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Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

302 points by mirceagoia 15y ago

puppop 15y ago
Because there are no H-1B lawyers.
- mirceagoia 15y ago
  Do you think lawyers from other countries know US law? I don't think so. You will pretty much have to start over in US.
  - simonbrown 15y ago
    They would probably be prepared to learn it, if it paid. IANAL, but I'm guessing the main problem would be legal limitations.
    - jrs235 15y ago
      And the BAR, like any other "professional" "over-seeing" monopolistic organization isn't about to reduce it's own members value... just like the AMA, Teacher's Unions, ETC. When certification(s) is/are required [to practice], those that have the certifications have a vested interest in limiting the access to said certification(s). It's all a legal racket.
      - puppop 15y ago
        We need an American Programmer's Association.
  - ig1 15y ago
    You realize there are huge outsourcing industries (in the legal and accounting sector among others) where workers in India, China, etc. are trained to learn American standards, etc.
    - mirceagoia 15y ago
      Most of those are doing the grunt work. But when it comes to go in the court who is going to go?
      - ig1 15y ago
        Most legal work is grunt work, the time spent in court is only a fraction of what a lawyer does.
    - rprasad 15y ago
      As with coding sweatshops, the outsourced legal sweatshops really are an example of getting even less than you paid for.
  - retroafroman 15y ago
    Do accountants in other countries know US tax law? According to this source [0] at least some do. I don't see how general law would be much different. [0] http://www.nysscpa.org/cpajournal/2005/605/essentials/p54.htm http://www.nysscpa.org/cpajournal/2005/605/essentials/p54.ht...
    - rprasad 15y ago
      Here's how it works: I know the law of Australia, Hong Kong, China, and the U.S. However, I only advise clients about U.S. law. Why? Because I'm liable for malpractice if I get it wrong. Unless I'm willing to religiously follow the legal developments of X other nations, I would not be willing to take the risk of the law having changed since I last check it. And if I were the kind of person anal enough to follow legal developments in other countries, my skills would be in such demand that only megacorporations could afford my services.
  - geebee 15y ago
    I think they'd be able to learn. In fact, I'd say I'm sure they could learn. Keep in mind, there isn't much incentive to learn US law when it's illegal for you to practice in the US. If the US allowed foreign graduates to sit for the bar and provided a visa and path to a green card to anyone who managed to pass and hold down employment, I think many foreign law schools would appear. Many would fail, but many would pass, and some would be very talented. Honestly, I don't think it would be all that different from software development, though I suppose the bar requirement would probably establish a higher floor than you see in programming.
- antonej 15y ago
  Lawyers from other countries can and do come to practice in the US. It typically means getting an extra degree (LL.M.) and taking the state bar exam, but I've known a few people, particularly transactional lawyers from Canada, who seem to have made this transition. In general it would be easier coming from a common-law country like Canada, UK, Australia, etc.
  - geebee 15y ago
    A few states allow this, but I don't think most do... From http://www.americangraduateeducation.com/articles/en/post-masters-of-law.htm http://www.americangraduateeducation.com/articles/en/post-ma... "In order to sit for the bar examination, most states require an applicant to hold a Juris Doctor (J.D.) degree from an American Bar Association (ABA)-approved law school. For those individuals who have not earned a J.D. degree from an ABA-approved law school, bar admission authorities have developed varying requirements and criteria to ascertain if such individuals meet the minimum educational requirements for bar admission. In most U.S. jurisdictions, individuals who lack a J.D. are ineligible to take the bar exam..."
simonbrown 15y ago
Surely that's an opportunity for a new firm? The demand is obviously there (plenty of people don't see a lawyer for financial reasons), as is the supply (apparently).
- bane 15y ago
  There's a service that used to be called "Prepaid legal" with essentially a small retainer, and a minimum guarantee of services, with favorable rates when the service was used beyond that. It operated basically as a kind of legal insurance. http://en.wikipedia.org/wiki/LegalShield http://en.wikipedia.org/wiki/LegalShield
  - puppop 15y ago
    Yes, some company offer that. Cheap, but you lose the case with cheap lawyers. Penny wise, pound foolish.
    - isocpprar 15y ago
      Why do you think you automatically lose a case with cheap lawyers? If you are bringing a weak case against someone, then perhaps using high priced lawyers will be able to bully them into submission, but if the facts are with you, then a competent lawyer should be fine. If some are so bad that you will trivially lose, then perhaps the ABA/Bar has misrepresented their qualifications?
      - puppop 15y ago
        You get what you paid for.
jerrya 15y ago
This may not apply to the world of corporate lawyers the answer seems to be about, but at a smaller level, there are enormous switching costs involved in moving away from, and training a new lawyer. And it's not a free market. In a free market, the consumer can walk away from a purchase. Most times individuals or small businesses need a lawyer, they are in no position from walking away. They need a lawyer. And they need to stop spending time searching, and get on with resolving. So a lot of claims from lawyers that they operate in a free market are really not true. They mistake what are basically extortion/price gouging rates for free market pricing. And the search is expensive too, with few (?) lawyers willing to offer 30 min to an hour of their time to discuss your needs for free. This is another factor in increasing switching costs for the consumers. And of course, price is used as a signal for quality in a market in which quality is very hard to measure by most consumers. Sure I got a great deal on a lawyer, he only charges $150 per hour. Hmm, Your lawyer charges $400 per hour? Now, I'm not so confident.
- bane 15y ago
  "They need a lawyer. And they need to stop spending time searching, and get on with resolving. So a lot of claims from lawyers that they operate in a free market are really not true. They mistake what are basically extortion/price gouging rates for free market pricing." It's interesting because the same fundamental problem is true of health care in the U.S. It's essentially, "they need a doctor. And they need to stop spending time searching, and get on with not dying" The market dynamics and model are entirely different with these sorts of emergency industries. It's almost always "first available" and not "best cost". Even with shopping around (when the luxury is available) the decision is perceived quality first, cost second (or lower).
  - dantheman 15y ago
    There are both things that can be dealt with through a bit of planning. I.e. determine a pool of potential lawyers you will use and in the same regard determine a pool of potential hospitals/doctors you want to use. Then if you need one, you've done the leg work and know where to go.
bonesinger 15y ago
This article misses one point, law school is expensive! Students generally will want to pay their 6-figure debts with a matching salary. When you don't have to worry about a huge debt, it allows you to be riskier and try other avenues, such as public interest, or work in small lesser known industries
- tikhonj 15y ago
  The article did mention student loans. Also, I can't help thinking that the reason law school can be so expensive is that the students can then get overpaid jobs and pay it back.
  - mirceagoia 15y ago
    The law school is as expensive as the medical school, or almost. While at medical school you can understand the infrastructure you need to teach people, what infrastructure you need when learning law?
- viscanti 15y ago
  Desired salary is inelastic. Everyone would like to make as much as possible, regardless of debt level or career/education. If anything, a higher debt load should make someone risk averse, and more willing to take on more lower paying jobs, rather than waiting around hoping for a high paying job. In a situation where there's more supply than demand, those risk averse people should be pushing the overall price lower (there will still be niche situations where price isn't affected). Having a higher debt load might make you desire a higher salary, but it's real debt and needs to be paid off. Unless you're a member of a cartel who is fixing an artificially high price, competition should come into play and prices should drop.
nextparadigms 15y ago
Any way this market can be disrupted? Maybe through some more efficient/decentralized/AI-based services that would do much of the lawyer's jobs, forcing them to reduce their billing rates?
- mirceagoia 15y ago
  There are services like legalzoom.com ...but they didn't seem to make a scratch in this world. Or at least not big enough.
- scott_s 15y ago
  The author is doing just that. He talks about it at the end.
- antonej 15y ago
  Lots of people are trying (including me) in many different ways. No doubt technology can help in various ways, but I think the single most promising change is top-notch lawyers breaking away from megafirms to start their own smaller shops with a much leaner cost structure. That's what I did, but I didn't want to make the article all about tooting my own horn.
- wavephorm 15y ago
  Docracy was posted to HN recently: http://news.ycombinator.com/item?id=3666478 http://news.ycombinator.com/item?id=3666478 It's really limited or just starting out, no EULA's or anything that I can personally actually use.
  - ubervero 15y ago
    Yep, we're getting started, but we might get an EULA soon, stay tuned
- masebase 15y ago
  This space is really starting to heat up. There are already a good number of new legal startups, and I think it's only beginning.
- 15y ago
noonespecial 15y ago
Part of the reason might also be that the law has become so complex (as well as, in my opinion, intentionally obfuscated) that it demands a certain amount of resources to engage it at all. If you can't meet that level, its best not to engage it at all. You can't launch a satellite halfway into orbit to save a few bucks. You go all the way, or stay home.
wtvanhest 15y ago
The unobvious but major thing missed is that hiring the wrong lawyer is far more expensive than an additional $300 per hour. Since the only way to know if you are hiring the right lawyer is to base it on brand, top firms have a lot of pricing power and middle firms dissapear.
- roc 15y ago
  > "top firms have a lot of pricing power and middle firms dissapear" This is generally true. However, there's increasing pressure from clients, not to simply push billing rates lower, but for flat-fee arrangements. While in many areas of law the billable hour is secure [1], in many others there not only isn't a strong argument in favor of it, but clients are increasingly pushing back against it [2]. And I'm not surprised to see a successful lawyer completely ignoring it, even in a post that serves largely as a setup for his pitch about coming disruption. IME every lawyer who hasn't seen his primary clients insist on flat-fee billing would prefer to pretend the issue didn't exist. And those that are dealing with flat-fees, would prefer not to talk too loudly about it, for many of the prestige/traditional reasons behind the ever-increasing billable rate itself. Now, most firms are structured in a way that can wrap their minds around a $400 billing rate and remain profitable without changing things too much -- indeed they likely already have attorneys making the firm money charging "only" $400/hr. But a flat-fee is not only anathema to their pride, but largely unsustainable given their structures. Between the lines of those comments about "overhead" is the fact that most of it is unnecessary, legacy nonsense that has persisted solely because the billable hour warps incentives. [3] Most law firms are simply not ready for pricing that will require them to so optimize their internal operations. And this is where the real disruption will appear and where middle firms have an opportunity. [4] [1] Mergers, acquisitions, litigation, etc. [2] Legal zoom-type work, some ip registration, etc. [3] Hourly billing rewards inefficiency. If an attorney can generate enough business to keep themselves and their billable staff busy for as many hours per day that they care to work, cutting the time it takes them to perform their tasks by 20% means they bill 20% less. Which means they need to go scare up 20% more work to merely maintain their previous revenues. And as generating new business is not itself billable, Attorneys tend to treat "increased efficiency" as "more work for the same money". [4] They have some experience, less 'pride' clouding their vision, but sufficient revenue to fund experiments in innovation.
