Yale has a different decision set than other law schools.

Yale Law School’s $1.2 billion share of the Yale University endowment provides approximately $63 million in operating funds, which translates into $106,000 per student, though this amount appears to be headed up due to the 40.2% increase in Yale’s endowment in 2021. See “Yale endowment earns 40.2% investment return in fiscal 2021,” Yale News, Oct 14, 2021; Evan Gorelick, “Yale’s endowment, explained,” Yale Daily News, Oct 22, 2022 (discussing Yale endowment’s 5.25% target payout and policy of smoothing returns over multiple years).

To be clear, these are the funds available before Yale Law collects its first dollar of tuition.  Nonetheless, as the top-ranked law school in the US News rankings for more than 30 years, Yale has a superabundance of highly credentialed students who would be willing to pay or borrow the current cost of attendance. For the 2021-22 admission cycle, Yale admitted only 5.6% of applicants; of those admitted, 81% enrolled, making Yale the most selective and elite law school in the nation. See YLS, “Statistical Profile of the Class of 2025.”

Among elite law schools, Yale clearly has the strongest balance sheet.  Its closest competitors are Stanford Law ($76,000 in endowment funding per student) and Harvard ($56,000), which typically rank #2 or #3 in any given year. Among the rest of the T-14, endowment funding generates approximately $20,000 per student, with a high of $33,000 and a low of $4,000, albeit these figures, similar to Yale, may go up due to improved endowment performances, as pandemic-related fiscal and monetary policies tended to make the rich richer. (See Methodological Note below for how these figures are calculated.)

The big news, of course, is that Yale recently announced its withdrawal from the US News rankings, at least as an active participant. See Ines Chomnalez, “Yale Law School withdraws from ‘perverse’ U.S. News rankings,” Yale Daily News, Nov 16, 2022.  This decision, and its likely second-order effects for other law schools, are nearly impossible to accurately grasp without also understanding (1) the technical intricacies of how the US News rankings work, as this creates the underlying incentive structure; and (2) the significant risk that Yale was running by continuing to play the US News game, making it a poor data point for generalizing to other law schools.

This special off-publication post covers both topics.

1. The intricacies of how the US News rankings work

The US News ranking methodology had evolved over the years, but not enough to significantly shake up the relative position of most law schools.  In the year 2022, a law school’s rank is determined by the following five steps:

  1. 14 numerical inputs are put into “standardized” arrays
  2. Each resulting value is multiplied by a specific USN weight
  3. These weighted values are added together, resulting in a range expressed in standard deviation units (roughly -2.25 to +2.25)
  4. The standardized array is rescaled from 0 to 100, with the top school (Yale) receiving a score of 100 and the bottom school receiving a score of 0
  5. Scores are rounded to the nearest whole number, which causes ties.

Regarding step 1, attributes like LSAT scores, average debt load, bar passage, employment data, etc can only be combined into a single score by “standardizing” each numerical array.  The graphic below illustrates the effect of standardization—the distribution remains the same but the underlying units are expressed in standard deviation units.

Source: mathisfun.com

As a result of standardization, things like LSAT scores, jobs, and bar passage can be combined to form a single index or score.

Step 2 is to “weight” each input according to US News methodology. Below are the 14 weights for the 2023 rankings.

Source: Robert Morse, et al, “Methodology: 2023 Best Law Schools Rankings,” US News, Mar 28, 2022.

One of the consequences of using standardized values is the potential for large interaction effects between the published weight and the range of the underlying distribution. Specifically, very large outlier values have the effect of increasing a weight’s relative influence on the overall USN score.

To make this as concrete as possible, most USN inputs have absolute top and bottom limits.  For example, 180 is the highest possible score on the LSAT. Likewise, Employed at 10 months and Bar Passage are capped at 100%. In addition, the 1-5 scale puts a hard stop on Academic and Lawyer-Judge Reputations.  However, at least in theory, there’s no limit to how much a law school can spend on “Instruction, Library, and Supporting Services.”  How much money do you have?

For a very long time, and by a wide margin, Yale has had more money than any other law school, due in part to a large number of benefactors who gave a lot of money a long time ago, and in part to an investment office run by the legendary David Swenson,  who created what has come to be known as the “Yale Model.” See Geraldine Fabrikant, “The Money Management Gospel of Yale’s Endowment Guru,NY Times, Nov 5, 2016.  Over the course of Swenson’s 36-year career, which ended in 2021 due to his premature death, Yale’s endowment increased from $1.3 billion (1985) to $42.3 billion (2021).  See “David Swensen’s coda,” Yale News, Oct 22, 2021.

