Why is Business Law Education So Bad? Value-Creation by Law Professors
The question posed in the title of this post—why is business law education so bad?—was first asked in a famous and provocative 1984 paper by Stanford law professor Ronald Gilson, Value Creation by Lawyers.
That paper is best known for developing a micro-economic answer to a different—but ultimately related—question: Why would anybody pay for business transactional lawyering? And, if no one would (or should) pay for those services, why should anyone pay (or be paid) to learn (or teach) them?
Although the questions are not new, they have become more important as technology and markets transform the practice and study of law.
Gilson argued that there was an economic explanation: lawyers produce and verify information that brings the deal price closer to a hypothetical “true” market value.
Although this question—and Gilson’s answer—have received the most attention, Gilson also had important observations about legal education. Boiled down, he suggested that law schools should: (1) expose students to the actual transactions in which they were likely to participate; and (2) teach them a legal theory that would help to explain both why these transactions occurred, and why (and how) lawyers would add value by performing services in them.
When Gilson wrote this, law schools struggled with both because, among other things, most legal academics had little transactional experience. In the more than thirty years since Value Creation, however, law schools have exploded with courses that achieve the first goal, exposure. It would be difficult today to find a law school that did not offer some form of skills training to prepare law students for careers as business lawyers. A large and growing literature describes in exquisite detail how to design and teach these courses.
Yet, so far as I can tell, neither the courses nor the literature engage the second half of the problem as Gilson framed it, legal theory. (I put to one side clinics, which have their own literature, as well as skills supplements for traditional classes). Rather, they focus on “transactional skills” qua skills, such as drafting and negotiating—admittedly vital functions—without considering how legal theory might explain, explore, enhance or critique them. They have taken half of Gilson’s recommendation and declared victory.
This is a problem for two reasons. First, it seems indifferent (perhaps hostile) to the role that legal theory and scholarship could play here. Transactional skills literature reads as a series of “recipes,” how-to-get-to-yes-guides insensible to the possibility that, in many deals, “no” may be better the answer.
Why might legal theory matter in skills training? When it works, our scholarship is a disciplined and sustained critique of legal systems, broadly defined. We are in various ways trying to understand what legal systems do, whether and how they could do it better, and what any of the foregoing (“better”?) mean. To teach legal skills without some effort to connect practice to theory shorts the students (and probably the teachers) by about half.
For many in this context, this might be an invitation to an economic analysis of transactional practice. For example, I teach a workshop that is a set of early-stage financing simulations. Most of what the students do is negotiate and draft under moderately realistic conditions, viz. entrepreneur leaves Oldco to start Newco with tech from Oldco and money from Angel.
But, I also have students read an excerpt of Gilson’s paper at the beginning of the semester and carry questions about “value creation” across the term: How, if at all, are they creating value in the deals on which they are working? Why would anyone pay them to do this? What does “value” even mean? Is it more than price net of cost? If so, what does that look like? They share their thoughts in discussion and through periodic journal entries.
Economic analysis is hardly the only theory relevant to business transactions practice. I sometimes have them read on relational contracting (“real deal” v. “paper deal”) and implicit bias (what role do transactional lawyers play in the socio-demographics of tech startup culture?). There are doubtless many other academic approaches that might work.
The point is not to learn theory as an end in itself, but rather as a possible path to innovation in practice. How can students develop the capacity to see deeper patterns that affect practice today and (perhaps) in the future?
Most everyone supports the idea of innovation in law. Indeed, courses on transactional skills are often lauded as innovations in themselves. I think this is true. But, failing to link practice to theory misses an opportunity to help students develop or enhance their capacity to innovate. It is hard to design the future if you don’t think clearly about what is wrong with the present. Legal theory is not the only means of critique, of course—but it is a pretty good one.
Second, it happens to be our means of critique, and thus our comparative advantage. Law practice, especially BigLaw, appears increasingly to provide robust skills training. There is no reason to think that ordinary, tenure-track law professors will do a better job of teaching students about today’s deals than the lawyers who actually do them.
Some schools appear to solve for this by hiring more “professors from practice,” a position that is apparently meant to expose students more directly to folks with recent practical experience. Deans at these schools may think that this is the fix: real lawyers teaching real deals! (And probably cheaper, too!).
Putting to one side the fact that these are probably senior lawyers who may not know much about how the work actually gets done, this seems problematic because it risks further marginalizing the scholarship of the tenure-track faculty. It compartmentalizes theory and practice as two distinct functions taught and learned as largely discrete phenomena.
Reasonable minds differ on this, but I think that that is the heart of the problem. In law, perhaps unlike other disciplines, theory and practice bear an important relationship to one another (see “first” above), and developing legal theory through scholarship is our stock in trade. Unless we abandon the system of academic tenure as we know it, scholarship is the most “valuable” thing most of us are paid to do most of the time.
But this bespeaks one of two problems with the whole transactional skills education project. One is that many tenured/track faculty may beg off: they do know theory, and they don’t know practice, and so they should leave the latter to the experts.
That, I think, is simply a cop out. There are many practical solutions to this, the most obvious of which is collaborating with practitioners (as I do and as the Gilson/Goldberg “Deals” course apparently does).
Second, and perhaps more problematic, there is a long tradition of hostility to legal theory, especially among practitioners. Famous jurists—notably the Chief Justice of the U.S. Supreme Court—notoriously mock (and mischaracterize) legal scholarship.
This hostility is hardly new. A century ago, Thorstein Veblen famously sneered that law school “belongs in the modern university no more than a school of fencing or dancing.” The history of legal education since then can be seen as one long effort to prove him wrong, to show that legal academics are, in fact, serious, even as we must also train paying customers to engage in a service profession whose economics are, themselves, sometimes opaque and dicey.
All of this reminds me of a Marilyn Monroe line in The Misfits—her last film—that has long haunted me: “We’re all dying, aren’t we?” she asks, slow-dancing with her co-misfit, Clark Gable. “We’re not teaching each other what we really know, are we?”
That pretty much sums up what I fear about how we teach transactional skills. If we think that we are creating value for our students by teaching only how to do today’s deal, and not also to ask “why” we do any of the things we do, in a rigorous and disciplined way, we are shortchanging our students and ourselves, because we aren’t teaching what we really know.
Legal education, like legal practice, is largely about both critique and construction. If we do only one or the other, e.g., construction without critique, we miss half the value we can create.