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Monday, October 10, 2005

Tax Rate Preference Supporters Remain Persistent 

Last month, I pointed out the challenges of coming up with the dollars to rebuild the Gulf Coast. Early in the month, in a posting that drew more than the usual attention, I argued that with an expected demand for federal spending in the wake of Katrina, it was time to eliminate the capital gains and dividend tax rate preferences, and to postpone a vote on eliminating the estate tax. Within a few days, as I reported in this post, the estate tax permanent repeal vote was postponed. No news appeared about the proposed extensions of the capital gains and dividend tax rate preferences.

So, a few days later, I expressed hope that Congress would postpone any votes for extending the tax cuts for dividends and capital gains. Later in the month, I penned another post, one in which I criticized the idea of increasing federal spending while holding fast to, or extending, existing tax cuts.

Not that I dare take any credit for the postponement of the estate tax permanent repeal vote, but surely the powers-that-be in the Senate aren't listening to my advice with respect to capital gains and dividend tax rate extensions. This latest bit of news is enough to assure me that my opinions about estate tax repeal either weren't read by Senators and their staffs, were read but ignored, or were read and embraced by those who at the moment are powerless to do anything with them.

The news that triggers this dismay comes from a BNA Report, the headline of which evokes concern. When I read "Senate GOP Leaders Confident Tax Cuts Can Go Forward" I begin to wonder whether the Twilight Zone's parallel universe concept is playing out in some sort of hazy way. According to the report, Senate Republican leaders and the Finance Committee insist that legislation extending the capital gains and dividend tax rate preferences will move forward, even though members of both parties are urging that Congress re-think the wisdom of doing so. Hmmm. Maybe some folks are reading my ideas. Or perhaps, knowing that I don't hold a monopoly on them, they are reading the commentary of folks who share my disdain for taxing capital gains and dividends at lower rates. In Washington, the buzz is that Senator Rick Santorum is the architect of the idea that the revenue attributable to not extending those preferences be used for Katrina relief. Whodda thunk? Hmmm. But within days, he relented, because he was "assured" that the "cost" of extending the tax rate preferences would be "offset" which he said makes him "feel a lot more comfortable."

Well, it doesn't make me comfortable and I doubt it makes very many Americans comfortable. After all, where does the offset come from? Leaving the alternative minimum tax hidden tax increase in place? Raising taxes on someone? Who?

The silliness of the argument supporting these rate preferences and their extension is evident in the statement made by Senator Charles Grassley. He "fears" that failure to extent these rate preferences "could cause a ripple effect and discourage investment in the wake of Hurricane Katrina." Excuse me, Senator, are you saying that without these rate preferences the investors who are swimming in funds to invest would invest in China? In Europe? In oil refineries? In anyplace but the Gulf Coast? In jars buried in the backyard and paper bags in the mattress? You see, Senator, these folks who have amounts to invest need to invest somewhere, and even if they plunk their money into bank certificates of deposit, the banks can in turn loan the funds for the construction that needs to be done. Why reward investors for doing what they would do in any event? Your logic, sir, suggests that if we don't lower the tax rates on earned income to as low as those on capital gains and dividends, that everyone with compensation income would simply stop working.

When the buffet table is loaded up, we often don't notice, or if we do notice often don't mind or say anything about, the person who is loading up his or her plate to the breaking point. But when the buffet table is lean on supply, we do expect the loaded plate crowd to back down and to have some sense of balance and equity. In polite society, we ask kindly before taking the last serving from the bowl. Why is it that some folks, especially folks who seem to be getting their way so often in how things are done, seem unaware of, or willing to ignore, the sort of civil behavior that is at the root of the orderly society they also claim to admire?

That, of course, is a rhetorical question.

Friday, October 07, 2005

Alleged Tax Court Judge Bias: The Topic That Will Never Die 

As many people in the tax world know, one of the tax topics in which I have serious interest is the question of alleged Tax Court bias. Six years ago, in response to an article that challenged a letter to the editor in which I asserted that the Tax Court was not biased in favor of the government, the University of Tennessee Law Review published "Instant Replay, Weak Teams, and Disputed Calls: An Empirical Study of Alleged Tax Court Bias," (66 Tennessee Law Review 351 (1999), see here), in which I presented carefully culled empirical evidence that demonstrated that the Tax Court was not biased in favor of the government, and that if there was a bias, it was a slight bias in favor of the taxpayers.

In the intervening years, other commentators have explored questions that space limitations kept out of my 1999 article. For example, in "Political Affiliation of Appointing President and the Outcome of Tax Court Cases," (84 Judicature 310 (May/June 2001), available here), the quartet of Mark P. Altieri, Jerome E. Apple, Penny Marquette and Charles K. Moore explored in detail the impact on tax court decisions of the political party of the president who appointed the judge. In "Empirical Research on Judicial Reasoning: Statutory Interpretation in Federal Tax Cases," (31 N.Mex.L.Rev. 325 (2001), see here), Dan Schneider explored whether judges favored any one method of interpreting the Internal Revenue Code over other methods, and whether specifically identifiable personal characteristics nudged judges to use a particular method. In "Assessing and Predicting Who Wins Federal Tax Trial Decisions," (37 Wake Forest L. Rev. 473 (2002) and 96 Tax Notes 1147 (2002), see here), Dan Schneider explored whether the outcome in a tax case was affected by a judge's gender, attendance at an "elite law school," previous work experience, race, years as a judge, or appointing president's political party affiliation.

The topic continues to fascinate researchers, commentators, and, I would hope, taxpayers and their advisors. Recently, Robert Howard, of Georgia State University's Department of Political Science took on the question of whether, and if so, why, tax decision outcomes in Tax Court cases and District Court cases might differ. In "Comparing the Decision Making of Specialized Courts and General Courts: An Exploration of Tax Decisions (26 Justice System J. 135 (2005), available here), he concludes that the Tax Court, as a specialized court, is "free from any practical structural constraints" and "uses its expertise to allow a much freer hand in decisions for its judges' policy preferences." He finds that this is not what one would have expected from a goal of having an expertised court decide cases without ideological influences. He also concludes that "while there has been some concern that, like the tax court, specialized courts would be no more than extensions of the IRS and thus likely to exhibit bias in favor of the agency, and while the U.S. Tax Court might issue more rulings in favor of the IRS than the U.S. District Court, the reason might be as much due to ideology as any bias based on structure or experience."

Howard bases his conclusion on the results of his empirical research. He discoverd that the Tax Court and district courts are "slightly conservative in their decisions, ... confront roughly the same types of cases, [and that] more than two-thirds in both courts are from individuals, with roughly one-fourth of the dockets of each composed of business matters." He also notes that in Tax Court 36% of taxpayers act without counsel, whereas only 10% of taxpayers do so in the district courts. In addition, "more than twice as many tax-shelter and tax-protester cases are heard in the tax court (21 percent) than in the district court (10 percent)." Finally, his data showed that "the taxpayer ...l won 20 percent of the time in the tax court and in 32 percent of the cases in the district court."

From this data Howard generates some interesting observations. "As expected, the more liberal the judge, the greater the likelihood of support for the Internal Revenue Service, while the more conservative the judge, the greater the likelihood of support for the taxpayer. Tax court judges are more ideological in deciding cases than are district court judges. Finally, the hypothesis that liberal judges would react more negatively, and conservatives more positively, to tax-protestor or tax-fraud issues was confirmed for both courts." He also notes that when taxpayers in the Tax Court have an attorney, it is more helpful to them than in the district court, suggesting that the district court relies more on the IRS whereas the Tax Court judge can "appreciate and understand the arguments of counsel." He also noted that "the district court was more sensitive to the type of litigant, being more likely to support a business or a trust or estate, than was the tax court."

What this does to the oft-repeated thought that taxpayers have more success in district court because the judges, and their clerks, are far from expert with taxation, and tend to be more sympathetic to taxpayers, remains to be seen. Howard concludes that Tax Court judges indeed are more expert. Yet he also concludes that the judges in both forums are roughly the same, ideologically speaking.

There is good news. Affirming one of the conclusions I reached in my 1999 article, Howard states, "prior IRS experience does not matter for type of judges." He also refers to me as a "scholar" and as a "tax scholar," and brands my 1999 article as a "scholarly examination" of the issue. Note to self: photocopy, enlarge, and hang on office door.

As Howard points out, more research comparing specialized and general jurisdiction courts is necessary. A particular question worth exploring is "the issue of congressional and executive control[, because t]he fifteen-year tenure of nineteen tax court judges, as opposed to the lifetime tenure of more than 600 district court judges, allows Congress and the president to modify and alter the small tax court's ideology more quickly than the ideology of the district courts[,and g]iven the volatile and highly politicized issue of taxes, the ideological rulings of the tax court might be due to congressional design, and the decisions might deliberately match congressional and executive preference."

It is gratifying to see that my 1999 article, the first in which a comprehensive, systematic, extensive, and thorough empirical exploration of Tax Court decisions was the basis of the arguments (in contrast to articles such as the one in which the author "flipped through" several volumes of Tax Court decisions), has inspired other scholars to examine other factors. I'm told that this is the way tax commentary and dialogue ought to work. Propositions are made, debated, affirmed, or discredited. Mine appears to have survived.

