeker's mindset. "Oh gee gosh golly, when can we start charging $144,435 a year?" (When you found analysis suggested cost should be $144,425 a year you should have stopped there and scratched your head.) You know, some law schools buy nice luxury apartments for their faculty, so they don't have to pay "rent," only collect it? The faculty would have to start buying some nice luxury houses, lest they have to park all their new money in those Treasuries you were talking about for want of anything to spend it on.

But beyond rent seeking, your analysis is a bit flawed. What about...

a) Paying tuition for 3 kids? - Well, if we have it your way, that'll be about $3,000,000 dollars in loans if they all decide to go to law school. Tell the dumb ones only little Johny gets to do some learnin (boy it's like the 1950s now a days...)

b) Saving for your and your wife's retirement? - At least $1,500,000.00

c) Buying a house? -Another $400,000.00

d) Living a nice life while working like a dog before your IRR breakeven?

e) Saving for yous, your wife's, your parents, and your wife's parents elder-care expenses?

And the median lifetime salary for a potential Penn law graduate is not anywhere near 42 grand: that's not even their median starting salary.

These are serious flaws and could easily bring your potential calculated cost to...about what it is now. And a fair portion of that cost would represent pure rent seeking by the law school.

If you realize that most Big Law careers don't last beyond 4 to 7 years, your calculated cost could easily fall below current cost.

And your risk premium of 5.5% over Treasuries is far too low. For those who don't make big law, their life would be absolutely crushed under (if we have it your way) about $500,000 in loans.

Imagine you wanted to renew your lease, and your landloard said: "You're a lawyer, right? You have loans? How much do you pay on those? Well, it seems you have quite a bit of money left over, don't you? Well, give that to me." "But I need that money." "Well, keep a montly equivalent of a median sallary for yourself, plus $100.00. Your return is positive! Congratulations." "But it's just a studio apartment in Manhattan and I'm a Big Law attorney!" "Yes, but we've all decided to raise our rents, and you're screwed."

Rent seeking is a market distortion, plain and simple.

econ 302.

Do you know what isn't a market distortion? When price reflects value-added. Note: added.

[manofjustice]

Fordham has not yet posted their class of 2011 data. When they do, I can provide the same analysis for them, if you wish.

With respect to Fordham, the risk premium would need to be sharply higher.

[dingbat]

Fordham has not yet posted their class of 2011 data. When they do, I can provide the same analysis for them, if you wish.

With respect to Fordham, the risk premium would need to be sharply higher.

This we can agree on. Presumably Fordham would also have a lower weighted average salary.

Good stuff. Finally we've broken from the circle.

Read this: http://en.wikipedia.org/wiki/Rent-seeking "A famous example of rent-seeking is the limiting of access to lucrative occupations."

Rent seeking is economically unproductive and is bad because it displaces other potentially economically productive employments of a society's wealth, and it decouples the return of work from its value (your law school doesn't make your extra earnings over your lifetime: you do), disincentivising value-creation. That is not the purpose of capitalism: rent seeking is a market distortion that our government typically addresses through legislation. In theory, if everyone earned their living by rent seeking, the economy would completely collapse and GDP would be 0.

I know what rent seeking is. I also know it is not part of the current discussion (is law school worth it?)
If you want to have a separate discussion about rent seeking, that's fine, although I'll skip to the conclusion: for the most part I agree with you

Your "how much can a lifetime bear in tuition costs" analysis is a description the rent-seeker's mindset. "Oh gee gosh golly, when can we start charging $144,435 a year?" (When you found analysis suggested cost should be $144,425 a year you should have stopped there and scratched your head.) You know, some law schools buy nice luxury apartments for their faculty, so they don't have to pay "rent," only collect it? The faculty would have to start buying some nice luxury houses, lest they have to park all their new money in those Treasuries you were talking about for want of anything to spend it on.

erm, nope. purely in terms of looking at it as an investment, I said

Top schools could probably raise tuition and would still have to turn applicants away.

Based on your challenge, I then provided justification to support my statement.
Let's not get into the details of what a school could do with the profits, should they go that route, as I'm sure you can agree that it's a ridiculous conversation to have

But beyond rent seeking, your analysis is a bit flawed. What about...

a) Paying tuition for 3 kids? - Well, if we have it your way, that'll be about $3,000,000 dollars in loans if they all decide to go to law school. Tell the dumb ones only little Johny gets to do some learnin (boy it's like the 1950s now a days...)

who is paying tuition for 3 kids? How will it cost $1,000,000 per kid?
Where did you get this from? What's the relevance to this discussion?

b) Saving for your and your wife's retirement? - At least $1,500,000.00

c) Buying a house? -Another $400,000.00

d) Living a nice life while working like a dog before your IRR breakeven?

e) Saving for yous, your wife's, your parents, and your wife's parents elder-care expenses?