Whereas Yale, Harvard, Stanford, Chicago, Columbia, and other T-14 schools cluster together on large and important inputs like LSAT (a range of 1.43 to 1.60 in std deviation units), Academic Reputation (1.98 to 2.57), and Employed at 10 Months (0.83 to 1.57), the same is not true for Instruction, Library, and Supporting Services, which ranges from 1.5 to 4.3. When multiplied by the 9.0% USN weight, this gives Yale a (nearly) insurmountable edge for the overall #1 spot, as the next closest school is nearly a full standard deviation away.

Yet, it’s important to pull back and understand the role that the rankings play in the market for entry-level legal talent.  Many years ago, Russell Korobkin, now interim Dean of UCLA Law, posited that the US News rankings are primarily a coordinating mechanism for highly credentialed students to signal their ability to elite employers, akin to selecting the Eiffel Tower as an obvious and efficient meeting place for two strangers to connect in Paris. See Russell Korobkin, “Harnessing the Positive Power of Rankings: A Response to Posner and Sunstein,” 81 Ind L J 35, 42-43 (2006).  Korobkin’s theory is strongly corroborated by what we see year after year in the entry-level hiring market. See, e.g., Post 114 (Evan Parker noting that “53% of first-year associates in the NLJ 100 come from the T-14,” which he observes is much too restrictive to make significant progress on diversity).

This coordinating function between highly credentialed students and BigLaw creates a massive lock-in effect for elite law schools. Specifically, a near guarantee of a large firm job upon graduation gives T-14 school enormous pricing power, which is only partially exhausted by charging higher effective tuition (i.e., tuition dollars net of overall financial aid) while also maximizing LSAT and UGPA inputs.  We see this greater pricing power in the high average debt loads for T-14 graduates, which range from $132,000 to $184,000 versus an average of $107,000 for the rest of the law school hierarchy.

Yet, here’s the conundrum: a law school trying to increase or preserve its overall rank has a very powerful incentive to take in more tuition dollars and spend it on academic programming (i.e., Instruction, Library, and Support Services). This is because the current year’s rank is always “reflexing” forward to influence marketplace perceptions and thus impacting the following year’s Reputation, Student Selectivity, and Placement metrics. See Wendy Nelson Espeland & Michael Sauder, “Rankings and Reactivity: How Public Measures Recreate Social Worlds,” 113 Am J Sociology 1 (July 2007).

Although US News has recently added measures to reward schools with lower student debt, these metrics (5% total) are unlikely to make up for a corresponding hit to total per-student spending (9%), particularly when wealthy peers benefit from large outlier values. All law school deans and admissions officers know that applicant volumes and yields are highly sensitive to a school’s rank. Thus, most law schools worry about setting off a negative feedback loop.

In sum, unilateral disarmament is a dangerous strategy for any law school concerned about maintaining calm and good relations with stakeholders, as students, alumni, and central university administrations all care about a school’s rank.  This is why we’re locked into a terrible system that increases racial, socio-economic, and generational inequity.  See Post 182 (reporting dismal statistics, particularly for first-generation law school graduates, who are disproportionately Black and Hispanic).

2. Yale Law’s unique decision set

In the 2023 US News rankings, the average per-student cost for Instruction, Library, and Support Services at a ranked ABA-Accredited law school was $45,400.  Yale’s expenditures, in contrast, were more than $150,000 per student.  As noted at the beginning of this post, Yale’s endowment provides approximately $106,000 in operating funds.

In short, unlike other law schools, Yale Law is in a position where it can operate comfortably with significantly less tuition, including essentially zero for a significant percentage of its student body.  The only hitch is that going all-in on this approach would likely cost Yale Law its #1 rank in US News. Faced with this decision set, Yale concluded that the best path forward was to pull out of the US News rankings altogether.

This path has several advantages.  Foremost, it’s unlikely to hurt the Yale Law brand, as three decades on top of US News give the school a multi-year pass to do whatever it wants with essentially zero negative impact on student and employer perceptions. Second, once unshackled from the need to enroll students with better credentials than Harvard and Stanford, Yale has enormous latitude to engage in holistic admissions for a much broader range of candidates.

Regarding this point, it’s worth noting some of the chronic subliminal costs associated with living in a rankings-constrained environment. In his recent book, The Meritocracy Trap (2019), Yale Law Professor Daniel Markovits comments on a recent systematic study of family background undertaken by Yale Law students:

[The study] confirms a massive skew toward wealth: more Yale law students grew up in the top 1% of the income distribution than in the entire bottom half (roughly 12% to roughly 9%); the median Yale law student grew up in a family whose household income is roughly $150,000 annually (the top fifth of the overall income distribution); and less than 3% of Yale law, students grew up in or near poverty.

Id at 98. Most law faculty don’t enjoy the cognitive dissonance of believing in and advocating for progressive policies while simultaneously being dependent upon a system of privilege to maintain our own relative position. Although it’s a massive collective action problem, the moral dimensions remain.