It is an important question. Despite the seeming "academic" tone to most of these articles, and despite the fact that this is one work product I sent to student-edited law journals rather than the usual places I send my manuscripts, it deals with an issue of serious practical concern to taxpayers and tax practitioners. The decision to contest an IRS deficiency in Tax Court or district court, which is affected by a variety of factors, not the least of which is ability to pay the tax so that a refund can be claimed and suit brought in district court, is one that has faced taxpayers for decades. Frequently affected by anecdote, tax "lore," and personal experience, these decisions can now be considered against the backdrop of empirical research and conclusions offered by an ever-growing body of analytical works that inform those dealing with tax litigation issues.

Thursday, October 06, 2005

A Six-Part Tax Chart for Tribune Co. v. Comr. 

He's at it again. Andrew Mitchell, that is. Or TaxChartMan as he could well be known.

This time, he's cranked out a six-part chart of Tribune Co. v. Commissioner, 125 T.C. 8 (2005), which involves a failed reverse triangular merger. Aside from assisting tax practitioners in analyzing the decision, it also serves as further proof of a point I often make to law students who struggle as they tackle tax law, namely, that sometimes it is the complexity of the transaction that overloads the brain's neural circuits. One look at Andrew's most recent chart demonstrates that complexity, but it also arranges it into digestible, sequential pieces. Breaking things into pieces and illustrating them, figuratively speaking, is a very useful way to learn.

Take a look at my previous postings about the various tax charts from Andrew (here, here, here, and here) for additional kudos for this rapidly growing project. To see the other charts, start at the main tax charts entry page.

Try Being Jim Maule for a Day: BlawgThink 2005 Is Calling You 

I received an invitation to an event that I'd like to attend but cannot attend. I knew I'd regret not starting sooner or making better progress on the cloning project. It wouldn't surprise me to discover that some other event I couldn't attend would have moved me further along the "clone myself" path.

Anyhow, Dennis Kennedy, who is hosting this event (no, not a cloning event) also invited me to invite others, and so I am sharing with readers of MauledAgain an invitation to what should be an educational, thought-provoking, and fun event.

The event is the LexThink BlawgThink conference being held on November 11 and 12 in Chicago.

This year's conference is built on three questions that Dennis raised after attending BlogWalk 6, an day-long conference on knowledge management and blogging that used the Open Space Technology scheduled for use on BlawgThink's second day. Question One: If blogging is a world-changing technology, when and how do we start to change the world? Question Two: Is it the technology or is it the bloggers? Question Three: And, what happens if we bring bloggers together, turn them loose, and see what projects and collaborations grow out of
that combination?

Thinking about those questions inspired Dennis Kennedy and Matt Homann, the other co-organizer, to try to get a group of legal bloggers together, in person and face-to-face. Dennis and Matt believe that despite all the advantages of email lists, wikis, collaboration software groups, IM sessions and conference calls, "there's nothing like being together in person if you want to have collaboration happen." One of the reasons that I'd attend if my schedule permitted me is the lure of this assertion from Dennis: "In fact, I believe that, in the future, some of the most important innovations that happen in the practice of law will be traced back to conversations that began at BlawgThink." I don't think he is reaching beyond credulity when he makes this claim.

Among the readers of MauledAgain are folks who don't have a legal blog, folks who have one, and some who have one that is connected with their law practice. There's something in this conference for everyone.

BlawgThink's first day has three tracks, one for each of those three groups I mentioned. Track one, which would have been useful to me back when I was getting started with blogging and surely will be of value to the lawyers, judges, law students, and law faculty who are thinking of "getting on board the blog train," will focus on "Blogging Basics" such as blogging tools, how to write a post, blog etiquette, news aggregators, and blogging tips and predictions. Track two, for legal bloggers with a law practice to promote, will focus on "Marketing and Client Development" that digs into using blocks to market a practice, builiding reputation with blogs, the ethics of blogging, tying the blog into practice areas, and more tips and predictions. Track three, directed at those who have figured out the basics of blogging, is simply called "Blogging 2.0" and addresses advanced RSS, podcasting, collaboration, blog design, Flickr, OPML, De.licio.us, Rojo, other cutting-edge blog-enhancing tools, and yes, still more tips and predictions. Anyone want to guess which of these tracks caught my eye?

BlawgThink's second day has no agenda as such. Scary proposition for a conference planner, but I like the idea. Rather than more panel presentations, PowerPoint slides, and keynote speakers, the proceedings get turned over to the attendees. Not unlike a law school seminar. Small group meetings are anticipated to highlight the day, along with opportunities to go one on one with others, and brainstorming should overshadow the proceedings. Can't get to all of the small-group sessions because your clone project also hasn't gotten untracked? No problem: Notes from each small group discussion will be circulated to attendees later in November.

I wish I could be there. It would be fun, and educational, to meet the people behind the other law blogs and to pick their brains about the technical and substantive aspects of their blogging. Goodness, maybe some of the people attending BlawgThink 2005 would want to ask me some questions. Yeah, I know, that can be dangerous.

For more about BlawgThink, go to the LexThink website, and then click on the link to BlawgThink 2005. To register, follow the "contact us" link on that website.

If the outcome is even one blogless reader cranking up his or her own blog, or even one reader who is a blogging practitioner ramping up his or her blog, this extension of the invitation will have served well. If you do attend, I surely would like to hear from you, and I'll share your comments. Oh, no, wait, you'll be doing that on YOUR blog, so I'll post a link.

Wednesday, October 05, 2005

Want to Be a Lawyer? Just Say That You Are! 

In a Law.com article, "Law School: Make It Optional?," Professor George B. Shepherd of Emory University School of Law proposes a radical change not only in the requirement (in almost all states) that lawyers must have attended law school but also in the use of a bar exam to identify those who are qualified to practice law. After outlining each of his proposals and arguments, I will analyze them. Prof. Shepherd's points are numbered and my reactions are prefaced with "JEM:"

1. Law schools are very similar in terms of the number of years required (three), the size and cost-per-student of libraries, and the retention of full-time faculty who are more expensive than part-time teachers.

JEM: Essentially, this is true. However, the size of libraries is changing because the adoption of less expensive digital resources in place of more expensive paper volumes is progressing at different speeds among the various law schools.

2. Law schools are very similar because they comply with accreditation standards established by the American Bar Association (ABA), which are followed because almost all states require lawyers to have graduated from an accredited law school.

JEM: This, too, is pretty much true. Most law schools also belong to the American Association of Law Schools (AALS), which sets even tougher requirements for membership.

3. The accreditation standards, though defended by the ABA as "necessary to train students properly and to protect the public from law schools producing incompetent lawyers" do less in protecting the public interest and more in protecting the interests of law professors, law librarians, and the lawyers serving on the ABA accreditation committee.

JEM: I would like to see empirical data supporting this claim. The accreditation standards ensure that legal education will satisfy minimum requirements geared to developing competent attorneys. For example, it is a worthy goal to require that faculty have satisfied certain requirements so that students are properly educated. If there is a problem, and I tend to think that there is, it involves the failure of accreditation standards to require that law faculty bring not only outstanding educational achievement to the classroom but also meaningful practical experience.

4. Law faculty and librarians have an incentive to extend law school to as many years as possible in order to increase the number of full-time faculty who must be hired.

JEM: Much of the need for additional faculty reflects the increased enrollments in most law schools. If the number of students increases by 20 percent, the number of faculty must increase, especially for courses that are limited in enrollment size. Although the cost of adding a faculty member is marginal in terms of salary, it is significant in terms of office space. Most law schools, absent a building expansion, face finite constraints on faculty size. Another cause of the need for more faculty is the expansion of the number and types of courses that must be offered, but most law schools address a substantial portion of these needs by hiring adjunct faculty.

5. Lawyers serving on the accreditation committees are motivated by a desire to minimize competition by curtailing the number of persons admitted to law practice each year.

JEM: Even assuming one can determine motivation, the facts suggest that if this is indeed a goal, the accreditation committees are failing miserably. During the past decade, more than several law schools have been accredited, and enrollments have increased rather than decreased. Law school enrollment tends to increase when applications increase, and applications are dependent in part on the hiring rate of law school graduates. This semester, it seems as though all the students in my basic tax class are getting interviews and call-backs by the boatload, suggesting that lawyers in practice are trying to hire more lawyers.

6. Practicing lawyers manipulate bar examination pass rates to limit competition, taking advantage of a system installed during the Great Depression to prevent an "oversupply" of new lawyers.

JEM: Bar examination pass rates have been manipulated in certain instances, such as happened some years ago when Pennsylvania lowered the minimum passing score in order to increase the number of minority lawyers passing the bar examination. Pennsylvania has since raised the minimum passing score. There is no evidence that I have seen suggesting that the passing score is adjusted after some sort of determination by practitioners of how many attorneys ought to be admitted after a particular bar examination.

7. Students should have the choice of two, three, four, five, or more years of law school.

JEM: I'm all for increasing the number of years of law school, though I think the fourth year should permit changing the third year to year-long externships in the law practice world. The fifth year would then exist in the form of matriculation in an LL.M. Program. If three years of law school are more than enough, and two years is supposedly sufficient for some lawyers, then why are enrollments in LL.M. programs, and the establishment of those programs, mushrooming? Could it be that lawyers graduate from law school only to discover that they did not learn enough, do not understand enough, were not pushed enough, and suffer from trying to do six years of bachelors', masters' and doctoral work in three years because they did not come into a J.D. program with a prerequisite LL.B, and LL.M.?

