Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?
forbes.com
forbes.com
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). 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).
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.
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.
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).
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.
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.
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).
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.
In other news, shopping for food while hungry is more expensive.
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.
[edit] Not that I think that the global market for food to be a free market.
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.
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?
"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.
(The OECD saying it's a definition don't make it so.)
A proper definition is: A market wherein all exchanges are voluntary, i.e., no force is involved.
But yeah, it's far from a free market. I'm with you there. That doesn't mean we can sunder the term "free market" and say it's not a free market for a bunch of made-up reasons, which is what I was countering.
(The OECD saying it's a definition don't make it so.)"
Is that definitive? As the description of the definition of the noun 'definition' from http://thesaurus.com/browse/definition defines definition as a description, of this I am definite. ;)
A definition must identify the nature of the units, i.e., the essential characteristics without which the units would not be the kind of existents they are.
And
The rules of correct definition are derived from the process of concept-formation. The units of a concept were differentiated—by means of a distinguishing characteristic(s)—from other existents possessing a commensurable characteristic, a Conceptual Common Denominator. A definition follows the same principle: it specifies the distinguishing characteristic(s) of the units, and indicates the category of existents from which they were differentiated.
The distinguishing characteristic(s) of the units becomes the differentia of the concept’s definition; the existents possessing a Conceptual Common Denominator become the genus.
Thus a definition complies with the two essential functions of consciousness: differentiation and integration. The differentia isolates the units of a concept from all other existents; the genus indicates their connection to a wider group of existents.
For instance, in the definition of table (“An item of furniture, consisting of a flat, level surface and supports, intended to support other, smaller objects”), the specified shape is the differentia, which distinguishes tables from the other entities belonging to the same genus: furniture. In the definition of man (“A rational animal”), “rational” is the differentia, “animal” is the genus.
Both are from http://aynrandlexicon.com/lexicon/definitions.html
Definition, however, is a descriptive, not proscriptive term. Succinctly, the definition of a term is whatever a broad consensus "agree" upon. Dictionaries serve to help identify that consensus, although they are not completely authoritative. The definition of a word may not coincide with its essence in any way -- for example, the phrase "to beg the question" has two primary definitions. The first and newer definition is equivalent to "to ask the question." The second and older definition is to assume the conclusion within the question itself. Together these definitions do not elucidate the "essence" (or "distinguishing characteristic", in Ayn Rand's primitive terminology) because they are wholly unrelated to each other. Instead, they're simply descriptions of the common modes in which English-speaking society uses the phrase "beg the question."
The best example is your definition of the word definition. The word "definition" does not have any intrinsic meaning -- only that which we place on it. Moreover, the meaning can vary between subsets of the broader population -- your use of the word definition in no way coincides with my use of the term in formal mathematics. This doesn't mean that you can't disagree with a given definition for a word, only that you're insistence that you're correct or even that your definition has some objectively superior qualification makes your use of the word the "correct" one.
As quoted from Oscar Wilde, so this post might be recursive ;)
Because I'm human, it could be the case I haven't thought things through carefully, but it's not simply not the case.
And I don't think I was being arbitrary. When challenged on your point you merely pointed to the quotes you had made and told people to read the book, which to me is pure dogma.
So admittedly I got a bit snarky. Although I was also attempting to be a bit self critical, which was why I referenced that quotation.
"All that is ours was once flushed down your toilets. Over there is our aquarium. This is our library.
Nothing but crumpled porno and Ayn Rand."
And I honestly don't take Ayn Rand as a definitive resource on much beyond her own ego. She claimed that her philosophy was unique, other than a sole debt to Aristotle. Aristotle of all people. The guy who can't even count the legs of a fly and who thinks that menstruating women cloud mirrors if they look in them. So sorry if I stoop to ridicule if you worship her turgid prose, but really.
[edit] Also - as to her definition of table that you gave, well it could just as easily be describing a shelf. And the idea of the definition of table being some absolute thing based on shape is preposterous. I do wish these philosophers would have a chat with some designers before waffling on about platonic forms of household objects. A table is defined by usage, expectation and personal perception. In weightless environments, the concept of table could easily be a clear, easily accessible floating box kept in the middle of a spacecraft's living space, for instance.
So sorry if I stoop to ridicule if you worship her turgid prose, but really
In case you actually think I approach ideas in a dishonest, religious way (hence, "worship")--I don't. This is just a stupid comment.
