Caveat emptor, libertarianism, and social ethics

Asked if there was a contradiction between his stand against expanding class sizes and the growth of the student population at N.Y.L.S., Mr. Matasar wrote: “The answer is that we exist in a market. When there is demand for education, we, like other law schools, respond.”

The following question is just a specific example of an issue that arises in all sorts of contexts: What obligations should law schools have toward their prospective students?

The libertarian answer, I suppose, (is Brad Potts around to speak ex cathedra on this?) is that schools should be obliged to maintain a reasonable level of informational transparency regarding the costs and benefits of attendance. Of course at that level of generality this answer leaves a lot to be desired, since it’s unclear what a “reasonable” (socially optimal?) level of transparency involves. For example everyone would agree that law schools shouldn’t be able to outright lie to prospective students about, as the economists say, “outputs” regarding employment data. But how much information should they be required to disclose? I’ve argued recently that the current disclosure requirements are — or rather were, they’ve just been strengthened a bit — very inadequate, in that the data they elicit is quite misleading. In my view law schools should be required by the ABA to disclose accurate (this means at least minimally audited) information regarding what percentage of their graduates have permanent full-time jobs that require a law degree a year after graduation, and what those jobs pay.

I suppose even this might be too much for at least some libertarians, who would consider that level of regulatory interference with “market” transactions between the producers and consumers of legal services to be unwarranted. It’s easy enough to foresee the standard argument: schools that don’t disclose information relevant to potential students will be at a relative disadvantage to schools that do, and will be punished by the “market” for such students accordingly (somehow these arguments never seem to take collective action problems seriously, although I’m well aware that the next move in the libertarian discourse is to point out that the collective action problems themselves are largely a function of having any regulatory structure at all, and if the ABA didn’t exist the free market would work as it should etc).

Nevertheless there seems to be something of a consensus among the powers that be that the current disclosure requirements for law schools are too lax, and that the potential consumers of legal education need better information if they are to successfully maximize their utility.

But I’m interested primarily in a more difficult issue, which is what obligations, if any, law schools should have to prospective students beyond disclosure of quantifiable cost/benefit data. Here it seems to me that the standard answer in our political culture has pretty much become “none.” As long as we disclose to you what we will sell you, and what it is likely to be worth, the argument runs, then you, as a rational maximizing consumer, a captain of your own soul, a sovereign adult member imbued with certain inalienable rights, and so forth, are on your own.

This seems to me to be the wrong answer. It’s the wrong answer because the underlying assumption — that people are reliable maximizers of their own utility — is wrong even on its own narrow terms. People, and especially young people who are formally adults but still naive, inexperienced, and more unrealistic than they’ll eventually become, have a strong tendency to simply ignore the relevant data as it can be expected to apply to them (interestingly they are very realistic about the predictive significance of this same data as applied to their classmates).

In the specific context of legal education, this circumstance calls for a certain degree of paternalism. The mere fact that there’s a market for what we’re selling should not end discussion of whether we ought to be selling it at the price it is currently fetching to the people who are currently buying it. Of course even at the level of the crudest self-interest the sellers of legal education must pay some attention to quantifiable costs and benefits, since at some point the cost/benefit ratio can get so out of wack that the ability to exploit our market will be undercut, and we will discover that we no longer have a “sustainable business model,” as the MBAs say.

But we shouldn’t have to get to that point to ask the questions we should be asking. Education in general, and legal education in particular, is a business, but it is not only a business. Law schools should not be run on the basis of precisely the same set of principles as a Lexus dealership, i.e., how much can we get away with charging for a consumer good that offers its prospective purchasers a complex mixture of practical value and status enhancement via conspicuous consumption? That this has become a highly controversial assertion is a comment on the triumph of a certain sort of economic politics in our culture.