8. Students should have the option of attending law schools with no libraries or small libraries, and only part-time faculty.

JEM: I was waiting for the option of attending law schools with no classes, but that comes later. I do agree, however, that there must be ways to reduce library resource costs by taking advantage of digital technology. What has been happening is a reduction in the space need to store paper materials, with the resulting space savings being transferred to computer facility and study room areas.

9. Law school should be optional, and the lawyering profession should be open to those who have not attended law school.

JEM: I'll agree if Prof. Shepherd agrees that medical school should be optional and that he'll be the first patient of a physician trained in some other manner. I could be persuaded, though, that a person without law school education should be permitted to take a bar examination, of the type I think it ought to be, and if the person passes, excellent. I predict, however, that almost no one without a law school education could pass the practice-focused, think-on-your-feet bar examination that needs to exist.

10. The bar examination should be eliminated because it is a "relatively recent experiment that has failed."

JEM: I totally disagree. If anything, bar examinations need to be toughened. Steps have been taken to make them more useful predictors of practice success, such as the "case project" that is part of the New Jersey bar examination. To the extent that the bar examination reflects the "memorization and spit back out" approach of many law school examinations, it simply separates good memorizers from bad memorizers and disadvantages those who are great problem solvers and problem preventers so long as they have access to the information. The bar examination, as deficient as it is, has not failed, because it has kept a lot of unqualified people from heading out to make other people's problems worse.

11. The unaccredited law schools in California offer a model that could be put in place in order to provide low-tuition legal education.

JEM: The California system is tied to one of the most brutal bar examinations in the country. The pass rate for the July 2004 examination was 69.4% for those graduating from ABA-accredited law schools in California, 65.8% for those graduating from ABA-accredited law schools in other states, 28.6% for those graduating from law schools not accredited by the ABA but approved by the California State bar Committee of Bar Examiners, and 9.1% for those who graduated from unaccredited law schools. See this site for more details. With this sort of track record, how are unaccredited law schools going to "sell themselves" to prospective students? Even if a student is seeking lower tuition, can the student safely assume that his or her intellectual skills are sufficient to beat the odds, or should the student assume that there is something about the program at an unaccredited school that will reduce the student's chances of passing? I'm all for reform of legal education, but I'm not for its destruction.

12. Students seeking to do sophisticated legal work at "elite law firms" could select "expensive, full-service law schools" and students seeking to "work with individuals on simpler matters, or ... to work as lawyers in local business or government" could select "a more basic law school."

JEM: This proposal assumes that one can do "simpler" legal work with less sophisticated legal education. The twist in this notion is the idea that legal work can be simple. The past several decades has brought an explosion of legislation, administrative regulation, and judicial decisions that have complicated every area of practice. A fine example can be found in the experiences of law students who, seeking less demanding and complicated legal education for reasons other than cheaper tuition, namely, preservation of G.P.A. and minimization of course load demands, decide to "not take tax." What happens? They discover that just about every area of practice requires an understanding of tax. Ask those domestic relations lawyers whose clients were disadvantaged because the spouse's lawyer, understanding tax, transferred burned out tax shelters in the property settlement after their clients succeeded in getting the transferee spouse almost to beg for the property. It's no wonder that domestic relations lawyers are among those enrolled in the Graduate Tax Program. Or perhaps one can propose that "simpler wills" can be drafted by those with more simplistic legal education. The common misperception that will drafting for clients with assets less than the applicable federal estate tax cut-off can be done without understanding tax overlooks several important factors. First, it is possible that between the day the "simple" will is drafted and the day the client dies that the client become wealthier and subject to estate tax. Second, almost all clients, even those with modest assets, need living trusts, powers of attorney, health care powers, etc. etc. Third, the income tax issues involved in estate planning exist for all clients. Estate planning and will drafting is an area of practice for which malpractice claims are among the highest. Unfortunately, there's not much left in law that is simple. I don't like that, but if I'm designing a system for educating and admitting lawyers to practice, I must accept the reality of complexity. And the idea that government lawyers can or should do their work with a "more basic law school" education is a scary thought. Very scary.

13. Eliminating accreditation would permit competition among law schools, causing some of the new, less expensive schools to offer higher quality education.

JEM: I've tried to think of the things that a law school would do that would cause it not to qualify for accreditation but yet cause its education to be of higher quality. Remove all paper materials from a library? Sorry, but until everything from the past is digitized, that's very bad. Remove all of the "library" in the information supply sense? Even worse. hire fewer faculty and increase class size? All education experts agree that educational quality diminishes as class size increases, no matter where one is on the spectrum whether K-12, undergraduate, or graduate. By increasing faculty size, we have been able to tri-section courses that once were bi-sectioned, thus cutting class sizes in the big courses from roughly 120 or 130 to 70 to 80. Having taught classes as large as 160 and as small as 15, I can vouch for the difference in quality of education for the student, because in the large classes they are less likely to ask for, and get, individual attention. Hire only adjuncts? That's a possibility, but remember that despite finding excellent adjuncts who remain affiliated with the school for years, law schools also have had to deal with adjuncts whose client demands prevented exam grading, too many canceled or rescheduled classes, and similar problems. Although digital technology has made it easier for students to interact with an adjunct professor, they still do not get from adjuncts the same educational mentoring they can obtain from faculty whose full-time responsibility is, at least theoretically, caring for the education of law students. About the only thing I can think of that would, perhaps, increase educational quality is the assignment of more courses to faculty members, cutting down the size of the faculty, but also cutting down or eliminating faculty "scholarship." There is a serious question of whether student tuition ought to be devoted to funding "scholarship," especially when the faculty member is teaching few students and publishing theoretical pieces of questionable value and interest to the legal profession. If, underneath all of Prof. Shepherd's proposals is a plea for a teaching-oriented law school, that's something that can be accomplished without eliminating law school as a law practice prerequisite and without eliminating the bar exam. On the other hand, it is essential for law faculty to research and write at least with respect to practice-oriented issues so that they remain competent in their areas of expertise. At best, we're talking about a slight reduction in faculty size and a slight reduction in costs, surely not of the magnitude Prof. Shepherd seeks.

14. States that choose to eliminate the requirements of bar exam passage and attendance at an accredited law school could offer other pathways into the profession, such as apprenticeships.

JEM: Been there, done that. I was fortunate to know, and still know, lawyers who made their way through the preceptorship requirement that Pennsylvania had in place "back before my time." It was a relic of the pre-1920s era for which Prof. Shepherd pines. It was abandoned. Why? It didn't work. If anything failed, as Prof. Shepherd claims is the case with the bar exam, it was preceptorship. Great concept. Inadequate in practice. True, sometimes the match was excellent, and worked to the benefit of attorney and new graduate. But often it was a case of "make work" or tagging along. Today, the experience that comes closest is the judicial clerkship, and if there were some way to have every law graduate do one I could be persuaded to go that route. The advantages of clerking are so well-known and so universally acknowledged that I'll omit singing the praises. Unfortunately, the business environment that permeates today's legal practice makes it difficult, if not impossible, not only financially but logistically, to re-create an apprenticeship program. Even assuming that the mentoring attorney is of high quality, there's no guarantee that the apprentice would be getting experience relevant to what the apprentice ends up doing in practice.

15. This proposal is a return to the system that existed before the 1920s, which was characterized by easily passed bar examinations such that an Abraham Lincoln could become a lawyer by passing a 10-minute oral bar exam.

JEM: When Abraham Lincoln was alive, it probably was possible to manifest one's knowledge of the law in 10 minutes. There was no income tax. There was no environmental law. There wasn't much of domestic relations law. There was no civil rights law and not much in the way of employment law. There was no aviation law. There were few statutes, hardly any regulations, and only occasional cases. Abraham Lincoln could handle a will or a land transfer with far less effort than is required of today's lawyers, some of whom sadly think they can get away with 19th century practice skills in a 21st century world. The transfer of land involves familiarity with a wide array of legal topics. My fourth cousin several times removed Abraham Lincoln would struggle to practice in today's world unless, aha, he went to law school and studied far more than he could hanging out in a law office. And it surely would take more than a ten-minute conversation to determine if he was up to par.

16. This proposal would create a system like those used in other "responsible professions, such as business and accounting."

JEM: Prof. Shepherd, why did you use as examples two of the most maligned professions of the late 20th and early 21st century? With apologies to the capable and honest accountants and entrepreneurs that I know, the last thing I, or others, want to see, is business and accounting being held up as models for lawyers.

17. Employers would have the choice of hiring lawyers with J.D. degrees or lawyers without J.D. degrees, depending on need.

JEM: About the only thing this would do for employers would be to pay lower salaries to these hypothetical un-degreed lawyers. But employers already do this. They hire paralegals. And that's pretty much the sort of work that un-degreed lawyers would be trusted to do.

18. This proposal would generate a "large increase in the number of lawyers," of which a "large proportion ... would be minorities."

JEM: This proposition presupposes several things. It presupposes a pool of qualified individuals who do not go to law school simply because of the high tuition, in spite of numerous scholarship and financial aid programs at almost all law schools designed to assist economically disadvantaged applicants, especially minorities. I don't think that pool of applicants exists. It also presupposes that individuals lacking the requisite intellectual skills for admission to, and successful completion of a law school education, or for the successful completion of a bar examination, would somehow become good lawyers by investing time being apprenticed. It would be helpful to have proof of such an outcome. I don't see it.

19. There are not enough lawyers in the nation, and this shortage causes high fees ("$60 per hour or more"), which blocks the poor and middle class from obtaining legal services.

JEM: I tend to agree that there are not enough lawyers. I do not think $60 per hour is a high fee. I pay that much or more for my auto mechanic, my lawn cutting service, my physician, my plumber, my heating and air conditioning specialist, and I would pay that much or more for snow removal services if I went that route. Legal fees are high, not because of the per-hour rate, but because of the number of hours required for a task. If an estate plan could be put together and all the documents drafted in two hours, $120 would be a bargain. Unfortunately, living in a highly regulated, complex, and litigious society, in which every possible outcome needs to be, and probably ought to be, taken into account, the simplest of estate plan arrangements is going to cost $250 or more, unless someone is trying to get by "on the cheap" or deliver less than what is being promised. Generally, we get what we pay for.

20. Increasing the supply of lawyers would drive hourly rates "down to $25 per hour or less for simple tasks." This rate is comparable to that charged "by qualified professionals with similar training ... in other fields, such as management of small businesses, bookkeeping, tax preparation, nursing, carpentry, plumbing, physical therapy and chiropractic."

JEM: I haven't paid a plumber $25 or less for many years. I haven't paid a nurse, physical therapist, or chiropractor, but from what I see, $25 is on the very low side. Nurses, for example, are in such demand, that those acting as independent contractors can charge more, except when Medicare or health care plans artificially push down their rates. Interestingly, reference to such plans brings to mind the pre-paid legal services plans, which have been, pretty much, dismal in their success.

21. Even though it admits lawyers with degrees from unaccredited schools, "California does not appear to have higher levels of lawyer malpractice or dishonesty."

JEM: If that is true, and I haven't been able to find statistics, probably because of confidentiality issues, it's because California admits very few lawyers from unaccredited schools. See the statistics under point 11, above.

22. Many people needing legal services do not need accreditation protection, because they are sophisticated. A lawyer's status as a graduate of an accredited law school has little influence on the hiring decision of a corporate legal department, because the decision will reflect the applicants' reputations, experience, and referrals. Admittedly, accreditation requirements do help protect the poor and unsophisticated, yet at the cost of reducing the supply of lawyers and raising legal fees.

JEM: I think there are too few graduates of unaccredited law schools to permit a conclusion as to what corporate legal departments, or other legal employers, would do if there were a large supply of such graduates. My guess, based on employer reaction to factors such as G.P.A., identify of school, and other characteristics, is that employers would hold a bias in favor of accredited law schools, whether that accreditation were mandatory or, as indicated in point 27, below, optional.

23. The risk of consumer harm posed by removing the accreditation and bar exam requirements would be offset by the establishment of reputable enterprises, with H&R Block as an example of how exploitation by unscrupulous tax return prepares is eliminated by the market.

JEM: The existence of H&R Block, even if one accepts Prof. Shepherd's description of it as the be-all and end-all of tax return preparation, has not done much to remove dishonest tax return preparers from the scene. Not that H&R Block should have the responsibility for doing so, but absent a controlled gateway, there's no guarantee that the honest will drive out the dishonest. It's for this reason that Congress passed legislation regulating paid tax return prepares and the IRS continues to seek ways to enforce those rules and to advocate additional protections. Oh, and as for H&R Block, visit, for example, this site, and make up your own mind. I worked for H&R Block years ago, and I am not convinced that being an apprentice there is the best way or even a good way to learn how to do tax returns as well as they need to be done.

24. Lawyer incompetence and dishonesty should be punished "more severely" and punishment should not be limited to the most egregious violations.

JEM: I totally agree. But this can be done without eliminating the bar exam or removing accreditation of law schools.

25. Lawyers should be policed not by other lawyers but by others, perhaps detectives and attorneys hired by state governments to investigate and prosecute lawyer misconduct.

JEM: I'm a wee bit confused by the rejection of self-policing coupled with the idea of hiring attorneys to investigate lawyer misdeeds. Perhaps it has something to do with moving lawyer regulation from the lawyers who now handle it to a different government agency. If so, there are serious issues, because the courts regulate who practices before them, and so moving that task to the executive branch of a state government might raise separation of powers issues in states where the constitutions resemble the U.S. Constitution in this regard. On the other hand, if the proposal is to add non-lawyers to lawyer disciplinary boards, why not? I think it's been done in some states, and it might advance the goal of cracking down on lawyers who violate the rules.

26. States without mandatory bar examination passage requirements could set up voluntary bar examinations through which lawyers could obtain specialization certificates. Uncertified lawyers could be hired to do simple tasks.

JEM: And what would the un-certified, non-specialist lawyer do? Tax? Nah, need a certificate. Criminal law? Best not, for mistakes here can be a matter of life and death. Environmental law? Whoa, almost as complex as tax. Securities work? Ditto. Will drafting? No way, considering how prone this area is to malpractice. Admiralty? Ha. Wait. They'd do "simple tasks." What simple task? Does that mean practicing law as would be done by someone who wanted courses limited to "main rules," as I roundly criticized a few months ago? If anything, in addition to three (or an externship-enhanced four) year law school education, most lawyers need additional education and specialization. That, however, is a matter of making continuing legal education a rigorous exercise that is accompanied by tests and examinations. After all, with the removal of law school (and its examinations) and the bar exam, legal education under Prof. Shepherd's vision would become one giant CLE, which too often is characterized by attending lawyers who are reading novels, knitting, doing crossword puzzles, sleeping, and otherwise not digging in. On this I speak from personal experience both as an attendee and as a provider.

27. Law school accreditation could continue as an option for law schools not concerned with reducing costs and setting lower tuition.

JEM: And every university-affiliated law school would continue to seek accreditation. Why? In part because of university requirements and accreditation of other programs (unless Prof. Shepherd also wants to remove accreditation of other university schools, such as medical schools, which, after all, following his logic, would make sense because there are insufficient doctors, medical costs are high, and many people fail to get adequate medical care, and which would make available physicians with only "basic medical education.") And in part because of the prestige, the same motivation that has brought most law schools to membership in the AALS.

28. Those seeking to become lawyers could choose among accredited and unaccredited law schools.

JEM: Those seeking to become lawyers have that choice today. They vote with their feet. They seek admission at the accredited schools. Those who end up at the unaccredited schools have all sorts of difficulty becoming lawyers, not because the schools are per se deficient but because the students haven't quite put together what it takes to practice as a lawyer in 21st century America.

In conclusion, though Prof. Shepherd makes some good points, and I agree that student tuition ought not be funding some of the "scholarship" being generated by law schools through the efforts of those whose focus is insufficiently directed toward good teaching, I nonetheless think it would be ill-advised to urge states to follow California's example and not require attendance at an accredited law school. The nation does not need 49 more states doing what California does. And I think it would be disastrous to eliminate bar examinations as a prerequisite to admission to practice. To the contrary, there ought to be continuing bar examinations coupled with continuing legal education requirements. After all, the law changes, and I've seen enough incompetence among practitioners to fear the reduction of, rather than an increase in, education and testing. Ultimately, the effort should be to reform legal education rather than tossing it into the dust-bin of history to be replaced by antiquated practices long past their time.

Tuesday, October 04, 2005

Blogging and the Future of Legal Scholarship 

The October 7, 2005 issue of the Chronicle of Higher Education (apparently taking a cue from magazines that ship their November issue in August) has a magnificent article by Henry Farrell on academic blogging. Giving his essay the catchy and affirmative title of "The Blogosphere as a Carnival of Ideas," Farrell, who is an assistant professor of political science and international affairs at George Washington University, makes a very strong case for the benefits that can accrue to the academy, faculty, and the public when the professoriate puts some energy into blogging academic topics. This is one of those essays that brings the "I wish I had written this" thought to my mind.

Rather than beginning with praise for blogging, Farrell begins with a story that illustrates one reason why blogging hasn't caught fire among academics. He describes the concerns of an untenured professor who had been blogging anonymously but who then let his identity slip. He had been trying to avoid real or imagined "invasions of his personal and professional life." Although tenured faculty have far less to put at risk if they blog, barring total implosions in which they reveal confidential information or write thoroughly inappropriate posts, untenured faculty, and tenured faculty who are seeking to change positions, face multiple disadvantages. First, writing about controversial topics can alienate senior faculty, administrators, and hiring committees. Second, time devoted to blogging probably eats away at time available for "traditional" scholarship.

After describing these impediments to blogging, Farrell concludes that it is an "enormous mistake" to "dismiss blogging as a bad idea altogether." He's right. Academic blogging provides all sorts of advantages. Faculty who blog can "debate ideas, swap views about their disciplines, and connect to a wider public." A few use blogs to air their gripes. Many, perhaps most, wrap the blog into their academic identities. As Farrell puts it so brilliantly, "For these academics, blogging isn't a hobby; it's an integral part of their scholarly identity. They may very well be the wave of the future." Blogging, he points out, are intellectually exciting. At least for now, they provide the academic with a forum for interchange free of the constraints afflicting academic endeavors in general, such as seeking grants, getting tenure, and competing for endowed chair positions. Farrell says:
Properly considered, the blogosphere represents the closest equivalent to the Republic of Letters that we have today. Academic blogs, like their 18th-century equivalent, are rife with feuds, displays of spleen, crotchets, fads, and nonsenses. As in the blogosphere more generally, there is a lot of dross. However, academic blogs also provide a carnival of ideas, a lively and exciting interchange of argument and debate that makes many scholarly conversations seem drab and desiccated in comparison. Over the next 10 years, blogs and bloglike forms of exchange are likely to transform how we think of ourselves as scholars.
He focuses on law and philosophy to illustrate the extent to which academic blogging has taken hold. Using Dan Solove's statistics, he reports that 130 law professors have active blogs. That may be a bit understated, but it amounts to about one law professor at each law school. Wow, it is still lonely out here in the law school blogosphere.