And the idea of the definition of table being some absolute thing based on shape is preposterous
This is a misunderstanding of the idea being presented. But anyway, you couldn't get a complete understanding without reading the original source (it's from a book), so speculating on it here is probably pointless.
So how am I being dishonest?
Also, how have I misunderstood the idea being presented here;
"For instance, in the definition of table (“An item of furniture, consisting of a flat, level surface and supports, intended to support other, smaller objects”), the specified shape is the differentia, which distinguishes tables from the other entities belonging to the same genus: furniture."
Now admittedly, the book may expound upon this and create a completely different interpretation based on the overall context, but given that you presented me with this excerpt and claimed it as a reasonable argument, you will forgive me for dealing with only the words that were in front of me at the time.
I didn't claim it as a reasonable argument. I don't think it's very useful out of context. Just wanted to illustrate genus and differentia.
So how am I being dishonest?
You're being dishonest because you're just indulging your emotional whims by "judging" things on completely irrational criteria, instead of actually examining the ideas.
That was my judgement when you used her lexicon as the ultimate arbiter of the definition of 'definition' and then just told people to read it when challenged on this position.
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.
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).
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.
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.
And, I'd note that we have little else to go on. After all, we can't discern the quality of a given lawyer by the outcome of our particular case. Say your lawyer lost. Were they a bad lawyer, or was it simply that your case was poor? As a non-lawyer, you don't have the expertise to judge. Furthermore, lawyers won't discuss the qualifications of other lawyers for various reasons, so it's difficult to get any sort of objective ranking.
You can't launch a satellite halfway into orbit to save a few bucks. You go all the way, or stay home.
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.
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.
You could say the same for any number of industries - hire the wrong structural engineer and that bridge or building will collapse, hire the wrong nuclear engineer and attack sub might run out of power while engaging the enemy, hire the wrong electrical engineer and the airliner's control system may fail, etc - and yet only very few people in those industries can ask for over $250/hr.
Similarly, with the police, because they are charged with law enforcement and being equipped with guns is very different than dealing the local surly person at the market.
That's why I'm of the opinion that certain professions need a lot more oversight and avenues of recourse than others. One would be foolish to think otherwise.
In each of your examples, the person you are referring to has a ton of oversight and proceesses in place to catch errors. (I don't know about nuke engineer, but in general the military avoids paying market wages by recruiting then training then placing).
In the lawyer situation picking the wrong guy can be financial suicide.
I suspect there's an opportunity for disruption here. Google doesn't hire most of their engineers based on 'brand'. They hire based on ability.
If one were to create an efficient way to identify GOOD lawyers from middle tier firms and these solo outfits, this may wrest a good amount of business from top tier firms.
Someone who works at Google could have better input, but my understanding is that they choose top brand name schools to recruit from. And they recruit from top startups that they acquire.
Also, the discussion about lawyers is not about hiring individuals, it is about hiring an individual within a firm. A firm which has resources to back that lawyer.
--But, you are right that being able to identify great lawyers at mid tier firms would lead you to a very interesting business. If you can figure it out, please recruit me and give me options. :)--
There are plenty of good lawyers from middle tier firms, solo outfits, and boutique (i.e., specialty) firms. These practitioners already service the vast majority of people needing legal assistance (including small-to-medium businesses).
Corporations choose BigLaw not because they're the best (boutiques and specialized mid-tier firms generally produce higher-quality results in any given area of law), but because BigLaw firms have the resources and capabilities to handle anything that a large corporation can throw at them. When you're dealing with dozens or hundreds of litigation cases across the country in a dozen or more areas of the law, you go with a BigLaw firm b/c that one firm can handle all of your legal matters, reducing complexity and cost.
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?
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?
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.
> With a doctor or lawyer more often than not the more you pay the better the service/advice you get.
Do you know this, or do you just believe / hope this? I'd argue that the actual quality of service delivered (not just how nice their suits or offices are) is very difficult for customers to assess. At least with cars, there are independent ratings agencies that will tell you that your more expensive car is actually safer. (Doctors actually have stats like mortality and length of hospital stay.)
If you're a litigator, much of that will depend on the facts in a particular case. If you're drafting a contract or financing doc, it may never end up in litigation, so you'll never find out if it was a "good" contract or a "bad" one.
