Do Too Many Lawyers Spoil The Economy? [1994] | Hacker News Reader

Do Too Many Lawyers Spoil The Economy? [1994]

csmonitor.com

42 pointsa5seo25 comments

It's an interesting article, though the conclusion is somewhat underwhelming: according to the study, there are 40% more lawyers than the optimal number.

The article also points out some legitimate sources of imprecision in the data. GDP is a poor measure of the economy as a whole. Consider the classical example of the broken window fallacy. GDP goes up when people go around breaking windows! In a more real world context, consider the two huge coal plants that were recently shut down here (thanks to litigation) in Chicago. They were responsible for about $100m/year in health damage to the community, and each created only about 50-70 jobs. Shutting down the plants is clearly a net benefit for the economy, but GDP mis-measures this situation. GDP will go down after the shut-down, not only because of the lost jobs, but perversely because fewer people will seek medical treatment for respiratory illnesses!

There is a narrative about their being too much litigation in the economy, but I'm inclined to believe there is too little. I'm doing pro bono work for a village in Illinois that was heavily polluted by a subsidiary of a major oil company. Like, children playing and going to school in heavy-metal contaminated soil level of polluted. The village didn't sue until it was past the statute of limitations because it thought the government would take care of them. This story is replicated all over the US. It's great for GDP when a company pollutes and hurts peoples' health, because that damage to human and environmental capital is "off the books" for the purposes of the GDP calculation.

I think the general feeling is that there is too much frivolous litigation, but you may be right that there's not enough of this other type.

The other general feeling is that even when a case is legitimate, the plaintiffs often get very little per person from the settlement, but the lawyers make out handily.

There aren't too many lawyers, there are too many laws. I would bet that if the study had correlated the number of laws and its effects, it would find the same result. After all, when a complex set of laws is passed, some lawyer must become a specialist in it. There were no personal injury attorneys until products liability laws were passed in the twenties. Likewise, there were no securities lawyers until the SEC was formed and securities laws were passed in the thirties. Patent lawyers, bankruptcy lawyers, etc. Obamacare was 2000 pages of law alone. The resulting regulations and case law will be tens of thousands of pages dictating the actions of people who will need a lawyer to know it all, analyze it, and apply the law to their clients' situations.

tl;dr: correlation != causation

That's like blaming accountants for income tax. Too many (bad) regulations spoil the economy. They lawyers are the symptom, not the cause.

With more or less 40% of congress consisting of lawyers* , they might be the cause as well as the symptom.

* http://economix.blogs.nytimes.com/2012/02/23/first-thing-we-...

Lawyers are really bad at gaming the system in their own favor. Whereas the AMA tightly controls the number of accredited medical schools to keep supply low and salaries high, the legal profession sued itself (law schools sued the ABA) to remove accreditation restrictions that would limit the supply of lawyers.

I know this will be an unpopular opinion, but law is one of the few remaining ethical professions. If lawyers acted more like the rest of the business world (e.g. the financial sector, small businesses), in pursuing their own self-interest, lawyers would be a lot better-off.

"I know this will be an unpopular opinion, but law is one of the few remaining ethical professions."

I might actually believe that. One of the biggest champion of free speech and human rights in general in Malaysia is the Malaysian Bar Association.

I would be interested in some elaborations on this. I have a pop-culture-derived gut sense that lawyers are slimy good-for-nothings, but intellectually, I know better though I'm short on actual rationales.

First, there are a lot of lawyers engaged directly in public service. Lawyers work at non-profits, as public defenders, and for the government. A number of my friends (say 1 in 10) from law school had the grades to make $150k+ at a large law firm and didn't even apply to such jobs, instead taking $45k/year jobs as public defenders. While DOJ is often used as a political tool, the rank-and-file there are true believers, mostly top graduates from top schools who could make twice as much in the private sector. Now, to be perfectly fair the large majority of lawyers do work in the private sector, but even there public service is institutionalized in a way it isn't in other professions. The majority of lawyers at any large law firm do at least some pro bono work. Last year, attorneys at my big Wall Street law firm did on average over two working weeks worth of pro bono. Nearly all law firms count at least a week or two of pro bono towards yearly hours requirements. Nowhere near 10% of my engineering friends went to go work at non-profits for low pay, and I know very few engineers that donate that much work for free.

