Paul Campos wrote:Plus an additional factor is that once some university pulls the plug on its law school a bunch of others will find it much easier to follow suit.
I don't see why this follows. Once one school closes, many of the students it would have enrolled will end up elsewhere. Demand at other schools will go up.
Imagine how absurd it would have sounded in early 2007 to predict that a couple of nation's oldest and most prestigious investment banks simply wouldn't exist a year later.
The banks were connected in two ways though. They were exposed to the same underlying risk, and they were directly exposed to each other. I don't see the latter applying to law schools. Camden doesn't owe Seton Hall $50,000,000.
As for the underlying risk, that's a bit iffy. Schools do share a common cause for decreased enrollment (high prices, mediocre outcomes), but what it would take to close a school would be largely school-specific (the merger fiasco, losing accreditation due to low bar passage, etc). Should a school close, its competitors will do better, not worse. While a bank closing exacerbates the problems at other banks, a law school closing mitigates the problems at other schools.
The only way I could see there being a domino effect is if a school closing creates a large amount of negative press about law school generally, further pushing down enrollment, and that lower enrollment making some students question the stability of evey mid or low ranked school, creating an industry-wide run.
[Edit: I think maybe you weren't saying a law school closing is like a bank closing in structure, but just that black swan events happen.]