shingen 15y ago
It's why Legalzoom is doing so well.
Duff 15y ago
A: Because they get other jobs that meet their income requirements. People who make it through law school usually aren't idiots. So if they fail to achieve a satisfactory career in Law, they move into other areas. Attorneys work in government as political appointees, lobbyists and policy people; they work as corporate managers; they run businesses in areas other than law, etc. Also consider that the barriers of entry for lawyers are high. Referrals are a huge source of business, so it's difficult to start a new firm without alot of capital.
kwekly 15y ago
"Back to Econ 101. What happens when you double the price of something? Demand for it decreases." Pretty sure what he's describing is sliding the supply curve straight up, which has exactly the opposite effect.
- sp332 15y ago
  I think you have marginal utility confused with marginal cost. For a given supply, as demand increases, that causes an increase in price. But obviously, increasing the price does not (usually) cause an increase in demand.
  - jerednel 15y ago
    If we're rationalizing this with economic principles, I think we can chalk it up to "imperfect information". Also demand is static regardless of price changes. Quantity demanded is what changes. Apologies for the pedantry but don't want anyone reading too much here and making that mistake on a econ test :)
- Symmetry 15y ago
  A doubling in the price can either be due to an increase in demand or a decrease in supply. In this context, though, its pretty clear that the author is talking purely about shape of the demand curve, not about the supply curve at all.
ktizo 15y ago
Perhaps it is because lawyers are, by definition, the experts at defending dubious practices.
pak 15y ago
So, Forbes is republishing Quora answers now? This must be part of that new strategy where they try to gain more traffic (http://www.forbes.com/sites/kashmirhill/2012/02/16/how-target-figured-out-a-teen-girl-was-pregnant-before-her-father-did/ http://www.forbes.com/sites/kashmirhill/2012/02/16/how-targe...) with other people's content (http://www.nytimes.com/2012/02/19/magazine/shopping-habits.html?pagewanted=all http://www.nytimes.com/2012/02/19/magazine/shopping-habits.h...).
- flyt 15y ago
  These answers are republished by Quora to Forbes, with permission from the original authors. See this for more info: http://www.quora.com/How-does-Forbes-decide-which-Quora-answers-to-post-on-their-website http://www.quora.com/How-does-Forbes-decide-which-Quora-answ...
  - mirceagoia 15y ago
    Indeed, that's the situation. There is a partnership.
    - andrewem 15y ago
      Slate appears to have a similar partnership, with the first such post appearing earlier today: http://www.slate.com/blogs/quora.html http://www.slate.com/blogs/quora.html
      - flyt 15y ago
        Huffington Post too: http://www.huffingtonpost.com/quora/ http://www.huffingtonpost.com/quora/
  - gersh 15y ago
    I asked the original question, and I was never notified that they were posting it to Forbes. I guess it is kinda cool. I suppose they only notify/ask permission from the people, who write the answers.
lionhearted 15y ago
Having worked some recently with lawyers, their chief value is similar to that of the historical value of having assassins on the king's payroll. The power is not in using the assassins, which is expensive and dangerous, but in that people are more scared to provoke and escalate with someone known to employ assassins.
andrewtbham 15y ago
The supply of lawyers is high, but the supply of good, experienced lawyers with good reputations is lower.
jonnathanson 15y ago
To some extent, lawyers (or, more accurately, law firms) are Veblen goods -- meaning that their services are perceived as being better if they're more highly priced and exclusive. There's a general perception that a high-priced lawyer is a top-notch lawyer, and that skimping on such lawyers carries a huge deal of legal risk. This dynamic plays out particularly in the BigCorp world, and especially if there's ever a perceived threat of litigation. (The idea that a competitor would hire "the best of the best," or "an army of lawyers," or "top guns," drives your own desire to pay for same).
- cobrausn 15y ago
  It seems to me that lawyers have a captive market - I mean, you're not going to not hire a lawyer when you need one, yes? And with the truckload of new laws that enter the books every year, there will likely be no shortage of need anytime soon. It seems to me this 'salary matching' is basically price-fixing, even if unintentional. If my only option is a $650 / hour lawyer or a more prestigious $750 / hour lawyer, why not pay the higher price? I mean, legal matters can be scary to those not well versed in the intricacies of the law.
  - rayiner 15y ago
    > It seems to me that lawyers have a captive market - I mean, you're not going to not hire a lawyer when you need one, yes? It's not any more captive than any other sort of market. If you live in LA and need a car, you're not going to not buy a car, right? Corporations hire expensive lawyers for the same reason they get expensive architects to do their interior design. It's a signaling mechanism.
- jcfrei 15y ago
  my point exactly (and the author seems to have missed it). there's such a thing as adverse selection in the market (of lawyers) which means that information asymmetry prevents the formation of a correct market price. in this case people just won't hire a cheap lawyer with discount rates, because they have no insight in the capabilities of a lawyer (or in the field of law) appart from a few if any references and the price.
lallysingh 15y ago
There are a few things to add in here (IANAL, but I'm close to quite a few). A major element is billable hours. When you want to reduce a bill for a client, during bad times or whatever, you can always under-bill the number of hours spent. Or change the mix of high-low-rate hours expended. Reducing the number of hours billed doesn't (necessarily) reduce the number of billable hours you can credit the attorneys. While you can have equal salaries across departments, you have bonuses, which depend on how many hours you billed. Also, #billable hours is a great sort criteria for who's first on the shit-list and first on the promote-list.
chollida1 15y ago
the way I had lawyer, dr, etc. fees explained was that they can charge so much as you often don't get a second chance. If your life is on the line for an operation, you want the best doctor available. Your life on the line in a trial, you get the best lawyer available. This has a trickle down effect. Or put another way, if you don't get a second chance, things had better go right the first time. Fear is a powerful motivator. Want that dream house? Better make sure the paper work from the forclosure is done properly. Sure you can try to do it yourself or with a budget firm, but what if they make a mistake. Your dream house is gone. Want to make sure your kids are protected in case of your death, better get the best lawyer you can to do your will. Sure, you can print a form off the internet, but we've all seen that go wrong. Don't your kids deserve peace of mind during the troubling times surrounding your death?
- johngalt 15y ago
  This is the #1 reason, and the common explanation, but lets examine it further. You risk your life getting into your car every day. You don't pick the most expensive car? Choosing air travel is commonly an exercise in finding the lowest price, despite the inherent risks/fear of traveling 4 miles up at 500mph. Why are these commodities while preparing a will is not? There are transactions/disputes that require highly skilled people to direct/settle, but I wonder how many legal systems have been specifically constructed to require guidance. How can we tell when something is costly because it is complex or merely complex to make it costly?
  - chollida1 15y ago
    > You risk your life getting into your car every day. You don't pick the most expensive car? Choosing air travel is commonly an exercise in finding the lowest price, despite the inherent risks/fear of traveling 4 miles up at 500mph. Why are these commodities while preparing a will is not? That's easy. The expense of a car or plane doesn't indicate it's safety, infact it's usually the opposite, the more expensive the car or plane the faster it goes and less safe it can make your trip. With a doctor or lawyer more often than not the more you pay the better the service/advice you get. > There are transactions/disputes that require highly skilled people to direct/settle, but I wonder how many legal systems have been specifically constructed to require guidance. How can we tell when something is costly because it is complex or merely complex to make it costly? Completely agree with this.
thinkcomp 15y ago
There are all sorts of reasons, but first and foremost is the lack of transparency in all things legal. This is why I'm working on PlainSite (http://www.plainsite.org http://www.plainsite.org). The opacity creates the illusion of difficulty, the need for (arbitary) specialized knowledge, and uncertainty as to the real price because so many factors are hidden from view. For example: you're expected to follow the law even without knowing what the law says. When you want to find out what the law says, it's not easy--it's certainly not available in a standardized format. When you want to interpret what you find, assuming you find it, that's not easy either. Courts interpret things in new ways all the time. The federal court system charges you to access public information contained in court proceedings, with limited exceptions--that is, if you even know where to look for it. See http://www.thinkcomputer.org/20120209.pacer.pdf http://www.thinkcomputer.org/20120209.pacer.pdf. The interface is terrible and hard to use. The way in which you write lawsuits is obscure, counterintuitive, and creates additional needless work. In addition to all of these factors, and perhaps because of them, lawyers (especially at big firms) have institutionalized fraud. It's taken for granted that legal billing is often fraudulent. If you charge $500 per hour and your system only resolves to the tenth of an hour, that means if you spent four minutes writing an e-mail, you can charge for 0.1 hours, or $50. But really you only did $33.33 of work. That's a nice cushion. But what actually happens is that an attorney might do 45 minutes of work and round it up to an hour--even though that work is formatting in Microsoft Word that the client could have done; or printing out a Word document in order to scan it in as a PDF. Still seem worth $500 per hour? For those lawyers not at large firms, they're covering expenses (such as law school) that are enormous. High rates are a necessity, and who would charge far lower than market rates anyway? It might be interpreted as a signal that something is wrong. Of course, don't for a minute think that paying $800 per hour will get you a better lawyer than paying $300 per hour. It might. Either way, you'll be paying someone in a staggering number of cases to unscientifically guesstimate What The Government Might Do, when the answer is, "who knows?". That doesn't mean all lawyers are the same; some are definitely better than others. But it has nothing to do with price. More lawyers could afford to charge reasonable market rates, and not work for large firms, if it weren't for the ABA mandating that you have to attend a law school (that results in huge piles of debt) or clerk for years (four in California) in order to join the bar. See http://www.nytimes.com/2011/10/25/opinion/are-law-schools-and-bar-exams-necessary.html http://www.nytimes.com/2011/10/25/opinion/are-law-schools-an.... Lawyers know, too, that you can't get rid of them (also thanks to the ABA), and so you're locked in. There's a monopoly on business representation, for example. See http://www.plainsite.org/issues/index.html?id=137 http://www.plainsite.org/issues/index.html?id=137. It's absurd.
shawnee_ 15y ago
