Law Professor Free Agency and “School-Specific” Capital
[posted by Bill Henderson, cross-posted to ELS Blog]
[Update: Paul Caron (Cincinnati), Michael Madison (Pittsburgh Law), Jeff Lipshaw (Suffolk), Jim Chen(Louisville) have picked up on the analysis in the below post. Thereseems to be some misunderstanding on my point of “long-termcontracts.” In retrospect, I should have said “long-term commitments”(i.e., extra-legal and perhaps not committed to writing) to avoid whatI think is an unproductive analysis of run-of-the-mill employment andcommercial contracts.
I am talking about this: Academic X says, “I will stayhere X number of years and ignore outside offers if you provide me withthe resources to execute the following institutional plan [e.g.,labor-intensive but high-yield teaching, public service, usefulscholarship that will be noticed and solve a real world problem,etc.].” Law School Y says, “I love this idea. If you are right, itwill grow our institution. Because you have committed to building ithere, School Y will fund it.” Because both Academic X and Law School Yhave aligned personal and institutional agendas, their cooperation andcommitment grows the institutional pie; both are made better off.Moreover, it becomes magnetic for other scholars and funders who sharethe substantive vision.
So we are talking about communitarian norms here. Thistype of approach is easy in small groups, which is what law facultyare. Firm-specific capital in law firms is harder to grow/maintainbecause (a) they have gotten larger, (b) covenants not to compete areprohibited, and (c) there are liquidity constraints imposed by the banon non-lawyer ownership. On the other hand, law firms work harder atit because they increasingly operate in a competitive nationalmarketplace–firm-specific capital can be huge competitive advantage. Law schools, in contrast, are not subject to the same marketpressures–the most elite have huge endowments and donors who want togive more to be associated with the elite brands. Thus, in the legalacademy, the free agent ethos is damn near ubiquitous.
No need to be abstract about all this. I lay out a highly plausible counteractive approach in this comment.]
Several bloggers have noted Clayton Gillette’s recent article, Law School Faculty as Free Agents, 17 J. Contemp. Leg. Issues 213 (2008). See, e.g., Paul Caron, Larry Ribstein, Al Brophy, and Paul Secunda. Gillette’s essay provides the type of straight thinking needed to move the Moneyball-Moneylawdebate into a mode of institutional analysis that can produce actualresults. I will briefly lay out Gillette’s analysis and then extendit to a concept I call “school-specific” capital–an analog tofirm-specific capital.
Law Professor Free Agency
In a nutshell, here is Gillette’s argument. The lateral market forlaw professors is primarily based upon scholarship, which is anobservable, coveted good. Teaching and service, to be sure, arerelevant goods, but they are hard to measure. Further, faculty makehiring decisions; when they land a high profile scholar, they shareequally in the school’s reputational gain (albeit these gains arelargely limited to opinions of other professors). Yet, if newcolleagues shirk committee work or are disengaged and uninspiringteachers, the costs borne by individual faculty members are negligibleor non-existent. Hence scholarship becomes the focus of lateralhiring. Clayton observes,
In 30 years of teaching,service as vice dean, and membership on appointments committees, Idon’t believe I have ever heard a discussion of a candidate’squalifications that included serious consideration of institutionalservice, except insofar as it related to scholarship. …
[H]iring schools tend to invest little in discovering teachingquality. The hiring decision is typically made after one or two facultymembers at the hiring school attend one or two of the visitor’sclasses, and that is done through a process (e.g., informing thevisitor when faculty members will attend, and allowing the visitor tochoose that time) that diminishes the likelihood that those classeswill be representative. … The result is that, as opposed to themeticulous, highly tailored criticism to which a candidate’sscholarship will be subjected, a candidate’s teaching will be evaluatedlargely to determine whether it is “good enough.” (pp. 228-29)
Gillette’skey insight is that the lateral market in legal academia, unlikebaseball (a crucial point), does not force the decision-makers[faculty] to internalize the benefits and costs of free agentactivity: Some costs potentially get externalized onto the students,alumni and law school administrators. When scholarship opens so manydoors, Gillette suggests, it is easy to see how a more robust lateralmarket can skew institutional incentives and detract from overalleducational quality.
To my mind, Gillette sets forth a very coherent and plausibleanalysis. [I suspect a lot of people will quibble with it, however,believing that their own lateral experience (or aspiration) reflects amore optimal outcome at the institutional level. Listeners interestedin the merits of this debate should weigh the critic’s potentialbias.] It is an open question whether lateral mobility is really onthe rise. At Indiana Law, we are building a law faculty universedatabase that covers 80 years of AALS schools. See “Is Lateral Movement on the Rise? A Precise Answer is on the Way,”ELS Blog (Dec. 21, 2006). We see a lot of lateral movement in the 30s,40s, 50s, 60s, and 70s. Eventually we will answer to the naggingempirical question of whether lateral movement is truly on the rise.
But one thing I can say with confidence–information published on the Internet (Leiter Faculty News and Concurring Opinions) has increased the perception ofheightened movement. And perception is all that is necessary to changebehavior and institutional norms–possibly in the wrong direction.