Farrell then makes one of those bold statements that I appreciate: "In both of those disciplines, those who don't either blog or read and comment on others' blogs are cutting themselves out of an increasingly important set of discussions." Why is this happening? Farrell points out that although the "depth of thought" in blog posts may not approach that of traditional scholarship, a situation that I don't think blogging necessarily requires, the process of blogging brings to the communication of ideas a timeliness that is almost entirely lost in the traditional venues of peer-reviewed or student-edited journals. If he thinks this is a problem in academic publishing generally, consider the inadequacy of "traditional scholarship" to deal with developments in the world of taxation, where's yesterday's news becomes ancient history very quickly. It takes months, if not years, for another academic to have a response published in the traditional world. With blogging, responses are much more timely, and thus easier to process. Years ago, this sort of impact was predicted for the Internet and its progeny. Having been among those who foretold this change, it is gratifying to watch its emergence.

Farrell also notes that once a person has experienced the pace of blogging, a return to the "traditional" ways of communicating is difficult. Indeed. For me, it would be similar to driving a sports car and then going back to travel on horseback. Farrell then paraphrases John Holbo of the National University of Singapore, "the difference between academic publishing and blogging is reminiscent of 'one of those Star Trek or Twilight Zone episodes where it turns out there is another species sharing the same space with us, but so sped up or slowed down in time, relatively, that contact is almost impossible.'" Wow. This is almost as good as the article I threaten to write on the tax consequences of time travel.

The last of Farrell's points that interest me involve the impact of blogging on the present hierarchy of academia. His proposition that blogging can bring more attention to an adjunct professor or independent scholar who holds an interesting viewpoint than does "ponderous stodge regurgitated by the holder of an endowed chair at an Ivy League university" is magnificent not only in its vocabulary but in its reality. The playing field of rankings and rank are turned "topsy-turvy." Farrell's acknowledgment that blogging can bring academics an opportunity to converse with the "wider public" is perhaps more significant than it initially appears. Blogging may be the machine that brings down the ivy-covered walls that permit too many academics to live in a separate reality than do most people, just as the invention of cannon obsoleted the military advantages of castle walls. As Farrell writes, "This openness can be discomfiting to those who are attached to established rankings and rituals -- but it also means that blogospheric conversations, when they're good, have a vigor and a liveliness that most academic discussion lacks......Blogging democratizes the function of public intellectual."

Farrell's concluding paragraph nicely summarizes his thesis, one to which I subscribe:
Both group blogs and the many hundreds of individual academic blogs that have been created in the last three years are pioneering something new and exciting. They're the seeds of a collective conversation, which draws together different disciplines (sometimes through vigorous argument, sometimes through friendly interaction), which doesn't reproduce traditional academic distinctions of privilege and rank, and which connects academic debates to a broader arena of public discussion. It's not entirely surprising that academic blogs have provoked some fear and hostility; they represent a serious challenge to well-established patterns of behavior in the academy. Some academics view them as an unbecoming occupation for junior (and senior) scholars; in the words of Alex Halavais of the State University of New York at Buffalo, they seem "threatening to those who are established in academia, to financial interests, and to ... well, decorum." Not exactly dignified; a little undisciplined; carnivalesque. Sometimes signal, sometimes noise. But exactly because of this, they provide a kind of space for the exuberant debate of ideas, for connecting scholarship to the outside world, which we haven't had for a long while. We should embrace them wholeheartedly.
We must remember that almost everyone who woke up the day after the printing press was invented carried on with their life thoroughly unaware of how much life had changed.

Having seemingly heaped praise on Henry Farrell, or at least having saluted his essay, I need to express some mild disagreement with several of his propositions. I'm going out on a limb, and surely cannot "prove" my position. So perhaps I'm simply questioning the seemingly absolute articulation Farrell gives to these perceptions.

First, Farrell states that blogging "some depth of thought" and that "it's difficult to state a complex thesis in the average blogpost." There is much to be said for these propositions at the moment, but I'm not ready to concede that it must be this way or must remain this way. A complex theses can be expressed in a blogpost, and if a sufficient number of academics begin doing so, the average academic blogpost will evolve to something more than a several paragraph observation. Readers of my blog know that many of my posts resemble short articles, especially when two or three addressing the same issue are combined. I'd like to think that neither I, nor other academic bloggers, are abandoning any portion of our thinking process when we blog. There are days when I invest several hours into composing a blog, reminding me of how my late colleague Dick Turkington impressed on me the need to invest time in composing an email reply to a student inquiry on a substantive topic because tossing an off-hand response, something known to happen in oral conversation with students, could backfire. After all, if others are reading a serious blog post, they will be quick with the criticism if they find error or sloppiness. The same critical eye that reads a printed journal page surely can read a blog post. Farrell, though, isn't wrong on his assertions. It is, of course, a time of transition, and transition often brings inefficiencies and discontinuities. It's just that I'd like to hold out hope that blogging need not be, or remain, constricted, and can provide a forum for thought no less deep than that found in traditional print journals.

Second, Farrell writes, "Few if any academics would want to describe their blogging as part of their academic publishing record (although they might reasonably count it toward public-service requirements). While blogging has real intellectual payoffs, it is not conventional academic writing and shouldn't be an academic's main focus if he or she wants to get tenure." There are two points here. Farrell is correct, that in today's academic world, blogging is not treated as conventional academic writing, and someone seeking tenure cannot ride a blog to the permanent faculty appointment. Somehow, though, that must change. Tenured faculty, who do not face similar risks, must take the lead and pave the way for the world of the mid-21st century when, at least in law, the idea that a third year law student stands as gate keeper to the academic careers of law faculty will have become a joyously discarded awful tradition. The day when untenured faculty can share their theses through a blog, receive comments from peers and the public, revise their thoughts, and make timely contributions to the on-going debate surrounding a particular topic will be a day when the academy surely could praise itself for having turned its currently inward-focused scholarship into a true public service. As to Farrell's other point, I offer myself as a person who describes my blogging as part of my academic publishing record. Of course, since much of my publishing consists of tax books that the academy insists on calling "monographs" for reasons I've never understood, it is easier for me to see "law scholarship" as something far wider than an article in a student-edited law journal. Not that I haven't done that sort of writing, when it was appropriate for what I had to say, but it isn't the center of my scholarship. Of course, that one of the other two bloggers on the faculty is the Dean helps. As does the fact that if Dan Solove's numbers are in the ballpark, as I think they are, Villanova has three bloggers, thrice the national average. Surely that should earn us a place in the U.S. News and World Report top 25. Just kidding. At least for the moment.

Third, Farrell predicts, " While blogging won't replace academic publishing, it builds a space for serious conversation around and between the more considered articles and monographs that we write." I truly hope he is wrong, and I suspect he wouldn't be all that upset if he were. Academic publishing must become "of the blog" and abandon its current process and form. At least in law, blogging opens the door, perhaps a back door, to the peer review that is so noticeably absent, especially when compared with other disciplines. Ironically, my writing that doesn't qualify as "scholarship" in the eyes of many of my law professor peers undergoes far more peer review, treating attorneys as peers, than does the "traditional scholarship" of my law faculty colleagues. Blogging encourages law reviews to say goodbye to paper products and move to a digital world. Not only will this move save money, a proposition that appeals to every Dean I know, but it will also resurrect for law students the opportunity to see their publishable work, denied publication because of cost constraints, made available to the public. Villanova led the way in this regard when it established the Villanova Tax Law Compendium, which for other reasons is hibernating deeply. As student-edited law journals become extinct, law students can turn their attention to their own serious academic blogging, as a few already do, rather than spend time finishing articles and cranking out footnotes for law faculty who leave too much of their writing to law students.

In addition to these three tweaks of Henry Farrell's essay, I want to add another notion that he doesn't highlight, though he gives it some attention. This is the issue of publicity. As he points out, academics like publicity, and struggle to find it, especially in the world outside of the academy. More importantly perhaps, especially in certain aspects of the operation of educational institutions, administrators delight in publicity of the right sort. Publicity helps with fund-raising. It helps with rankings. It helps with attracting quality students to enroll. No university or college administrator would turn a nose up at good publicity. My blogging, much like my other scholarship that doesn't show up in law school academic journals, reaches a far wider audience than does typical law review writing. I understand that the "quality" of the audience matters to many at least as much, if not more, than the "quantity," but if the quantity is sufficiently high, the quality will follow, if that is important. Without getting into the debate about the need to reach beyond other law faculty and judicial clerks, suffice it to say that a school's reputation, in any discipline, is enhanced when it is strengthened in all venues and not just within the bounds of a select few. In other words, administrators ought to be encouraging academic blogging, while, of course, being wise in their reaction to non-academic blogging by academic personnel.