Traditional supply-demand economics just doesn't explain the behavior of "middleman" industries, such as lawyering, real estate agenting, etc. Traditional supply-demand economics assumes a 1:1 ratio where there is one buyer and one seller and there is some amount of economic surplus that the two parties play tug-of-war with. Traditional supply-demand economics works great when buyer and seller negotiate directly. But in middleman industries, the middlemen can hop on either side, and play for either team. They are able to effectively scope out surplus from either or both sides, predatorize the weaker side with almost _no risk_ to themselves, and destroy a lot of the potential realized value between the original parties in their process. So basically it creates a "parallel" economy where prices aren't determined by supply or demand, but rather by fear and a kind of high-stakes prisoner's dilemma between buyers and sellers where buyers and sellers bear all the risk and lawyers and agents reap all of the rewards.
- anigbrowl 15y ago
  Traditional supply-demand economics assumes a 1:1 ratio where there is one buyer and one seller That's not what 'ceteris paribus' means.
- monochromatic 15y ago
  In what way are lawyers middlemen?
pbreit 15y ago
The fee overage acts as insurance. Since the downside of legal services (no matter the competence) is significant, consumers believe the extra money they are paying will help mitigate any unfortunate circumstances.
jriley 15y ago
I would add: 1) Pay can be high with win/lose stakes 2) Different pay models (contingency)
mfaustman 15y ago
This whole argument that this is "not a free market" is silly. None of the factors pointed to here would actually limit choice or restrain price movement. It is a free market, but that does not mean that the market lacks information asymmetries that would artificially morph prices. As Antone points out, there is a strong quality perception issue. Ironically, it is the Bottom Line Law Group that is fighting this perception of quality on a daily basis (vs a Wilson or Fenwick). Thus it does not matter if the supply increases if the consumer perceives the bottom-end as an inferior good. This skewed perception is rooted in a total lack of transparency in the legal industry. This lack of transparency limits the consumer’s ability to find lawyers like Antone, and keeps the cost of standard information and a simple opinion high. I agree with Antone that the industry is on the brink of change, but it is a BIG messed up industry. Change will come in many forms within the industry's mirco verticals. It will come from networks of smaller more specialized law firms such as the Bottom Line Law Group, and from innovations which create more transparency in the industry to find qualified attorneys and access quality information.
ShabbyDoo 15y ago
There is one restriction in particular which I believe has a huge effect on the legal industry's slow pace of change -- only lawyers may own companies which provide legal services to clients (vs. in-house counsel). So, want to start an online, virtual law firm? Either act as a referral service or make sure you never want a non-attorney to have equity in your company. Why does this rule exist? I haven't a clue.
- deleted 15y ago
  [deleted]
- joshuaheard 15y ago
  This is true for most state-licensed professionals like doctors and accountants. There are two main reasons for this. The first is that a non-licensed person could easily bypass the license rules by affiliating with a licensed person in name only and doing all the work requiring a license. The second is that licensed professionals have ethical and professional duties to their clients that they are taught as part of their licensing eductation. A non-licensed person may not know these duties, or be aware of their rationales, and may try to influence the licensed person to violate them.
  - physicslover 15y ago
    I don't believe this is true for doctors, although, I could be wrong but I think HMO's get around the restriction. The bottom line is that lawyers are a protected guild with rules like the one mentioned above that artificially inflate the value of their services.
larrys 15y ago
The article doesn't address what could be the most important factors. First, your relationship with a lawyer is a personal relationship. And it's hard to break a personal relationship over a yearly price increase of single digit %. And lawyers regularly wine and dine and become "friends" with their clients. The client really thinks that the lawyer likes them. If you've ever worked in sales you know what I mean by this. Lawyers are nice and friendly and that insures the loyalty of the client. When I was in high school I delivered gifts to the clients of a small law firm. I remember the partner deciding who got what gift (based on amount of work). This wasn't a bribe. Just a thank you to insure ongoing loyalty. (Maybe some were bribes of course). Remember rates aren't doubled they go up a little each time they are raised. If you are already paying $400 per hour you aren't bolting for $425/hr. It's not like rates are doubling in a year. The other reason is FUD. People convince themselves and rationalize that a certain lawyer at a certain rate will get the job done. They are afraid of switching lawyers and having a bad outcome. So the above is certainly one of the things that keeps legal rates high. What about new startup lawyers? Well the way any professional service works you start out with whatever work you can get at whatever price you can get (let's say). Then as you gain clients you slowly wean yourself from the low priced clients (by taking longer, not returning calls etc.) and they get the message. This leaves you with the best clients who you can raise rates on (because they like you and are fearful of changing). So even if there was a group that charged low rates (to corporate buyers) over time their rates would rise as well. Because of the person factor I mentioned in the first paragraph. Finally, even though lawyers can now market (I remember when they couldn't) they won't "sell" in the traditional sense. If I sell a service (like web hosting web design or unix sysadmin) I can pickup the phone and call people. I can go door to door. I can place ads. Lawyers can place ads of course but that's not the most effective way to sell personal services. Then you are waiting for someone to contact you. Selling is selling. If lawyers were ethically allowed and it was acceptable practice to "cold call" I believe you would see rates dropping in certain types of work.
grellas 15y ago
A few quick thoughts (am about to go into a meeting): 1. Lawyers are not immune from market forces. This is easily seen at the micro level: a new practitioner with no established reputation can charge $800 per hour and see where that gets him (of course, precisely nowhere). On the macro level, law has been a boom business ever since at least the 1960s when expansive liability theories came to be widely adopted by the legislatures and the courts. So, what used to be regarded as a dispute over garbage at the local dump becomes a massive environmental enforcement action by which dozens of parties face multi-million dollar liabilities; what used to be a distribution chain in which only the end-point seller typically bore liability to the consumer becomes massive product liability suits going back to the manufacturers and imposing strict liability on them in ways that can ruin a multi-billion business; what used to be the $.25 that a cab driver overcharged you because of some shifty trade practice becomes a major class action in which all the vendors in the area are swept in to face a protracted legal fight and potentially substantial damage exposure; etc., etc., etc. The point being: the legal landscape has changed dramatically and, for example, the Big Law firm that I worked at in the early 1980s grew from 23 lawyers in 1965 to about 250 in 1980 and is today over 1,000 lawyers. Demand is up in a huge way over the decades and law remains a boom business in this respect (certainly Big Law remains so) notwithstanding the recent economic calamities that have beset us all. That is the main reason why the very high fees are charged: because businesses are willing to pay them (when they are not, overt or disguised discounting occurs with great regularity). 2. That said, I am no fan of the Big Law model and have expressed my criticisms at some length elsewhere (see, e.g., http://news.ycombinator.com/item?id=1648342 http://news.ycombinator.com/item?id=1648342). I also have stated in some detail why I think the large firms have been left reeling from the recent economic shock and how this has caused a general revulsion against the billable fee structure used in these firms (see http://news.ycombinator.com/item?id=1649507 http://news.ycombinator.com/item?id=1649507). 3. In reality, the legal field is pretty diverse and price does matter for those who consume legal services (why shouldn't it?). The providers of those services who remain stuck in old ways will need to adapt to the short-term problems but they obviously hope to keep the old structures in place in hopes that the good old days will return. For the broader legal market, however, there is already wide variety in the range of services and pricing offered. As a consumer, you need to do your due diligence and shop around. In the broader market, lawyers want your business and will adapt as needed to get it.
tsotha 15y ago
The same reason professional athletes make so much money even though high schools and colleges are full of kids who want to play for a living. Just having a good lawyer isn't enough - he needs to be better than the lawyer on the other side.
JackC 15y ago
Before we talk too much about why lawyers are so expensive, it's worth checking out how much they actually get paid. It's the weirdest salary chart you'll ever see: http://www.nalp.org/salarydistrib http://www.nalp.org/salarydistrib Basically it's the sum of two separate curves -- a bell curve centered around $45,000 a year, and a sharp, sharp peak up at $160,000. What's going on here? Well law is two separate markets -- the bell curve is the 90% of lawyers who compete on cost in a more or less normal market, and the sharp peak is the 10% of lawyers who work at BigLaw firms that march in lockstep at $160,000 for new associates. So for the 90%, the answer is that law is a highly competitive market. You're paying $150,000 in tuition to get a job that averages $45k a year when you start, and won't go up too fast. You're doing largely hard, boring work, it sucks to do without support staff, and it's time-consuming to do right. If the product costs a lot, it's not because the lawyer is overpaid -- it's because that's how much it costs to produce. Lawyers who drop below that price go out of business. For the 10%, they're in a weird parallel universe where the cost of their service is almost totally irrelevant to their clients. They're handling international mergers, billion-dollar divorces, and Federal indictments of entire financial firms. The question of whether the lawyers charge $300 or $600/hr is like the question of whether your parachute costs $50 or $100 before you jump out of a plane. If there's the slightest chance that the $100 parachute is safer, you go for it. That's why the starting salaries march in lockstep -- no BigLaw firm can afford to let people think that the cream of the crop from Harvard Law is being hired by their competitors. They'd lose all their business if anyone else had a clear edge. But this only relates to a small minority of lawyers. ... To disclose my own bias, this article/conversation is strange to me because I took a big pay cut to go from programming (which I could do before I graduated from college) to law (where most of my lower salary goes to student loans). I knew I would. I didn't join the BigLaw 10% (which I would have hated), but I'm getting to work on things that matter to me, and I'm proud I made that call. But to see a bunch of programmers talk about why lawyers have it so good ... yeesh. This isn't to say that law can't get easier or cheaper. There are huge wins to be had from automation here, and I always turn into the resident tools guy wherever I work. I've had to get pretty good at VBA of all things, and 1000 curses on that misbegotten tongue. (Jashkenas, are you listening? Need a project after CoffeeScript?) I also think law school needs to get a lot cheaper -- like college tuition in general, it's been growing at twice inflation for decades, and that can't be right. One other thought -- the bar is indeed a protected guild, and I'm not sure where I stand on that, but there are reasons for it. First and foremost, you will never know whether your lawyer has done a good job. If you hire a programmer, there may be problems behind the scenes, but you can more or less tell whether they've done what you hired them to do. If you hire a lawyer, and you lose your case, you will often have not the slightest idea whether they were competent -- there's just not enough signal for most laypeople to analyze in most cases. Even my own supervisors often have no idea whether I've done my job right. They ask me a question, I answer it, and without repeating the work I did they have no way of telling whether I'm right or how long it should have taken to complete. Requiring education, examination and licensing is one way to address that problem. It definitely raises the price. In theory it also lowers the chances that you're buying snake oil. Something to consider anyway.
