Author Archives: sdiamond

A Fall 2015 seminar on “global tectonics” – call for papers

I am organizing a seminar to take place in the fall at my law school on “global tectonics.” The theme will be the application of law to the problems created by what I call global tectonics. I intend to consider problems like the Ukraine, Boko Haram, Mexican drug violence and more. Students will be reading the globalization and rule of law literature and then examining these trouble spots where global social, political and economic tectonic plates are clashing. They will be asked to consider how or whether legal solutions to these situations are feasible. If you have any ideas for papers or other material for the seminar or would like to present work of your own please let me know. My campus email address is sdiamond@scu.edu.

The continuing disconnect between law school critics and market reality

I just happened to notice that the law school critics continue to distort the findings of the Simkovic and McIntyre paper on the economic value of earning a JD. This paper sends a chill down the spines of the critics because it lays waste to their argument with straightforward data. This requires them to engage not just in mental gymnastics that lead to the kinds of absurd confusions about valuation found here and here but now to outright falsehoods posted to one of the most important law school blogs in the country.

One egregious example is found in the comments section at Paul Caron’s blog, TaxProf. There one finds another anonymous (and ubiquitous blog) commenter named “Unemployed Northeastern” (UNE) who thinks that he has a better grasp on the economics of legal education than that provided by the exhaustive research of S&M.

UNE states, for example, that the paper is not peer reviewed. But the Journal of Legal Studies which just published the S&M paper is a peer reviewed journal published by the University of Chicago. As it states on its web page: “Manuscripts are reviewed in a single-blind process: the identities of authors are revealed to referees, but referees remain anonymous.”

UNE makes other false or misleading statements as well such as a claim that:

“The study does not include any salary information for law school graduates from the classes of 2008 through 2014, which is a period about 40% as long as the cohort in their study (mid-90’s through 2007). *Coincidentally,* that is when law school grads’ prospects and salaries fell off a cliff.”

The clear suggestion is that S&M purposely cut off their data at a point when new data would contradict their initial conclusion. This is baseless and unfair. It is also just plain wrong.

First, the paper relied on data from four year panels produced by the Census Bureau. The authors begin their work with the 1996 panel and the last one available to them when they conducted the analysis was for students who graduated in 2008. They then track what happens to all JD holders in those panels through 2013. This includes, therefore, the entire period of the recent recession. It does not include someone who earned a JD after 2008 but S&M make clear that it is all but impossible to conclude that this would change their result.

As they write (p. 273):

“Although our sample does not include those who graduated after 2008, it includes 2008 graduates who, as young and inexperienced workers, are likely vulnerable to many of the same shocks. Our sample also includes individuals who graduated during previous recessions, and the long-term impact of early-career recessions on subsequent earnings is therefore averaged into our results. Future research could explicitly consider cohort effects.”

There is certainly no basis for the insinuation made by UNE that the authors were fixing the data.

Their logic is simple: they are measuring career earnings for JD holders relative to holders of a BA. Earnings in the early years of a career as a JD holder are lower and rise over time. In fact, JD holder earnings peak nearly 20 years after law school, much later than those of BA holders.

Fig. 1:

The Economic Value of a Law Degree Fig 1

As S&M write (p. 271):

“Another limitation of the NALP data and of studies that focus on starting salaries is that earnings of professional degree holders, including law degree holders, typically grow rapidly and peak in middle age. First year earnings represent a small fraction of the present value of lifetime earnings—roughly 2 percent for law degree holders—and are imperfect predictors of subsequent earnings.”

In addition, earnings of lawyers are cyclical, as their data make starkly clear.

Fig. 2:

The Economic Value of a Law Degree

As S&M write: “we investigate changes in the law school earnings premium from 1996 to 2013 and find a cyclical pattern….Although the earnings estimate declined from its 2008 peak in recent years, the estimate remains close to the long-term historical average. Indeed, the estimate was lower in the late 1990s and early 2000s than in the last 3 years. The estimate today is about the same as it was in 1996.”

The impact of the recession caused a downturn in the earnings of JD holders but the effect was short lived as the data I summarize below indicates (with only one down year – 2008 – in lawyer incomes since 1997). UNE also ignores the fact that the value of a JD is relative, as S&M make abundantly clear: “The economic value of a law degree turns not on whether law school graduates practice law but rather on how much more readily they find work with the law degree than they would have without and how much more they earn with the law degree than they would have without.” (p. 252)

The alternative for most law school applicants is life without an advanced degree or certainly life without one as valuable as a JD. Thus, the question that always must be posed is whether one is better off with a JD, even in the middle of an economic downturn.