I close with reaction to a quote from the same journal that published Henry Farrell's wonderful commentary. One of my colleagues passed me an email several weeks, in which he prefaced a quote from page A-46 of the September 2, 2005, edition of the Chronicle with the observation, "you will be startled by this." I was. The quote? "[C]omputer-based entertainment, like...blogging, [is] safer than some recreational activities...like drinking." A bit of research revealed that the quote came from an article on student computer addiction. Written by Elizabeth Farrell, who is not identified and who may or may not be related to Henry Farrell, the article points out that students who immerse themselves in fantasy on-line games struggle to cope with, and return to, reality. This is a genuine and serious problem. However, equating on-line gaming, on-line gambling, instant messaging, and "blogging," will do nothing to assist advocates of academic blogging in getting their message across to the uninformed. Worse, it will hinder that effort. The term "blogging" has become a word that needs an adjective to make it meaningful. There are all sorts of blogging, and the type of blogging that Elizabeth Farrell is trying to describe surely does not include the efforts of a student (or teacher) to publish a serious academic analysis of a topic.

Academic blogging will change academic scholarship, including legal scholarship. The number of faculty who blog is growing. A few deans and a few academics are beginning, sometimes grudgingly, to acknowledge not only the benefits of academic blogging to the institution and to the development of academic discussion, but also the nature of serious academic blogging as a form of scholarship that deserves attention, respect, and deference. I live for the day when a hiring committee, rather than asking, "has this candidate already published three articles in a traditional journal?" instead asks, "does this candidate have a blog, and what's its URL?" Maybe dean hiring committees will also make inquiries about the blogs of the applicants they are considering. "Can't be a dean without a blog" sounds good to me.

Monday, October 03, 2005

When is Free Not Free? 

On Friday, I pointed out that my opposition to cutting the federal gasoline tax as a response to rising gasoline prices had been carried by others to the point of suggesting increases in fuel taxes, as Andy Cassel had pointed out in his Philadelphia Inquirer column that same morning. Shortly thereafter I received an email from former student, Nakul Krishnakumar, a frequent reader of this blog, and an advocate of a no-tax gasoline free market. As he pointed out, we've tossed this issue back and forth several times, though he remains "dismayed and puzzled at [my] insistence on raising the fuel tax." It's not as though I'm insisting on it to the point that I insist we do not lower fuel taxes, it's just that I think it's an idea that makes sense. Where Nakul and I disagree is on the necessity of a user fee (in this instance, wrongly called a "tax") that shifts to the users of fuel the costs that fuel usage imposes on society. At the very least, it ought to be indexed for inflation. Advocates of indexing the income tax rates and fixed dollar amounts in the Internal Revenue Code have made the case for indexing taxes, period. Yet many income tax indexing advocates oppose indexing fuel taxes.

Nakul writes, "Suffice it to say, I would prefer a more free market approach. This means we should discontinue all fuel taxes and let the market dictate when we start substituting newer fuel sources. In my humble opinion, increasing the federal fuel tax isn't going to solve our problems." To the extent a free market permits players in the market to shift costs onto those not in the market, such as what happens when a developer plunks a housing subdivision down in the middle of a rural area miles from other development, the market isn't free. Society, through government, must regulate markets, to some extent, to preclude inappropriate cost shifts.

That's why the attempts to deter price gouging, namely, setting market prices above what they would be if all parties to the transactions had comparable bargaining power, is acceptable to free-market advocates of my persuasion. A market is not free if market participants are disadvantaged by extraneous factors. Free markets do not necessarily operate fairly.

On the other hand, government regulation must be limited. It makes sense for government to represent nonparticipant third parties on whom the "free" market would otherwise impose costs against their will. It also makes sense for government, to the extent the free market fails to do so, to act in the interest of integrity and fairness. It is not, however, acceptable for government to regulate the market to the extent doing so puts the government in a dictatorial position. That is why I was amused and dismayed to read one of the responses to Andy's Friday column, published on Sunday in a "Talking Back: Readers' take on gouging" feature by the Philadelphia Inquirer. There is one letter that dismays me, and so Nakul surely is flabbergasted.

Fred Schaffhausen takes the position that oil companies are charging "excessive prices" and "without question are gouging the public." He argues that oil company mergers during the past 10 years have "created monopolies that eliminate price competition at the pumps." He claims that "All the tripe fed to the driving public by the press, TV reporters, and advertising agencies about a shortage of crude oil and refinery capacity is pure garbage. You can get all the gas you want - just pay their price at the pump." After claiming that the nation "has been built around the use of automobiles and trucks by its citizens at affordable gasoline prices," and that because "[g]asoline has become a necessity in our lifestyle[, i]t has become as essential as water and electricity." He concludes, "Therefore, it should be regulated in its price, distribution and manufacturing."

Wow.

Let's first deal with the factual issues. Yes, there have been oil company mergers, but until there is one oil company (Microsoft Oil, anyone?), there is no monopoly. Proof that price competition exists can be found in the news stories of gasoline outlets whose lower prices generate long lines at their pumps, such as this one. There are gasoline price differentials, and it takes a little bit of searching to find them, using, for example, web sites such as this statewide gasoline price comparison dataset.

And then there is the claim that reports of crude oil and refinery capacity shortages are garbage. Before the hurricanes struck, global crude oil production barely matched global demand. The two hurricanes damaged or destroyed dozens of drilling rigs, oil platforms, and underwater pipelines in the Gulf of Mexico, taking significant amounts of crude oil production off-line. The two hurricanes put about 20% of refining capacity out of action, so even if the crude supply held constant, there would be no place to take up the product that cannot be refined at damaged refineries. One good source for deep, technical, beyond the emotion analysis, is The Oil Drum, which brings together people with opinions from all over the spectrum and taps them into scientific, engineering, economic, and other specific data about the oil and gas industry that makes it bewildering that such an ignorant statement about supply could be held as a belief, let alone used as the premise for a call for government regulation. The supply of oil, and gasoline, is finite. Refining capacity is limited. Of course, if Mr. Schaffhausen can produce evidence of tankers of oil waiting offshore, or ready-to-run but empty refineries begging for crude to turn into gasoline, perhaps many in the know would be disabused of their alleged ignorance or caught in their alleged lies. In this instance, though, I think the ignorance is on the accuser's side.

I'll leave to others to ponder whether government regulation of gasoline prices should be put in the hands of FEMA. Or perhaps a new agency could be created, and Mr. Brown or some other "friend of a campaign funds donor" could be put in charge. Yikes. There are some scary ideas floating around out there.

Whether the nation has been built around the use of automobiles and trucks is, at best, debatable. Surely during the last half-century the nation has become very automobile-focused and truck-dependent. But the nation was built long before World War II, using horses, trains, and a variety of energy sources such as water power. Oil wasn't discovered and put to use until the late nineteenth century, and the automobile remained the privilege of the wealthy until the 1920s, not becoming an almost universal transportation mode until after World War II. There's nothing about the automobile, or gasoline, in the Declaration of Independence or the Constitution.

Turning to the proposal to regulate gasoline as government regulates water and electricity, there is nothing more striking than the inadequacies of the electricity and water markets. Competition, only recently introduced into some electricity markets, has been repressed, creating the sort of monopolies that Mr. Schaffhausen so strongly dislikes. After all, whether the monopoly is run by what he calls "the fat cats" in industry or by what I will call "the fat cats" in Congress and government agencies, it's still a monopoly, and far more likely to be inefficient when run by those who have no one to whom they must answer. Though I often criticize executives of large corporations for their excessive salaries and questionable decision making, I have a wee bit more faith in them than I do in a roomful of government bureaucrats. At least the former usually have experience in their industry and aren't relying solely on theory learned in some isolated and sterile environment.

Mr. Schaffhausen's argument proves too much. Yes, electricity and water are essential (although one could argue that water is far more essential than electricity). Gasoline is probably as essential as electricity. But so are clothes. So is food. So is most medical care (setting aside, for example, cosmetic surgery). So are most prescription drugs. Toilet tissue is essential, or so I'm told by someone who was caught in the woods without it and unwittingly used poison ivy leaves as a substitute. Toothpaste is essential. The list goes on and on and on. Perhaps coffee is essential, or so say some of my friends. I could be tempted to argue that sugar is essential but I know better. Should all of these items also be regulated? Goodness, once that happens, we might find some retired Soviet bureaucrats to stop by on an exchange program and help write a five-year plan. After all, government control of life's essentials worked so well in the Soviet Union it ought to be imitated here.

When Mr. Schaffhausen complains that Andy Cassel (and, I presume, those who think like he does on this issue) should "take off [the] dark glasses" and "[t]ake off [the] blinders," he suggests that there is some reality beyond what is apparent to anyone who studies the factual data. But, unfortunately, there isn't. The population of the world doubles, but the amount of crude oil does not double. United States citizens increase demand for gasoline by 20%, but refining capacity increases slightly, if at all. The percentage of the world's population dependent on fossil fuels quadruples, and new oil and gas discoveries during the year don't equal what has been used. Debating whether the last economically recoverable barrel of oil is extracted in 2008 or 2015 or 2030 is distracting, because the facts are clear. The world's population is outgrowing resources. When we're finished debating oil, we can turn to clean water, which I continue to think will be the cause of world-wide armed conflict. However difficult it is to cut back on fossil fuel usage, it is triply difficult to cut back on water usage.

