Economists on Deregulation of the American Legal Profession: Praise and Critique

Abstract

Both law professors and economists are discussing deregulation of the American legal profession, often without consulting each other. This symposium essay reviews the book length deregulation argument entitled First Thing We Do, Let’s Deregulate All the Lawyers. The essay argues that Let’s Deregulate is a tremendous addition to the literature: it disregards laws various professional shibboleths and offers a crisp and persuasive argument that the current barriers to entry are very, very costly to law students, clients, and society at large. Let’s Deregulate estimates the 2004 lawyers’ earning premium at $64 billion. The estimation is high, but well supported. Even if the absolute figure is rejected, the finding that barriers to entry have raised lawyer salaries is patent and inescapable.There are two notable weaknesses to Let’s Deregulate, however. First, while the supply side argument (entry barriers result in fewer lawyers, reduced competition, and higher prices) is outstanding, the demand side argument is much less persuasive. Let’s Deregulate asserts that a raft of recent laws and regulations (including various environmental, class action, consumer protection and intellectual property laws) are inefficient and more costly than beneficial. This claim is difficult enough to prove empirically, but Let’s Deregulate piles on by claiming that the legal profession has been a prime mover in the creation of these laws. These two claims add an unnecessary degree of controversy and difficulty to an already unlikely mission. Critics of deregulation can thus characterize the entire effort as a politically motivated assault on disliked law, rather than an even-handed attempt to quantify the costs and benefits of lawyer regulation.Second, and more understandably, Let’s Deregulate misses some of the unique nuances of the market for lawyers. For instance, it suggests that state legislatures control lawyer regulation, and state supreme courts actually do. This is a critical distinction for any reform effort. The analysis also treats the market for lawyers as a monolith, and there is much evidence that there are two private markets for legal services: big law firms who compete internationally for large scale corporate work and everybody else – small firms and solo practitioners working for smaller businesses and individuals. Despite the critiques, the essay concludes that Let’s Deregulate is a tremendous addition to the literature and encourages more lawyer/economist cross-pollination on the topic.