“Students are doing the math,” said Michelle J. Anderson, dean of the City University of New York School of Law. “Most law schools are too expensive, the debt coming out is too high and the prospect of attaining a six-figure-income job is limited.”

[…]

“We have been sharply increasing tuition during a low-inflation period,” [Brian Tamanaha] said of law schools collectively, noting that a year at a New York City law school can run to more than $80,000 including lodging and food. “And we have been maximizing our revenue. There is no other way to describe it. We will continue to need lawyers, but we need to bring the price down.”

So far, pretty well known reporting—and kudos to Ethan Bronner, the Timesian who got the byline.

But the most fascinating aspect of this story to me is how we see the dynamics of supply and demand working out in real time.  Take another look at that chart (above): It shows applications plunging almost 50% in less than a decade, with about 80% of that total drop (eyeballing the graph, from about 90,000 in 2010 to barely 50,000 this year) taking place in three years. I must confess I would not have predicted two or three years ago that people would vote with their feet so decisively and massively, but give them credit: They have.

Even more interesting (you may call it ominous should you prefer) is that the drop in applications has been disproportionately high among students earning the best scores on the LSAT. In other times and places this phenomenon has been called a “brain drain”-out of law schools, that is, and into unknown other precincts. If to engineering schools, some might say “About time,” and who could argue? Regardless of where the former law school applicants with high LSATs are going, it probably makes sense that they are going-somewhere. After all, they’re the ones with the most options. And yes, life is unfair.

What lesson do I take away?

I actually think this behavior should be read as a cautionary tale for any set of institutions that finds its customers turning away because the value of the offering has seriously deteriorated—and which cannot change quickly in response. At the end of the Times piece, Prof. Bill Henderson of Indiana (disclosure: a friend) points out the obvious reality:  “There are going to be massive layoffs in law schools this fall. We won’t have the bodies we need to meet the payroll.”

Bill may have, uncharacteristically, been holding his tongue. Layoffs will be followed by law schools closing outright, I believe.  You would think, as a rational economic actor, that schools facing potentially mortal peril would reform to save themselves. You would think. But who honestly believes many schools will?

This is the perversity of complacency in action.  It’s almost as if schools preferred failure to change.

As I said, a cautionary tale.

Finally, we cannot leave this article without noting one of the oddest invocations of “supply and demand” I’ve run across in many months, here:

“We have a significant mismatch between demand and supply,” said Gillian K. Hadfield, professor of law and economics at the University of Southern California. “It’s not a problem of producing too many lawyers. Actually, we have an exploding demand for both ordinary folk lawyers and big corporate ones.”

She said that, given the structure of the legal profession, it was hard to make a living dealing with matters like mortgage and divorce, and that big corporations were dissatisfied with what they see as the overly academic training at elite law schools.

I wouldn’t single out Prof. Hadfield for scrutiny were it not for how common the error she makes is. She glides right over the fact that there are actually three distinct markets involved (each, needless to say but permit us to stipulate for the record) with its own supply/demand dynamic.  She conflates it all into one, palpably imaginary and nonexistent, market.  Let me explain, first by citing Paul Campos’ analysis and then by adding a few thoughts of my own.  Campos: