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.

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 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.

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

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My co-author Stanford-based economist Jenny Kuan and I each traveled to different parts of the country recently to present our research on the problematic changes in stock market structures. I presented the paper at the meetings of SASE held at Northwestern’s Kellogg School of Business and Jenny presented the paper at the ISNIE meetings at Duke. We got helpful comments from both events and are honing in on a new draft for submission to a peer reviewed finance journal. Here are the slides I used in Chicago.

1. I read the recent working paper and was surprised and concerned that the words “academic freedom” do not appear in the paper. Are we to conclude that academic freedom is not a principle to be an integral part of the law school of the future? Presumably not. But I would appreciate learning the Task Force’s views on this basic principle.
2. An implication of the push for diversification of law schools is that the ABA should no longer require tenure as an accreditation standard. For a century or more tenure has been considered inextricably linked to the protection of academic freedom. If the Task Force believes that tenure should no longer be part of the standards, how does it believe academic freedom can be protected?
3. In light of the concern that many legal academics have about the threat to tenure and academic freedom that is part and parcel of the program being pushed by the law school “reform” or “critics” movement does the Task Force believe that the law school’s place inside independent colleges and universities plays a critical role in the promotion of the rule of law?

Michael Froomkin at Discourse.net has an excellent summary of the new JD value study and takes on in the comments some typical but poorly thought through objections.

Study Finds the Net Present Value of a Law Degree is Highly Positive | Discourse.net.

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