Of course the problem for all four of the jobs you mention (law prof., judge, teacher, analyst) is distortion of the market by the government (well, maybe also unions). Judges and teachers have their salaries set by government, which makes them extremely slow to respond to changes in the market. Taxpayers tend to get upset when pols vote themselves or other officials raises, especially when the economy is bad (which I think is what’s happening to judges now) or the officials are perceived to be bad at their jobs (teachers as a group have really bad PR). Market driven jobs don’t have to answer to the tax payer, and they can adjust salaries far more efficiently.

I know there are very good civic reasons why judges and teachers have fixed pay scales, but

they are economically inefficient. Whether judges or teachers should be paid more becomes more of a beauty contest then a question of economic merit.

Sometimes, though, even those civic reasons don’t make sense. I don’t see at all why math teachers aren’t paid more than English teachers (or corp. law profs. more than constitutional law profs). I wonder if there’s a similar market distortion for different types of judges?

I also wonder if part of it is the belief that prestige is a sort of prize — something given for away for free — rather than something sold — something traded away. The claims about being underpaid are usually for jobs that are very prestigious but typically involve a significant pay cut. If you think of getting the prestigious job as sort of like wining a prize, then it may seem somehow unfair that the prestigious job comes with the pay cut: it may seem that the person who “wins” the prestigious job still sort of deserves what they would have had if they had not “won.”

In my experience, these sorts of underpaid/overpaid arguments are based on the notion that you deserve to have your cake and eat it, too. If you are fortunate enough to be able to chose between career path A or career path B, and you pick lower-paying career path B because you like it better or it is more prestigious, you still deserve to get the best parts of career path A that you voluntarily gave up (or at least something close to it). You’re then underpaid if you don’t get what you deserve.

Your market approach presupposes that you don’t deserve anything, but rather get only what you select and give up what you don’t select. I just don’t think that’s the way those who make these arguments look at the issue.

This means that the only sure way to get a larger pay increase is to go on the lateral market. Once you’ve established that you have mobility, your pay should adjust to the market price for your resume. If you don’t, it generally won’t. That’s just deans behaving the way economists predict they will. (In economic terms: because the market for law professors is not completely efficient, most law professors are underpaid.)

Another odd feature of the law professor market is that deans feel constrained to pay professors in different disciplines equally, all else being equal. This is why corporate law types are very hard to come by; they have much higher paying alternatives available to them. Tax types typically come out of government, not the private sector, for the same reason. ACLU types, by contrast, are relatively easy to come by. (By this I mean no criticism of ACLU types; I mean merely that moving into academia involves a pay increase for some, a pay decrease for others.)

In that case, the idea seems to be a mismatch between social value and the incentives of the people who are doing the paying. For some reason, those doing the paying have a lot of money, and they’re willing to spend it to do something horrible to the rest of us, and transaction costs are such that the market can’t get some Coasean solution.

2. Actually, there are for-profit law schools. The schools in Charlotte, Florida and Phoenix are owned by InfiLaw, which is a profit-making company. And there are a number of non-law school examples of for-profit higher education (Univ. of Phoenix, DeVry, ITT). So there may be some grist for the mill. Also, my experience with non-profits (mainly hospitals and private schools) is that they tend to be as voracious competitors as for-profits. The only difference is that profit in a non-profit is reflected in the accounting as “fund balance.”