EdgarWinter wrote:Because declining marginal utility of money is why going to law school at sticker is (like somebody said earlier) borderline insane for most people.
Declining marginal utility of money is basically the idea that each additional dollar/unit of cash that you acquire is worth somewhat less to you than the one before it. If you make only $5k/year then a $5k raise is extra-great because it lets you not starve to death or whatever. On the the other hand, if you're already making $200,000 you probably don't give much of a shit.
People arguing for how great an investment law school is should factor this in--rational decision-making criteria is utility, not money per se. What people should be measuring is not the money-outcomes of law school but rather their own utility outcomes from law school (which are derived from the money ones). Thing is that it's not a perfect translation when you're dealing with such large disparities of cash (biglaw and subsequent high-power career ($160k*) vs strike-out (let's say $50k if you're lucky)).
You can't just go (160+50)/2==expected payout of law school is $105k/yr and act like that is a useful measure, because you want to base decisions not on money averages but on utility ones. And your utility average is going to be way below the utility that a simple $105k would leave you with. This is why ToTransferOrNot's execution example makes sense--potentially having a life of barely any cash after loan payments overbalances the potential upsides to not striking out even if simple monetary calculations seem to point out otherwise. (That said all this crap about "diversification" is beside the point imo).
*yes I know that's only first year salary but let's face it your career avg will probably not be much higher than that given that you'll probably exit biglaw sooner rather than later).
I took an intro to economics course one time too.