The S&M answer is unambiguously yes: “The unadjusted log earnings gap of .67 between the general population of bachelor’s degree holders and law degree holders translates into an average earnings premium of 95 percent.” (See Table 2.)

UNE continues his baseless attack on S&M with a suggestion that the authors lack the training to carry out the project, suggesting that one of the authors, law professor Michael Simkovic, is not as highly credentialed as another leading law school critic named Stephen Harper. Harper spent his entire career as a litigator for a major Chicago law firm and has been criticized by me and others for his failure to understand the basics of valuation as it applies in the law school debate. It borders on silly to suggest Harper is more capable of analyzing the JD labor market than S&M.

UNE also attempts to minimize the fact that the S&M paper was widely circulated in advance of its publication in a peer reviewed journal and was read favorably in advance by a wide range of leading figures in labor economics. This is a standard part of the academic vetting process and is intended to test the results and methodology of a research project. UNE seems unfamiliar with this aspect of scholarship. I detailed the results of this process in a blog post at the time because a similar kind of attack on the paper was made by Brian Tamanaha who quickly folded his tent. As I wrote then:

“Their research was reviewed in advance of its posting on SSRN by a large array of respected senior scholars in law, economics and business. It was also peer reviewed prior to its acceptance at the American Law and Economics Conference held at Vanderbilt earlier this year, prior to its public posting on SSRN. As a test, without telling the authors, I wrote to one of those reviewers [fwiw, a very senior figure in labor economics] who, in fact, is a fan of the work of Tamanaha and asked him for his view of the research. He sent me the copy of the comments he originally sent to the authors in which he concluded their paper to be ‘very careful and well done’ although he reserved judgment on whether what is happening in the market for JDs is ‘all cyclical or at least partially structural.’ This is hardly the reaction of a reader who believes the work he is considering is sloppy much less faulty or misleading.”

Suffice to say that while Professor Simkovic is a young scholar he is more than capable of carrying out the research and UNE (whose academic credentials remain a mystery) has failed to identify a serious flaw in the work. It is not a surprise that it was published in a leading peer-review academic journal published by the University of Chicago.

(Professor Simkovic also, of course, had the assistance of a co-author, finance professor Frank McIntyre. This is a standard form of co-authorship in the academic world where specialization requires collaborative work across fields. I make no apologies, for example, for the fact that I rely heavily on my co-author, an economist, for our work on the structure of stock markets. UNE simply ignores this, no doubt because it weakens his position.)

In fact it is clear that the law school critics have a very weak understanding of labor economics and of the particular nature of market for lawyers. They also make the mistake of conflating the market for law schools and the market for holders of a JD and for lawyers. The latter markets have been very stable over time, consistent with the S&M results.

Below are several charts that indicate the disconnect between the “market” for law schools in terms of numbers of law school applicants and enrollees, on the one hand, and the market for lawyers. As a comparative metric, I have included a chart showing US GDP growth. The picture one sees is a very volatile market for law schools and a very stable market for lawyers and GDP growth, the recent downturn notwithstanding.

US GDP 1997-2013:

GDP

Working Lawyers 1997-2013 (BLS):

Working Lawyers US 1997-2013

Licensed Lawyers 1997-2013 (ABA):

Licensed Lawyers 1997-2013

Lawyer Incomes 1997-2013 (BLS):

Lawyer Incomes 1997-2013

First Year Enrollment 1997-2013 and Law School Applicants 2005-2013 (ABA and LSAC):

Enrollment Applicants

Because the available LSAC data begins only with the recent downturn, compare this chart from an LSAC memo which shows in the top black line LSATs administered and in the green line first year admits and then most relevant for this blog in red the number of applicants going back to 1980-81.

ABA data

Note the prior peaks and valleys in applicants. We have seen this picture before.

Finally, here is JDs granted 1997-2012 (ABA):

JDs granted

The conclusion one draws from this picture is that the labor market for JDs remains stable, healthy and continues to grow. Law schools are producing licensed lawyers and JD holders in a pattern that is fairly consistent with the growth in the market for those graduates, and, importantly, with the earnings premium they will accrue over a career compared to going through life with only a BA degree (the only realistic alternative for most law school applicants).

The more volatile swings up and down in law school enrollment and applicants remain to be explained. I have suggested elsewhere that several factors impacted the current situation including the steep rise in enrollment in the wake of the crisis due to the “law school as hideout” factor linked in turn to the fact that the economy did not recover in time to provide immediate employment to graduates at the rate they desired. But for those bitter-end critics still hoping to see widespread closures of law schools (for reasons that seem more ideological than logical) they are likely to be sorely disappointed. The data stacks up against them.