jasonkester 15y ago
Same reason so many of us here can bill out at several hundred dollars an hour even though there is an unlimited supply of people calling themselves computer programmers who will happily try to do the same job for $7/hr. Valuable stuff is worth paying more for.
johnnygleeson 15y ago
For anyone interested there is a good book called 'The End of Lawyers?' by Richard Susskind, a visiting Professor at Oxford, that discusses the ways in which technology will gradually commoditize many elements of traditional legal practice. http://www.amazon.com/End-Lawyers-Rethinking-Nature-Services/dp/0199541728 http://www.amazon.com/End-Lawyers-Rethinking-Nature-Services... Chapters 1. Introduction - the Beginning of the End? 2. The Path to Commoditization 3. Trends in Technology 4. Disruptive Legal Technologies 5. The Future for In-house Lawyers 6. Resolving and Avoiding Disputes 7. Access to Law and to Justice 8. Conclusion - the Future of Lawyers.
nwenzel 15y ago
Supply Induced Demand. They're out there, so you need one too. The other guy has 2, you better get 2, too. No such thing as an "excess supply."
deleted 15y ago
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niknir 15y ago
I believe a major frustration is the costs of discrete advice or legal services. This is caused by a high fixed cost associated with even interacting with a lawyer. Calling, scheduling a meeting, signing paperwork, paying a retainer, going to an office, and so on. I used to be the business intelligence lead at Yelp, and saw that people gravitate to products that make the entire experience of engaging local service providers as simple as possible. With those problems in mind, I'm starting Lawdingo.com, a market for immediate legal advice delivered by lawyers over video chat, billed by the minute. The product is still in development, but I have some great startup lawyers on it if anyone would be interested in trying it out. Feedback on Lawdingo is much appreciated.
tomkarlo 15y ago
I used to "hire" law firms regularly for my clients. What's not being mentioned here is that since in most cases the individuals _choosing_ the law firms for large financial and M&A transactions (which represent the real meat of the "big law" business) generally aren't directly paying the legal fees, there's relatively little incentive for them to push for lower prices. (And if I remember correctly, if those legal fees are part of a financing transaction, they don't count against the businesses "normalized/adjusted" income, either.) If I'm the CFO of a company that's doing a $500M financing round, am I really going to choose a lesser law firm to save maybe $100K in bills? I'm already probably paying the bankers $5M or more to do the deal in fees (arguably, that's the real gouging, given that the work doesn't really scale with the deal size but the fees do.) If I choose a cheaper firm, and they mess up (and frankly, all the firms make mistakes, especially when you have junior associates drafting filing docs) it could cost me my job. (The most cost-conscious clients I've seen were entrepreneurs or at least majority owners of businesses - they saw those fees as coming right of out their own pockets, so they tried to do whatever they could to keep them down) In-house counsels are definitely trying to push down costs by doing more things internally or offshoring more mundane stuff like day-to-day contracts. But at the same time, most of your in-house counsels come from a big law firm, so they're unlikely to break away completely, either.
rayiner 15y ago
The legal field isn't really amenable to simplistic economic analysis. With all due respect to thinkcomp, the idea that licensing requirements are what is driving the cost of legal services is totally wrong. First, legal services generally aren't that expensive. If you need someone to help you draft a deed to some property, you can probably get that work done for cheaper than you would pay an engineer to design you a retaining wall on that property. When people say legal services are expensive, what they mean is that high-end corporate legal services are expensive. Second, corporate legal services is not expensive because of limited supply. There are about 45,000 JD's graduated each year, and maybe 3,000-4,000 are hired at big firms that do corporate work. The rest work for far less money, in the $45-$60k range. If you wanted to start a firm doing corporate legal services at low cost, paying attorneys $80k a year (half the going rate of a first year at a large firm), you would literally drown in job applications. While in a platonic sense there is a supply constraint in the legal field, it has a practical effect more akin to crash safety regulations in cars than something that actually constrains supply to drive up prices. If the state bars got rid of the requirement that lawyers attend an accredited law school, there would be almost no change in the cost of legal services at the top. Big firms hire the large majority of their associates from only 20 or so schools, out of the 200 that exist. Why would adding a category of potential hires below the huge group of people already not getting hired drive down salaries? The price of high-end legal services is insensitive to the supply of lawyers for the same reason the price of Apple products is largely insensitive to the number of Korean competitors in the market: 1) brand is tremendously important; and 2) there are actual differences in the quality of the product. Re: 1) Because it is difficult to tell whether your lawyer did a bad job or whether you just had a bad case, branding and signaling becomes tremendously important. It is that branding and signaling that makes companies keep going to firms that hire primarily from the top schools, even when there is nothing, legally, that prevents them from taking it to firms that have more diverse hiring standards. Re: 2) The adversarial nature of law means that there is an arms race for the smartest people. While a lot of even high-end legal work can be very routine and boring, some of it can be very complex. That 10% of legal work that requires out-thinking the opposing counsel can have major repercussions for companies, and as such companies are willing to spend the money to ensure that their lawyers are smarter (at least on paper) than the opposing party's lawyers.
- 15y ago
Uchikoma 15y ago
What I found interesting in dealing with layers: they charge high rates even for standard contracts, EULAs etc. and when asked if one is safe with their advice, only tell you that courts can decide in whatever way they want - so no.
rayiner 15y ago
To respond to one point in the article: > Associate salaries are not an efficient, free market. That is probably true, but the evidence supplied in the article supports an inference the opposite of the one made by the author. If everybody in New York pays $160k as an informal arrangement, that suggests artificially low salaries, not artificially high ones. Why would a bunch of firms act informally in concert to artificially drive up their costs? And associate salaries, of course, have only an indirect effect on legal fees. The price of a good is directly influenced only by supply and the demand curve. The costs of making the good are irrelevant except to the extent they influence supply. Clients, of course, don't care what associates make. The amount they will pay for services is entirely a function of their demand and the supply of law firms willing to do the work.
physicslover 15y ago
My naive understanding is that only lawyers can own and operate a law firm. In other words one can't form the equivalent of an HMO and hire a bunch of lawyers and pay them a salary and offer legal counsel to individuals. I believe this is mandated by bar associations on ethical grounds, though I find it absurd. This artificially inflates the cost of legal services.
GigabyteCoin 15y ago
Who said there is an excess supply of lawyers?
joshuaheard 15y ago
Simple, because government keeps passing more and more laws that create more ways to become liable. While there may be growing supply of lawyers, there is a growing demand due to this explosive growth of new laws. Stop the government from controlling every inch of our lives, and you will see lawyers getting cheaper. I also agree with the previous reply that this article only deals with the 10% of lawyers who work in big firms. The other 90% of lawyers that don't work in big firms are out there competing everyday for your business and are charging reasonable rates.
itmag 15y ago
HN, help me make up my mind: is an abundance of lawyers to be seen as a necessary component of a complex society? Or is it a symptom of decay? Are lawyers necessary agents of the greater good or are they vampiric rent-seekers on a byzantine legal morass? I'm not trying to be clever; I genuinely want to figure this out.
- DanBC 15y ago
  (Obviously, IANAL and I have no legal training). In England people are encouraged not to go to law until they really need to. People with family law problems (divorce, access to children, etc) are encouraged, strongly, to use mediation before they go to court. This mediation can be lawyer led, but it can also be led by other professionals. People with employment problems usually need to filter through any internal company policies before they go to law. Rejecting pre-trial discussions is usually a bad idea. Solicitors will tell you that going to law is a bad idea, and expensive, and will often not get the result you want. I think, BICBW, that they need to do this as part of their professional codes of conduct. They're tightly regulated, and encouraging people to go to law if they're unlikely to win is frowned upon. Note that none of this is a barrier to effective law; once you need to go to law you've usually had several discussions with solicitors and you know what's involved and what to expect from your barrister. There are separate tracks for quick and easy civil "small claims" cases, but even these can sometimes be avoided by using existing legal protections. (The very consumer-friendly "Distance Buying Regulations" or the credit card protections, for example.)
- DanBC 15y ago
  Here's another reply which tries to better answer your question: I live in England. We have free health care available to all. But if you want to pay you can buy private medical insurance. I was debating with some friends. They said that it was wrong for doctors who got free training in the NHS to then go and work privately; they said that doctors should work for X years in the NHS. I said that doctors didn't get free training; they have large student debts and they work for years in tough conditions for low pay. And then I asked what the difference between doctors (educated and trained at UK tax-payer expense) and lawyers (educated at UK tax-payer expense)? Why is it wrong for doctors to work privately, and not for lawyers? Why are legal-aid lawyers so hard to find in the UK? Why is "pro-bono" so rare? Some lawyers can be drivers of social change for good (fair pay, anti-racism, etc) but they often get hoovered into creating laws or finding loopholes for weird corporate behaviours.
crusso 15y ago
Think about this. If you have too many doctors, they run out of sick people and their prices go down. They don't go out and start injuring people to make business for themselves. Lawyers do just that. If they don't have work, they can attack innocent citizens to create work for themselves. Frivolous law suits create new market pressure for more attorneys. Whenever you see slip-n-fall attorney commercials, that's just an window into the parasitically-based ecosystem that lawyers operate in. Failing that, lawyers are the most likely profession to go into politics and create more laws that need what to sort them out? Oh yeah, more lawyers. It's a troubling profession that needs to be considered carefully when you're making decisions about the economic impact of laws upon society.