These are serious flaws and could easily bring your potential calculated cost to...about what it is now. And a fair portion of that cost would represent pure rent seeking by the law school.

These are things that one would need to do regardless of whether they went to law school (and earning the higher salary) or choosing a different profession (and earning a much lower salary). Therefore, I only compared the increase in salary.
As for working like a dog, well, again a separate discussion, and again one where you and I would probably agree to some extent

And the median lifetime salary for a potential Penn law graduate is not anywhere near 42 grand: that's not even their median starting salary.

Hang on; $42k is the national median salary, which I used as a basis for comparing the increased benefit of going to that law school.
Yes, there are alternatives that pay more (e.g. doctor) which I ignored because, well, that gets into a very big quagmire. It is impractical possible outcome and analyse it.
and yes, I didn't take potential wage increases into account, which I did not do for law school graduates either. I mean, lockstep for biglaw is pretty steep. If we add the potential to make partner at a V5, we start talking potentially stupid numbers.
If you call that a flaw, then, well, call me flawed for not spending several months working out every possibility.

Keep in mind that the future earnings potential issue could cut either way. Please feel free to do the analysis yourself

If you realize that most Big Law careers don't last beyond 4 to 7 years, your calculated cost could easily fall below current cost.

Yes, but most biglaw careers don't transition to flipping burgers at mcdonalds either. Some work low paying jobs, others go on to the executive boardroom at multi-national corporations. Again, this could be modeled, but I think it's reasonable to assume that, between people starting out non-biglaw and getting salary increases, biglaw alum taking a 50% paycut, and biglaw alum making big bucks, keeping the weighted average income level is a reasonable assumption.
Feel free to develop your own models that include every eventuality.

And your risk premium of 5.5% over Treasuries is far too low. For those who don't make big law, their life would be absolutely crushed under (if we have it your way) about $500,000 in loans.

I didn't say my way would be to raise tuition that high, but it could be justified.
As for the risk premium, that is open to debate. Considering the odds of achieving biglaw at Penn, I personally know several hedge funds who would take that bet at that risk premium.
Based on current tuition rates, I don't know a single investor who would turn such an investment down.

Imagine you wanted to renew your lease, and your landloard said: "You're a lawyer, right? You have loans? How much do you pay on those? Well, it seems you have quite a bit of money left over, don't you? Well, give that to me." "But I need that money." "Well, keep a montly equivalent of a median sallary for yourself, plus $100.00. Your return is positive! Congratulations." "But it's just a studio apartment in Manhattan and I'm a Big Law attorney!" "Yes, but we've all decided to raise our rents, and you're screwed."

I don't even know what to make of this

Rent seeking is a market distortion, plain and simple.

econ 302.

Do you know what isn't a market distortion? When price reflects value-added. Note: added.

I do not think that means what you think it means
Value added, in economics, is the difference between sale price and production cost. It doesn't apply to a non-goods based business, such as the service industry or education, where no units are produced.
As a matter of fact, value added can be summed up as total labor expense plus operating profit, which means that, if we were to stretch the use of the term, by definition, for an educational institution, the "value added" would equal the price
http://en.wikipedia.org/wiki/Value_added

[rickgrimes69]

manofjustice, you keep talking about "value" but I don't think you know what that means. "Value" of a school is not determined by job prospects, quality of staff, location, the way the campus smells, or any other reason that you think it should. The value of something is whatever someone is willing to pay for it. Fordham can charge a higher price simply because that is what their students value that education to be. If students felt it was overpriced, they would stop paying tuition and Fordham would have no choice but to lower prices. But they don't, so they won't.

[manofjustice]

manofjustice, you keep talking about "value" but I don't think you know what that means. "Value" of a school is not determined by job prospects, quality of staff, location, the way the campus smells, or any other reason that you think it should. The value of something is whatever someone is willing to pay for it. Fordham can charge a higher price simply because that is what their students value that education to be. If students felt it was overpriced, they would stop paying tuition and Fordham would have no choice but to lower prices. But they don't, so they won't.

And we've found ourselves back in the head-spinning merry-go-round of circular argument.

I understand what you think you get: students have other options. I granted to you that even at inflated costs, law school is a net positive-that is one (rational) reason students keep going. There are other irrational reasons too. But you're not getting it:

Reread above post re: rent-seeking. Even if consumers are willing to pay the rent, even if they net positive after paying it, the rent is a market distortion, quite similar to monopoly pricing.