Faculty free speech victory at Chicago State – my guest post on Eric Goldman’s blog

My guest post on an important court victory for faculty free speech can be found here.

Henry Manne, 1928-2015

Steve Bainbridge writes here of the passing of Henry Manne, one of the most important legal thinkers of the late 20th century. I did not know Henry at all personally until one evening a few years ago I was very pleased, out of the blue, to receive an email from him commenting on a paper of mine that had been posted on SSRN. That led to a brief but fruitful exchange of ideas about law and capitalism that proved very helpful in my own thinking and apparently, while he was perhaps just being polite in saying so, in his own thinking as well. Henry was someone who I think, alongside the late Benoit Mandelbrot whom I also was privileged to get to know in a similarly random way, should have received a Nobel Prize. Henry’s work and ideas will be of significance for a very long period of time and deserve careful study.

Remembering the words of Thich Nhat Hanh on Martin Luther King’s day

While many tomorrow will, understandably, recall Rev. King’s “I Have a Dream” speech, I often think of another of his great speeches, one that was, in some ways, more radical and disconcerting because he linked his struggle for racial justice to US foreign policy.

It was delivered in New York in 1967 and can be heard here.

There is also a personal aspect of that speech for me because my young son’s great uncle, Thich Nhat Hanh, was quoted by King in the speech:

“This is the message of the great Buddhist leaders of Vietnam. Recently one of them wrote these words, and I quote: ‘Each day the war goes on the hatred increases in the hearts of the Vietnamese and in the hearts of those of humanitarian instinct. The Americans are forcing even their friends into becoming their enemies. It is curious that the Americans, who calculate so carefully on the possibilities of military victory, do not realize that in the process they are incurring deep psychological and political defeat. The image of America will never again be the image of revolution, freedom, and democracy, but the image of violence and militarism.'”

Thich Nhat Hanh had met with King when he came to the United States from Vietnam and apparently had a significant impact on King’s thinking. In fact, King nominated him for the Nobel Peace Prize. This year, Thich Nhat Hanh is quite ill so there is a poignancy to this important historical connection. It is also the case that now is once again a time when America must find a way to stand for “revolution, freedom and democracy” as the events in Paris and the middle east remind us.

As market reality sets in law school critics get testy

As the economic recovery continues and evidence emerges that the job market for lawyers is continuing its steady growth, the small group of hard core law school critics is getting a little nervous. From the very beginning the critics have been fueled by misguided notions about how markets actually work and severely challenged abilities to understand the empirical evidence of the relative health of the market for lawyers.

One recent example is an ongoing exchange between Professor Ted Seto of Loyola Law School and blogger Matt Leichter. Seto had the temerity to note that projections about future legal employment made by the BLS, long and heavily relied upon by law school critics, had recently been adjusted. Under the old, now discredited, BLS methodology it appeared that law schools, collectively, were graduating far more JDs than could be absorbed by the market. It turns out the opposite is very likely to be the case, as Seto explains quite clearly.

Now retired lawyer Steven Harper expands the critics’ new offensive with a claim that many law school deans and professors will soon declare the “crisis” to be over. He provides no basis for this claim, which he likely will suggest was purely rhetorical. It is extremely rare that “many” deans, much less “many” law professors, ever declare anything collectively to be true. I don’t know about the law schools Harper is familiar with, but we have trouble getting committees of seven people to agree on a time for a meeting.

Unfortunately, this kind of rhetoric is typical of the way he plays loose with the facts. It’s the kind of approach one has come to expect from Harper, as demonstrated here and here. In the same post, for example, he relies on data for something he calls “total legal services employment” with a link, not to the original data – which is from the BLS, but to a compilation of the BLS data by Ben Barros for the blog Faculty Lounge.

This data shows a slight decline, he notes, between the end of May 2013 and the end of November 2014 of 100 jobs (out of a total of more than 1.1 million.)

This leads to his key conclusion: that despite what he admits is an overall macroeconomic recovery, “the hoped-for increase in attorney demand was nowhere to be found.”

There is only one problem, well, actually three problems.

First, Harpers fails to explain that the data Barros provided is seasonally adjusted.