302 points by mirceagoia 15y ago

puppop 15y ago

Because there are no H-1B lawyers.

mirceagoia 15y ago
Do you think lawyers from other countries know US law? I don't think so. You will pretty much have to start over in US.
- simonbrown 15y ago
  They would probably be prepared to learn it, if it paid. IANAL, but I'm guessing the main problem would be legal limitations.
  - jrs235 15y ago
    And the BAR, like any other "professional" "over-seeing" monopolistic organization isn't about to reduce it's own members value... just like the AMA, Teacher's Unions, ETC. When certification(s) is/are required [to practice], those that have the certifications have a vested interest in limiting the access to said certification(s). It's all a legal racket.
    - puppop 15y ago
      We need an American Programmer's Association.
- ig1 15y ago
  You realize there are huge outsourcing industries (in the legal and accounting sector among others) where workers in India, China, etc. are trained to learn American standards, etc.
  - mirceagoia 15y ago
    Most of those are doing the grunt work. But when it comes to go in the court who is going to go?
    - ig1 15y ago
      Most legal work is grunt work, the time spent in court is only a fraction of what a lawyer does.
  - rprasad 15y ago
    As with coding sweatshops, the outsourced legal sweatshops really are an example of getting even less than you paid for.
- retroafroman 15y ago
  Do accountants in other countries know US tax law? According to this source [0] at least some do. I don't see how general law would be much different. [0] http://www.nysscpa.org/cpajournal/2005/605/essentials/p54.htm http://www.nysscpa.org/cpajournal/2005/605/essentials/p54.ht...
  - rprasad 15y ago
    Here's how it works: I know the law of Australia, Hong Kong, China, and the U.S. However, I only advise clients about U.S. law. Why? Because I'm liable for malpractice if I get it wrong. Unless I'm willing to religiously follow the legal developments of X other nations, I would not be willing to take the risk of the law having changed since I last check it. And if I were the kind of person anal enough to follow legal developments in other countries, my skills would be in such demand that only megacorporations could afford my services.
- geebee 15y ago
  I think they'd be able to learn. In fact, I'd say I'm sure they could learn. Keep in mind, there isn't much incentive to learn US law when it's illegal for you to practice in the US. If the US allowed foreign graduates to sit for the bar and provided a visa and path to a green card to anyone who managed to pass and hold down employment, I think many foreign law schools would appear. Many would fail, but many would pass, and some would be very talented. Honestly, I don't think it would be all that different from software development, though I suppose the bar requirement would probably establish a higher floor than you see in programming.
antonej 15y ago
Lawyers from other countries can and do come to practice in the US. It typically means getting an extra degree (LL.M.) and taking the state bar exam, but I've known a few people, particularly transactional lawyers from Canada, who seem to have made this transition. In general it would be easier coming from a common-law country like Canada, UK, Australia, etc.
- geebee 15y ago
  A few states allow this, but I don't think most do... From http://www.americangraduateeducation.com/articles/en/post-masters-of-law.htm http://www.americangraduateeducation.com/articles/en/post-ma... "In order to sit for the bar examination, most states require an applicant to hold a Juris Doctor (J.D.) degree from an American Bar Association (ABA)-approved law school. For those individuals who have not earned a J.D. degree from an ABA-approved law school, bar admission authorities have developed varying requirements and criteria to ascertain if such individuals meet the minimum educational requirements for bar admission. In most U.S. jurisdictions, individuals who lack a J.D. are ineligible to take the bar exam..."

simonbrown 15y ago

Surely that's an opportunity for a new firm? The demand is obviously there (plenty of people don't see a lawyer for financial reasons), as is the supply (apparently).

bane 15y ago
There's a service that used to be called "Prepaid legal" with essentially a small retainer, and a minimum guarantee of services, with favorable rates when the service was used beyond that. It operated basically as a kind of legal insurance. http://en.wikipedia.org/wiki/LegalShield http://en.wikipedia.org/wiki/LegalShield
- puppop 15y ago
  Yes, some company offer that. Cheap, but you lose the case with cheap lawyers. Penny wise, pound foolish.
  - isocpprar 15y ago
    Why do you think you automatically lose a case with cheap lawyers? If you are bringing a weak case against someone, then perhaps using high priced lawyers will be able to bully them into submission, but if the facts are with you, then a competent lawyer should be fine. If some are so bad that you will trivially lose, then perhaps the ABA/Bar has misrepresented their qualifications?
    - puppop 15y ago
      You get what you paid for.

jerrya 15y ago

This may not apply to the world of corporate lawyers the answer seems to be about, but at a smaller level, there are enormous switching costs involved in moving away from, and training a new lawyer. And it's not a free market. In a free market, the consumer can walk away from a purchase. Most times individuals or small businesses need a lawyer, they are in no position from walking away. They need a lawyer. And they need to stop spending time searching, and get on with resolving. So a lot of claims from lawyers that they operate in a free market are really not true. They mistake what are basically extortion/price gouging rates for free market pricing. And the search is expensive too, with few (?) lawyers willing to offer 30 min to an hour of their time to discuss your needs for free. This is another factor in increasing switching costs for the consumers. And of course, price is used as a signal for quality in a market in which quality is very hard to measure by most consumers. Sure I got a great deal on a lawyer, he only charges $150 per hour. Hmm, Your lawyer charges $400 per hour? Now, I'm not so confident.

bane 15y ago
"They need a lawyer. And they need to stop spending time searching, and get on with resolving. So a lot of claims from lawyers that they operate in a free market are really not true. They mistake what are basically extortion/price gouging rates for free market pricing." It's interesting because the same fundamental problem is true of health care in the U.S. It's essentially, "they need a doctor. And they need to stop spending time searching, and get on with not dying" The market dynamics and model are entirely different with these sorts of emergency industries. It's almost always "first available" and not "best cost". Even with shopping around (when the luxury is available) the decision is perceived quality first, cost second (or lower).
- dantheman 15y ago
  There are both things that can be dealt with through a bit of planning. I.e. determine a pool of potential lawyers you will use and in the same regard determine a pool of potential hospitals/doctors you want to use. Then if you need one, you've done the leg work and know where to go.

bonesinger 15y ago

This article misses one point, law school is expensive! Students generally will want to pay their 6-figure debts with a matching salary. When you don't have to worry about a huge debt, it allows you to be riskier and try other avenues, such as public interest, or work in small lesser known industries

tikhonj 15y ago
The article did mention student loans. Also, I can't help thinking that the reason law school can be so expensive is that the students can then get overpaid jobs and pay it back.
- mirceagoia 15y ago
  The law school is as expensive as the medical school, or almost. While at medical school you can understand the infrastructure you need to teach people, what infrastructure you need when learning law?
viscanti 15y ago
Desired salary is inelastic. Everyone would like to make as much as possible, regardless of debt level or career/education. If anything, a higher debt load should make someone risk averse, and more willing to take on more lower paying jobs, rather than waiting around hoping for a high paying job. In a situation where there's more supply than demand, those risk averse people should be pushing the overall price lower (there will still be niche situations where price isn't affected). Having a higher debt load might make you desire a higher salary, but it's real debt and needs to be paid off. Unless you're a member of a cartel who is fixing an artificially high price, competition should come into play and prices should drop.

nextparadigms 15y ago

Any way this market can be disrupted? Maybe through some more efficient/decentralized/AI-based services that would do much of the lawyer's jobs, forcing them to reduce their billing rates?

mirceagoia 15y ago
There are services like legalzoom.com ...but they didn't seem to make a scratch in this world. Or at least not big enough.
scott_s 15y ago
The author is doing just that. He talks about it at the end.
antonej 15y ago
Lots of people are trying (including me) in many different ways. No doubt technology can help in various ways, but I think the single most promising change is top-notch lawyers breaking away from megafirms to start their own smaller shops with a much leaner cost structure. That's what I did, but I didn't want to make the article all about tooting my own horn.
wavephorm 15y ago
Docracy was posted to HN recently: http://news.ycombinator.com/item?id=3666478 http://news.ycombinator.com/item?id=3666478 It's really limited or just starting out, no EULA's or anything that I can personally actually use.
- ubervero 15y ago
  Yep, we're getting started, but we might get an EULA soon, stay tuned
masebase 15y ago
This space is really starting to heat up. There are already a good number of new legal startups, and I think it's only beginning.
15y ago

noonespecial 15y ago

Part of the reason might also be that the law has become so complex (as well as, in my opinion, intentionally obfuscated) that it demands a certain amount of resources to engage it at all. If you can't meet that level, its best not to engage it at all. You can't launch a satellite halfway into orbit to save a few bucks. You go all the way, or stay home.

wtvanhest 15y ago

The unobvious but major thing missed is that hiring the wrong lawyer is far more expensive than an additional $300 per hour. Since the only way to know if you are hiring the right lawyer is to base it on brand, top firms have a lot of pricing power and middle firms dissapear.

roc 15y ago
> "top firms have a lot of pricing power and middle firms dissapear" This is generally true. However, there's increasing pressure from clients, not to simply push billing rates lower, but for flat-fee arrangements. While in many areas of law the billable hour is secure [1], in many others there not only isn't a strong argument in favor of it, but clients are increasingly pushing back against it [2]. And I'm not surprised to see a successful lawyer completely ignoring it, even in a post that serves largely as a setup for his pitch about coming disruption. IME every lawyer who hasn't seen his primary clients insist on flat-fee billing would prefer to pretend the issue didn't exist. And those that are dealing with flat-fees, would prefer not to talk too loudly about it, for many of the prestige/traditional reasons behind the ever-increasing billable rate itself. Now, most firms are structured in a way that can wrap their minds around a $400 billing rate and remain profitable without changing things too much -- indeed they likely already have attorneys making the firm money charging "only" $400/hr. But a flat-fee is not only anathema to their pride, but largely unsustainable given their structures. Between the lines of those comments about "overhead" is the fact that most of it is unnecessary, legacy nonsense that has persisted solely because the billable hour warps incentives. [3] Most law firms are simply not ready for pricing that will require them to so optimize their internal operations. And this is where the real disruption will appear and where middle firms have an opportunity. [4] [1] Mergers, acquisitions, litigation, etc. [2] Legal zoom-type work, some ip registration, etc. [3] Hourly billing rewards inefficiency. If an attorney can generate enough business to keep themselves and their billable staff busy for as many hours per day that they care to work, cutting the time it takes them to perform their tasks by 20% means they bill 20% less. Which means they need to go scare up 20% more work to merely maintain their previous revenues. And as generating new business is not itself billable, Attorneys tend to treat "increased efficiency" as "more work for the same money". [4] They have some experience, less 'pride' clouding their vision, but sufficient revenue to fund experiments in innovation.

shingen 15y ago

It's why Legalzoom is doing so well.

