Gatekeeping and the Economic Value of a Law Degree (Part 1)

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When I first read the commentary concerning Michael Simkovic and Frank McIntyre’s “The Economic Value of a Law Degree,” I was most surprised by the attention that the commenters paid to the paper’s passing reference to the typewriter. S&M are aware that their work arrives at a time when it is popular to believe that technology has wrought a structural change to lawyers’ earnings. For their part, S&M cite Frank Miles Finch’s obloquy against typewriters in the first volume of the Columbia Law Review to show that worries of technological ruin are nothing new in our line of work. After listing several other examples (such as word processing and Westlaw), S&M maintain that “lawyers have prospered while adapting to once threatening new technologies and modes of work.”

Taken out of context, this last statement might sound as if S&M are engaging in bold fortunetelling based on a scant historical record, but a few paragraphs later, S&M concede that “past performance does not guarantee future returns” and “[t]he return to a law degree in 2020 can only be known for certain in 2020.” When read in conjunction with the rest of the paper, the typewriter reference serves as a brief and lighthearted reminder that we, like others before us, can fall victim to nostalgic gloom and doom.

Despite its minor role in the article, commenters have been eager to mention the typewriter observation, with references ranging from the favorable (here), to the neutral (here and here), to the mildly dismissive (here and here), to the critical (here). Having given some thought to the last entry on this list, Deborah Merritt’s wonderful blog entry on Law School Cafe, I now realize that I shouldn’t have been surprised by the attention paid to the typewriter; it turns out to be an important point for S&M to make.

Merritt argues contra S&M that (1) Finch was not engaging in sky-is-falling melodrama and (2) that the typewriter “may have contributed” to a structural change in lawyers’ earnings—specifically, the creation of three-year law schools and formal schooling requirements for bar admission.  As to the first point, Merritt explains that Finch mentioned the typewriter to bolster his argument that apprenticeships had ceased to be a viable training environment for lawyers. He was not predicting that the typewriter would lead to the demise of his profession; rather, he was talking about the need for an adequate training substitute. As to the second point, Merritt points out that the New York bar adopted Finch’s recommendations, in part, because it was persuaded by his Columbia article. I add that the ABA would eventually adopt similar requirements as well, also referencing Finch’s article in the process. Merritt highlights that Finch’s main point was that the typewriter limited apprentices’ exposure to the study of important legal texts and created a difficult learning environment. As a result, Finch argued, law school was the far better educational option.

Merritt’s post is thoughtful, well-researched, and concise. Moreover, she is largely right. Finch was not engaging in nostalgic sky-is-falling reasoning. In S&M’s defense, however, the notion of a Typewriter Doomsday was not altogether uncommon in the early Twentieth Century. To take but one example, Arkansas law titan George B. Rose mentioned the following in a 1920 speech to the Tennessee Bar Association:

A great menace to the wellbeing of the bar is the disproportionate increase of its numbers. With the invention of the typewriter, the simplification of pleadings and the improved methods of travel, one lawyer can now do the work of two in the olden time; yet the proportion of lawyers to the remainder of the community has enormously increased.

Rose’s remarks were received with great applause and an honorary membership into the Tennessee bar.

More importantly, Merritt stands on solid ground when she argues that technological change contributed to a shift in the business practices of legal professionals and, in turn, the shape of American legal education. There can be little doubt that this shift can be described as “structural.”

But I disagree with Merritt insofar as she believes that a structural shift in schooling requirements weakens S&M’s paper. To the contrary, it helps the paper by providing a prima facie explanation for relative stability in the law degree’s value.

We must be mindful of the distinction between structural shifts in lawyers’ earnings and structural shifts in other aspects of the legal profession, such as educational requirements. Clearly, Merritt’s focus is the latter, and S&M’s focus is the former. And just because S&M have chosen to focus on one kind of structural shift does not mean that they have “dismissed” other structural shifts, as Merritt says. S&M readily acknowledge that the structural shifts can occur with law school enrollment:

These distinctions and widespread publicity may enable critics to influence college graduates’ career plans, the judiciary, and perhaps the future of legal education. They may have already contributed to a steep three-year decline in law school applications and enrollments.