This means the data has been smoothed by the BLS wizards to provide a different picture of the labor market. The BLS does this with its employment numbers because it can sometimes be helpful to abstract away from seasonal ups and downs in the labor market. But that also means you are not seeing the actual employment data and that you will not get end of year averages. More specifically in the law context, while the BLS has its own reasons for seasonal adjustment one impact is to reduce the employment numbers in summer months failing to show the impact of hiring of summer associates.

In fact, the unadjusted data (link below) show an increase in legal services employment between May 2013 and November 2014, from 1,131,300 to 1,134,800.

Second, the data category Harper uses includes more than just lawyers. Now Harper notes this in a parenthetical reference but he does not explain it. In fact that “legal services” category includes so many non-lawyers (e.g., some 270,000 paralegals) that the category is nearly double the size of the number provided by the BLS for people actually working as lawyers. Of course, the ups and downs of that larger “legal services” category tells us something about the state of the legal industry though what exactly is not entirely clear. But it is not automatically a good proxy for “attorney demand” and Harper makes no case that it is, instead he just blindly relies on it.

This might be ok if we did not actually have data for people who do work as lawyers but in fact the BLS tracks that, too. Inconveniently for Harper, however, it shows a fairly steady recovery in employment (and incomes) for lawyers since the onset of the 2008 crisis.

As I pointed out in a recent post: “The number of lawyers employed in the US has risen steadily every year over the last decade (except for a one time drop in 2008 to 553,690) to a high in 2013 of 592,670. Average annualized earnings have grown every year as well from $107,800 in May of 2003 to the May 2013 total of $131,990.”

(There were 425,170 people working as lawyers in May of 1997. That climbed to 504,370 in May, 2002 and hit a pre-crisis high of 555,570.)

The third problem is that even if one only had the “legal services” employment data, that data actually shows steady recovery from the crisis, too. Here is a link to the entire data set month by month for the last decade, non-seasonally adjusted, thus allowing the creation of annual averages. So at year end, what do annual averages show?

That jobs in legal services grew steadily from 2004 to 2007 and then as the crisis took hold fell off in the following three years (2008-10) before beginning to grow steadily over each of the next four years (2011-2014) hitting a number last year higher than any since 2008.

In fact, if Harper had gone back to the original data he could have seen that even his seasonally adjusted number (data set here) improved from November to December in 2014.

Of course, steady recovery over the last several years in employment of lawyers does not mean the crisis is over for law schools. Just as many more students delayed job hunting by going to law school post 2008, now the delayed impact of the inevitable downturn in enrollment is hitting home.

It does mean, however, that the dominant meme of the law school critics – that law schools themselves are fraudulent institutions that should be radically restructured if not eliminated – is discredited.

“It’s the economy, stupid,” as James Carville famously pointed out, not the allegation of central planning made by the critics and their right wing friends at the Cato Institute.

As explained here and many other places, law school enrollment tends to be counter-cyclical. Law school was seen in the past by many recent college grads as a place to hide out if economic conditions were weak. Since most business downturns subside more quickly than the 2008 crisis, this was a reasonable strategy. But it proved unworkable with such an unusually severe and prolonged downturn. So an overhang of law school graduates was created and it will take time for that to resolve.

Perhaps even more important to take note of: law schools are not great at tightly controlling the production of new lawyers. We don’t have central planning in the US. Despite what the critics may think of the ABA it does not exercise Stalinist levels of control over law schools in our free market society. So there is always going to be some level of mismatch between supply and demand.

Meanwhile, Ted Seto is probably right to note the potential for a swing in the opposite direction now. What led to oversupply over the last few years may lead to undersupply in the near future.

A related data point (also based on historical BLS and ABA data, not projections) is significant: while law schools specialize in producing licensed lawyers, that does not mean they produce graduates who predominantly work as lawyers. The ABA tracks the number of licensed lawyers in the US and the BLS, as noted, tracks the number of people working as lawyers. Over the past 17 years (I could not access precise BLS data for lawyers prior to that), slightly less than half of all licensed lawyers are, it appears, actually working as lawyers. (There are others who work as judges and in other JD-required roles.) I think it’s reasonable to presume that relationship has been stable for some time. (It was 45% in 1997, 49% in 2003 and 47% in 2013.)

Whether we admit it or not, in other words, law schools have for a long time been in the business of producing almost as many non-working lawyers as working lawyers – and that is not a function of any kind of misleading brochures handed out by marketing staff. It’s a function of the value of a JD to the many thousands of people who continue to maintain their law license even though they are not working as lawyers. That’s why the best study of the earnings premium associated with a JD – by Simkovic and McIntyre – is able to demonstrate a career earnings premium for the JD itself not for a career working as a lawyer.