Duff 15y ago

A: Because they get other jobs that meet their income requirements. People who make it through law school usually aren't idiots. So if they fail to achieve a satisfactory career in Law, they move into other areas. Attorneys work in government as political appointees, lobbyists and policy people; they work as corporate managers; they run businesses in areas other than law, etc. Also consider that the barriers of entry for lawyers are high. Referrals are a huge source of business, so it's difficult to start a new firm without alot of capital.

kwekly 15y ago

"Back to Econ 101. What happens when you double the price of something? Demand for it decreases." Pretty sure what he's describing is sliding the supply curve straight up, which has exactly the opposite effect.

sp332 15y ago
I think you have marginal utility confused with marginal cost. For a given supply, as demand increases, that causes an increase in price. But obviously, increasing the price does not (usually) cause an increase in demand.
- jerednel 15y ago
  If we're rationalizing this with economic principles, I think we can chalk it up to "imperfect information". Also demand is static regardless of price changes. Quantity demanded is what changes. Apologies for the pedantry but don't want anyone reading too much here and making that mistake on a econ test :)
Symmetry 15y ago
A doubling in the price can either be due to an increase in demand or a decrease in supply. In this context, though, its pretty clear that the author is talking purely about shape of the demand curve, not about the supply curve at all.

ktizo 15y ago

Perhaps it is because lawyers are, by definition, the experts at defending dubious practices.

pak 15y ago

So, Forbes is republishing Quora answers now? This must be part of that new strategy where they try to gain more traffic (http://www.forbes.com/sites/kashmirhill/2012/02/16/how-target-figured-out-a-teen-girl-was-pregnant-before-her-father-did/ http://www.forbes.com/sites/kashmirhill/2012/02/16/how-targe...) with other people's content (http://www.nytimes.com/2012/02/19/magazine/shopping-habits.html?pagewanted=all http://www.nytimes.com/2012/02/19/magazine/shopping-habits.h...).

flyt 15y ago
These answers are republished by Quora to Forbes, with permission from the original authors. See this for more info: http://www.quora.com/How-does-Forbes-decide-which-Quora-answers-to-post-on-their-website http://www.quora.com/How-does-Forbes-decide-which-Quora-answ...
- mirceagoia 15y ago
  Indeed, that's the situation. There is a partnership.
  - andrewem 15y ago
    Slate appears to have a similar partnership, with the first such post appearing earlier today: http://www.slate.com/blogs/quora.html http://www.slate.com/blogs/quora.html
    - flyt 15y ago
      Huffington Post too: http://www.huffingtonpost.com/quora/ http://www.huffingtonpost.com/quora/
- gersh 15y ago
  I asked the original question, and I was never notified that they were posting it to Forbes. I guess it is kinda cool. I suppose they only notify/ask permission from the people, who write the answers.

lionhearted 15y ago

Having worked some recently with lawyers, their chief value is similar to that of the historical value of having assassins on the king's payroll. The power is not in using the assassins, which is expensive and dangerous, but in that people are more scared to provoke and escalate with someone known to employ assassins.

andrewtbham 15y ago

The supply of lawyers is high, but the supply of good, experienced lawyers with good reputations is lower.

jonnathanson 15y ago

To some extent, lawyers (or, more accurately, law firms) are Veblen goods -- meaning that their services are perceived as being better if they're more highly priced and exclusive. There's a general perception that a high-priced lawyer is a top-notch lawyer, and that skimping on such lawyers carries a huge deal of legal risk. This dynamic plays out particularly in the BigCorp world, and especially if there's ever a perceived threat of litigation. (The idea that a competitor would hire "the best of the best," or "an army of lawyers," or "top guns," drives your own desire to pay for same).

cobrausn 15y ago
It seems to me that lawyers have a captive market - I mean, you're not going to not hire a lawyer when you need one, yes? And with the truckload of new laws that enter the books every year, there will likely be no shortage of need anytime soon. It seems to me this 'salary matching' is basically price-fixing, even if unintentional. If my only option is a $650 / hour lawyer or a more prestigious $750 / hour lawyer, why not pay the higher price? I mean, legal matters can be scary to those not well versed in the intricacies of the law.
- rayiner 15y ago
  > It seems to me that lawyers have a captive market - I mean, you're not going to not hire a lawyer when you need one, yes? It's not any more captive than any other sort of market. If you live in LA and need a car, you're not going to not buy a car, right? Corporations hire expensive lawyers for the same reason they get expensive architects to do their interior design. It's a signaling mechanism.
jcfrei 15y ago
my point exactly (and the author seems to have missed it). there's such a thing as adverse selection in the market (of lawyers) which means that information asymmetry prevents the formation of a correct market price. in this case people just won't hire a cheap lawyer with discount rates, because they have no insight in the capabilities of a lawyer (or in the field of law) appart from a few if any references and the price.

lallysingh 15y ago

There are a few things to add in here (IANAL, but I'm close to quite a few). A major element is billable hours. When you want to reduce a bill for a client, during bad times or whatever, you can always under-bill the number of hours spent. Or change the mix of high-low-rate hours expended. Reducing the number of hours billed doesn't (necessarily) reduce the number of billable hours you can credit the attorneys. While you can have equal salaries across departments, you have bonuses, which depend on how many hours you billed. Also, #billable hours is a great sort criteria for who's first on the shit-list and first on the promote-list.

chollida1 15y ago

the way I had lawyer, dr, etc. fees explained was that they can charge so much as you often don't get a second chance. If your life is on the line for an operation, you want the best doctor available. Your life on the line in a trial, you get the best lawyer available. This has a trickle down effect. Or put another way, if you don't get a second chance, things had better go right the first time. Fear is a powerful motivator. Want that dream house? Better make sure the paper work from the forclosure is done properly. Sure you can try to do it yourself or with a budget firm, but what if they make a mistake. Your dream house is gone. Want to make sure your kids are protected in case of your death, better get the best lawyer you can to do your will. Sure, you can print a form off the internet, but we've all seen that go wrong. Don't your kids deserve peace of mind during the troubling times surrounding your death?

johngalt 15y ago
This is the #1 reason, and the common explanation, but lets examine it further. You risk your life getting into your car every day. You don't pick the most expensive car? Choosing air travel is commonly an exercise in finding the lowest price, despite the inherent risks/fear of traveling 4 miles up at 500mph. Why are these commodities while preparing a will is not? There are transactions/disputes that require highly skilled people to direct/settle, but I wonder how many legal systems have been specifically constructed to require guidance. How can we tell when something is costly because it is complex or merely complex to make it costly?
- chollida1 15y ago
  > You risk your life getting into your car every day. You don't pick the most expensive car? Choosing air travel is commonly an exercise in finding the lowest price, despite the inherent risks/fear of traveling 4 miles up at 500mph. Why are these commodities while preparing a will is not? That's easy. The expense of a car or plane doesn't indicate it's safety, infact it's usually the opposite, the more expensive the car or plane the faster it goes and less safe it can make your trip. With a doctor or lawyer more often than not the more you pay the better the service/advice you get. > There are transactions/disputes that require highly skilled people to direct/settle, but I wonder how many legal systems have been specifically constructed to require guidance. How can we tell when something is costly because it is complex or merely complex to make it costly? Completely agree with this.

thinkcomp 15y ago

There are all sorts of reasons, but first and foremost is the lack of transparency in all things legal. This is why I'm working on PlainSite (http://www.plainsite.org http://www.plainsite.org). The opacity creates the illusion of difficulty, the need for (arbitary) specialized knowledge, and uncertainty as to the real price because so many factors are hidden from view. For example: you're expected to follow the law even without knowing what the law says. When you want to find out what the law says, it's not easy--it's certainly not available in a standardized format. When you want to interpret what you find, assuming you find it, that's not easy either. Courts interpret things in new ways all the time. The federal court system charges you to access public information contained in court proceedings, with limited exceptions--that is, if you even know where to look for it. See http://www.thinkcomputer.org/20120209.pacer.pdf http://www.thinkcomputer.org/20120209.pacer.pdf. The interface is terrible and hard to use. The way in which you write lawsuits is obscure, counterintuitive, and creates additional needless work. In addition to all of these factors, and perhaps because of them, lawyers (especially at big firms) have institutionalized fraud. It's taken for granted that legal billing is often fraudulent. If you charge $500 per hour and your system only resolves to the tenth of an hour, that means if you spent four minutes writing an e-mail, you can charge for 0.1 hours, or $50. But really you only did $33.33 of work. That's a nice cushion. But what actually happens is that an attorney might do 45 minutes of work and round it up to an hour--even though that work is formatting in Microsoft Word that the client could have done; or printing out a Word document in order to scan it in as a PDF. Still seem worth $500 per hour? For those lawyers not at large firms, they're covering expenses (such as law school) that are enormous. High rates are a necessity, and who would charge far lower than market rates anyway? It might be interpreted as a signal that something is wrong. Of course, don't for a minute think that paying $800 per hour will get you a better lawyer than paying $300 per hour. It might. Either way, you'll be paying someone in a staggering number of cases to unscientifically guesstimate What The Government Might Do, when the answer is, "who knows?". That doesn't mean all lawyers are the same; some are definitely better than others. But it has nothing to do with price. More lawyers could afford to charge reasonable market rates, and not work for large firms, if it weren't for the ABA mandating that you have to attend a law school (that results in huge piles of debt) or clerk for years (four in California) in order to join the bar. See http://www.nytimes.com/2011/10/25/opinion/are-law-schools-and-bar-exams-necessary.html http://www.nytimes.com/2011/10/25/opinion/are-law-schools-an.... Lawyers know, too, that you can't get rid of them (also thanks to the ABA), and so you're locked in. There's a monopoly on business representation, for example. See http://www.plainsite.org/issues/index.html?id=137 http://www.plainsite.org/issues/index.html?id=137. It's absurd.

