Law schools are under siege. Applications have dropped to around 54,000 annually, from around 100,000 in 2004. First-year enrollment has slipped to under 40,000 students, from 50,000 in 2010. Jobs are scarce—especially for students coming from lower-tier law schools. The average annual tuition has risen to just over $40,000 per year, from about $23,000 in 2001. Average debt on graduation has followed suit, jumping to about $125,000 in 2011, from $70,000 in 2001. No wonder many experts expect perhaps a dozen schools to close their doors within a year while other schools slash their class size, faculty and staff to stay open.
Meanwhile "Big Law"—the largest 200 or so law firms, which serve elite corporate clients in major urban areas—are under stress. Firm size has topped out, and both partnership shares and entry salaries are treading water at best. Clients now scour bills and disallow certain fees. Alternative, transaction-based fee arrangements are now more common. Competition has replaced cushy long-term relationships.
Terrible news, for sure. But is the "Profession in Crisis," as the subtitle of Stephen J. Harper's "The Lawyer Bubble" has it? The answer is no. A bubble may have burst, but not for the high end of the profession or for the thousands of attorneys working in specialized niches. Mr. Harper, a former partner at Kirkland & Ellis, a 1,500-lawyer global firm headquartered in Chicago, and an adjunct at Northwestern University Law School, takes undue pride in chronicling how the mighty have fallen. But he misses how they may rise again.
The author's gloomy predictions about Big Law's future rest almost completely on the fate of a small number of firms that were doomed by hubris: Finley, Kumble in the 1980s; Heller Ehrman, which closed its doors in 2008; and especially Dewey & LeBoeuf, the troubled New York megafirm with a 1,000 lawyers in 26 cities world-wide that endured a mass exodus of partners leading to its highly visible bankruptcy in 2012. In each case, Mr. Harper documents the same death spiral: greedy partners draining resources and sapping morale; young associates forced to flee a firm they had eagerly joined; a preoccupation with short-term profits leading to an unhappy demise. At Dewey & LeBoeuf, for example, some top partners drew down a staggering $7 million per year.
Such vivid accounts take up half of "The Lawyer Bubble." Yet the author ignores the more salient fact that the vast majority of big firms have avoided this grisly fate. Mr. Harper never looks into how these savvy firms survive in a tough environment. They do so, in part, by avoiding overstaffing, by cutting bad clients and by paying premium wages to young associates—many of whom, debts paid, happily bail out for less stressful work as in-house counsel for companies or in the government and nonprofit sectors. Over all, the model proves stable: With Congress passing monstrosities like Dodd-Frank and the Affordable Care Act, top-flight legal talent is needed more than ever to guide well-heeled clients through the growing regulatory maze.
Ironically, Mr. Harper misses the most significant recent dislocation in the practice of law, which is at the consumer end of the market: the rise of low-cost online law firms like LegalZoom and RocketLawyer that aid clients in drafting standard partnerships, wills, leases and the like. These firms pose a mortal threat to sole practitioners, not to Big Law.
So what does the new legal environment mean for legal education? Mr. Harper thinks that law schools fail because their faculties won't sully their hands with people with "actual experience" but seek out people "who are good at big ideas." Exhibit A for this pointed barb is, well, me. Mr. Harper observes that for 45 years my "full-time work experience has been almost entirely academic"—seemingly unaware that I, like many of my academic colleagues, don't list on my résumé the many firms with whom I have worked throughout my career.
Nonetheless, Mr. Harper charges that academics like me, who are obsessed with high theory, cause "institutional inertia" in law schools and prevent the sort of evolution necessary to gear students up for the 21st-century legal market. The author's recipe for change includes large doses of hands-on instruction on business relations and practice skills. But law schools can't just be "practical training" centers, as Mr. Harper would have them; they must make sure that their students grasp the fundamentals of legal theory and doctrine. Future lawyers must also be capable of connecting law with collateral disciplines ranging from corporate finance to game theory to cognitive psychology.
That is what I teach, and that is also what firms want when they hire me to work on complex legal problems. The best lawyers I know don't want law schools to turn out graduates with less knowledge and more gimmicks; they want better-educated lawyers who can hit the ground running. If 50 years ago students could make good use of three years of a law-school education, they certainly can do so in today's vastly more complicated world.
Mr. Harper's blunderbuss condemnation of most large firms and most law schools is off-target. By and large, they have proved resilient in a competitive legal climate.
Mr. Epstein is a professor of law at New York University, a senior fellow at the Hoover Institution and a senior lecturer at the University of Chicago Law School. His "The Classical Liberal Constitution" will be published in the fall.