The second half of the twentieth century has been dominated by an American culture that respected no boundaries, whether social, economic, political, military, or religious. It is a culture that was weaned on parental and government promises of cornucopia, dashed with politicians' seasoning of entitlement flavor. Reality was tossed to the dogs of postmodern deconstruction, and pretense ruled the day because it makes most people feel good. Out of the deep ocean come two huge storms, precursors of the ones that will churn up in their vanguard. The house on shaky foundations begins to totter, and the emperor gets a chance to look in the mirror at his clothes.

The nation, and the world, are in trouble. Deep, serious trouble. Even if no further natural disasters, terrorist activities, or other catastrophes strike, there's still far more to do than many people seem willing to undertake. Servant-leadership and stewardship, especially in the public arena, are sorely lacking. Institutions seek to protect themselves, as though they and their entrenched managers are more important than the institution's mission and responsibilities.

So I remain unconvinced that the solution is to remove taxes and user fees and let "the market" run free, if that means it runs free of integrity, free of knowing the facts, and free of common sense. The price of gasoline, with or without a change in fuel taxes, is not going to return to $1.50 a gallon. Unless, of course, someone invents a way of making gasoline from sea water. And how will that happen when the sciences attract far fewer students than in the past? Yes, trouble is swirling all about.

Friday, September 30, 2005

Raise, Don't Lower, Fuel Taxes 

Back in March of 2004, long before hurricanes rampaged through the Gulf of Mexico, I criticized suggestions to cut the federal gasoline tax as a response to rising gasoline prices. I pointed out that the federal gasoline tax is a small component of the overall price, that it is not the cause of increased prices, and that a reduction in the federal gasoline tax does not guarantee a reduction in the pump price. I also pointed out the essential problem, namely, the insufficiency of supply to match demand. I then suggested letting the market set the price, find ways to reduce consumption, re-evaluate spending priorities, and revamp public transportation.

So here we are, a year and a half later, with my March 2004 analysis and suggestions finding their way onto the front pages. I don't know if I should be pleased with my foresight or distressed that the situation worsened during the past 18 months because my message generally went unheard or heard but unheeded.

Andy Cassel, in his Philadelphia Inquirer column published this morning ("Taxes, not talk, aid conservation),* discusses the impact of taxation on energy conservation. He notes that many "fervent free-market fans" (love that alliteration!) advocate RAISING federal gasoline taxes. Andy explains that the resulting increase in pump prices will compel people to find ways to reduce consumption and re-evaluate spending priorities. In effect, all the words in my March 2004 posting have far less effect than a swift kick in the wallet. He's right.

Raising the federal gasoline tax is very consistent with my philosophy that user fees should have a more important role in revenue collection and distribution than they currently have. Andy and the economist whose arguments he scrutinizes point out that the use of gasoline imposes costs on society. The use of gasoline depletes a finite resource. It pollutes the air. It enables the loss of farmland turned into isolated residential subdivisions in the far exurbs of the nation's cities. It contributes to the mindset that generates traffic jams and driving speeds below those of maximum mileage efficiency. It requires the importing of foreign oil and the ensuing political and military costs inherent in the use of imported oil. Surely the cost imposed on society by the use of a gallon of gasoline (or other depletable resource) far exceeds the per-gallon federal gasoline tax.

The chief concern about raising the federal gasoline tax is that people who are poor or otherwise under financial distress would be disadvantaged. Though many of those who are poor consume little or no gasoline, there also are many who depend on gasoline for their livelihood. The answer is to find a way to alleviate the financial distress of the poor, whether that distress is caused or exacerbated by an increased gasoline tax or jumps in the price of food, clothing, or any other essential or quasi-essential commodity. There are several ways of doing so. One economist suggests cutting payroll taxes and putting the proceeds of a gasoline tax increase into the social security trust funds. I'm not certain I like this idea, because it would not limit cuts in payroll taxes to the poor. Perhaps a boost in the earned income tax credit? Perhaps adjustments to the standard deduction and personal exemption so that individuals who are truly poor are not paying federal income taxes?

I am convinced that (1) it makes no sense to reduce federal (or state) gasoline taxes, (2) the price of depletable resources, including gasoline, diesel, heating oil, and natural gas, will continue to increase enormously during the next decade, and (3) ultimately replacements must be invented to provide substitute sources of fuel. Perhaps increased taxes not just on gasoline but on all depletable resources can be channeled into the research that must be conducted during the next decade so that by 2015 or 2020 the world doesn't find itself in a state of economic, political, and military chaos when the oil and gas producers announce that very little remains. And I am not convinced that an event causing reduction in demand, such as a world-wide war or global epidemic, will alleviate the problem. At best, an epidemic postpones the inevitable but for all we know the epidemic may claim the lives of those best suited to do the requisite research. At worst, a world-wide war would not only reduce demand by halving the planet's population but it also would surely destroy most of the oil and gas facilities needed to meet demand. I'll leave for another day a discussion of how society can encourage people to become educated in the sciences so that the pool of researchers is sufficient, even if that means cutting back on the number of degrees awarded in subjects that despite being interesting, challenging, or somehow fulfilling, just aren't as useful in dealing with what looms as a catastrophe orders of magnitude higher in impact on life and lifestyle than were two hurricanes.

All of this will require leadership. It will be a factor in the 2006 and 2008 elections. I continue to scan the potential candidates and I continue to feed my pessimism. Borrowing from Pink Floyd, "Is there anybody out there?"

* The Philadelphia Inquirer web site is down, so I cannot get the specific URL.

Wednesday, September 28, 2005

Legal Education and Legal Practice: Diverging? 

Stephen J. Friedman, dean of Pace University School of Law, has published an essay in which he asserts that "legal education has not evolved to meet the demands of a rapidly changing profession." Much of what he says repeats what I, a few others in legal education, and legions in practice have been saying for many years. His essay, though, is so diplomatic that he doesn't address a recent phenomenon in legal education that, if left unchecked, will exacerbate the problem. That phenomenon is the change in the preferred background of individuals hired to teach at American law schools.

At the core of Dean Friedman's analysis is his conclusion that "the educational goal of an American law school should be to educate and train effective new lawyers." He addresses how law schools should attain this goal, but for me that's a matter of dealing with a symptom rather than the problem. The problem is that many law faculty do not agree with Dean Friedman. I do. Whenever I make an argument that rests on the premise that the goal of legal education is to educate law students so that they can become legal practitioners, I am met with disagreement from many of my colleagues, not only where I teach, but elsewhere. One colleague put it as succinctly and openly as possible. Law schools, she explained, exist to train legal philosophers. I am grateful she was so direct, because it spared me the effort frequently required to get past the slogans often used to mask that perspective.

My practical reaction is, "Who's going to hire legal philosophers?" Apparently the answer is, "Law schools." What has been happening in law school faculty hiring is a rush to find candidates with Ph.D. degrees. A debate is underway in the legal blogosphere on the question of whether a Ph.D. is "necessary" or "essential" for teaching interdisciplinary courses in law schools. These are courses involving the relationship between law and economics, law and sociology, law and philosophy, and similar "law and" topics that look at law from a theoretical perspective.

Before turning to the question of whether law school graduates, after seven years of post-high-school education, are bringing to their employers as much as those with degrees from graduate programs in other disciplines, it helps to examine how legal education has evolved to the point that as long as thirteen years ago the American Bar Association MacCrate Commission issued a report criticizing the disconnect between legal education and law practice. Though many law schools have responded by creating and enlarging legal clinics, externships, practice simulation courses, and other experiences that mirror, to a greater or lesser extent, what happens in law practice, those efforts remain on the margin in all but the very few law schools that make legal practice experiences the centerpiece of student academic activity.

Legal education suffers from a flaw that does not afflict other disciplines. It awards doctoral degrees to students who do not have bachelors or masters degrees in the subject and who have not been required to pursue a program of prerequisite courses as is the case with the M.D. degree. A wee bit of history is most enlightening. Before the 1960s, a student graduating from an American law school earned an LL.B. degree, namely, a bachelor of laws. It was the student's first law degree. Awaiting those students who chose to continue their legal studies, though at the time few did, were the LL.M. and S.J.D. degrees, which are, respectively, the masters and doctoral degrees in law. During the 1960s law students pressured law schools to award doctoral degrees, because their college classmates who continued their studies were earning doctoral degrees. Rather than rebutting the request by pointing out that the person earning a Ph.D in, say, history, already had a bachelors and masters degree in history and thus had invested as many as 8 or 10 years in studying the subject, law schools accepted the simplistic, logical and yet misleading argument that "seven years of post-high-school education entitles the student to a doctoral degree." Hence, the invention of the J.D. degree to replace the LL.B. Law schools offered their existing graduates the option of replacing their LL.B. diplomas with J.D. diplomas. I personally know attorneys who chose not to do so because, having been in practice, they understood the superficiality of the change.