shawnee_ 15y ago

Traditional supply-demand economics just doesn't explain the behavior of "middleman" industries, such as lawyering, real estate agenting, etc. Traditional supply-demand economics assumes a 1:1 ratio where there is one buyer and one seller and there is some amount of economic surplus that the two parties play tug-of-war with. Traditional supply-demand economics works great when buyer and seller negotiate directly. But in middleman industries, the middlemen can hop on either side, and play for either team. They are able to effectively scope out surplus from either or both sides, predatorize the weaker side with almost _no risk_ to themselves, and destroy a lot of the potential realized value between the original parties in their process. So basically it creates a "parallel" economy where prices aren't determined by supply or demand, but rather by fear and a kind of high-stakes prisoner's dilemma between buyers and sellers where buyers and sellers bear all the risk and lawyers and agents reap all of the rewards.

anigbrowl 15y ago
Traditional supply-demand economics assumes a 1:1 ratio where there is one buyer and one seller That's not what 'ceteris paribus' means.
monochromatic 15y ago
In what way are lawyers middlemen?

pbreit 15y ago

The fee overage acts as insurance. Since the downside of legal services (no matter the competence) is significant, consumers believe the extra money they are paying will help mitigate any unfortunate circumstances.

jriley 15y ago

I would add: 1) Pay can be high with win/lose stakes 2) Different pay models (contingency)

mfaustman 15y ago

This whole argument that this is "not a free market" is silly. None of the factors pointed to here would actually limit choice or restrain price movement. It is a free market, but that does not mean that the market lacks information asymmetries that would artificially morph prices. As Antone points out, there is a strong quality perception issue. Ironically, it is the Bottom Line Law Group that is fighting this perception of quality on a daily basis (vs a Wilson or Fenwick). Thus it does not matter if the supply increases if the consumer perceives the bottom-end as an inferior good. This skewed perception is rooted in a total lack of transparency in the legal industry. This lack of transparency limits the consumer’s ability to find lawyers like Antone, and keeps the cost of standard information and a simple opinion high. I agree with Antone that the industry is on the brink of change, but it is a BIG messed up industry. Change will come in many forms within the industry's mirco verticals. It will come from networks of smaller more specialized law firms such as the Bottom Line Law Group, and from innovations which create more transparency in the industry to find qualified attorneys and access quality information.

ShabbyDoo 15y ago

There is one restriction in particular which I believe has a huge effect on the legal industry's slow pace of change -- only lawyers may own companies which provide legal services to clients (vs. in-house counsel). So, want to start an online, virtual law firm? Either act as a referral service or make sure you never want a non-attorney to have equity in your company. Why does this rule exist? I haven't a clue.

deleted 15y ago
[deleted]
joshuaheard 15y ago
This is true for most state-licensed professionals like doctors and accountants. There are two main reasons for this. The first is that a non-licensed person could easily bypass the license rules by affiliating with a licensed person in name only and doing all the work requiring a license. The second is that licensed professionals have ethical and professional duties to their clients that they are taught as part of their licensing eductation. A non-licensed person may not know these duties, or be aware of their rationales, and may try to influence the licensed person to violate them.
- physicslover 15y ago
  I don't believe this is true for doctors, although, I could be wrong but I think HMO's get around the restriction. The bottom line is that lawyers are a protected guild with rules like the one mentioned above that artificially inflate the value of their services.

larrys 15y ago

The article doesn't address what could be the most important factors. First, your relationship with a lawyer is a personal relationship. And it's hard to break a personal relationship over a yearly price increase of single digit %. And lawyers regularly wine and dine and become "friends" with their clients. The client really thinks that the lawyer likes them. If you've ever worked in sales you know what I mean by this. Lawyers are nice and friendly and that insures the loyalty of the client. When I was in high school I delivered gifts to the clients of a small law firm. I remember the partner deciding who got what gift (based on amount of work). This wasn't a bribe. Just a thank you to insure ongoing loyalty. (Maybe some were bribes of course). Remember rates aren't doubled they go up a little each time they are raised. If you are already paying $400 per hour you aren't bolting for $425/hr. It's not like rates are doubling in a year. The other reason is FUD. People convince themselves and rationalize that a certain lawyer at a certain rate will get the job done. They are afraid of switching lawyers and having a bad outcome. So the above is certainly one of the things that keeps legal rates high. What about new startup lawyers? Well the way any professional service works you start out with whatever work you can get at whatever price you can get (let's say). Then as you gain clients you slowly wean yourself from the low priced clients (by taking longer, not returning calls etc.) and they get the message. This leaves you with the best clients who you can raise rates on (because they like you and are fearful of changing). So even if there was a group that charged low rates (to corporate buyers) over time their rates would rise as well. Because of the person factor I mentioned in the first paragraph. Finally, even though lawyers can now market (I remember when they couldn't) they won't "sell" in the traditional sense. If I sell a service (like web hosting web design or unix sysadmin) I can pickup the phone and call people. I can go door to door. I can place ads. Lawyers can place ads of course but that's not the most effective way to sell personal services. Then you are waiting for someone to contact you. Selling is selling. If lawyers were ethically allowed and it was acceptable practice to "cold call" I believe you would see rates dropping in certain types of work.

grellas 15y ago

A few quick thoughts (am about to go into a meeting): 1. Lawyers are not immune from market forces. This is easily seen at the micro level: a new practitioner with no established reputation can charge $800 per hour and see where that gets him (of course, precisely nowhere). On the macro level, law has been a boom business ever since at least the 1960s when expansive liability theories came to be widely adopted by the legislatures and the courts. So, what used to be regarded as a dispute over garbage at the local dump becomes a massive environmental enforcement action by which dozens of parties face multi-million dollar liabilities; what used to be a distribution chain in which only the end-point seller typically bore liability to the consumer becomes massive product liability suits going back to the manufacturers and imposing strict liability on them in ways that can ruin a multi-billion business; what used to be the $.25 that a cab driver overcharged you because of some shifty trade practice becomes a major class action in which all the vendors in the area are swept in to face a protracted legal fight and potentially substantial damage exposure; etc., etc., etc. The point being: the legal landscape has changed dramatically and, for example, the Big Law firm that I worked at in the early 1980s grew from 23 lawyers in 1965 to about 250 in 1980 and is today over 1,000 lawyers. Demand is up in a huge way over the decades and law remains a boom business in this respect (certainly Big Law remains so) notwithstanding the recent economic calamities that have beset us all. That is the main reason why the very high fees are charged: because businesses are willing to pay them (when they are not, overt or disguised discounting occurs with great regularity). 2. That said, I am no fan of the Big Law model and have expressed my criticisms at some length elsewhere (see, e.g., http://news.ycombinator.com/item?id=1648342 http://news.ycombinator.com/item?id=1648342). I also have stated in some detail why I think the large firms have been left reeling from the recent economic shock and how this has caused a general revulsion against the billable fee structure used in these firms (see http://news.ycombinator.com/item?id=1649507 http://news.ycombinator.com/item?id=1649507). 3. In reality, the legal field is pretty diverse and price does matter for those who consume legal services (why shouldn't it?). The providers of those services who remain stuck in old ways will need to adapt to the short-term problems but they obviously hope to keep the old structures in place in hopes that the good old days will return. For the broader legal market, however, there is already wide variety in the range of services and pricing offered. As a consumer, you need to do your due diligence and shop around. In the broader market, lawyers want your business and will adapt as needed to get it.

tsotha 15y ago

The same reason professional athletes make so much money even though high schools and colleges are full of kids who want to play for a living. Just having a good lawyer isn't enough - he needs to be better than the lawyer on the other side.

JackC 15y ago

Before we talk too much about why lawyers are so expensive, it's worth checking out how much they actually get paid. It's the weirdest salary chart you'll ever see: http://www.nalp.org/salarydistrib http://www.nalp.org/salarydistrib Basically it's the sum of two separate curves -- a bell curve centered around $45,000 a year, and a sharp, sharp peak up at $160,000. What's going on here? Well law is two separate markets -- the bell curve is the 90% of lawyers who compete on cost in a more or less normal market, and the sharp peak is the 10% of lawyers who work at BigLaw firms that march in lockstep at $160,000 for new associates. So for the 90%, the answer is that law is a highly competitive market. You're paying $150,000 in tuition to get a job that averages $45k a year when you start, and won't go up too fast. You're doing largely hard, boring work, it sucks to do without support staff, and it's time-consuming to do right. If the product costs a lot, it's not because the lawyer is overpaid -- it's because that's how much it costs to produce. Lawyers who drop below that price go out of business. For the 10%, they're in a weird parallel universe where the cost of their service is almost totally irrelevant to their clients. They're handling international mergers, billion-dollar divorces, and Federal indictments of entire financial firms. The question of whether the lawyers charge $300 or $600/hr is like the question of whether your parachute costs $50 or $100 before you jump out of a plane. If there's the slightest chance that the $100 parachute is safer, you go for it. That's why the starting salaries march in lockstep -- no BigLaw firm can afford to let people think that the cream of the crop from Harvard Law is being hired by their competitors. They'd lose all their business if anyone else had a clear edge. But this only relates to a small minority of lawyers. ... To disclose my own bias, this article/conversation is strange to me because I took a big pay cut to go from programming (which I could do before I graduated from college) to law (where most of my lower salary goes to student loans). I knew I would. I didn't join the BigLaw 10% (which I would have hated), but I'm getting to work on things that matter to me, and I'm proud I made that call. But to see a bunch of programmers talk about why lawyers have it so good ... yeesh. This isn't to say that law can't get easier or cheaper. There are huge wins to be had from automation here, and I always turn into the resident tools guy wherever I work. I've had to get pretty good at VBA of all things, and 1000 curses on that misbegotten tongue. (Jashkenas, are you listening? Need a project after CoffeeScript?) I also think law school needs to get a lot cheaper -- like college tuition in general, it's been growing at twice inflation for decades, and that can't be right. One other thought -- the bar is indeed a protected guild, and I'm not sure where I stand on that, but there are reasons for it. First and foremost, you will never know whether your lawyer has done a good job. If you hire a programmer, there may be problems behind the scenes, but you can more or less tell whether they've done what you hired them to do. If you hire a lawyer, and you lose your case, you will often have not the slightest idea whether they were competent -- there's just not enough signal for most laypeople to analyze in most cases. Even my own supervisors often have no idea whether I've done my job right. They ask me a question, I answer it, and without repeating the work I did they have no way of telling whether I'm right or how long it should have taken to complete. Requiring education, examination and licensing is one way to address that problem. It definitely raises the price. In theory it also lowers the chances that you're buying snake oil. Something to consider anyway.