Also see above posts re: irrationally exuberant consumers and collusion. Both causes of market distortions and explanations of why people "keep on going," in the latter case because their choices are limited and in the former case because they don't know any better.

You are without a doubt completely wrong to suggest that every price is the proper market price just because it is the price.

If market distortions pervade an entire economy, the economy can collapse. Quite by definition, as I explained above, if everyone makes their living by rent seeking, GDP is 0. If it would be that bad if everyone does it, why do law schools get to do it? Are law schools special?

You must justify the market price of law school by demonstrating that the market price is set free of market distortions or that the market price reflects economic value (because a market price set free of market distortions does reflect economic value, and vice versa. (In fact, that this is true underlies all of human economic progress. But apparently that's not good enough for a law schools.)

And even if the price is the proper market price, see above posts re: law schools having a duty beyond maximizing their own profits. If lawyers and judges have such a duty, so do law schools.

I swear, you would make the worst PR rep for law schools: "we are raising our prices cause we can, go fuck yourself..." I'd like to see that on abovethelaw.

[manofjustice]

I know what rent seeking is. I also know it is not part of the current discussion (is law school worth it?)

The current discussion is whether law school costs too much, not whether it is worth it. To demonstrate the distinction between the two, I introduced rent seeking, very much a part of this discussion.

These are things that one would need to do regardless of whether they went to law school (and earning the higher salary) or choosing a different profession (and earning a much lower salary). Therefore, I only compared the increase in salary.

And these are things people can't afford now. So your breakeven is too low.

I didn't say my way would be to raise tuition that high, but it could be justified.

Why isn't that your way? You said "it could be justified." (By the way, if you're looking for a reason, try mine.)

As a matter of fact, value added can be summed up as total labor expense plus operating profit, which means that, if we were to stretch the use of the term, by definition, for an educational institution, the "value added" would equal the price
http://en.wikipedia.org/wiki/Value_added

So all I need to do to increase my value added is to raise my prices? I don't need to work to actually add value? Don't you see how your strictly classical definition of value added, which assumes markets without distortion, is circular when you ignore the possibility that actual markets are distorted?

[dingbat]

There is a market distortion re law school, but the biggest market distortion is (virtually) guaranteed student loans.

Irrationally exuberant consumers is a very debatable point. You yourself have stated that law school is a net positive. Not everyone requires the net positive to be as large as others.
Yes, a lot of consumers don't have a good understanding of the pros and cons, but that doesn't in and of itself prove that consumers are irrationally exuberant. (I will admit that both arguments for and against have valid points and valid flaws)

Collusion, on the other hand, is incorrect. Law school deans do not call each other up to discuss tuition. It's more a matter of game theory.

You are also incorrect when you say "if everyone makes their living by rent seeking, GDP is 0"
GDP growth would be 0, which is something different altogether.
GDP growth of 0 would not in and of itself cause an economy to collapse.
Also, if market distortions pervade an entire economy that does not mean that the economy will collapse (history is full of examples of economies that were full of market distortions that did not collapse)

You say "And even if the price is the proper market price, see above posts re: law schools having a duty beyond maximizing their own profits. If lawyers and judges have such a duty, so do law schools."
This is true, which is why a school like Yale doesn't charge $250k per year. They could, and they would still fill up their entire class.
Law schools raise their prices because they have to. There are many factors that go into it, from staff demanding higher salaries (and getting them) to increased technological costs, to higher utility costs. While an argument can be made that professors earn too much, the same argument can be made for many other professions. Just because the profession overall is overpaid, doesn't mean the employers of said profession can get away with charging less.

Nobody goes to HYS to be taught by a TTTT graduate (unless s/he has some seriously major bonafides post graduation); Students go to HYS to be taught by the best and brightest professors out there. If a professor is not quite good enough to get into HYS (or a good enough offer) they will go to CCN, or one of the lower T14 instead.
If a professor is not quite good enough to get into the T14, or to not get compensated enough, they'll go to the T30. etc. etc.
It works pretty much the same as law school applicants.

Plain economics means that in a system where there are no limits on salaries (aka capitalism), the cost will keep going up so long as the market (in this case for law school professors) can bear it.
As the cost of law schools goes up, so does tuition. As long as the market for a law school education can bear it, tuition will keep going up.

Unless we shift away from capitalism, there's no real stopping it.

You are right in that the market is not in equilibrium, but you are wrong in the direction. While it sucks that this is the case, the cost of law school tuition will keep going up until it reaches equilibrium (being where the cost of law school is such that no more applicants want to become students than there are seats available)
Econ 101