Good question, the answer is obviously I can't say its' true for 100% of the cases but do this thought experiment.
You are going to court against someone else, you get a public defender, your opponent brings in a team of 10 lawyers costing $100,000 a week.
If the evidence makes the case look like its 50:50. What is your chance of success? I think almost everyone would agree that its much lower than 50:50 after you factor in the lawyers.
More realistically, you're a company and you choose a $400/hr law firm instead of a $600/hr law firm. Are you necessarily going to get worse advice? I'd argue that would often just depend on how much experience each firm has in the particular subject you're hiring them for - and neither firm is adjusting their rates based on that.
Just yesterday I came across a situation where a major law firm was working as investor counsel on a type of deal they almost never advise on (because they're the clients usual firm for other types of deals) - I'm sure they didn't offer the client a discount because they have less experience than a lot of cheaper, less prominent law firms.
Hmm, yes you are right.
Point conceded.
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.
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.
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.
That's not what 'ceteris paribus' means.
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.
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. 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-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. It's absurd.
That's exactly the problem, regulatory capture of government protected guilds. It's exactly the same with Doctors and the AMA, or electricians, hell in some places even interior decorators.
If you've ever had to hire a commercial electrician, it's absolutely terrible. Once they pull a permit and start working, it's extremely difficult to replace them, and they know it.
Recently the general contractors in Georgia convinced the state to raise the net worth requirement for contractors. They are already required to have massive insurance coverage, so the only reason was to protect the incumbent contractors from new competition.
Anywhere you end up with government sanctioned guilds ran by industry or ex-industry people, you're just asking for regulatory capture and the resulting protectionism.
Here is the Abstract: "Clifford Winston of the Brookings Institution talks with EconTalk host Russ Roberts about the market for lawyers and the role of lawyers in the political process. Drawing on a new co-authored book, First Thing We Do, Let's Deregulate All the Lawyers, Winston argues that restrictions on the supply of lawyers and increases in demand via government regulation artificially boost lawyers' salaries. Deregulation of the supply (by eliminating licensing) would lower price and encourage innovation. " --> http://www.econtalk.org/archives/2011/09/winston_on_lawy.htm...
The USPTO appeals board you mentioned is not a court at all. It is an administrative body whose holdings are again subject to review in US District Court.
I cannot defend the USPTO; much of what they do is indefensible.
The reason you can not represent anyone other than yourself in court without passing the BAR examine is because the defendant might not be properly represented and cause problems such as mistrial or open up loads of appeals. Why? The bar examine is used to ensure that an attorney knows and understands the legal rules and procedures. That's it. If an attorney fails to object to a motion [on behalf of their client], fails to file a motion [on behalf of their client], or fails to respond to a claim or motion [on behalf of their client] then their client isn't being properly represented. Why can YOU represent YOURSELF? Because if you fail any of those things, well, it's your own fault. What is the number one topic we are failing to teach in our education system? BASIC [foundational] law and legal issues.
I'm completely unqualified as an electrician here in Canada, but I have more varied experience with electrical circuits, safety testing and literally everything to do with the job than 99% of electricians here in Canada (and the US for that matter).
I can tell you the very simple system that works for the rest of the construction industry outside of those requiring "qualifications". It's called permits and paid on completion. If the electrician doesn't pass on his permit, it doesn't reach completion and you don't pay. Why does this system work for framers, brick layers and every other trade, but it doesn't work for an electrician. Sorry that's fishy.
I legally can do my own wiring on my own house here in Canada and get it inspected by the ESA and then the building inspector to pass permit. An electrician has to pass the permit anyway. Why can I not work on someone elses house and get the ESA to pass my work? Why can I not apply for the ESA to inspect my work and verify that I'm a competent electrician. Because I would like to tell you the truth, in that only 20% of those "qualified" electricians are actually doing work to code and more importantly safely.
Occupational licensing doesn't just improve service quality (if it improves service quality), it also increases the price. The result is often that instead of great quality, the consumer gets nothing at all because ze can't afford it. This hits the poorest people hardest. In the USA, the poor have a famously bad time with healthcare and legal advice.
There are mechanisms other than mandatory qualifications by which consumers can measure quality, including voluntary qualifications, reputation, and price signaling. These aren't perfect, but neither are mandatory qualifications. Each mechanism has advantages and disadvantages.
