The Chronicle of Higher Education reports that (HT: Caron):
At a time when law-school graduates are facing greater debt and fewer job opportunities, the University of Miami School of Law has offered to pay accepted students to stay away—at least for a year. The school's unusual offer, which followed an unexpectedly high number of acceptances for this fall's entering class, comes during a period of soul searching in legal education about just how many lawyers the nation needs and whether educators have an obligation to paint a realistic picture of students' prospects for landing jobs that would justify taking out loans of $70,000 or more.
At least 10 new law schools are on the drawing board around the country, in addition to the 200 already accredited by the ABA. At the same time, the demand for legal services has dropped during the economic recession, prompting hundreds of firms to lay off lawyers, cut salaries, and delay the start dates of new associates. As law schools continue to churn out graduates, the resulting bottleneck could make the competition for jobs even more fierce. And some legal experts predict that even when they do resume hiring, many big firms won't be able to continue paying new associates the salaries of $120,000 or more that students had counted on to whittle down their debt.
But that sobering news hasn't stopped students from flocking to law schools, which saw the number of applicants rise 4.3 percent for this fall, according to the ABA. ...
I want to advance the thesis (based in large part on some thoughts I garnered from my colleague Rock Sander) that law may be a mature industry.
The post-war expansion of the regulatory state, the opening of the courthouse doors to new claims during the warren Court era, and the litigation explosion provided an exogenous shock that caused demand for lawyers to rise rapidly. Following a fairly standard s-curve model, the demand for lawyers grew faster than the population and economic expansion would have predicted, driven by the aftermath of those shocks. Over the last couple of decades, however, the market for lawyers has adapted to those shocks. Because there have been no comparable major exogenous shocks affecting the demand for lawyers, the market has matured. We would therefore predict that growth in the demand for lawyers would slow until it reaches a level that can be sustained by population and economic growth.
Characteristics of a mature industry are commonly said to include:
- Consolidation among suppliers: Witness the mergers and growth of large law firms, squeexing out the middle market
- Buyers demand cost reductions and emphasis on service: We see this happening all the time as consumers of legal services, especially at the high end of the market, have become very sophisticated and demanding
- Stiffer competition
- Reduction in innovation: When was the last time there was real innovation in the way lawyers provide services?
If law in fact is a mature industry, we face a problem of systemic oversupply. The rate at which demand for new lawyers grows has permanently leveled off. Economic recovery will help, but it will not change the fundamental structural changes in the market for lawyers.Unfortunately, the growth in the number of law schools and size of entering classes at many law schools was premised on the assumption that the demand for lawyers would continue to rise at the high rate characteristic of the period, say, 1960-1990. Because that growth rate was artificially high due to the exogenous shocks of the preceding decades, the number of law schools and large law school class sizes no longer make sense. Indeed, if law schools continue to grow in number and size at their current rate, the gap between demand for new lawyers and the number of new lawyers will continue to rise every year.
Put another way, we have been growing the number of law schools as though the demand for lawyers would permanently continue to experience exponential growth, whereas in fact it follows the classic natural growth S-curve.
My suggestion? Assuming we aren't going to have real free markets for legal services, but will continue to have such barriers to entry as ABA law school accreditation, bar exams, and so on, which presumably would solve the problem, we need to constrict supply. Lop off the bottom third of law schools and see if that solves it.
