The Problem with Opportunity Costs
Glyph asked me to consider doing a post on opportunity costs and college/grad school education a few weeks ago. He probably asked me this because of my constant insistence that a university education and graduate school education is a net benefit and social good. Also because of my semi-regular complaining about what happened to the legal market when I attended law school and how constant freelancing gets me down.
Here it is.
Wikipedia gives a good rundown on Opportunity costs. They are basically the alternatives not taken and what benefit you could have received from had you taken them. For example, time spent in school (university, grad school, vocational/trade school) could have been spent on the job market, getting paid and learning skills instead of (probably) incurring loans to go to school while riding out a potentially bad job market.
Opportunity costs are real but problematic. The big problem with them is that they invite all sorts of unknowns and hypothetical thinking. There seems to be an assumption on the part of the person who brings up opportunity costs that the alternatives are always better or going to lead to good places than the path taken.
Above the Law’s Elie Mystal wrote an essay on the costs of dropping out of a big law job to take up blogging in 2005. He guestimates that his pre-tax and non-bonus earnings would have been close to 2.3 million dollars. This is a lot of money. He also states that Big Law made him psychologically miserable and continuing would have been a dilemma because he would have moved up his lifestyle expenses and not been willing to break away from them.
Mr. Mystal spoke about this essay on Slate Money. He was asked whether he would choose to go to law school again and said, basically, “Fish no.” Mystal theorized that had he foregone law school he would have been further along in his journalism career, potentially writing and editing for more prestigious publications than Above the Law.
I am not so sure that this is true. Elie Mystal is very smart and hard-working. He was able to get into Harvard Law School and get a job at a prestigious law firm. These are quality accomplishments. There is a good chance that a younger Mystal would have been able to get an internship or entry-level job as a journalist — but “chance” is the operative word here. Perhaps it was his experiences with law school and working at law firms as an associate that gave Mystal an in to becoming a legal blogger. Mystal also received his undergrad degree from Harvard, so his possibilities were probably endless.
Most people do not receive their undergraduate and law degrees from Harvard. The strangeness of the American Higher Education system has graduates from top-tier universities considered as also-rans in our top industries. Plenty of people get well-payed jobs and/or rewarding careers without going to Harvard but going to Harvard always helps. I think reason we focus on Big Law and Wall Street jobs so much is because those jobs offer the best chance at paying off student loans relatively quickly. Otherwise they seem to be a life-long affair.
There is a good chance that bad economies would have played a part in my outcome regardless of my choices after graduation. I started college in the fall of 1998 during the boom days of Tech 1.0 and the Clinton economy. I went to college because that is just what one did in my hometown. And then 9-11 happened during my senior year, and Tech 1.0 went bust soon after that. I think that most people who graduated when I did were left without the kind of firm plans they might have had in a different economy.
I decided to teach English in Japan for a year because I wanted to live abroad and teaching English in Japan was one of the easiest ways to do so. I had a blast, but I gained few if any skills because of the low bar that private teaching companies have for both training and lessons. There is a chance that I could have gotten real skills during my Japanese year doing something else — or, possibly, I could have just been another liberal arts kid grad working in a cafe or store.
After coming back from Japan, I tried getting into theatre. I landed some internships, but I wanted to direct; the general assumption was that to get that kind of gig one needs to go to graduate school. So I applied and went to graduate school. During my first year there, however, I became suspicious about the chances of ever making it as a professional theatre director. Looking at other career options, I considered dropping out to attend law school. I even went so far as to apply. Ultimately, though, myy parents encouraged me to stick out graduate school, saying if I left I would always have regrets about what “could have been.” (They will never say so, but I wonder if my parents feared that my regrets would have caused me to flunk out of law school.)
I worked during my second and third years of graduate school in non-theatre jobs. My first job was a part-time job as a publicity assistant for a small company. I was pretty horrible at it. My second was an being an independent elections supervisor for the Board of Directors at highly passionate but highly troubled non-profit. This involved a crash course in conflict management because the elections I was supervising involved two camps that had hated each other since the early 1970s. Still cynical about my chances of making it as a theatre director, I applied applied once again to law school. I got into a better law school during my second application.
This time when I entered school the economy in general (and the legal market in particular) were imploding. The legal market has never really recovered from the general chaos of 2009 that Mystal writes about in his essay, though I have been doing okay. There have been bouts of unemployment. There has been a lot of stress. There is still a lot of worry and fear that my legal career is going to be permanent freelance work. Of course, there is also the chance that everything will work in a few years and this will all become “when I was your age” story fodder, and that I will eventually feel silly looking back at mu teenage-like angst.
So maybe going to law school worth it for me. I was not that employable from in my early twenties, except for some temp work here and there. Maybe there is an alternative version of my life where I made it as a theatre director or became an associate professor on a tenure track. There could be another version of my life where I am a struggling adjunct like most other people in my generation in academics. Maybe I am working in a bookstore and happy. Maybe I am working in a bookstore and miserable. Who knows?
Thinking about the opportunity costs is just too hypothetical.