Following up on yesterday's post, LSAT Test-Takers at Ten-Year Low:

• New York Times, For 2nd Year, a Sharp Drop in Law School Entrance Tests, by David Segal:

Legal diplomas are apparently losing luster.

The organization behind the LSAT reported that the number of tests it administered this year dropped by more than 16%, the largest decline in more than a decade. …

The decline reflects a spreading view that the legal market in the United States is in terrible shape and will have a hard time absorbing the roughly 45,000 students who are expected to graduate from law school in each of the next three years. And the problem may be deep and systemic.

Many lawyers and law professors have argued in recent years that the legal market will either stagnate or shrink as technology allows more low-end legal work to be handled overseas, and as corporations demand more cost-efficient fee arrangements from their firms.

That argument, and news that so many new lawyers are struggling with immense debt, is changing the way law school is perceived by undergrads. Word is getting through that law school is no longer a safe place to sit out an economic downturn — an article of faith for years — and that strong grades at an above-average school no longer guarantees a six-figure law firm job.

For some law schools, the dwindling number of test-takers represents a serious long-term challenge. What I’d anticipate is that you’ll see the biggest falloff in applications in the bottom end of the law school food chain,” said Andrew Morriss of the University of Alabama School of Law. “Those schools are going to have significant difficulty because they are dependent on tuition to fund themselves and they’ll either have to cut class size to maintain standards, or accept students with lower credentials.”

If they take the second course, Mr. Morriss said, it would hurt the school three years later because there is a strong correlation between poor performance on the LSAT and poor performance on the bar exam. If students start failing the bar, then the prestige of the school will drop, which would mean lowering standards even more. “At that point,” Mr. Morriss said, “the school is risking a death spiral.”

• Above the Law, Declining LSAT Test Takers Could Spell ‘Death Spiral’ for Bottom Law Schools, by Elie Mystal:

Yesterday, news came out that the number of people taking the LSAT declined for the second year in a row. Sharply declined. … So what’s going to happen to the law schools that exist by the grace of the stupidity of prospective law students? Well, the New York Times is eager to start throwing dirt on the graves of the law schools at the bottom…. Fewer applicants will put some pressure on law schools that shouldn’t be here, and discourage other universities from opening up a new one.

• Inside the Law School Scam, All Down the Line, by Paul Campos (Colorado):

[W]e should anticipate about 66,000 law school applicants this cycle, which would represent nearly a 25% decline in the course of the past two years. These numbers would wreak havoc with law school admissions if law schools kept their admissions standards constant. Two years ago 69% of applicants were admitted to at least one school, and 18% of admitted applicants didn't end up enrolling. … Retaining those ratios would yield a total of 37,300 matriculants for this year's class at ABA schools, i.e., a shortfall of about 27.5% relative to the total 2011 entering class.

Since large numbers of lower-tier schools, which are heavily tuition-dependent, could not reduce the size of their classes on anything like that scale without wrecking their balance sheets, they will engage in some combination of cutting admissions standards, decreasing class size more modestly, and cutting their operating budgets. This will especially be the case at the 20 or so proprietary ABA schools who can't ask central university administration for a break on the skim, that is, the portion of law school revenue extracted by central for the law school's share of general university expenses — this is a legitimate operating expense like any other — and, more controversially, for cross-subsidization of other university programs. …

It seems unlikely that any of this will have any immediate fiscal effect on elite schools, where demand for admission will remain relatively high. … But at some point down that line a harsh fiscal reality is already kicking in for schools that aspire to be a homeless person's Harvard.  And it seems likely that point in the line is going to be moving up the law school hierarchy at a brisk pace.