Alternative medicine practicioners, or even experienced doctors who qualified in another country, are not allowed to perform the same procedures as doctors regardless of whether their patients would like them to. There is a very real loss of choice.
People who wanted a traditional medical practitioner would be protected, and those who were willing to take more risk would have the choice.
The staggering amount of money that do get paid to quacks selling stuff that is proven not to work show us very clearly that informed choice is largely a fantasy when dealing with the general public.
It seems to me that that private group of scientifically grounded medical practitioners who certified their members, but had different criteria from the state licensing system could be a very good thing.
This alternate certification would need to prove its reputation just as the institutions that certify doctors have. It seems likely that there are ways to train and certify doctors that produce better professionals than the current ones.
I doubt you're arguing that current state approved medical institutions cannot be improved upon. Why not allow alternatives to compete with them?
Could be, perhaps. Now weigh that hypothetical scenario against what actually happened in history that led to the state medical boards being created.
> I doubt you're arguing that current state approved medical institutions cannot be improved upon. Why not allow alternatives to compete with them?
Because we tried that and it didn't work last time. It got so bad that self-proclaimed "doctors" set up self-proclaimed "medical schools" as a con, paid large sums of money for cadavers "no questions asked", and ended up getting people murdered.
Do you have some legitimate problem with your state's medical board? I'd suggest you take it up with your state legislator.
Besides, there are alternatives--some states have separate osteopathic boards that license D.O.'s rather than M.D.'s, yet licensed D.O.'s have the exact same privileges as any other doctor.
I nowhere suggested going back to how things were before, and my proposal explicitly rejected the idea of allowing self-proclaimed doctors.
I still can choose to pay more for someone with a demonstrable history, but if I want to take the risk on an unknown and save some money in the process, why shouldn't I be able to?
Take the electrician example: what happens if an unlicensed electrician kills himself when performing work? Does his family get to collect from your homeowner's insurance? Can they sue you? Are you criminally liable?
What about when you sell the house? Should you have to disclose that someone unlicensed did the wiring? What if you don't and the house ignites in a fire one night caused by improper wiring, killing the future owners, are you responsible? Is the electrician?
And you don't even want to touch the potential for abuse... regulation causes a lot of problems, I completely agree. But it serves to protect the public; we're effectively paying for protection against deception that capitalizes on our lack of knowledge in a specialty. That's worth protecting.
There's nothing in the current law about granting you immunity from criminal liability as long as you hire a licensed electrician, so that's a completely moot point.
>What if you don't and the house ignites in a fire one night caused by improper wiring, killing the future owners, are you responsible? Is the electrician?
In most jurisdictions you can already preform electrical work on your own property. If you install a ceiling fan should have to disclose to the new owner that it wasn't installed by a licensed electrician? Are you responsible for killing the future owner? There are scores of people installing their own light fixtures, where's the public outcry over all the dead homebuyers?
What happens when you hire the unlicensed kid next door to cut your grass, and he cuts off his foot?
What happens when an unlicensed painter falls off a ladder and kills himself?
If you want protection from damage caused by people you hire to work on your house, only hire contractors who are insured. Make them present proof of insurance before the job begins.
You would not be entirely responsible for killing the future owner...but yes, under the doctrine of negligence, you would be at least partially responsible for killing the future owner. In fact, this is one of the first things you learn in your first year of law school.
The unlicensed kid: That depends on how he cuts off his foot. Was he distracted? Was your wife distracting him at the time sunbathing nude next to the pool? Was he using your mower? Was your mower broken?
Unlicensed painter: Also depends on the specific facts. Was it his ladder? Why did he fall off the ladder? What did he fall onto? Would such a fall normally have killed a person? What special facts in this situation resulted in the painter's death?
Protection from damage: You're spot on. In fact, in Ohio, you're required to hire only licensed and bonded (i.e., insured) contractors for renovations or construction work. Moreover, contractors are required to provide proof of license and bond before they begin work or try to collect payment.
No, the difference is in the lobbying power of industry incumbents. A quick search will show that there are states where interior decorators, and trumpet players are required to be licensed.
I think the law can assume a reasonable person would be aware of the dangers of electricity. Most states have moved away from requiring gas pump attendants--is a reasonable person aware of the dangers of gasoline? If so why not the dangers of electricity?