Second, law has lagged the rest of corporate America culturally. Over the last 50 years, corporate America has replaced independent ethical principles with the "ethics of the market." The business culture has internalized the idea that the purpose of corporations is to maximize profit for their shareholders to the point here people genuinely believe that anything legal that maximizes profit is not only good business but rather morally righteous. The legal profession is one of the last places where people use the word "fairness" without it being the punchline to some joke about things that are only relevant in grade school. Obviously you see more of this in the judiciary or among public service lawyers than at big Wall Street firms, but even lawyers defending big evil corporations have a constitutional discomfort with bending the rules too much--after all without rules a lawyer's life would be without meaning.

Third, law is as a profession very self-conscious about it's special role in the economy. Lawyer's attitudes towards their ethical codes are more similar to that of accountants than say that of financial service professionals. Part of this is the constitutional preoccupation with rules, but the other part is basic self-interest. In the financial sector, there are little to no consequences, other than some bad press, for selling a client on a bad deal while taking the other side yourself. In the legal sector, breaches of ethical duties to clients trigger the professional death penalty (disbarment). People have this image of scummy lawyers lying and cheating to benefit their clients, but very few lawyers like their clients enough to risk their own livelihoods on their behalf. Every single admitted lawyer went through an invasive "character and fitness" investigation before the state licensing boards, an investigation so thorough it digs into sealed juvenile records and verifies the consistency of facts on your law school applications. I was quite shocked at how much more seriously my classmates in law school took the Honor Code than my classmates in engineering school... Now, you certainly do see lawyers lobby for laws that create more work for them, but it's kindergarten stuff compared to businesses that lobby to be allowed to externalize more of the costs of their activity onto workers in the form of workplace hazards, or banks that lobby to be allowed to take more risks with their depositors' money. When I was working as an engineer in the defense industry, it wasn't like we scrupulously avoided opportunities to make ourselves relevant ("now that you've invaded Iraq, you might want to look at our product...")

Now, I don't want to oversell my case. There are a lot of scummy lawyers, especially of the personal injury kind. And most lawyers who make a good living do it by defending big evil corporations. But you know what? There are lots of scummy people everywhere and everyone works for those big evil corporations anyway. And unlike lawyers those people don't swear to follow an ethical code that makes it a punishable ethical violation to not rat out your friends.

> law is one of the few remaining ethical professions.

No, it isn't, at least not in general. There are lawyers who enact their job as an ethical profession and we should be thankful for them. But there are lawyers who couldn't care less about being ethical who do pursue their own self-interest or unethical interests of others. Therefore it's not an ethical profession. Just one where you might find someone who cares about your rights.

I don't want to throw the same insults at each and every lawyer, because there are clearly some who don't deserve it but the majority of lawyers I had to deal with so far definitely deserved every bad name they're called.

And those lawyers get disbarred when they get caught, and are forced to compensate their victims, and can't use bankruptcy or other means to evade paying such reimbursements.

Individual lawyers may not be ethical, the profession as a whole is. In order to remove the bad apple, you need to report them to the state bar association.

Unfortunately, at this point, the number of accountants/tax-lawyers dependent on tax-complexity for their livelihood does create a pressure against simplification. Their and their clients' lobbying creates plausible-sounding rationales to keep every advantageous wrinkle in the code.

One particularly vivid example is Intuit's lobbying against federal and state efforts to make individual tax-filing easier:

http://www.techdirt.com/articles/20100723/09055310339.shtml

For many a sensible person, lawyers seem to be more a liability than an asset. Rightly so. Indeed they are more often than not rent-seekers, and the rent is sky high. That is, until you are faced with a serious problem.

Imagine you are falsely accused and facing charges that could land you in some maximum security prison, sitting on death row. Or, even worse, imagine you get caught downloading too many JSTOR articles in a university library. Then, lawyers don't seem like rent seekers. They are an asset, not a liability. And you need one. Or two. Or a whole team of them. You can't have too many. The more the merrier.

As with anything else in life, context is relevant.

"More often than not?" The article says that there are 40% more lawyers than the optimal number. Thus taking the article at face value, at most 30% of lawyers are more of a liability than an asset. Under the model of the article, decreases the number of lawyers beyond that level would decrease GDP.

