William D. Henderson (Indiana-Bloomington), Drawing the Right Lessions from the Bleak Entry-Level Legal Job Market:

Since the last major legal recession of the early 1990s, elite law schools adapted their business model to the seeming certainty of virtually guaranteed high paying jobs for their graduates. This meant increasing tuition, hiring more faculty, reducing teaching loads, and generally loading more debt onto students. For at least the last 15 years, the sizzling corporate legal market made this high-cost model financially viable, even though the only thing these models maximized (or strongly incentivized) was faculty scholarship. Because corporate counsel are fundamentally changing how they value and buy outside legal services, there may not be enough high-paying entry level jobs to support the very high cost of legal education, even at elite schools.

Yet, unbelievably, due to the weighting of per pupil direct expenditures, schools with higher cost structures generally fare better in the US News rankings. Among elite schools, direct expense (financed with high tuition, high student debt, and large endowments) is the input that keeps the elite schools at the top of the pecking order — Yale's is three times the average, and Harvard, Stanford, NYU, and Columbia are more than double. Of course, less elite law schools wishing to become more elite — i.e., pretty much every school with a few exceptions — have tried to keep up by modeling themselves after elite schools, including a "scholarship-first" strategy. Thus, the cost structure at virtually all law schools has climbed far in excess of the earning capacity of the median law school graduate. See Morriss & Henderson, The New Math of Legal Education, ABA Young Lawyer (July 2008). Yet, due to deficiencies in (a) information, and (b) how information is analyzed, the status quo rolls on. …

With corporate firms experiencing sluggish demand and tremendous downward pressure on fees, changes in hiring patterns (both the number of jobs and their remuneration) are going to exert tremendous pressure on law schools to rethink their business models. To my mind, the proper response is for law schools to really think through how they can maximally enhance the human capital of law school graduates. … 

For the last several decades, entry level-lawyer remuneration — a tempting market-based metric of value-added — has been based on a combination of branding and sorting of raw inputs. In other words, it is not the curriculum at Harvard or Yale, or the massive scholarly output of the faculty, that drove the demand for their graduates. Rather, it was the Ivy-League brand (think Pavlov's dog) buttressed by statistics that these schools had admitted students with very high IQs. In turn, firms used this information to signal their superior collective credentials to their clients. At end of the day, pedigree definitely has CYA value for many general counsel. But the Bi-Modal distribution suggests that this signal became dramatically overvalued. See Henderson, The Bursting of the Pedigree Bubble, NALP Bulletin (July 2009).

So the open question goes to the very heart of professional education: what type of law school curriculum and teaching methods are really worth the price paid by today's students? … The schools that rise to this challenge are, in the long run, going to fare better than those who continue to be believe that more faculty law review articles will raise the school's ranking, thus enticing more employers to hire their students.