The more critical point is that breaking up structural shifts into various types can be a useful analytic tool. Distinguishing between structural shifts in the value of a law degree and structural shifts in access to the practice of law permits us to make an important observation—namely, that it is possible for the latter to prevent the former. Critics of S&M doubt that the past performance of law degree holders is a reliable predictor of future performance. We can hypothesize that, to the extent law degree holders can insulate themselves from exogenous forces that threaten the value of their services, they will increase the stability of the degree’s value and, therefore, the reliability of predictions based on their past performance.  The underlying reasoning for the hypothesis is as follows.  All other things being held constant, those who are within service industries that have the power and willingness to manipulate the supply of available service providers will likely be better at braving exogenous shocks than those who are not. Under those circumstances, when such measures are taken to protect those already possessing the credentials necessary to perform that service, the value of those credentials will tend to be relatively stable.  Whether these measures have been or will be effective enough to stabilize the value of the law degree is a question worth considering.

There are several important gatekeepers to the practice of law: law schools, the American Bar Association, state bar associations, state supreme courts, etc. These gatekeepers possess, and sometimes use, tools that have the potential to protect the economic value of the law degree. They can change the qualifications for entry, expand or contract the domain of permissible services, raise or lower rate maximums, or regulate advertising practices, among other things.  And while a considerable minority of law degree holders do not practice law (about 40% according to the SIPP data that S&M consider), there are enough practicing lawyers to give protectionist measures a fighting chance to stabilize the overall value of the degree.

Merritt deserves much credit for bringing this observation to the fore in connection with the S&M paper, although she did not expand upon it (an excusable omission in light of the fact that we are talking about a single blog post).

Having the luxury of multiple posts, I will use Part 2 to discuss a few of the protectionist measures that gatekeepers have taken over the last century.  I will focus in particular on the measure that Merritt discusses–the advent of a law school prerequisite for admission to the bar.

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7 Responses

  1. Derek Tokaz says:

    Two important gatekeepers you didn’t mention are clients and firms. Law schools, the ABA, and bar associations are gatekeepers to obtaining a license to legally practice law. Clients get to decide if you’re actually going to practice law.

    A lot of people have pointed out that the current legal market has created a paradox; there are thousands of unemployed and under-employed law school graduates, and an underserved middle class. One explanation is that it doesn’t make sense for a fresh law grad to give up a steady paycheck at Starbucks (and health insurance) just to take one or two small matters and then face total unemployment after. There’s a minimum threshold of clients you need for hanging up a shingle to make sense. But, there’s another explanation from the client’s side.

    From the client’s perspective, hiring a lawyer does not automatically create value. Being licensed to practice law doesn’t give the lawyer some magical power to bless a document. What adds value for a client is the lawyer’s knowledge, skills, and experience, and the fresh graduate is lacking in these areas. Even if the fresh grad is offering some bottom of the barrel rate, say $20/hr, the client could reasonably decide that the costs outweigh the benefits.

    This seems especially likely to be the case when you consider how much better educated the population at large is, and the vast amount of free or low-cost resources that are available for the middle class potential-client who wants to go the DIY route. The client probably also understands the long-term benefits of going the DIY route. If you take the time to learn how to write a will yourself, then you don’t need to hire a lawyer a second time when you change it five years down the road.

    Then there’s the firms (and I don’t just mean big firms, but firms of any size). Firms are the major source of the knowledge, skills, and experience that lawyers need acquire to be useful to clients. The law schools get to decide how many JDs are put on to the market, the state bars decide how many get licensed, but the firms get to decide (more or less) how many become skilled lawyers.