“School-Specific” Capital
Gillette actually understates his argument. Specifically, theproliferation of a free agency ethos not only undercut educationalquality, it inhibits the cooperative, highly committed, selflessenvironments need to create truly exceptional institutions. One ofthe major implications of more professor mobility is the diminution of”school-specific” capital–i.e., desirable law school attributes, suchas innovative curriculum, public service reputation, alumni good will,that remains largely intact when a professor leaves. So more freeagency suggests fewer law schools that transformgood human capital into great human capital. On this score, the “best”law schools can, in fact, be pretty mediocre. (I believe there is away out of this box, which I will address below.)
More after the jump. …
Law schools with high levels of school-specific capital can bewonderful places to work. Conversely, schools that have squanderedtheir school-specific capital in the single-minded pursuit ofscholarship can be spiritually depleting. This was the experience of Julius Getman (Texas Law). In this book, In the Company of Scholars(1992), Getman reflects upon his annual ritual in the 1960s of attending theAALS annual meeting in the hopes of generating a lateral offer. Eventually he moved from Indiana to Stanford to Yale, with visits atCornell and Chicago along the way. But in the end, he was largelydisillusioned with the professional satisfactions of being at the topof the hierarchy. Academics at elite institutions were often insecure,elitist, focused on personal agendas, and uninterested in solving realworld problems. (This may be true at all institutions, suggestsGetman, but only more so at the very top of the food chain.)
Drawing upon his experience, Getman observes:
Peoplewho become professors are rarely indifferent to the title and statusthat comes with the role. It would be difficult to overstate the roleof hierarchy in academic life. Its power is manifest at every point,its impact felt on every issue. …
The desire for status–a higher place in the academichierarchy–shapes both personal and institutional goals and decisions. It can have a positive impact in fueling effort, but it can bedestructive, as well, interfering with effective teaching andscholarship [here Getman refers to grand theorizing rather than a studyof reality] and leading institutions and professors away from useful orenjoyable endeavors toward those thought to be more prestigious. (pp.252-53)
I suspect a lot of law professors aspire towork at institutions that are committed to being “effective”, “useful”and “enjoyable” from the perspective of all stakeholders–that isschool-specific capital. But most of our discourse does not reflect aunderstanding of how such institutions are created. Most of us want tobelieve the most prestigious schools are such places; that way we don’thave to do much original thinking.
As Gillette’s analysis suggests, building and/or maintaining an effective, useful, and enjoyableinstitution requires a critical mass of scholars who are willing behavein ways that may undercut their currency in the lateral market–e.g., creating a new law school program, teaching alabor-intensive skills-based course, and attending alumni and studentmixers rather than writing another law review article. When colleaguesleave for “better” schools, momentum toward firm-specific capital isundermined. I know a few schools take pride in their “feeder” status;yet, I have gradually concluded that this line of thinking as anunproductive rationalization. When the faculty is churning too much,there is no continuity or buy-on for time horizons that are needed fortruly ambitious institution building. Success is equated with exit.
Solutions
My analysis of school-specific capital is influenced by my study oflaw firms. One of the key features of a law firm with firm-specificcapital is that it eventually creates a bigger pie, creating financialand/or psychic benefits that makes virtually all partners better off. Law firms with the right structural incentives foster a culture ofteamwork and cooperation that achieves better and more cost-effectiveresults for clients, thus binding clients to the firms. As law firmsbecome larger, it becomes harder (but not impossible) to build andmaintain firm-specific capital. Two significant hindrances tofirm-specific capital are (a) the unenforceability of lawyernon-compete contracts, and (b) the ban on non-lawyer investment, whichmeans that expensive long-term investments in human and physicalcapital have to be paid for either through debt or retained (andtaxable!) earnings. Thus, long-term planning in firms can–and Iwould argue, often does–unravel when impatient partners lateral toother firms.
Law schools, fortunately, do not suffer from either constraint. Thus, one way to deal with the corrosive influence of the free agentethos is the use of long-term contracts. Specifically, individualfaculty members (or groups of faculty members) agree to forgo anylateral offer in exchange for the time and resources to build programsand curriculum that produce large institutional payoffs. Ideally,these will be ventures in which scholarship, teaching, and servicebecome coextensive. The larger the success, the more magnetic theculture, the more devoted the faculty, students, and alumni. In turn,the money flows back into the institution because donors realize thatsomething truly substantive is going on. Then even more ambitiousschool-specific capital can be built.
In contrast, law schools with hallowed reputations can raise moneybecause donors like to be associated with prestigious institutions. But that isnot a viable model that most schools can follow. Moreover, it does notprovide a useful market test that funnels money into initiatives thatproduce long term value. Most tier 1 law schools tout that they havebecome”better” when they hire highly prolific lateral scholars–but inreality, these aremulti-million commitments that guarantee little more than coursecoverage and the accolades of professors. There is also very littleempirical evidence that such a strategy can produce a meaningfulreputation change that redounds to students and alumni.
To my mind, this common pattern reflects very shallow analysis. What is the plan for school-specificcapital?