For every 1% increase in the number of lawyers, economic growth falls 3% (1986)
sciencedirect.com
sciencedirect.com
My point is not that this would be a good idea, it's that GDP growth is not a good measure for a society across the board.
Maybe GDP growth would be higher if we could simply dump toxic waste in water supplies, and the threat of lawyers/class action suits that helps prevent that behavior hurts economic growth.
If we account for externalities witha reasonable "weight" most economic activity must be operating close to or at an absolute loss
For example, if two housewives join the workforce by cleaning each other’s now unattended houses, GDP shows a large increase even though the situation is (arugably) a net loss for everyone involved.
Thus we are wasting an unfathomable amount of natural resources by delaying our transition to a space-faring civilization. And world GDP is currently the best measure we have of human technological progress.
The main reason for delays on this front seems to be a lack of long-term thinking, as well as a general disinterest in advancing space technology.
That depends on how profitable it is to provide the treatment for terminal illnesses.
Doesn’t sound very reliable, especially being from 1986 when we generally had a much less sophisticated understanding of the intricacies of statistics and hypothesis testing.
Conversely to the paper’s implication, too many lawyers can also be seen as evidence of a society based on the rule of the law, with strong legal institutions, processes, separation of powers and other patterns of integrity, and lack of rule by decree in any form, all of which are valuable and possibly necessary components of sustainable economic growth. In such a society, law will naturally be one of the more prestigious and attractive professions.
I’m sure there’s some optimal ratio of lawyers to scientists|engineers|teachers|builders and other productive professions, where exceeding that ratio results in lower than optimal growth. But even a society with too many lawyers probably has stronger growth than one with none.
There are many times in my career that I have seen that as soon as lawyers get involved, all innovation stops.
Early steam engine development was a collaborative endeavor, with various engineers building on the ideas of others to make incremental improvements in steam technology. Then came Bolton and Watt, who used patents to stop the development of steam engines superior to their own products.
The Bolton and Watt patents prevented the development of steam railway engines, and in so doing delayed the beginning of the railway era--and all the societal development it created--by twenty years or more.
Intellectual property law is a gift to monopolists. It is not a social good.
See: https://en.wikipedia.org/wiki/History_of_the_steam_engine
Well, it means strong legal institutions. But...
Take criminal law, for example. Lots of lawyers mean that each criminal gets their day in court. That's good. But a law-abiding society would be better.
Or take contract law. Lots of lawyers mean that, if the other party violates the contract, you can sue them. But wouldn't it be better to have a society where more people just did what the contract said, instead of trying to find ways to weasel out of it?
Even with respect to the government, yes, when they overstep their bounds, we can take them to court, and we can even win and make them stop doing whatever they're not supposed to. But really, it would be better if they just stayed within the constitutional parameters of what they're allowed to do.
In all these cases, it's good (really!) that we can have our day in court, in a system that is at least relatively fair. The lawyers are the sign of a healthy legal system. But they're also the sign of an unhealthy society, that is restrained by court cases rather than by doing the right thing.
Skimming through the short paper its basic regression attempts to control for differences in development by including variables for other development indicators, but it's a very small sample skewed by Korea, Japan and especially autocratic-era Taiwan reporting low levels of [formally qualified] lawyers. The authors even comment they 'would be surprised if someone could not come up with a specification to support the opposite conclusion'!
> Beyond the optimal number of lawyers, however, the effects of their work are negative. In this graph, the optimal number of lawyers per 1,000 white-collar workers is said to be about 10; because the US has about 14, it has an excess.
Today we might have a slightly lower excess. The number of lawyers per 100,000 people has been stable since the 1980s. Meanwhile, the fraction of white collar workers has gone up a bit.
It’s also worth observing that the Anglosphere countries tend to be the most legalistic, but also are the most economically dynamic: https://www.theglobeandmail.com/report-on-business/rob-comme...
> This measure is certainly not without its shortcomings.
and
> Indeed, we would be surprised if someone could not come up with a specification and/or sample which might even support the opposite conclusion.
WTF.