    I know many professors have talked about how increasing regulation (and its increasing complexity) will mean more demand for lawyers in the coming years, but you have to consider who exactly is more in demand. If the law becomes more complex, that means it’s harder for a fresh grad to be useful to a firm. Maybe before it took 1 year of on-the-job training to be somewhat competent, but if the changing nature of the law means it takes 2 or 3 years, fewer firms will want to pick up the cost of training the next generation. In the short term, it makes much more sense to give extra work to your mid and senior associates and just pay them larger bonuses. And, with how firms try to use PPP to lure rainmaking partners, the short term benefits can easily win over long term stability.

    So, if on one end the law is becoming too complex for young lawyers to be useful, and on the other end it’s simple enough for clients to handle it themselves, we could be looking at a very important structural shift.

    PS: Does anyone have any data on the underserved middle class? Whenever I hear about it, it’s always just assumed to exist.

  2. Couldn’t current law degree holders could work to insulate themselves from exogenous forces without extending that insulation to would-be lawyers? The more interesting question to me isn’t whether the law degree’s value is stable, but what factors are causing the value to fluctuate (or not). Looking forward to Part 2’s discussion of the gatekeepers’ measures and how they’ve affected would-be lawyers in recent history. Especially curious about how those past measures have led to structural shifts in access to the practice of law, i.e., law school.

  3. @Derek Tokaz: I also thought it odd that Prof. Sheppard didn’t mention clients & firms, but took the “etc.” at the end of his short list to mean he would be adding to the list in Part 2.

    P.S.: Does anyone have any reading recommendations re: websites like LegalZoom or LawDingo?

  4. cas127 says:

    To me, that admitted *40%* JD-but-not-practicing-lawyer figure is the forest-lost-for-the-trees part of the whole subsequent rather-in-the-weeds analysis (pro and con S/M).

    Can somebody point me in the direction of a detailed analysis of this 40%?

    What specific careers do they end up in that still manage to generate a premia? At what median salaries by job?

  5. Barry says:

    Derez: “From the client’s perspective, hiring a lawyer does not automatically create value. Being licensed to practice law doesn’t give the lawyer some magical power to bless a document. What adds value for a client is the lawyer’s knowledge, skills, and experience, and the fresh graduate is lacking in these areas. Even if the fresh grad is offering some bottom of the barrel rate, say $20/hr, the client could reasonably decide that the costs outweigh the benefits. ”

    This is very important:

    1) You can’t practice law as a part-time job, unless your other job is one you can postpone with no notice because you got a client have to be in court at 8AM the next morning (and then will have to schedule days in court).

    2) An inexperienced, unconnected lawyer is very dangerous; you might pay a steep price for his/her learning curve, whether it’s a criminal case, civil suit, contract or will.

  6. Barry says:

    “What specific careers do they end up in that still manage to generate a premia? At what median salaries by job?”

    Law schools work very hard to be ignorant of these people.

    As for the premium, imagine that you’ve spent three years (and the price of a house) on a professional degree, once which people reasonably assume would lead to a job ***in that field***. After one, two, three, four or five years either scrounging for odd jobs or trying to make a run of the legal profession, you look for a ‘real job’ outside of it.

    Imagine the handicaps you’d be under – after all, you took serious professional training, and couldn’t get a job/a real job in that field. If people don’t know better (and they don’t), you’d look like a failure. That would lock you out of many positions, and you’d be trying to get these jobs at age thirty or older.

  7. cas127 says:


    I agree entirely.

    But a brief skimming of the S/M paper (I haven’t read the whole thing yet) suggests that they dispose of the fate of *40%* of the profession (that part *not actually *in* the profession…) with a footnote and non-granular waving in the direction of the SIPP data.

    Where can the detailed SIPP records be found? Have S/M made a data set available?

    It shouldn’t be too hard to generate a table detailing the end careers of the non-lawyer 40% of JDs (with median salaries).

    Have S/M generated such a table or just published the aggregated (and therefore impossible to analyze) median for *all* JDs?

    I think the latter (perhaps I am mistaken – anybody have a cite/URL?) and I am *very* dubious as a result.

    It is very hard to see 600,000 JDs as CEOs and hedge fund managers…