The contractor and buyer still should be criminally liable for any willful noncompliance.
this just doesn't align with evidence. if it were true, there would be too few lawyers, not too many lawyers.
i'm not saying the effect you describe never happens, but when it does, there is not enough supply, driving prices up (this is probably the case in medicine, where there are not enough doctors, driving prices up)
In the US, unlike many other countries, practicing law requires a graduate degree from an accredited school. This dramatically adds to the cost of a legal education, and drives up the price for everyone. This is the direct result of "regulatory capture of government protected guilds."
There definitely is regulatory capture going on. Small, more affordable schools are in a real bind over having to meet stringent and arbitrary accreditation criteria, but that doesn't affect the number of lawyers because students are willing to pay anything to become a lawyer anyway.
the cost of law school is a fixed (and by the time you become a lawyer, sunk) cost, and therefore has no bearing on supply decisions.
moreover, how does the cost of law school jack up prices in a world where there is an excess of lawyers? if you're a lawyer, do you charge the amount that covers your loans, or the amount that nets you the most profit?
the very fact that there are excess lawyers is evidence that regulation of who gets to become a lawyer is not increasing prices. now i'm not saying that lawyers are efficiently priced, merely that regulatory capture is not the reason for this.
>if you're a lawyer, do you charge the amount that covers your loans, or the amount that nets you the most profit?
If all lawyers were interchangeable, your argument might hold, but the artificially high price of legal education leads to a misallocation of resources--The increased cost of student loans can cause lawyers to move into specialities that are higher paying, causing shortages in one area and surpluses in others.
This is circular. You're arguing that shortages in some areas are causing higher prices, but then arguing that lawyers are leaving certain areas for the areas that pay higher salaries. You can't say that prices are high for corporate legal services because supply is restricted while saying that the high cost of legal education causes a surplus of lawyers in areas where salaries (i.e. prices) are the highest.
You can't make sense of the legal market by thinking of it in terms of regulation cutting off supply leading to higher prices. That is not the major operative force in the legal field.
The major operative force is branding, and that drives everything else. Companies pay substantial fees to hire firms with brands. Firms with brands pay substantial salaries to hire attorneys with brands.
There are 200+ ABA-accredited law schools, with 45,000 graduates each year. Only about 10-15% get a job working with a big firm that does corporate work. This is because at a big New York firm, fully a quarter of the new hires might come from Harvard and Yale, and 90% from the top 15 schools. Even with the high cost of legal education there is a huge untapped supply of attorneys who would jump at the chance to work for half as much as Harvard grads to do corporate work. There are no ABA restrictions to hiring these people to do corporate work. What there is is a lack of demand for lower-price lower with lesser credentials in that particular subset of the market.
I'm not saying that. I agree with you that there is a surplus of corporate lawyers, and so deregulation wouldn't really reduce the price in that sector.
Even if there were cheap lawyers who learned through apprenticeship instead of law school, large companies still wouldn't hire them.
I'm talking about prices being driven up in other areas, where law school grads with insane debt don't want to work.
I know several law school grads who couldn't find the kind of high paying job they were looking for. However, since they had so much debt they ended up taking non legal jobs (one is a project manager, the other an entrepreneur), instead of moving into another lower paid area of the law.
Because of high education costs (and the requirement that lawyers posses a graduate degree, which means most of them are going to be at least 25 by the time they can start practicing, plus the psychological factors involved in having spent 7 years in school), there is a minimum price below which most lawyers will not work, and will seek other opportunities.
It's valid to make the "guild" argument and say that the education requirement is driving up prices, but only if you argue that the education requirement is artificially restricting supply. When ABA-accredited schools are graduating about twice as many students as are getting hired, that's a difficult argument to make. Would salaries really go down if you added an entire category of potential hires below the current group that already isn't getting hired?
Before I went to law school, I unconsciously thought of law as a branch of engineering: Learn the rules, twist the right dials, and things will happen as you expect. That was naive. Law does have rules, and dials to twist, but for socio-political reasons I won't go into here, the rules and dials aren't tightly locked to outcomes. As a result, law has long struck me as being more akin to weather-guessing than to engineering.
In terms of "institutionalized fraud," you are totally wrong. The legal profession is one of the most heavily-regulated professions that exists today. The duties imposed on lawyers--which are legal obligations to act or refrain from acting--should not be taken lightly. For example, Rule 8.3 of the Model Rules of Professional Conduct[1] (adopted in whole or in part by 49 states) provides:
(a) A lawyer who knows that another lawyer
has committed a violation of the Rules
of Professional Conduct that raises a
substantial question as to that
lawyer's honesty, trustworthiness or
fitness as a lawyer in other respects,
*shall* inform the appropriate
professional authority.
