NYU has created a bit of stir in legal education by announcing that it will start mandating a financial literacy course for all of its students. I think this is a fantastic move from a pedagogical angle, a career angle, and a public interest angle. Some thoughts on this below, as I think it relates in part to Credit Slips' larger discussion of finance and society.
Pedagogically, having a required financial literacy course has huge efficiency benefits. Every 2L/3L business or tax law class spends some time covering basic topics (what’s a secured loan, what’s stock, how to calculate present value, what's a basis point, etc.). There’s a huge amount of unnecessary repetition. It’d be better to put it all into one basic concepts class so we could actually teach students more in the other courses.
Careerwise, fluency in basic financial concepts will make first year associates more useful for practices (transactional, regulatory, and litigation) that touch on anything financial. How much, I can't say, but in a tough legal employment market, I think it gives students with the background a leg up, both in terms of the value the bring to the firm (ability to communicate with clients, time saved not having to explain basic stuff, etc.) and in terms of their ability to have sophisticated conversations with job interviewers. As between two otherwise matched job candidates, I'd think the one with the financial literacy training has a leg up. Obviously this might make such a course a better fit for schools with a large percentage of graduates going to firm or regulatory work, but it's worth underscoring that financial issues aren't just about doing corporate deals. They arise in consumer law, family law, collection of judgments, etc.
From a public interest angle, I think mandating financial literacy is absolutely critical. The students we train in law schools today are the next generation of policymakers. We would never dream of graduating students who couldn't discuss procedural rights or civil rights in sophisticated terms. Yet we routinely graduate students who can't have an equally sophisticated discussion about economic and financial rights.
For faculties (like the Georgetown one) that believe they have a social justice mission (however defined), training students to be able to engage in economic justice conversations is critical. Any sort of economic justice agenda has to start with financial literacy. Our failure to do so has had real consequences. My public law colleagues at Georgetown are terribly upset by the foreclosures and resultant destruction of wealth in communities of color, such as Price George's County, Maryland for example, but it's really not possible to understand the situation, much less do anything about it, without having a basic understanding of how mortgage finance works. We're not going to ever train students in the weedy details of securitization, but I would hope that the basic transaction structure would be something a financial literacy course might teach given its importance to financing an enormous share of consumer receivables. At the very least, ensuring that students understand the basics of a mortgage or secured loan would seems reasonable.
There is also another part to the public interest angle--financial literacy matters prophylactically in terms of shaping regulation. The field of financial regulation has long been ceded to those who work for financial institutions. 2008 was the result. There have been a handful of lonely academic voices in the wilderness, to be sure. But if we want to avoid another 2008, we need more people to follow financial regulation than just those working for banks. I want to emphasize that this isn't a right vs. left issue. This is a public interest issue. Given the special status of ABA-accredited law schools for bar admission in many states, I think there's a duty to ensure our graduates are able to be part of the economic regulatory debates, not just those on social or procedural rights.
There are all kinds of practical questions about how and where to put a financial literacy class into the curriculum (a problem my business law colleagues at Georgetown and I haven't solved) and what should be taught in the class, but conceptually I think it is long, long overdue.
I have no problem with mandating such a class. We mandate all kinds of other things in the 1L curriculum, and we also decide what to teach in the elective courses. I had no interest in contracts before law school, was annoyed I had to take it, and now I teach it. So, I'm sold on mandatory educational brocoli. (One could have a test-out option, but that's a detail.) In any case, I doubt students will select schools based on whether they are required to take a single class.
A final aside: I hate the term "financial literacy"--it smacks of the kind of consumer education classes that the financial services industry has pushed as a way of avoiding substantive regulation, and which Lauren Willis's work has shown is of questionable value. I'd rather just think of this as "Finance for Lawyers" or "Financial Concepts". A finance course for lawyers is a different thing altogether than teaching consumers not to overspend. But that's an aside. It's a great idea. Good for NYU for doing it.