David R. Henderson  

Let's Deregulate all the Lawyers

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The authors carefully build their case, first telling of the various restrictions on who can be a lawyer. All but a few state governments, they note, require prospective lawyers to have graduated from a law school that the American Bar Association has accredited. One notable exception is California, where one can become a lawyer simply by passing the bar exam and a competency exam. Every state government but Wisconsin's requires all would-be lawyers to pass a bar exam. The Wisconsin government makes exception only for graduates of the University of Wisconsin Law School! This would make sense, from the viewpoint of quality assurance, only if the University of Wisconsin Law School graduates are, on average, better than those of any other law school, including Stanford, Harvard, Chicago, and Yale.
This is from "Let My Lawyers Go," in Regulation, Winter 2011-2012. It's my review [scroll down to page 42] of First Thing We Do, Let's Deregulate All the Lawyers, a recent book by Clifford Winston and Robert W. Crandall of the Brookings Institution and Vikram Maheshri of the University of Houston.

Some other highlights from my Regulation review:

Why do the authors think regulation is not about assuring quality? One reason is that the American Bar Association, which accredits law schools--essentially a fox in charge of the hen house--has not even considered accrediting foreign law schools or online law schools. If the ABA's true motive were to assure quality, it would seriously consider accrediting such schools. Another reason, they write, is that "the ABA has refused to provide further information about a law school's quality beyond its accreditation status and has continually issued disclaimers of any law school rating system."

The authors also point to a subtle benefit of deregulation: it would break down solidarity in the legal lobby, thus undercutting the push for more government regulation of the legal profession. [DRH note: Drop the last four words of the previous sentence. The editor added them and I missed that when I read the page proofs.] They don't make this argument totally clear, but it seems to be an application of the late Mancur Olson's theory of collective action. The big problem with collective action, noted Olson, is the free-rider problem: those who don't pay for the benefits of lobbying still get the benefits. The free-rider problem, therefore, leads to less lobbying than otherwise. The American Bar Association and the American Association of Justice (formerly the American Trial Lawyers Association), which both lobby for regulations and legislation that benefit lawyers, would have a bigger free-rider problem if there were more lawyers and fewer restrictions on who could become a lawyer. I find this argument persuasive, but it would have been helpful if the authors had elaborated on it somewhat.

The authors also estimate the gain in incomes to lawyers due to the restriction of competition. It's huge.

UPDATE: My Econlib colleague, Russ Roberts, interviewed Cliff Winston, one of the authors, on Econtalk. It's here.

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CATEGORIES: Labor Market , Regulation

COMMENTS (12 to date)
Æternitatis writes:

While I--a lawyer!--agree with the thrust of the argument and its conclusion, this does not quite follow:

"This would make sense, from the viewpoint of quality assurance, only if the University of Wisconsin Law School graduates are, on average, better than those of any other law school, including Stanford, Harvard, Chicago, and Yale."

Much of law as practiced is actually state law--including most criminal, contracts, and torts cases, and many other important areas--and hence varies from state to state. The best law schools, also often called "national law schools", are infamous for not teaching anything beyond general principles in these areas and certainly couldn't teach the specific laws of each state. Hence, for most lawyers, a state bar exam and preparation for it are actually necessary for the particular state in which they are going to practice. If Wisconsin law schools (which includes Marquette, besides the Univ. of Wisc.) actually require all students to learn Wisconsin law, then waiving the bar exam for them (but not for the graduates of many better out-of-state law schools) actually makes some sense.

MJG writes:

I've read the book, listened to them on podcasts, and read a variety of articles about this, as I find it of interest. I am not, however, at all convinced by the argument, and I have no confidence that the authors have any real conception of the various levels of legal practice, the reality of advice to clients or quality of work product, or the expectations by clients in the real world (running the gamut from indigents to corporations and investment banks. The conclusions all follow from a very disconnected ivory tower view of how the legal market actually works.

I also think a greater focus on how foreign legal practices operate, which end up very similar despite not requiring formal law school.

In any event, I think there is something to be said for deregulating parts of legal practice and there may be benefits, but despite their earnest efforts I did not find this a serious work in that it had little practical understanding of its subject.