No one wanted the kind of mismatch in JD’s and jobs that occurred after 2008. And I didn’t want to sell my home at a significant loss in the wake of the crisis either. But as court after court has pointed out law students cannot blame the law schools for the problems of the wider economy any more than I can blame the bank that loaned me money to buy my house. Had the law school critics taken up the calls for debt relief that I and others issued instead of worrying about over-wrought theories of law school as a scam, thousands of recent graduates might be better off today.

Washington Post joins the myth making about law schools and legal employment – New Year’s Update

There is no question that law schools have suffered from the impact of the dramatic collapse of the world economy in 2008. Because of a lag effect the full impact was delayed a couple of years but now indeed enrollment has dropped significantly.

The delay in the enrollment decline occurred because new college grads tried to flood into law schools from 2008-2010 in order to wait out the economic turmoil. The problem they then faced was that the recovery only took hold in 2012-13 and that meant oversupply in the market. The enrollment bubble can be seen in this chart prepared by the ABA. As the economy took off under the influence of low interest rates in 2003 enrollment steadily climbed and jumped up significantly as the credit crisis was in full swing. The peak in first year enrollment was in AY2010-2011 at 52,488. The continuing impact of that bubble period is indicated by the fact that the highest number of JD’s ever awarded in the US occurred in 2013, three years after the peak of first year enrollment.

Now, of course, law schools face both a reputational effect of that oversupply problem and the fact that with a wider economic recovery underway law school is no longer necessary as a hiding place for unemployed college grads. Many college graduates can get jobs right away with just a BA, even if these gigs don’t pay as well as lawyering.

Ironically, and as has happened in several prior business cycles, the decline in the attractiveness of a JD is occurring as the legal employment market is steadily recovering. New BLS data analyzed by Ted Seto at Loyola Law School in Los Angeles suggests there will be a shortage of lawyers beginning as early as 2016. One legal industry consultant, Peter Zeughauser, told the Wall Street Journal that “the legal industry across the country was faring better than in the years following the financial meltdown of 2008. ‘For the first time in six years, the legal economy is back on track,’ he said.”

These basic facts about economic cycles and the BLS data on legal employment do not bother the Washington Post, however. Their legal reporter Catherine Ho reports today that there is a “shrinking job market for young lawyers” and a “major retrenchment” underway since 2008 in the legal sector.

This would certainly come as a surprise to the many large law firms handing out bonuses that are larger than any they have awarded associates since 2007. The conclusion also flies in the face of the data the BLS carefully assembles on legal employment and wages. The number of lawyers employed in the US has risen steadily every year over the last decade (except for a one time drop in 2008 to 553,690) to a high in 2013 of 592,670. Average annualized earnings have grown every year as well from $107,800 in May of 2003 to the May 2013 total of $131,990.

And even in Washington, D.C.’s lawyer rich environment, legal employment and incomes have recovered steadily. Employment reached a crisis period low of 28,390 in 2010 but hit 31,810 in 2013, well in excess of the pre-crisis 2007 number of 29,060. Average annual earnings have been slightly more volatile but hit $162,800 in 2013, a significant bump up from the pre-crisis number of $143,520 in 2007. In fact, lawyer incomes increased in DC in 2008, 2009, and 2010, with a slight drop in 2011 before hitting a record high $165,590 in 2012 and then settling back in 2013.

These numbers hardly suggest a shrinking market much less a major retrenchment. It is possible that the Post, like many law school critics, prefers anecdotes to data, so I asked the Post reporter Catherine Ho if she could provide me the basis for her reporting but have not yet received a reply. If I receive it I will update this post.

[New Year’s Day Update: Ms. Ho has not yet responded to my inquiry. The facts about a recovering economy are hard to deal with for the law school critics. Even the man made global warming crowd in a post authored by Professor NPV himself chose to ignore what the BLS data and other indicators of rising lawyer employment and incomes tell us in their quixotic effort alongside their friends at the Cato Institute to destroy the American law school.

[A year by year look at enrollment indicates that enrollment flattened and even fell during the impact of the dotcom bubble then started to rise when that bubble burst only to flatten again once the real estate bubble took hold, then rose again as that bubble burst only to start falling off now that recovery has – slowly – started to take hold. It is this kind of cycle effect that mystifies the law school critics in a manner that is reminiscent of those who used to think man caused global warming. At least the global warming crowd has had the courage to change their mantra to “climate change.”]

