Thursday, November 29, 2012

The shady economics of law school

Back at George Washington I had a law professor named Lawrence E. Mitchell. He was my corporate finance professor. And we learned an awful lot about corporate finance.  The real takeaway from the class, however, was Professor Mitchell's teachings about dicey corporate accounting practices.

This was in the mid-90s, years before Enron and all of those other book-cooking corporations crumbled under the weight of their Alice in Wonderland balance sheets.  Professor Mitchell was WAY ahead of the game on this stuff, though, noting how rampant and wrong it was that corporations were valuing things as assets when they really were costs, setting themselves as virtual ponzi schemes designed to pay executives now and screw investors later and the like.

I found all of that incredibly useful as a lawyer. Indeed, I remember and use the concepts from that class more than any other class I took at GW. And not just in legal practice -- when all of the corporate scandals began in the early 2000s, I knew exactly what was going on thanks to Professor Mitchell. The man, quite literally, wrote the book on corporate irresponsibility and I am a much smarter and well-informed person because of him.

Flash forward to today and I read an editorial in the New York Times from one Lawrence E. Mitchell.  I had lost track of him over the years, but he is now the dean of Case Western Reserve Law school in Cleveland.  His editorial is about how, contrary to the growing sentiment over the past few years, law school is a good investment:

For at least two years, the popular press, bloggers and a few sensationalist law professors have turned American law schools into the new investment banks. We entice bright young students into our academic clutches. Succubus-like, when we’ve taken what we want from them, we return them to the mean and barren streets to fend for themselves.
The hysteria has masked some important realities and created an environment in which some of the brightest potential lawyers are, largely irrationally, forgoing the possibility of a rich, rewarding and, yes, profitable, career.

I realize a dean of a law school has to say such things, but the cold hard reality is that, unlike it was for me and my friends back in the 1990s, law school is no longer a good investment for most people. It's a piss-poor one, actually, and unless you (a) have rich parents or already have the money saved to pay the exorbitant tuition; or (b) have a great chance of getting a well-paying job due to family or personal connections in private practice, law school is a sucker's bet.

If you choose to go to law school, you will go into outrageous amounts of debt and you will come out facing a job market that no longer hands out jobs with six-figure salaries as if they were samples of Genral Tso's chicken at the food court.  It's brutal out there, and new graduates are killing each other for increasingly scarce and increasingly lower-paying jobs, all the while law schools -- which are used by universities as profit centers -- belch thousands of new graduates into the job market each May.

To be fair, later in the editorial, Dean Mitchell notes that the market is rough and that it may be wrong to focus on that first job out of law school. Look beyond that first job out of law school, he says, to the rewards that will come later.

There is some truth to that part. Indeed, I'm the living embodiment of a law school education helping one do things other than practice law. But as I have noted quite often, the road I traveled is not an easily replicable one. Indeed, if it wasn't for sheer dumb luck and the unexpected and possibly undeserved generosity of other people at a couple of key times in my journey, I never would have made it. Oh, and I also had the benefit of 11 well-paid years in private practice before that -- with jobs obtained in a radically different legal job market than the one exists today -- to help me along the way and to give me the comfort to take the sorts of risks I took to get to where I am.

So as I sit here this afternoon, I am more than a little dumbfounded. Dumbfounded that the man who taught me everything I know about financial mismanagement, shady accounting and corporate ponzi schemes -- the man who, more than anything else, warned me against anyone who would classify something as an asset when it truly represents a cost -- is in the New York Times advocating that students continue to go into crazy law school debt and defending what has become, in essence, an educational ponzi scheme, all because he believes this thing that is literally bankrupting students is truly an asset.

But hey, I bet there will be more applications for Case Western as a result.