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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

by 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.
  - bane 15y ago
    Depends, this might work for some common cases, but there are lots of different kinds of lawyers just like different kinds of doctors. The lawyer I use for business is entirely different than the one I might use to defend against a murder charge is entirely different from defending against a traffic ticket is entirely different to sue on a trademark case is entirely different from suing somebody for slashing my tires, etc.
- circa 15y ago
  I hope your username is for the band and not the batman character. :)
- anamax 15y ago
  > The market dynamics and model are entirely different with these sorts of emergency industries. Would you call auto-repair an emergency industry? After all, if you break down on the side of the road, you need assistance immediately? The vast majority of medical care is NOT given in an emergency situation. The same is true of legal services. And yes, auto repair as well.
  - bane 15y ago
    So to answer your own question, when you are sick, need legal help, or stuck by the side of the road, do you comparison shop for best price or do you go to first available?
    - mirceagoia 15y ago
      Depends on how much time you have...if it's very urgent you get the first available...if it's not that urgent then you can afford to compare.
      - bane 15y ago
        Right, and the comparison is usually not over price, but perceived quality. The best example for doctors is elective plastic surgery. Do you get a boob job from the cheapest or the best? The glut of expensive surgeons in the L.A. area indicates cost is not a major factor. For lawyers it might be a lawsuit. Do you go with the cheapest lawyer? Most people go with who they think is most likely to win the case (or net the most money from the suit).
        anamax 15y ago
        > The glut of expensive surgeons in the L.A. area indicates cost is not a major factor. Unless you're also going to argue that the large number of expensive cars in LA "indicates that cost is not a major factor" for cars. (The same can be said for handbags.) Never confuse what rich folk will pay for luxuries with real world prices.
    - 15y ago
baddox 15y ago
I don't think that becoming dependent on a particular product, service, or supplier makes it "not a free market."
- jerrya 15y ago
  http://en.wikipedia.org/wiki/Free_market#Overview http://en.wikipedia.org/wiki/Free_market#Overview Adam Smith believed that an economy should be free of monopoly rents If I can keep you from switching lawyers, if I can keep you from interviewing other lawyers, if I know your choice is not "lawyer or no lawyer", but "which lawyer", then I can keep my prices artificially (not a free market) high.
  - Symmetry 15y ago
    Erm, how is that different than food? You can't choose not to buy food, so would you also consider that not to be a free market?
    - ktizo 15y ago
      You can grow it or hunt it. [edit] Not that I think that the global market for food to be a free market.
  - baddox 15y ago
    How do you distinguish between "keeping you from switching" and "it being inherently difficult to switch?" If you buy an expensive car that only runs on expensive and rare fuel (thereby restricting your choice in fuels), is the free market somehow violated? If you buy a Gillette razor that only works with Gillette blade cartridges, is the free market violated? I find the distinction rather fuzzy.
    - antonej 15y ago
      Good point. Lawyers and firms have few (if any) tools at their disposal to keep a client from switching firms. The inherent switching cost is fairly high for some matters, but firms that are sophisticated know how to compensate on the front end in a way that makes it easier for a potential client to switch to them.
javert 15y ago
So a lot of claims from lawyers that they operate in a free market are really not true. A free market isn't defined by whatever arbitrary criteria you make up. You can't claim it's not a free market because it's a hassle to switch lawyers, or because it's expensive to do so, or because searching for lawyers takes time.
- jerrya 15y ago
  That's not the claim I made, and you didn't address the claim I made. I said: the consumer cannot just walk away. If I am buying a stereo, my choice is between a) do I need a stereo or not, and b) where do I buy it. The purchaser of law services usually does not have the option of walking away from the deal entirely. His/her choice is limited to: which of these expensive lawyers do I go with?
  - javert 15y ago
    You also can't claim it's not a free market because you actually need the thing you're in the market for.
- dantheman 15y ago
  The fact that there is a bar and licensing means that it's not a free market.
  - javert 15y ago
    Bingo.
- ktizo 15y ago
  Here's a nice definition from the OECD website's glossary of statistical terms; "A free market economy is one where scarcities are resolved through changes in relative prices rather than through regulation. If a commodity is in short supply relative to the number of people who want to buy it, its price will rise, producers and sellers will make higher profits and production will tend to rise to meet the excess demand. If the available supply of a commodity is in a glut situation, the price will tend to fall, thereby attracting additional buyers and discouraging producers and sellers from entering the market. In a free market, buyers and sellers come together voluntarily to decide on what products to produce and sell and buy, and how resources such as labour and capital should be used." Given this definition, it is hard to see how there could ever exist a free market in professional legal services and surely only a fool (or possibly a lawyer), would seek to argue that there is one in existence already given the overwhelming evidence to the contrary.
rayiner 15y ago
> 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. You're conflating two different concepts. You're talking about transaction costs (not being able to walk away once you've hired a lawyer). Markets with high transaction costs can still be free, in the sense you can choose whatever lawyer you want and supply and demand aren't artificially restricted.[1] Markets with high transaction costs are, on the other hand, not efficient. [1] Supply in the legal field is regulated, but I'd argue it's supply in corporate law is not artificially restricted to any substantial degree.