Putin dances to the tune of fictitious capital

Today’s Financial Times has a front page story on the newest stage of the Russian crisis. Putin’s Russia is being hit by both western sanctions as a result of its invasion of its sovereign neighbor, Ukraine, as well as by a glut in the supply of global oil.

This chart indicates the significant downward move in oil prices:

ChartBuilder-1

As a result, the world market is marking down the value of the Russian economy and hence the ruble is tanking in value.

In response, Putin is now forced to pump large amounts of cash into the banking system to keep key financial institutions afloat. The latest infusion amounts to close to $8 billion for three major banks. While the regime is claiming the ruble crisis is over, the FT story includes the following: “This is only the beginning,” said a senior executive at a large Russian financial institution. “Everyone is bracing for what comes after new year.”

Indeed the news about the bank infusion sent the ruble down again Friday after a rally earlier in the week. The overall damage of recent months is clear in the chart below:

ChartBuilder

Meanwhile in a recent speech Putin continued to make noise about diversifying the Russian economy which is another way of admitting that a quarter century of post-Cold War political and economic development has largely been a waste for the majority of Russians (and for much of the former eastern bloc as a whole it might as well be said, Ukraine first and foremost).

Thus, the Cold War may be over but we are far from resolving the fundamental imbalances in the global economy. These have now become so severe that countries like China and Russia are increasingly willing to confront the West with provocative actions like the Ukraine invasion and the assertion of Chinese sovereignty in the south China sea area.

It is understandable that we sympathize with the victims of this kind of aggression but pushing counties like Ukraine to choose Nato membership over genuine autonomy, which has been US policy for years, only stokes the tensions with Russia and provides Putin with political capital that he uses to shore up his own domestic position. Sanctions, too, are a dual edged sword. It is true that Russia needs the world economy but authoritarian forms of capitalism have been very stable over time. As the crisis deepens inside Russia it is just as possible that it will lead to greater centralization of power by Putin and his military and bureaucracy.

Leading study of JD’s million dollar value published in Journal of Legal Studies

The widely respected Journal of Legal Studies has now published “The Economic Value of a Law Degree,” the most important and widely discussed study of the value of earning a JD authored by legal scholar Michael Simkovic and economist Frank McIntyre.

The study concludes based on exhaustive empirical analysis that includes the impact of the recent recession that “a law degree is associated with median increases of 73 percent in earnings and 60 percent in hourly wages. The mean annual earnings premium is approximately $57,200 in 2013 dollars. Values in recent years are within historical norms. The mean pretax lifetime value of a law degree is approximately $1 million.”

A working paper version of the article released last year triggered an intense debate because it provided strong empirical evidence that, despite the difficulties of recent law school graduates, over a career a JD had significant value relative to entering the workforce with only a BA. The concrete data assembled by the authors flew in the face of the anecdotal approach taken by most critics of the JD who dominated discussion of the future of law school in the wake of the economic crisis. Examples of the debate can be found here, here and here.

Here is the full abstract from the article:

“We investigate the economic value of a law degree and find that for most law school graduates, the present value of a law degree typically exceeds its cost by hundreds of thousands of dollars. The median and 25th-percentile earnings premiums justify enrollment. We track lifetime earnings of a large sample of law degree holders. Previous studies focused on starting salaries, generic professional degree holders, or the subset of law degree holders who practice law. We incorporate unemployment and disability risk and measure earnings premiums separately for men and for women. After controlling for observable ability sorting, we find that a law degree is associated with median increases of 73 percent in earnings and 60 percent in hourly wages. The mean annual earnings premium is approximately $57,200 in 2013 dollars. Values in recent years are within historical norms. The mean pretax lifetime value of a law degree is approximately $1 million.”

Some critics claimed, inaccurately, that the paper was not subject to peer review. It was, however, peer reviewed prior to its circulation in working paper form (as I explained here) and now has been published in a leading refereed journal published by the University of Chicago Press.

As the economic recovery from the collapse of the 2008-10 period continues its momentum there is some evidence that applications to top tier JD programs remain strong with applicants with very LSATs now having increased. Nonetheless, second and third tier schools remain challenged to survive the prolonged economic cycle. This study, however, is likely to reinforce the argument that the JD and law schools remain a viable and important economic institution.

The Facebook effect: secondary markets and insider trading in today’s startup environment : Research Handbook on Insider Trading

Coming out in (relatively) affordable paperback soon. Order now in time for the Xmas holiday gift giving season!

Source: The Facebook effect: secondary markets and insider trading in today’s startup environment : Research Handbook on Insider Trading