The reason I explain this rule in particular is because of Rule 1.5, which provides in excruciating detail a lawyer's ability to collect fees from a client.[2] Everything you said is wrong.
Here's the short, plain English version of Rule 1.5: the lawyer must communicate the fee arrangement to the client before the start of representation (except when charging an ongoing client the same rate in subsequent matters). There's a blanket prohibition against "excessive fees" and "minimum fees," and a set of factors used to determine whether a fee is reasonable.
Reasonable fees are judged by time and labor, the issues' difficulty/novelty, the lawyer's experience/reputation/abilities, the nature and length of the lawyer-client relationship, whether the lawyer must turn away other cases, whether it's a fixed or contingent fee basis, and the customarily charged fees. When dealing with contingent fee arrangements, they MUST be reasonable and signed by the client, but may not be used in criminal cases. Similarly in criminal cases, a lawyer may not ask for incentive fees, and is proscribed from taking a percentage of publication rights (i.e. Casey Anthony's lawyer asking for a percentage of any subsequent book deal in exchange for his time) until after all appeals have been exhausted. Contingent fees also may not be used in domestic relations.
When dealing with division of fees in law firms, it's not actually a "division of fees" in the legal sense. The lawyers are salaried employees of the law firm, which is hired to represent the client. Again, when you hire a law firm, you are not hiring a single lawyer; you're hiring the entire firm. Division of fees occurs when a single billing client is covering the fees of two or more lawyers who are not in the same firm. When this happens, division is permitted as long as it's proportional to the services each lawyer (or firm) provides to the client, and the client must agree to this allotment in writing.
Further in this thread, you announced that you should have a right to represent your company in litigation. That's absolutely ridiculous, and in criminal matters in the United States, is dissonant with the Sixth Amendment. In such cases, the corporation has a right to assistance from counsel. Because corporations are fictitious entities incapable of self-representation and thus incompetent, corporate pro se representation is impossible.
But, there are good reasons why a client shouldn't have a right to non-lawyer representation. The Model Rules of Professional Conduct attach an enormous burden to lawyers by compelling them to disclose to the authorities another lawyer's violation therefrom. Without strong industry self-regulation in this form, there would be no way to protect clients from invidious representation.
---
[1] http://www.americanbar.org/groups/professional_responsibilit...
[2] http://www.americanbar.org/groups/professional_responsibilit...
Your opinion that a Wachtell attorney isn't worth >$1,000/hour is immaterial. As a matter of law, what they're charging is not unreasonable, because you're paying for more than the amount of time an attorney spends typing on a word processor. You're paying for the firm's experience and reputation. Moreover, many lawyers would have actual knowledge of the firm's fraud, were it to occur. By not reporting this information, they risk being disbarred and losing their livelihood. I don't generally like to endorse the efficient-market hypothesis, but it appears highly unlikely that there's a giant conspiracy that results in systemic under-reporting and non-enforcement of the rules...
Imagine a James Lawyer at your prestigious $1000/hour partnership. He finds out Joe Partner is up to no good. What are his options?
Blow the whistle, get Joe Partner in trouble, get black-balled (if not outright fired [but, of course, not for whistle blowing]) and eventually (or immediately) have to find a new job. In trying to find other jobs, James finds nobody is interested in him in any capacity remotely near his previous level of employment, because, like any close professional community, everybody knows James is a whistle blower. He eventually has to settle for a position in a local law firm, make 1/3 what he was making before.
Or, don't blow the whistle. If Joe Partner eventually gets caught, James might get caught up in it, or he might be able to skate around it.
Do you really think no lawyers knew about Bernie Madhoff or World Comm or Enron? To say this ethical code of conduct justifies the high prices is laughable.
Moreover, in your hypothetical, it's not just James Lawyer who can report the business practice. A judge reviewing a claim of attorneys fees could find something suspicious. An in-house guy reviewing bills could find something suspicious. Somebody at another law firm working jointly on a case could find something suspicious. Those people have no disincentive to report that conduct, and indeed their ass is on the line if they do not.
