Looking at a paper by law school professor Herwig Schlunk reminded me that attending law school is similar to inventing a new machine. Both require an initial investment, both take several years to complete, and both will generate a private and social return. Also, they both result in capital creation.
Dr. Schlunk’s paper focused on three hypothetical law students: Also Ran, Solid Performer, and Hot Prospect. Looking at ROI (return on investment) with opportunity cost, borrowing costs, and future income as important considerations for each prototype, the professor concluded that law school for most might not be a wise investment.
Wearing economic lenses, Dr. Schlunk sees evidence of costs all students applying to all schools might consider.
The Economic Life
Rather like a recipe, land, labor and capital are the ingredients we use to make all of our goods and services. While all three are important, capital plays a special role. In his recent book, The Wealth and Poverty of Nations, Harvard professor David Landes explained why certain nations have experienced an increasingly better standard of living while others have stagnated. Looking at the variables he cites, physical capital which includes tools and machines, and human capital which involves education, entrepreneurship, and health, are most crucial for economic growth. Physical and human capital provide the highest ROIs.