So, today, legal education is a weird world in which a lawyer who seeks admission to a Graduate Tax Program to earn an LL.M. in Taxation must demonstrate that he or she already has a doctoral degree in law. Wow....a doctoral degree as a prerequisite to a masters degree in the same discipline. Is this upside-down or just goofy? Perhaps both, but more importantly it is a warning. The so-called three years of law study for which a student is awarded a J.D. degree are so insufficient that two more programs of law study await the person who wishes to "run the table" in the discipline. Market forces, particularly in specialized areas such as tax and international law, have generated a substantial increase in the number of students enrolling in the one-year LL.M. programs. Few continue to seek the S.J.D. degree, the only market value of which is a slight boost in the chances of being hired to serve on a law faculty. In recent years, the Ph.D. has eclipsed the S.J.D. as the "terminal degree" favored by many if not most law school hiring committees.

Of course there is an abundant supply of candidates with Ph.D. degrees, especially when compared with the number holding S.J.D. degrees. Everything else being equal, a candidate with a Ph.D. degree will hold an advantage over a candidate without one. In some instances, there is no doubt that the Ph.D. degree is essential. When a law school offers a joint program, such as one in law and psychology, the nature of the program usually demands that there be faculty who hold both a J.D. and a Ph.D. degree in the subject matter of the program. Packing the faculty with Ph.D. holders, as I saw in a brochure yesterday from a law school announcing its new hires, all but a few of whom held Ph.D. degrees, ultimately will turn law schools into philosophy schools, much to the detriment of the legal profession and the clients who rely on it to solve their problems and help them plan to avoid problems.

Is the Ph.D. essential, or even helpful, with respect to law curriculum not wrapped into a joint program? More importantly, does having a law faculty rich in Ph.D. degrees somehow make law schools more likely to prepare law students for law practice? My answer to that question is not only "no", it also includes the assertion that a Ph.D.-rich faculty makes it less likely. Law faculties are rapidly becoming the paradigm for S.J.D. degree faculties (though few law schools offer that degree), with a concomitant distancing from the traditional goals of the LL.B. (now masked as J.D. doctoral degree) first level program in law. Those who claim that "having some Ph.D. holders on the faculty is good" may be overlooking the natural selection process by which another is added, then another, until only Ph.D. holders are hired. Eventually the entire faculty becomes one on which no one serves without a Ph.D. It is a phenomenon not unlike the one by which most institutions of higher education in America have become politically homogenous. What does this "Ph.D. trend" foretell for legal education? The analysis should begin with the needs of those to be educated.

One of the biggest challenges faced by law students enrolled in most traditional law school courses is unfamiliarity with the underlying subject matter. Law, of course, does not operate in a vacuum and is not, at least to me and some others, an abstraction in its own right. Law is necessary because people do things, say things, write things, and disagree about things. Law exists in the context of conversations, agreements, accidents, thefts, murders, waste dumping, war, marriage, adoptions, and just about everything that people do. Thus, when a first-year law student encounters torts and criminal law, there is a higher comfort level than there is with contracts and civil procedure, because most first-year law students have a pretty good idea of what car accidents and murders involve but don't recognize much that is involved with concepts such as answers and exculpation clauses.

Consequently, (too) much time is invested in law school courses getting students up to speed with respect to the underlying transaction or event. Years ago, law students had to struggle on their own to get up to speed. In recent years, a variety of factors have coalesced to shift much of that remedial work into the classroom, at the price of topic coverage. Those factors, which include student resistance to self-teaching, student expectations of "three more years of college," the use of student evaluations in making tenure and compensation decisions with respect to faculty, and even the need of some faculty to be "liked" by their students, have caused overcompensation in attempts to blunt the severity of the generation-ago law school experience illustrated in tales such as "Paper Chase" and roundly criticized by many current law faculty as "unnecessary" or "not conducive to learning." I'm not talking about eliminating the practice of insulting, yelling at, or traumatizing law students. I'm talking about practices that let 90% of the class know that they can coast while the "principally responsible row" has responsibility for preparing the next day's class, or that reduce reading load to several pages a night because students do not prefer "demanding" courses.

At the same time that these adjustments have put pressure on faculty to reduce topic coverage so that familiarity with underlying transactions can be incorporated into the course rather than left to student self-learning characteristic of most other graduate programs, three other developments have put even more constraints on the depth of student experience with legal topics. One change is that the law has grown in scope and quantity, as areas of practice unknown or relegated to a distant corner thirty years ago have moved to center stage. Environmental law is perhaps the most widely suggested example, but there are others, such as employment discrimination and international trade law. The second change is that within each area of the law, rules, cases, and administrative pronouncements have issued forth in torrents of words. Though I am often heard to gripe about the "doubling" or "tripling" of tax law during the time I have been teaching, the same can be said by my colleagues who teach courses such as corporations, bankruptcy, international law, or just about any other area of the curriculum, with few exceptions. The third change is that by adding and expanding legal clinics, externships, and similar experiences into the curriculum, law schools have made it necessary for students to cut back the credits invested in traditional courses. After all, any proposal to resolve this problem by expanding law school to four years, matching, for example, medical school, are met not only with predictions of student resistance, but also with simultaneous proposals to reduce law school to two years on the justification that little is accomplished during the third year and third-year students claim to be, or are, "bored."

Because of these pressures, increasingly more students are graduating from law school without having taken courses in tax, decedents, corporations, domestic relations, or other long-considered "bread and butter" courses of the legal profession. They hope and try to fill in the gaps when they sit through the bar review "cram" courses after graduation. Those courses, as everyone knows, are no substitute for the law school experience. It comes as no surprise, then, that practicing lawyers are frustrated with what law graduates cannot do. Dean Friedman points out the commonly-known fact that the pressure to rack up billable hours leaves little or no time for partners and senior associates to take newly hired law graduates through the apprenticeship-like experiences that were common a decade or more ago. Clients understandably do not want to be billed for, or pay for, the training of newly hired graduates who are uncertain of what they are to do. Students who have been through a clinic and who are hired to work in the same or a related area of the law are among the few exceptions to this phenomenon. Even today, though, fewer than half, and probably fewer than a third, of law graduates have had the opportunity to "do a clinic." Though some large law firms have instituted substitute processes to bridge the gap, medium and small firms are economically compelled to leave that task to Continuing Legal Education providers. A dangerous trend, the shifting of legal education from law schools to CLE providers, is looming on the horizon.

Dean Friedman's proposal is not unlike one that I continue to advocate. He suggests that students have "a law school experience that comes as close as possible to an integrated combination of skills, knowledge and substantive law in one broad area -- such as litigation or corporate transactions -- than with a smorgasbord of unrelated courses." For years, I have advocated abandonment of the doctrine-focused law school subject breakdown to make room for transaction-based courses. For example, a first-year course in "residential leasing" would combine the relevant aspects of contracts, torts, property, tax, consumer protection, dispute resolution, litigation procedure, drafting, and all the other areas and skills of law that bear on the consequences of signing a lease and the planning factors that ought to be considered before doing so. Any seasoned lawyer will explain that in practice clients arrive with problems, to be solved or avoided, and not with doctrinal questions. Similar courses could be developed for "taking a job," "starting a business," "entering into a relationship," "having children," and so on. The primary benefit of this approach is that it integrates doctrine in a practical context, a benefit that is particularly useful considering the absence of the fourth year of law school in which this could be done. A secondary benefit is the efficiency of eliminating overlap, in which the same case or legal principle is covered in multiple courses, "boring" students who have already encountered it, but necessary because some students in the course haven't yet learned it.

Interestingly, Dean Friedman suggests that "While we don't need radical changes in a law curriculum that has worked for a long time, legal education must be brought into closer alignment with the need of law students to hit the ground running when they begin to practice law." I disagree. I DO think we need radical changes in a law curriculum that dates back to the end of the nineteenth century. My guess is that Dean Friedman, being a dean, is being necessarily diplomatic. After all, the principle disadvantage to my proposal is that it would require a huge amount of adjustment and remedial learning by law faculty. It is no wonder that they almost universally oppose my plan. Someday a law school, most likely a new one, will decide to forego "imitation of the elite 25" and set out to do what Langdell did some 125 years ago, and that is to change law school so that it is congruent with the world in which its graduates will practice. I doubt it will happen in my professional lifetime else I'd be hanging my phone number and email address on the end of this paragraph.

The likelihood, though, of this happening at any law school is decreasing rapidly. Trends in law school hiring are widening the gap. At one time, practice experience, whether in a law firm, corporate legal department, or government agency, was considered essential in the background of a faculty candidate. Now, the Ph.D. degree or some academic experience, is at least as desirable if not preferred. The intense pressure to publish "scholarly" pieces has given the edge to applicants who already have published. Considering the time pressures of law practice, it is less likely that a practitioner will carry to the interview the resume filled with publications as will the person who hasn't left the academy. Law faculties that evolve to become islands of academics researching and publishing in theoretical areas will be far less sensitive to the needs and realities of legal practice. In some instances, some traces of hostility to the practice world have been, and will be, detected.

Thus, when Dean Friedman writes, "A more focused approach to legal education would recognize that law schools are professional schools, designed to prepare students for entry into a specific profession," he expresses a perspective that conflicts with some of the trends that have been underway in legal education for the past 5 or 10 years. I am sure he is aware of these trends. It will be interesting to observe the outcome of the several changes he describes that have been made to the curriculum at Pace, though it will take another 5 or 10 years to measure that outcome by evaluating the experiences in practice of the students currently enrolled at his school. I wonder, though, if American legal education has that much time. I wonder if the legal profession can wait that long before deliberately or inadvertently changing its relationship with the legal academy.

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