by jerrya 15y ago

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.
- bane 15y ago
  Depends, this might work for some common cases, but there are lots of different kinds of lawyers just like different kinds of doctors. The lawyer I use for business is entirely different than the one I might use to defend against a murder charge is entirely different from defending against a traffic ticket is entirely different to sue on a trademark case is entirely different from suing somebody for slashing my tires, etc.
circa 15y ago
I hope your username is for the band and not the batman character. :)
anamax 15y ago
> The market dynamics and model are entirely different with these sorts of emergency industries. Would you call auto-repair an emergency industry? After all, if you break down on the side of the road, you need assistance immediately? The vast majority of medical care is NOT given in an emergency situation. The same is true of legal services. And yes, auto repair as well.
- bane 15y ago
  So to answer your own question, when you are sick, need legal help, or stuck by the side of the road, do you comparison shop for best price or do you go to first available?
  - mirceagoia 15y ago
    Depends on how much time you have...if it's very urgent you get the first available...if it's not that urgent then you can afford to compare.
    - bane 15y ago
      Right, and the comparison is usually not over price, but perceived quality. The best example for doctors is elective plastic surgery. Do you get a boob job from the cheapest or the best? The glut of expensive surgeons in the L.A. area indicates cost is not a major factor. For lawyers it might be a lawsuit. Do you go with the cheapest lawyer? Most people go with who they think is most likely to win the case (or net the most money from the suit).
      - anamax 15y ago
        > The glut of expensive surgeons in the L.A. area indicates cost is not a major factor. Unless you're also going to argue that the large number of expensive cars in LA "indicates that cost is not a major factor" for cars. (The same can be said for handbags.) Never confuse what rich folk will pay for luxuries with real world prices.
  - 15y ago

baddox 15y ago

I don't think that becoming dependent on a particular product, service, or supplier makes it "not a free market."

jerrya 15y ago
http://en.wikipedia.org/wiki/Free_market#Overview http://en.wikipedia.org/wiki/Free_market#Overview Adam Smith believed that an economy should be free of monopoly rents If I can keep you from switching lawyers, if I can keep you from interviewing other lawyers, if I know your choice is not "lawyer or no lawyer", but "which lawyer", then I can keep my prices artificially (not a free market) high.
- Symmetry 15y ago
  Erm, how is that different than food? You can't choose not to buy food, so would you also consider that not to be a free market?
  - ktizo 15y ago
    You can grow it or hunt it. [edit] Not that I think that the global market for food to be a free market.
- baddox 15y ago
  How do you distinguish between "keeping you from switching" and "it being inherently difficult to switch?" If you buy an expensive car that only runs on expensive and rare fuel (thereby restricting your choice in fuels), is the free market somehow violated? If you buy a Gillette razor that only works with Gillette blade cartridges, is the free market violated? I find the distinction rather fuzzy.
  - antonej 15y ago
    Good point. Lawyers and firms have few (if any) tools at their disposal to keep a client from switching firms. The inherent switching cost is fairly high for some matters, but firms that are sophisticated know how to compensate on the front end in a way that makes it easier for a potential client to switch to them.

javert 15y ago

So a lot of claims from lawyers that they operate in a free market are really not true. A free market isn't defined by whatever arbitrary criteria you make up. You can't claim it's not a free market because it's a hassle to switch lawyers, or because it's expensive to do so, or because searching for lawyers takes time.

jerrya 15y ago
That's not the claim I made, and you didn't address the claim I made. I said: the consumer cannot just walk away. If I am buying a stereo, my choice is between a) do I need a stereo or not, and b) where do I buy it. The purchaser of law services usually does not have the option of walking away from the deal entirely. His/her choice is limited to: which of these expensive lawyers do I go with?
- javert 15y ago
  You also can't claim it's not a free market because you actually need the thing you're in the market for.
dantheman 15y ago
The fact that there is a bar and licensing means that it's not a free market.
- javert 15y ago
  Bingo.
ktizo 15y ago
Here's a nice definition from the OECD website's glossary of statistical terms; "A free market economy is one where scarcities are resolved through changes in relative prices rather than through regulation. If a commodity is in short supply relative to the number of people who want to buy it, its price will rise, producers and sellers will make higher profits and production will tend to rise to meet the excess demand. If the available supply of a commodity is in a glut situation, the price will tend to fall, thereby attracting additional buyers and discouraging producers and sellers from entering the market. In a free market, buyers and sellers come together voluntarily to decide on what products to produce and sell and buy, and how resources such as labour and capital should be used." Given this definition, it is hard to see how there could ever exist a free market in professional legal services and surely only a fool (or possibly a lawyer), would seek to argue that there is one in existence already given the overwhelming evidence to the contrary.

rayiner 15y ago

> 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. You're conflating two different concepts. You're talking about transaction costs (not being able to walk away once you've hired a lawyer). Markets with high transaction costs can still be free, in the sense you can choose whatever lawyer you want and supply and demand aren't artificially restricted.[1] Markets with high transaction costs are, on the other hand, not efficient. [1] Supply in the legal field is regulated, but I'd argue it's supply in corporate law is not artificially restricted to any substantial degree.