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This article feels like someone with a vested interest in the status quo trying very hard to ignore something that makes economic sense.

by bediger 15y ago

rayiner 15y ago
Disclosure: I'm someone with a vested interest in the status quo. That out of the way, like much of the work from the Brookings Institute, this particular argument is based on a simplistic bit of back of the napkin economics. It sounds good to someone whose taken Econ 101 and little else: "ABA occupational licensing requirements have allowed lawyers to create a club with a limited membership that is able to raise prices to consumers, which is how top lawyers can get away with charging upwards of $1000 per hour for their time." But the reality of the situation is that there is almost no barrier to entry for lawyers as it is. The bar passage rate for graduates of ABA law schools in NYC is almost 90%. There is indeed a huge glut of lawyers---between 1/3 and 1/2 of graduates of ABA schools do not get jobs as lawyers. So what about those $1,000/hour lawyers? Why isn't the vast oversupply of lawyers bringing down prices? For exactly the reasons the article mentions: because when you're doing a $1 billion deal or you have bet-the-company litigation you don't want just any lawyer. You want your lawyers to be smarter than the other guy's lawyers. There is a huge rush to lawyers with the top credentials. There are already small firms paying their lawyers $40k/year and offering low rates that would be happy to take peoples' business. Even these firms have more applicants looking for a job than they can handle. Yet the business isn't forthcoming. If you want to see than $1,000/hour go down figure out a way to get Harvard and Columbia to graduate more JD's each year, or figure out a way to get people to buy cut-rate services from budget law firms. Also, even ignoring the economic fantasy in the Brookings argument, there is a practical issue. Subversion of the law is potentially extremely profitable but in highly market-distorting ways. Big firm lawyers will help clients push the boundaries of the law, but the potential for disbarment (basically the death penalty to a lawyer's career) is a strong incentive to force them to toe the line. Removing this check might not lead to the libertarian utopia the Brookings Institute imagines.
- westicle 15y ago
  This point can't be repeated enough in my opinion... far from being a cartel-industry, there is already fierce competition in the law. Small- to mid-tier law firms can generally handle all but the largest, most labour-intensive matters at a fraction of the cost of the top-tier firms. The top-tier firms get the work not because they're the only option, but because people want the best. If the quality or service drops, there are plenty of lower cost alternatives without needing to flood the market. In my opinion, deregulation of law is analogous to deregulation of medicine in that they are skilled professions which take many years of study to become competent in. The main difference is that you don't hear armchair economists advocating to let every man and his dog hang a "Discount Brain Surgery" sign on their fence.

This article feels like someone with a vested interest in the status quo trying very hard to ignore something that makes economic sense.

by bediger 15y ago

This article feels like someone with a vested interest in the status quo trying very hard to ignore something that makes economic sense.

rayiner 15y ago

Disclosure: I'm someone with a vested interest in the status quo. That out of the way, like much of the work from the Brookings Institute, this particular argument is based on a simplistic bit of back of the napkin economics. It sounds good to someone whose taken Econ 101 and little else: "ABA occupational licensing requirements have allowed lawyers to create a club with a limited membership that is able to raise prices to consumers, which is how top lawyers can get away with charging upwards of $1000 per hour for their time." But the reality of the situation is that there is almost no barrier to entry for lawyers as it is. The bar passage rate for graduates of ABA law schools in NYC is almost 90%. There is indeed a huge glut of lawyers---between 1/3 and 1/2 of graduates of ABA schools do not get jobs as lawyers. So what about those $1,000/hour lawyers? Why isn't the vast oversupply of lawyers bringing down prices? For exactly the reasons the article mentions: because when you're doing a $1 billion deal or you have bet-the-company litigation you don't want just any lawyer. You want your lawyers to be smarter than the other guy's lawyers. There is a huge rush to lawyers with the top credentials. There are already small firms paying their lawyers $40k/year and offering low rates that would be happy to take peoples' business. Even these firms have more applicants looking for a job than they can handle. Yet the business isn't forthcoming. If you want to see than $1,000/hour go down figure out a way to get Harvard and Columbia to graduate more JD's each year, or figure out a way to get people to buy cut-rate services from budget law firms. Also, even ignoring the economic fantasy in the Brookings argument, there is a practical issue. Subversion of the law is potentially extremely profitable but in highly market-distorting ways. Big firm lawyers will help clients push the boundaries of the law, but the potential for disbarment (basically the death penalty to a lawyer's career) is a strong incentive to force them to toe the line. Removing this check might not lead to the libertarian utopia the Brookings Institute imagines.

westicle 15y ago
This point can't be repeated enough in my opinion... far from being a cartel-industry, there is already fierce competition in the law. Small- to mid-tier law firms can generally handle all but the largest, most labour-intensive matters at a fraction of the cost of the top-tier firms. The top-tier firms get the work not because they're the only option, but because people want the best. If the quality or service drops, there are plenty of lower cost alternatives without needing to flood the market. In my opinion, deregulation of law is analogous to deregulation of medicine in that they are skilled professions which take many years of study to become competent in. The main difference is that you don't hear armchair economists advocating to let every man and his dog hang a "Discount Brain Surgery" sign on their fence.