I just wanted to note - statistical analysis is not a new or groundbreaking thing. A lot of these tests have been around for decades or centuries[1] and experimental design ditto. Honestly, it being from so long ago actually gives me a bit more faith in the results since gaming statistics to get a click-bait headline and more funding has become a cottage industry in recent years.
1. https://en.wikipedia.org/wiki/Student%27s_t-test#History - enjoy the amusing connection to Guinness, it's a favorite with new stats students.
A less developed country probably doesn't have solid rule of law, and so has fewer lawyers. A less developed country also can generate fast economic growth by transferring knowledge from more advanced ones.
By contrast advanced countries have solid rule of law, and so lots of lawyers. They also can't easily grow through knowledge transfer, because there is nobody to transfer knowledge from. They have to generate new knowledge themselves.
I would therefore suggest removing GDP/capita as a confounding factor first.
That said, lawyers are economic sand. The main purpose of lawyers is to make other lawyers be needed. And lawyers are good at convincing themselves that they were needed. We would be better off with fewer lawyers. If you don't believe me, consider the phenomena of patent trolls. What do they add to anyone other than themselves?
In addition to the all of the bad legal work, the best lawyers also often go to the "white shoe" law firms. In America, these law firms hire out their legal capital to corporate world that engages in beating down consumers and competition, which is resulting in an increasingly monolithic and sclerotic economy.
Then add in all of the secondary effects of exploitation/corruption of these not-productive-and-shouldn't-exist positions...
Further for every $1 you spend on an attorney, someone else has to spend $$ and the society has wasted that $$$ plus that time, none of which is productive.
On the other hand, get rid of lawyers and you're going to spend $$$ on mercenaries...
The true alternative for most people is they’re out the additional baked in cost of the lawyers and they can’t afford their own lawyer to “even the odds” so it’s asymmetrical warfare.
True of the police as well: calling them doesn't benefit me much, but they do play a role in making the streets (relatively) safe at night.
In both cases we might imagine a better way of doing these things, I'm speaking about the world we happen to have.
Whereas lawyers and police must deal with the imperfection of people and society, no matter how much it is reduced.
I suspect it's possible to have a society where doctors focus on improving the health of people rather than focusing on fixing things when they break; and I suspect there's a way to adopt that mindset with lawyers, as well. Police too, actually - if police are social workers first, and enforcers last.
People outside America do.
I’m not sure that money spent on lawyers is, by any measure, money that society has wasted.
Every dollar that society spends is a dollar that society earns. Economic activity isn’t a pie that is split up and expended. If I give you a dollar to do something and then you give it back to me to do something else, we’ve generated $2 in GDP with a single dollar bill.
Besides, lawyers are providing an important service of ensuring that the rest of the economy can chug along with confidence. Also, how many lives are saved because of conflicts resolved by law instead of lawlessness?
The ability to transact confidently is a very valuable service.
Number of lawyers can be used as a indicator fore the level of development in the the economy.
[1] https://twitter.com/pankajghemawat/status/575654688491708416
Take Japan, which it says has only 24 lawyers per 100k, compared to 396 per 100k in the US. Japan has several licensed non-lawyer professions that do a lot of work that in the US has to be done by lawyers.
In addition, a very large number of people in Japan study law as undergraduates, then go into corporate jobs where they are allowed to handle corporate legal matters that would require a lawyer in the US.
Observational studies like this are not sufficient to answer these sorts of questions even if you can use them to come up with cute, cheeky headlines.
Low economic growth implies low interest rates, high indebtedness, high asset prices and extended asset duration[1]. Therefore it is so much more important to look at your contracts carefully, because they matter so much more.
If you don't see it then imagine what a true 0% (or around -1%, to account for risk premium) riskfree interest rate across the entire duration means. It means, for example, that it theoretically makes sense to level entire mountains just to create more farmland or to build slightly faster highways because it will pay back over hundreds of years. Imagine negotiating such deals!
[1] this is not just my opinion, but also the opinion of 2012 Jerome Powell; you can find it in FOMC transcripts from before he became the chairman of the Fed.
Is that not what we are doing, in the US and elsewhere? Creating massive debt, the proceeds from which are plowed into real estate development via cheap loans, infrastructure stimulus bills, etc.
