A version of this article appeared February 21, 2013, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: Perverse Incentives of the Lawyers Guild.

While law school enrollment drops, ABA rules bust the budgets.

Law schools are in trouble. Applications are down almost 50% to an estimated 54,000 this year from 100,000 in 2004. Little wonder. According to the National Association for Law Placement, barely 65% of 2011 graduates had landed law-related employment within nine months of graduation, the lowest rate since NALP began reporting in 1985. Even the 65% number is suspect, given the powerful, rankings-driven incentives schools have to cook the figures. Meanwhile, many of the unemployed graduates have law-school debt exceeding $100,000.

It is a true crisis, and law schools are scrambling to figure out how to manage with fewer tuition-paying students. Law-school budgets have soared for several decades as faculties multiplied, salaries rose and facilities became ever grander. With annual tuition approaching or even exceeding $40,000 at most schools, even a dozen fewer students a year blows a $500,000 hole in the budget.

Riding to the rescue is the American Bar Association's Task Force on the Future of Legal Education. The task force's assignment is to study and make recommendations addressing the economics, delivery and regulation of legal education.

The ABA should start by looking within: The organization is a major source of the problem. Those large law-school faculties with some of the highest salaries in the academy, the palatial facilities, a persistent emphasis on theory instead of practical-skills training, and a limited reliance on online instruction have all been encouraged, if not mandated, by ABA regulations and the accreditation process.

As often happens with regulatory systems, whether governmental or professional, the ABA accreditation process was long ago captured by legal education's most influential stakeholders. ABA accreditation site-visit teams routinely include a dean, tenured classroom faculty, clinical faculty (historically untenured but now increasingly tenured, thanks to ABA requirements), a librarian, a university administrator and one judge or member of the practicing bar—but no students or consumers of legal services.

Given the powerful influence of faculty (the dean and librarian also are faculty), no wonder the ABA rules require that "the major portion" (at least 80%) of the teaching be done by full-time faculty and that all full-time faculty be eligible for tenure or some equivalent "security of position." But having full-time faculty doing the teaching doesn't mean they are doing it full time. Although students are paying the bills, teaching them is only one of five ABA-mandated faculty functions, including law school and university governance, public service, and, above all else, research and scholarship.

For law schools with ambitions for new and better facilities, the ABA rules provide leverage over parsimonious university administrators by mandating "adequate" resources and physical facilities. The threat of lost accreditation always looms large.

The rules demand a prominent role for faculty in the governance of every aspect of the law school, from budget to admissions and faculty hiring. Faculty numbers have skyrocketed, course offerings have exploded to include specialties unknown to practicing lawyers—which is what can happen if mandates mean you have more teachers than you need and no check on their fancies—and teaching loads have steadily declined.

Faculty also benefit from ABA mandates relating to the curriculum and method of instruction. A total of 58,000 minutes (yes, in minutes) of instruction are required for graduation, of which 45,000 must be in regularly scheduled classes. Online learning is thus discouraged.

The ABA's influence over the accreditation process has come at a significant cost to legal educators. In return for the gift of better facilities, greater job security and a job description of their own design, they have had to accept an inevitable proliferation of rules limiting their ability to experiment, innovate and respond to the changing realities of 21st century law practice.

There is a way out. Instead of the one-size-fits-all approach the ABA has taken for decades, what is needed is some creative competition for the declining pool of prospective students.

The ABA should free law schools from most of the existing standards and encourage them to draw on the enormous intellectual power of their faculties to design and test innovative approaches—and let a thousand flowers bloom. The ABA's role should be limited to assuring that prospective students and legal employers get full and honest information about what could become a bonanza of legal education alternatives.

Mr. Huffman is dean emeritus at Lewis & Clark Law School and a member of the Hoover Institution's Task Force on Property Rights, Freedom and Prosperity.