Economic Value of a Law Degree

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Pneumonia
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Economic Value of a Law Degree

Postby Pneumonia » Wed Jul 17, 2013 5:48 pm

anyone seen this?

http://www.concurringopinions.com/archi ... out-5.html (blog entry)

http://papers.ssrn.com/sol3/papers.cfm? ... id=2250585 (original paper)

Apologies if the above have been discussed previously. Forum search didn't turn anything up.

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jselson
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Re: Economic Value of a Law Degree

Postby jselson » Wed Jul 17, 2013 7:01 pm

Pneumonia wrote:anyone seen this?

http://www.concurringopinions.com/archi ... out-5.html (blog entry)

http://papers.ssrn.com/sol3/papers.cfm? ... id=2250585 (original paper)

Apologies if the above have been discussed previously. Forum search didn't turn anything up.


Yeah, saw it on Balkin. Gonna read it tonight. Looks interesting, but I think there is some sense in which it can still fit with TLS wisdom - ie., it's the folks at the bottom who can get really screwed. Yet at the same time, they might get screwed in life, too. The baseline for the paper looks like the right analysis. But it's still good for folks to realize that law is not this magical rocket to the upper-middle class for a bunch of people.

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Br3v
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Re: Economic Value of a Law Degree

Postby Br3v » Wed Jul 17, 2013 7:07 pm

Is this the article ATL was complaining about this morning?

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jselson
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Re: Economic Value of a Law Degree

Postby jselson » Wed Jul 17, 2013 7:14 pm

Br3v wrote:Is this the article ATL was complaining about this morning?


And wouldn't you know it's Elie writing about it :roll:

sf_39
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Re: Economic Value of a Law Degree

Postby sf_39 » Wed Jul 17, 2013 8:40 pm

I read it a few weeks ago. Analysis seems pretty sound from what I've studied/researched about finance. Asks the right questions (lifetime value, benefit relative to a BA, how predictive is the starting salary and employment issues).

I've done similar number crunching regarding lifetime NPV of a JD (with current employment numbers mind you) on my own and got roughly similar conclusions although not with as much detail and academic awareness. As a previous poster said it's circumstantial. Although what I think this analysis can do for the discussion is to go past the T20 or bust line of thinking but it doesn't mean go to Cooley's either. The income-based payments are also a big factor that the author says is not taken into account that potentially eliminates significant downside.

A assumption here is that the current employment trends will regress to a mean or maybe even a conservatively adjusted mean. Although even if not the author seems to imply there's still a earnings premium (albeit would be notably less present value when taking into account tuition). I think the reasoning for the assumption is fine (we can't predict the future, many structural/economic shifts have happened previously that caused employment issues and the law field marched on) but of course we can't predict the future which applies to both sides of the argument.

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Bronte
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Re: Economic Value of a Law Degree

Postby Bronte » Wed Jul 17, 2013 8:50 pm

I have not read it, but a Vanderbilt Law professor wrote a similar article years ago concluding the opposite. At the time, a number of his assumptions were criticized as overly pessimistic. I replicated his method and relaxed some of the assumptions and managed to rationalize my choice to pay sticker at a T14.

And that's the problem with this type of financial analysis. It can give you a ballpark figure and an order of magnitude. But it cannot make an investment decision for you. This is because, using figures within a reasonable range of inputs, you can get it to say "buy" or "sell" at your whim. This is well known in the finance and industry, and it applies just as well here.

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prezidentv8
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Re: Economic Value of a Law Degree

Postby prezidentv8 » Wed Jul 17, 2013 9:26 pm

Yeah just doing a little skimming I see a couple problems that might be pointed out. Nonetheless, looking forward to reading it later. Should be interesting.

Subjectively, though, I'm pretty skeptical. A long term analysis of any and every law degree seems to me to ignore the structural market change concept, recent history, the wide variation in actual outcomes, and the wide variation in the value of degrees from different law schools. I would also suspect at least a small response bias in the sample.

In any event, a million bucks over the course of a working life doesn't seem terribly far off what I'd expect as an average for that data set. It's only $25k a year on average, and that's spread among every possible outcome. As I see it, the problem is in the variation. Some people get to be megafirm partners. Others, shitlaw. Others, not lawyers.

Someone once told me that "on average, there was no housing crisis." That's how I think I'm going to approach this one.


ETA: Looks like they did address some of the structural change stuff....should be very interesting then!




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