Economists use the word “rent” to describe income made in excess of the minimum necessary to bring a factor of production into a particular use. You might first think of Kevin Durant and the lowest salary necessary to entice him to play basketball. If it next best option is to teach high school history, he collects millions of dollars of “rent.”
Monopolists acquire rents when the charge prices above the lowest necessary to bring a product to market. The existence of rents gives rise to rent seeking – effort and expenditures to acquire rents. Thus, one of the costs of monopoly is not the inefficiency that characterizes most monopolies but the expense of competing in various ways to attain the rents. Rent seeking itself produces no new wealth. It may make some people better off but only by making others worse off. Rent seeking is not a waste to those engaged in it but when taken as a whole is it an unproductive use of resources.
In the world of law schools, rent seeking at a massive level occurs as law schools scratch can claw to move up in the U.S.News and WR rankings. Think about it. In a simple version assume there are only 100 law schools and they will always be ranked from 1 to 100. If one law school moves up another must drop. Like monopoly profits that can only be “earned” by one firm; number 25 in the ranking is only there for one school at a time.
Law school rent seeking involves spending millions on what passes for legal scholarship and which has very little positive impact other than “publicizing” the school. Law schools also offer students with the highest LSAT scores and GPA generous scholarships whether there is financial need or not. This too can move a school up in the rankings. They maintain massive “messaging departments” to publicize the school. In fairness, wealth is created by educating people to become effective attorneys, but not by virtue of the millions spent on rent seeking designed to unseat a higher ranked school.
Is anything created by substituting one school for another as number 25 or 8 or 35? You might say yes, reasoning that the school on the move will find that its students find jobs and that the value of the degrees of alums appreciate. But unless there are actually more jobs, a job taken by a graduate of one school is a job taken away from the graduate of another school. And, if the value of a one graduate’s degree goes up it will be at the expense, at least in relative terms, of the graduates of other schools.
The obsession with ranking results is massive and ultimately wasteful rent seeking. It does not appear to have made legal service more available or to have increased the quality of those which are available. On a aggregate basis no clients are better off. Ultimately it is about a quest for status that has no net social benefits.