Should the ABA Mandate The LSAT?

Did Not Take LSAT

Ditto

For years, the American Bar Association has mandated that accredited American Law Schools require applicants for admission to take the so-called "Law School Aptitude Test" ("LSAT") or some other "valid and reliable admissions test."  The ABA also mandates that each school consider the results of such tests when making admissions decisions. Failure to comply with these requirements can result in the loss of a school's accreditation, in which case the school's graduates may not practice law in the vast majority of American states.  (Three states, California, Alaska and Tennessee allow students who have attended unaccredited law schools to practice law.)

Just last year, the ABA relaxed this requirement, allowing a school to waive the test for up to ten percent of its entering class for: "(1) students in an undergraduate program of the same institution as the J.D. program; and/or (2) students seeking the J.D. degree in combination with a degree in a different discipline."   Some law schools immediately took advantage of this exemption, and others followed suit.  St. John's, for instance, created a "Red Storm Scholars" program, whereby undergraduates at St. John's could  apply without first taking the LSAT.

Unfortunately the ABA has pulled the plug on what many viewed as a promising relaxation of the LSAT mandate, reimposing the requirement that each and every accredited law school require and consider this standardized test.  (There is no other "valid and reliable admissions test" on which a school could rely.)  Among other things, the ABA claimed that the new exemption was unfair to so-called "stand-alone" law schools, that is, schools with no connection to a larger university with undergraduate students.  The ABA also claimed that the rule was confusing and that regulated institutions were asking "so many questions" about how to implement the rule that "it was putting a lot of stress on the [ABA] staff."  (See this story, also linked above, quoting an ABA representative to this effect.)

Neither of these rationales for withdrawing the exemption withstands scrutiny.  For instance, one could deal with the unfairness concern by allowing stand-alone schools to accept students from one or more nearby undergraduate institutions.  (For instance, Hastings, a public stand-alone law school in San Francisco, could accept students from the nearby University of California at Berkeley.)  Or, one could simply open such programs to all applicants, and not just those who are undergraduates at the same institution as the JD program or seeking a J.D. degree in combination with with another advanced degree.  Moreover, one could deal with the purported confusion by crafting less confusing regulations!  The fact that a regulation is confusing, too stringent or stressful for the regulator does not ipso facto justify defaulting to an even more stringent regime, particularly when the rationale for the underlying regime is dubious at best (see below).

More fundamentally, the ABA's herky jerky approach to this issue should highlight a more fundamental question.  That is, should the ABA and 47 states consider themselves authorized to impose centralized Procrustean diktats such as the LSAT requirement on American law schools?  Yale Law Professor and author Stephen Carter answers this question with a resounding "no," chiding the ABA for "continu[ing] its ridiculous insistence that accredited Law Schools use the LSAT as an admissions criterion."

Professor Carter is absolutely correct.  Long before the ABA mandated the use of standardized tests, American law schools were selecting students for admission and providing such students with a legal education.  Neither John Marshall nor Thurgood Marshall, both pictured above, took the LSAT or, so far as this blogger is aware, any other standardized admissions test.  Neither did their classmates. More to the point, both matriculated at their respective Almae Matres before any centralized organization required the administration and consideration of standardized tests.  This blogger knows of no showing that American law schools are now producing better lawyers because of the ABA's LSAT mandate.

Of course, individual institutions should be free to require and consider standardized tests if they so choose.  However, as is often the case with the mandates imposed on Law Schools, there is no apparent rationale supporting a coercive one-size-fits all approach to this question. Instead, each institution should be free to experiment with its own methodology of evaluating applications for admission.  Law Schools are repeat players in the marketplace.   Simply put, law schools operate in a highly competitive market for students. Each school has every incentive to select the student body that will exhibit the best chance of academic and professional success, as such success will redound to the benefit of the school in question in various ways. There is no apparent market failure that conceivably justifies mandating that each such school employ a standardized admissions test.  Hopefully the ABA and the states that enforce its requirements will see the error of their ways and abolish this unjustified interference with the institutional prerogatives of the nation's law schools.

Vive La 49 ?

A recent article in Business Week highlights one inefficient byproduct of over-reaching French labor legislation.  The article reports that, in France, there are 2.4 times more companies with 49 employees than with 50 employees.  The article convincingly contends that there is a reason for this apparent statistical anomaly, namely, regulation.  Under French labor law, any company that employs 50 or more individuals is suddenly subject to certain onerous requirements.  Such companies must create three different "worker councils," inaugurate profit sharing, and submit proposed "restructuring" plans to the worker councils if the company plans to lay off employees for economic reasons.  (See this treatise for additional details of this regulation.)  (It is not clear whether employees of covered firms must also share losses with the a covered firm's owners.)  As Business Week reports, French entrepreneurs often seek to avoid such requirements by dividing what would otherwise be a single company of more than 50 employees into several companies with 49 or fewer employees, thereby avoiding altogether the onerous regulations explained above. 

It should go without saying that this artificial restructuring of economic activity to avoid regulation reduces the economic welfare of the French people, other things being equal.  For one thing, entrepreneurs must incur the real costs of organizing and incorporating more than one business entity.  These same entrepreneurs must also manage several nominally separate concerns, in some cases hiring additional and economically redundant managers to do so.  Such entrepreneurs must also forgo whatever economies of scale they might otherwise realize by expanding a single firm beyond 50 employees.  Finally, some entrepreneurs might forgo the benefits of vertical integration by dividing input suppliers and downstream customers into separate firms even if the combination of such entities would reduce the cost of economic activity.  Simply put, predictable efforts to avoid regulations applicable to firms with greater than 49 employees divert economic resources from productive to less productive uses thereby reducing economic welfare.

The sort of conscious regulatory avoidance just described does not exhaust the negative impact of the distinction between 49 and 50 person firms.  To the extent that the labor regulations just described increase the cost of economic activity, firms with 49 or fewer employees will, other things being equal, incur lower production costs and thus possess a competitive advantage vis a vis larger firms. 

Of course, the mere fact that firms will incur costs to avoid regulation does not necessarily counsel repeal of such regulations.  Such regulations might themselves increase welfare, by eliminating inefficient externalities or combating other sources of market failure such as monopoly.  Moreover, larger firms may pose a greater risk of the type of harm that the regulation seeks to combat and/or be better able to absorb the cost of such regulations.  In these circumstances, limiting such regulations to a subset of a nation's firms --- particularly its larger firms --- may constitute an optimal regulatory strategy.  If so, the costs of regulatory avoidance detailed above may be the unavoidable and incidental price of regulations that, on balance, create wealth.

Still, the labor regulations in question do not seem to combat any externalities or other market failure and thus themselves distort the allocation of resources and reduce welfare.  As a result, the costs of regulatory avoidance detailed above simply compound the inefficiencies resulting from the regulation itself and thus, along with many other anti-growth policies, help account for France's sluggish growth and high unemployment.  Indeed, some estimate that, by 2050, France's GDP, now 6th in the world and ahead of the United Kingdom's, will rank 11th,  behind that of Mexico and the United Kingdom.  Regulatory policies have consequences, and the consequences of the policies imposed by France are negative.