It's much worse in some places than in the US. For example the Swiss 50 year bond is currently priced at -0.36%, and this is "high" given recent yields history. Switzerland is already buying nearly every financial asset it can with printed money, including US stocks, but the credit markets don't give a damn. Swiss mortgages have theoretically infinite duration (you never pay it back by design). Austria has some extremely low yielding 100 year bonds despite not having existed yet for 100 years (in the current form). The deflation is just too strong.
And the reason deflation is bad is because we got hooked on debt long ago and wouldn't be able to pay the interest..
AFAIK, you don't really need (many) lawyers in CA to fight an employer's non-compete, since CA has ruled so clearly on it. (Although AFAIK you do need a lawyer just to navigate the courts-as-bureaucracy).
AKA, you need lots of lawyers to litigate on unclear laws, you need fewer to litigate on clear ones...?
In which case # of lawyers is a measure of the unclarity of the laws (and difficulty in engaging the courts); and it might be that lack of clarity that has a bigger impact on the economic growth...?
I think it may be more to do with a different but simple phenomenon: the growth and maturation of countries.
When a people/country are starting out "from scratch" with little material wealth, of course most of their economic growth are focused on material advances -- getting people to produce more, make technological innovations, infrastructural gains. Postwar USA (and Europe) people's economic activity was just to build up society. (broad strokes of course)
As a country gets older and more mature, and its material needs are reaching 90+% satisfied (by some subjective measure) then what happens? People have wealth, interests, commercial activites, and they start disputing with each other over it. Legal activity increases while primary production activity no longer dominates an economy.
So naturally, you observe that legal/professional services increase and of course at some point you'll experience a flattening or decrease of raw economic growth as a country can't sustain 10% growth every year. Then you think "oh, the lawyers caused this". But that's not interpreting the effect correctly.
I would wager you'd see an increase in the number of doctors and their economic activity, or artists, or musicians, etc. too.
Also whole legal systems affects the complexity. So it's not easy to compare between systems, not to even talk about countries.
I think it's pretty well understood that IP protection helps innovation to a point, but if you go to far it actually stifles growth and innovation more than not having any protection at all. If you have a ridiculous system of IP laws that allows pharmaceutical companies to avoid ever releasing anything into the public domain, you're going to also need an army of lawyers to enforce your draconian laws.
Nothing says long-term stability and prosperity like eliminating mechanisms to protect the populace from unlawful, illegal, or harmful conduct.
Rule of Law, who needs it?!
This hasn't been my observation.
What I've seen from my friends and their families is "fewer jobs = kids leave school to support the family."
Working class, immigrants, and service jobs: "kids leave school to support the family"
Middle class: "kids work their ass off at school so that they're one of the few to get a job (and failing that, move back into the parent's basement until the job situation improves)"
Upper middle class: "kids go to grad school, law school, or med school to wait out the poor economy and come out with a good credential afterwards"
Wealthy: "kids call up their daddy's wealthy private equity friend and get funding to buy up a struggling small company, fire half the workforce, goose the profits, and unload it on the public markets before anyone realizes that the business's core function isn't functioning anymore."
I've met all of the above, and definitely know a lot of folks that went to law school because they weren't sure they could get a job upon graduation. (Although a more common reason for that is that they don't know what they want to do...law school is a really attractive option for liberal arts grads whose coursework doesn't really line up with anything that makes money.)
it was the same for nearly 90% of my class.
a lot of my peers decided to take a second major the moment their job offers at the bulge brackets got cancelled. a handful of seniors also went back to school after they got retrenched at the banks.
> Despite the crudeness of the test, the small size of the sample and possible ambiguities in interpretation, the results provide a tentative confirmation of the hypothesis.
So ... lawyers are good for the planet?
Sometimes, resistance to boom growth is wise.
Per capita the US is high but not quite at the top - but almost all of those are small financial powerhouses like Switzerland or Macau.
>Here is another telling statistic: Brazil has more law schools — some 1,240 — than the rest of the world combined. And they have turned out some 800,000 lawyers — which means there are more lawyers per capita in Brazil than in the U.S.