To its credit, Yale appears to have been going down this road for several years, as all of the following policies suggest a movement toward unilateral disarmament:

  • Forgoing merit-based financial aid, see YLS, “How Need-Based Aid Work,” which is the primary tool used by law schools to increase their LSAT and UPGA inputs for US News.
  • Eliminating tuition for all students from low-income households. See Christine Charnosky, “Yale Law School Extends Full-Tuition, Need-Based Scholarships to 53 Students,” Law.com, Aug 12, 2022.
  • Significantly increasing the percentage of students of color from an average of 31% ten years ago to 54% for last year’s entering class. See id.
  • Financing public interest fellowships programs for its recent grads so they don’t have to head off to BigLaw right after graduation. Wee YLS, “Public Interest Fellowships.” This policy negatively impacts USN Placement metrics.

In the mid-2000s, when I assembled my first US News ranking model, Yale’s direct expenses translated to a 5.9 standardized score, which was nearly two units higher than its next closest peer.  Today, that financial advantage has become much more compressed, probably due to more aggressive law school fundraising (law school deans know that YLS’s advantage is money) and schools expanding the scope of what counts as an instructional expense. Thus, by staying in the USN game, Dean Gerken had to accept legitimate growing criticism for perpetuating a terrible system while also running the risk of being the infamous dean on the day Yale tumbled to #2.

Faculty are bound to applaud any small steps to deconstruct a bad system, particularly when it can be done costlessly through shrewd timing and strategy. See Ines Chomnalez, “Yale Law School withdraws from ‘perverse’ U.S. News rankings,” Yale Daily News, Nov 16, 2022 (reporting that ‘faculty members were ‘overwhelmingly supportive’ of [Dean] Gerken’s announcement”).  Yale went out on top with money in the bank. It’s not quite so easy for the rest of us.

How does this end?

I don’t know except to say that Yale has more non-tuition revenue than its two biggest competitors, Harvard and Stanford, and somewhere between a lot more and vastly more resources than everyone else.  And that confers independence.

It’s plausible that the T-14 could form a new league, or bracket, of elite law schools. Yet, these schools are very far from being equally rich.  What Yale can do through its endowment resources, other elite schools can only afford by charging tuition. Further, both students and employers are going to want, and search for, an “Eiffel Tower” to coordinate their movements and order their preferences—vanity and status-seeking are endemic to the human condition. A school that last ranked at #8 or #12 is not going to be satisfied with a status that is frozen in time. Only a school that last ranked #1 is going to be fully content with the new order, thus making any T-14 bracket inherently unstable. But much more problematic is the fact that any explicit coordination to wall off the market and create sharing rules is going to raise federal antitrust issues, something that antitrust scholars are already mulling over. See Daniel A. Crane, “Antitrust Concerns on Firing U.S. News & World Report,” Yale Journal on Regulation, Nov 16, 2022.

Regardless of how many law schools drop out, we should expect US News to carry on as before, imputing values to the schools as they have done for years with employment rates and other closely guarded metrics. Yet, what happens three or four years from now for prospective students considering law school—are they going to care about who used to be ranked highly in US News and, if they get that far, the principled reasons for why these schools dropped out?  Conversely, if Yale is offering an elite, differentiated, and discounted model that flows from its superior financial resources, that just might cut through the noise, enabling them to chart a different path—for themselves, not the rest of us.

I don’t like writing this next sentence, but I believe it is true: law faculty probably underestimate the financial stability and predictability that flows from a labor market organized around the US News rankings.  Because we don’t have to personally balance our law school’s budget, we focus disproportionately on the costs of the US News rankings without acknowledging how our school benefits. It is wishful thinking that a flawed US News methodology is the root cause of our problems. Yale and a handful of peers may be able to opt out, but the challenges remain for the rest of us.

Government intervention (laws, regulations) is the conventional solution to a collective action problem. Perhaps limits on the disbursement of federal student loans are the best way to end the rankings madness.  This type of belt-tightening may be inevitable and, in the long run, the best outcome, as the benefits would fall onto the next generation. With the other wicked problems they’re inheriting, they deserve a break.

Methodological Note

The underlying endowment data discussed at the beginning of this post comes from a recent post by Brian Leiter. See “Per student value of law school endowment,” Brian Leiter’s Law School Reports, May 9, 2022. To calculate total endowment, I multiplied Leiter’s per-student endowment figures by total enrollment figures published in the most recent ABA 509 Disclosures. I then multiplied this figure by the 5.25% payout target set by Yale Law, see Evan Gorelick, “Yale’s endowment, explained,” Yale Daily News, Oct 22, 2022, which appears to be similar to many other university policies.