I'm surprised you would actually take the statistics seriously. At face value, the article is pure entertainment. I would not consider an evaluation of a lawyer as a liability or an asset to be something that can be measured objectively. Every client is different and every client's situation is different. And it is the client who ultiimately decides whether the services are an asset or a liability, and no one else. My opinion is that lawyers do not add anything to the client's bottom line (but it doesn't matter what I think, only what the client thinks). In my view, lawyers function to limit the costs of the client's activities to the client (while at the same time adding to the client's costs themselves with legal fees). In other words, they operate to try to minimize the client's losses, to limit the client's liabilities. But we often have no evidence that such losses would have occurred absent the lawyers' involvement. We resort to speculation. Unfortunatley, lawyers play on fears to generate business. But there are some situations where this is not necessary, because the fears come from a real situation not a hypothetical. In these situations, there is a real, measurable risk of loss.

That's why I gave the (extreme) example of facing criminal charges. That's a situation where the losses seem quite imminent. The chance of serious losses is real and the accompanying fears are justified. I would argue society needs enough lawyers to handle those types of situations. Clients with serious problems where loss is imminent. But beyond that, it gets very subjective and very speculative. Needless to say, lawyers are very good at arguing the need for their existence and for their value to the client.

Whether it's 40% more than we needed in 1994, more than that or some lesser percentage, is anyone's guess. We all know it's too many. You don't need to conduct a study to see that.

If you think lawyers don't add to the client's bottom line, why are the Chinese rushing to develop their legal systems along western models? Why is the maturity of the legal system included in every international ranking of nations' desirability as a location to do business? Is it all just fear?

Lawyers are the dispute resolution mechanism that allows an economy full of people trying to screw each other (and trust me, as long as economies are full of people, they will be trying to screw each other) to work. The article is based on the reasonable premise that a bigger dispute resolution system contributes to GDP to a point, then starts hurting the economy beyond a certain point.

Note bene: you say "in 1994" as if we should assume the problem has been getting worse over time, but in reality the size of the legal sector as a %-age of real GDP has been decreasing since it peaked in the late 1980's: http://amlawdaily.typepad.com/.a/6a00e55044cbaf883401543574d...

"as if we should assume"

Whoa. Where are you getting that?

I will let the @strawman take it from here. Because that's who I think you are trying to argue with. :)

Before your ninja edit, you had a "(in 1994!)." The exclamation point implied that it may be more than 40% today.

Also, your argument is the strawman:

> My opinion is that lawyers do not add anything to the client's bottom line (but it doesn't matter what I think, only what the client thinks).

> But beyond that, it gets very subjective and very speculative. Needless to say, lawyers are very good at arguing the need for their existence and for their value to the client.

It was an economist, not a lawyer, who made the case for the value of lawyers to the economy.

"the exclamation point implied"

Well, if it did it wasn't intentional.

I am always editing. It's just how I write. HN faux pas I guess.

I'm not sure I follow the rest of your comment.

I was not suggesting the author of the article was arguing for the value of lawyers, I was saying that as a general statement. (And not that it proves anything but in this very thread we have a lawyer - you - arguing in favor of lawyers.)

It may be I'm just too stupid to undertand whatever else you are trying to show me with your quotes. But it does seem like you are reading things into my words and coming up with your own interpretation which, alas, does not match my intent.

Speaking in general terms, lawyers are a sign of a sick society. The law should be a set of agreed rules by which we all agree to abide in order to create a better society for everyone. If we need a specialised profession to explain to us what the rules we all implicitly agreed to abide by say we should do, or as is often the case not even explain to us but just tell us the outcome, the rules are no longer fit for purpose.

You assume a total lack of self interest: A perfect adherence to Kant. I disagree with you about it reflecting a sick society: I think it reflects a real one.

I disagree that my view assumes a lack of self-interest. I think it's possible to have real societies in which people can understand the rules (not necessarily choose to abide by them, but understand them) without a specialised profession to tell them what the rules mean. Self-interest has nothing to do with my suggestion that it should be possible to understand the rules of the society one lives in.

First of all, except at the top end, I don't think lawyers are any worse, ethically speaking, than any other category of private business. And they are absolutely necessary.

The glut of attorneys definitely ruins the economy for other attorneys. Their income distribution is bimodal, depending on the first law job out of school. If you get "biglaw" or a decent positions at, at the least, a mid-sized regional firm, you'll make a six-figure salary. If you don't and you fall into the legal underclass, you make less than an entry-level software engineer, and have student loans to pay off.

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