jasonkester 15y ago

Same reason so many of us here can bill out at several hundred dollars an hour even though there is an unlimited supply of people calling themselves computer programmers who will happily try to do the same job for $7/hr. Valuable stuff is worth paying more for.

johnnygleeson 15y ago

For anyone interested there is a good book called 'The End of Lawyers?' by Richard Susskind, a visiting Professor at Oxford, that discusses the ways in which technology will gradually commoditize many elements of traditional legal practice. http://www.amazon.com/End-Lawyers-Rethinking-Nature-Services/dp/0199541728 http://www.amazon.com/End-Lawyers-Rethinking-Nature-Services... Chapters 1. Introduction - the Beginning of the End? 2. The Path to Commoditization 3. Trends in Technology 4. Disruptive Legal Technologies 5. The Future for In-house Lawyers 6. Resolving and Avoiding Disputes 7. Access to Law and to Justice 8. Conclusion - the Future of Lawyers.

nwenzel 15y ago

Supply Induced Demand. They're out there, so you need one too. The other guy has 2, you better get 2, too. No such thing as an "excess supply."

deleted 15y ago

[deleted]

niknir 15y ago

I believe a major frustration is the costs of discrete advice or legal services. This is caused by a high fixed cost associated with even interacting with a lawyer. Calling, scheduling a meeting, signing paperwork, paying a retainer, going to an office, and so on. I used to be the business intelligence lead at Yelp, and saw that people gravitate to products that make the entire experience of engaging local service providers as simple as possible. With those problems in mind, I'm starting Lawdingo.com, a market for immediate legal advice delivered by lawyers over video chat, billed by the minute. The product is still in development, but I have some great startup lawyers on it if anyone would be interested in trying it out. Feedback on Lawdingo is much appreciated.

tomkarlo 15y ago

I used to "hire" law firms regularly for my clients. What's not being mentioned here is that since in most cases the individuals _choosing_ the law firms for large financial and M&A transactions (which represent the real meat of the "big law" business) generally aren't directly paying the legal fees, there's relatively little incentive for them to push for lower prices. (And if I remember correctly, if those legal fees are part of a financing transaction, they don't count against the businesses "normalized/adjusted" income, either.) If I'm the CFO of a company that's doing a $500M financing round, am I really going to choose a lesser law firm to save maybe $100K in bills? I'm already probably paying the bankers $5M or more to do the deal in fees (arguably, that's the real gouging, given that the work doesn't really scale with the deal size but the fees do.) If I choose a cheaper firm, and they mess up (and frankly, all the firms make mistakes, especially when you have junior associates drafting filing docs) it could cost me my job. (The most cost-conscious clients I've seen were entrepreneurs or at least majority owners of businesses - they saw those fees as coming right of out their own pockets, so they tried to do whatever they could to keep them down) In-house counsels are definitely trying to push down costs by doing more things internally or offshoring more mundane stuff like day-to-day contracts. But at the same time, most of your in-house counsels come from a big law firm, so they're unlikely to break away completely, either.

rayiner 15y ago

The legal field isn't really amenable to simplistic economic analysis. With all due respect to thinkcomp, the idea that licensing requirements are what is driving the cost of legal services is totally wrong. First, legal services generally aren't that expensive. If you need someone to help you draft a deed to some property, you can probably get that work done for cheaper than you would pay an engineer to design you a retaining wall on that property. When people say legal services are expensive, what they mean is that high-end corporate legal services are expensive. Second, corporate legal services is not expensive because of limited supply. There are about 45,000 JD's graduated each year, and maybe 3,000-4,000 are hired at big firms that do corporate work. The rest work for far less money, in the $45-$60k range. If you wanted to start a firm doing corporate legal services at low cost, paying attorneys $80k a year (half the going rate of a first year at a large firm), you would literally drown in job applications. While in a platonic sense there is a supply constraint in the legal field, it has a practical effect more akin to crash safety regulations in cars than something that actually constrains supply to drive up prices. If the state bars got rid of the requirement that lawyers attend an accredited law school, there would be almost no change in the cost of legal services at the top. Big firms hire the large majority of their associates from only 20 or so schools, out of the 200 that exist. Why would adding a category of potential hires below the huge group of people already not getting hired drive down salaries? The price of high-end legal services is insensitive to the supply of lawyers for the same reason the price of Apple products is largely insensitive to the number of Korean competitors in the market: 1) brand is tremendously important; and 2) there are actual differences in the quality of the product. Re: 1) Because it is difficult to tell whether your lawyer did a bad job or whether you just had a bad case, branding and signaling becomes tremendously important. It is that branding and signaling that makes companies keep going to firms that hire primarily from the top schools, even when there is nothing, legally, that prevents them from taking it to firms that have more diverse hiring standards. Re: 2) The adversarial nature of law means that there is an arms race for the smartest people. While a lot of even high-end legal work can be very routine and boring, some of it can be very complex. That 10% of legal work that requires out-thinking the opposing counsel can have major repercussions for companies, and as such companies are willing to spend the money to ensure that their lawyers are smarter (at least on paper) than the opposing party's lawyers.

15y ago

Uchikoma 15y ago

What I found interesting in dealing with layers: they charge high rates even for standard contracts, EULAs etc. and when asked if one is safe with their advice, only tell you that courts can decide in whatever way they want - so no.

rayiner 15y ago

To respond to one point in the article: > Associate salaries are not an efficient, free market. That is probably true, but the evidence supplied in the article supports an inference the opposite of the one made by the author. If everybody in New York pays $160k as an informal arrangement, that suggests artificially low salaries, not artificially high ones. Why would a bunch of firms act informally in concert to artificially drive up their costs? And associate salaries, of course, have only an indirect effect on legal fees. The price of a good is directly influenced only by supply and the demand curve. The costs of making the good are irrelevant except to the extent they influence supply. Clients, of course, don't care what associates make. The amount they will pay for services is entirely a function of their demand and the supply of law firms willing to do the work.

physicslover 15y ago

My naive understanding is that only lawyers can own and operate a law firm. In other words one can't form the equivalent of an HMO and hire a bunch of lawyers and pay them a salary and offer legal counsel to individuals. I believe this is mandated by bar associations on ethical grounds, though I find it absurd. This artificially inflates the cost of legal services.

GigabyteCoin 15y ago

Who said there is an excess supply of lawyers?

joshuaheard 15y ago

Simple, because government keeps passing more and more laws that create more ways to become liable. While there may be growing supply of lawyers, there is a growing demand due to this explosive growth of new laws. Stop the government from controlling every inch of our lives, and you will see lawyers getting cheaper. I also agree with the previous reply that this article only deals with the 10% of lawyers who work in big firms. The other 90% of lawyers that don't work in big firms are out there competing everyday for your business and are charging reasonable rates.

itmag 15y ago

HN, help me make up my mind: is an abundance of lawyers to be seen as a necessary component of a complex society? Or is it a symptom of decay? Are lawyers necessary agents of the greater good or are they vampiric rent-seekers on a byzantine legal morass? I'm not trying to be clever; I genuinely want to figure this out.

DanBC 15y ago
(Obviously, IANAL and I have no legal training). In England people are encouraged not to go to law until they really need to. People with family law problems (divorce, access to children, etc) are encouraged, strongly, to use mediation before they go to court. This mediation can be lawyer led, but it can also be led by other professionals. People with employment problems usually need to filter through any internal company policies before they go to law. Rejecting pre-trial discussions is usually a bad idea. Solicitors will tell you that going to law is a bad idea, and expensive, and will often not get the result you want. I think, BICBW, that they need to do this as part of their professional codes of conduct. They're tightly regulated, and encouraging people to go to law if they're unlikely to win is frowned upon. Note that none of this is a barrier to effective law; once you need to go to law you've usually had several discussions with solicitors and you know what's involved and what to expect from your barrister. There are separate tracks for quick and easy civil "small claims" cases, but even these can sometimes be avoided by using existing legal protections. (The very consumer-friendly "Distance Buying Regulations" or the credit card protections, for example.)
DanBC 15y ago
Here's another reply which tries to better answer your question: I live in England. We have free health care available to all. But if you want to pay you can buy private medical insurance. I was debating with some friends. They said that it was wrong for doctors who got free training in the NHS to then go and work privately; they said that doctors should work for X years in the NHS. I said that doctors didn't get free training; they have large student debts and they work for years in tough conditions for low pay. And then I asked what the difference between doctors (educated and trained at UK tax-payer expense) and lawyers (educated at UK tax-payer expense)? Why is it wrong for doctors to work privately, and not for lawyers? Why are legal-aid lawyers so hard to find in the UK? Why is "pro-bono" so rare? Some lawyers can be drivers of social change for good (fair pay, anti-racism, etc) but they often get hoovered into creating laws or finding loopholes for weird corporate behaviours.

crusso 15y ago

Think about this. If you have too many doctors, they run out of sick people and their prices go down. They don't go out and start injuring people to make business for themselves. Lawyers do just that. If they don't have work, they can attack innocent citizens to create work for themselves. Frivolous law suits create new market pressure for more attorneys. Whenever you see slip-n-fall attorney commercials, that's just an window into the parasitically-based ecosystem that lawyers operate in. Failing that, lawyers are the most likely profession to go into politics and create more laws that need what to sort them out? Oh yeah, more lawyers. It's a troubling profession that needs to be considered carefully when you're making decisions about the economic impact of laws upon society.