Do lawyers charge you for time while thinking about your case in the shower? Probably. Like any contractor, there is some margin for estimation while remaining ethical. But is there some grand conspiracy to systematically over-bill clients? There are just too many people who would have access to that knowledge, and who could only get in trouble for not ratting it out for that to be likely.
For non-lawyer assistants, (see Rule 5.3), the lawyer must make reasonable efforts to ensure that the non-lawyer's work complies with the professional obligations of the lawyer. This mostly applies to cases when a non-lawyer assistant is sorting through documents and accidentally loses one that's later found by the media. Again, if they're doing anything that's the practice of law, they're committing a crime. The subordinate would be criminally liable, and the supervising lawyer would be professionally liable under Rule 5.3.
Paralegals and office staff are not lawyers. Paralegals are allowed, by law, to draft legal documents. However, they cannot offer legal advice, and any documents they draft must be reviewed by a practicing lawyer.
It's not ridiculous for me to want to represent my company without having taken the bar exam--you're using a legal fiction to argue that even though I pay my company's taxes, I should not be allowed to represent its interests in court if I so choose. But even if I didn't pay my company's taxes, I would still want that option because the fictitious entity you describe is a creation of my capital and my labor and in every other respect its Board of Directors has the ability to guide its direction.
Regarding your second, the fact that you pay your company's taxes is irrelevant. "You" can be substituted by any other shareholder or partner; the shareholders/partners are not the corporation. The corporation is its own, independent legal entity. Because it's fictitious, it cannot make decisions, which means (as a matter of law) it's incompetent to stand trial.
Some jurisdictions may have rules deviating from this to allow corporate pro se representation by 100% shareholders in small claims matters, but they would be the exception.
Failure to report a crime is a crime. For everybody.
That's not true. In the US the offence still exists, but:
This offense, however, requires active concealment of a known felony rather than merely failing to report it.[1]
In most other English speaking jurisdictions the crime itself has been abolished.
I don't follow the logic here. If it's fictitious and incompetent to stand trial, then why it can be brought to trial at all?
I might charge $X00 per hour as a "blended" rate, taking into account that:
A) some of my $X00 time might be spent doing $15 per hour clerical tasks, but then I won't have to spend as much $X00 time instructing a $15 per hour person, then reviewing his work to be sure he got it right; and
B) some of my time will be spent doing work that's worth $1,000 per hour or more. (Cue Hedley Lamarr in Blazing Saddles: "My mind is a raging torrent, flooded with rivulets of thought cascading into a waterfall of creative alternatives.")
So it averages out, or at least that's the rationale. (Of course, that doesn't justify time-sheet padding.)
If they're doing word processing, it is because the language matters. Consider that the City of Cleveland lost the Cleveland Browns to Baltimore over a comma which completely changed the meaning of the exit provisions in the contract. The owner of the Dodgers likewise lost a $500 million stake to his ex-wife based on the language in his prenuptial.
Finally: if you want easy access to documents in the court docket: go to the courthouse where they are kept. It costs a lot of money to implement and maintain a digitizing system, and most courts simply do not have the resources to maintain such systems.
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.
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.
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.
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.
The problem is that at some point, you're paying a premium for a lawyer's skill in knowing what to do and for taking on the risk of being wrong, since you can sue the lawyer for malpractice if they fuck up.
Think of it like programmers: with all that open source code out there and all those GUIs, programmer's rates should be going down. Instead they're going up (at least for the good-to-great programmers): once the market has corrected for reduced costs, it readjusts upwards to correct for increased competition for talent.
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.
I believe this is mandated by bar associations on ethical grounds, though I find it absurd. This artificially inflates the cost of legal services.
[0] http://www.nysscpa.org/cpajournal/2005/605/essentials/p54.ht...
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.
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.
From
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..."
> 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.
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.
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.
This. Agree that these are the primary factors in the insane legal costs for high-value clients (corporations and high-net worth individuals). Also agree that for most folks, it is possible to find a good lawyer to do a will for under $500, an amicable divorce for under $800, or do all the filing to launch a business for under $400.
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.
Valuable stuff is worth paying more for.
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.
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.
I'm not trying to be clever; I genuinely want to figure this out.
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.)
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.
1) Pay can be high with win/lose stakes
2) Different pay models (contingency)
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
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.
Pretty sure what he's describing is sliding the supply curve straight up, which has exactly the opposite effect.
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 :)