Æternitatis writes:

I would make a second slight comment on the free-rider/collective-action issue. One should not focus on the ABA or the trial lawyer's lobby in this regard. These are purely voluntary associations and I, for example, practice law and litigate while not a member of either principally because of their lobbying on this and other issues. Instead one should look at the state bar associations which usually are mandatory and collect hundreds of dollars annually from each lawyer practicing in each state to keep lobbying for exclusion of the non-accredited under the laws of each state. They are the real villains here (though the ABA and other national organizations certainly don't help).

Æternitatis writes:

Finally, I should add that there is a vast dispersion in the hourly costs of legal services between members of the cartel, ranging from less than $100/hour to more than 10 times that in purely voluntary and competitive engagements. I see no reason why the law-school/bar-requirement rent should substantially vary in absolute terms between the members of the cartel. Therefore, the cartel rent part of elite lawyer's compensation is unlikely to be a very large part of their compensation, so we have little to fear from deregulation (which makes it somewhat less selfless for us to argue for deregulation).

Æternitatis writes:

In an ideal world, lawyer regulation should consist of nothing more than:

(1) The one and only perquisite of graduating an accredited law school would be the privilege of claiming to be a "J.D." If potential clients want to use this as a quality signal, or not, they should be free to do so.

(2) The one and only perquisite of becoming a member of the state bar is the title of "lawyer." Again, clients could take that as a signal of quality or not.

(3) The only requirement to becoming a bar member/lawyer would be to pass the state bar exam and a background check. Law school not required.

(4) Only lawyers should be allowed to appear in court for another. The purpose of this requirement would be to keep the most disruptive nuts and crooks out of court (and there are enough of those) and give the bar some opportunity to sanction minor malpractice by taking away the lawyer status (for a limited period of time or forever).

(5) All other legal work should be available to anyone the client picks, lawyer or not. Truly fraudulent and incompetent work would still be subject to suit for legal malpractice.

That's all.

David R. Henderson writes:

I know I didn’t spell your name right, but I did my best. Points taken, especially your criticism of my too-categorical statement about Wisconsin. Once you make the point, it’s obvious. I should have thought of that. BTW, I like the pictures on your web site of my two favorite Hayeks.

Andreas Moser writes:

Bar associations not only have the interests of lawyers on their minds, but also their own. Once you are admitted as a lawyer, they force you to undergo 10, 20 or 30 hours of "continuing legal education" annually, for which the lawyer has to pay of course.

Bar associations pretend to lobby for lawyers, but the reality is that lawyers are such a diverse group that they don't have too many common interests. I probably have more common interests with some of my criminal clients than with most other lawyers.

DougT writes:

Just a note: Vermont also allows candidates to "read the law," taking the bar without receiving a J.D. I believe Washington does as well. New Hampshire grants graduates of the UNH Law School a waiver from the bar, although they must still pass the Multistate Professional Responsibility Examination.

This would be a more convincing argument if issues of basic fact were checked over. I know New England is a small place, but still!

Æternitatis writes:

@DougT Interesting! I've made a little bit of a study of this and only ever heard of the Wisconsin exception. Thanks for updating me.

GIVCO writes:

Lawyers can really, really screw up people's lives. They can permit important statutory deadlines to pass, they often handle client money, they often paper monumental decisions, etc. They should not suck. Plus, they practice directly with government (courts and, more so, administrative agencies).

So having smarts and moral worthiness are pretty important attributes and they should streamline, not complicate, public services.

How does one regulate a floor for those qualities? I have no idea, but ABA accreditation is far, far distant from the answer; it makes life more expensive for cheaper, more accessible methods of qualifying. The Bar and Moral background check do some useful sifting.

John Thacker writes:

Wisconsin does require a course in Wisconsin law. I remember it being mentioned on Ann Althouse's blog.

I also remember that Milton Friedman (forget which book) mentioned that mandatory licensing for lawyers came about slower than mandatory licensing for doctors, and the requirements were somewhat more lax in restricting night schools and self-study and so on. He hypothesized that this was because so many backwoods rural legislators were self-taught or night school lawyers, who didn't want to pass a law saying that they themselves were unqualified.

David R. Henderson writes:

@John Thacker,
You remember correctly. It was in Capitalism and Freedom.

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