First Thing We Do, Let's Deregulate All the Lawyers

First Thing We Do, Let's Deregulate All the Lawyers

CLIFFORD WINSTON
ROBERT W. CRANDALL
VIKRAM MAHESHRI
Copyright Date: 2011
Pages: 110
https://www.jstor.org/stable/10.7864/j.ctt1261jp
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  • Book Info
    First Thing We Do, Let's Deregulate All the Lawyers
    Book Description:

    Not many Americans think of the legal profession as a monopoly, but it is. Abraham Lincoln, who practiced law for nearly twenty-five years, would likely not have been allowed to practice today. Without a law degree from an American Bar Association-sanctioned institution, a would-be lawyer is allowed to practice law in only a few states. ABA regulations also prevent even licensed lawyers who work for firms that are not owned and managed by lawyers from providing legal services. At the same time, a slate of government policies has increased the demand for lawyers' services. Basic economics suggests that those entry barriers and restrictions combined with government-induced demand for lawyers will continue to drive the price of legal services even higher.

    Clifford Winston, Robert Crandall, and Vikram Maheshri argue that these increased costs cannot be economically justified. They create significant social costs, hamper innovation, misallocate the nation's labor resources, and create socially perverse incentives. In the end, attorneys support inefficient policies that preserve and enhance their own wealth, to the detriment of the general population.

    To fix this situation, the authors propose a novel solution: deregulation of the legal profession. Lowering the barriers to entry will force lawyers to compete more intensely with each other and to face competition from nonlawyers and firms that are not owned and managed by lawyers. The book provides a much-needed analysis of why legal costs are so high and how they can be reduced without sacrificing the quality of legal services.

    eISBN: 978-0-8157-2191-8
    Subjects: Law, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Acknowledgments
    (pp. vii-viii)
  4. CHAPTER ONE Introduction
    (pp. 1-8)

    In late 2000 Justin Anthony Wyrick Jr. became the most requested legal expert on the website AskMeHelpDesk.com. To the great surprise of many bloggers and their followers, “Justin” was actually a fifteen-year-old high school student named Markus Arnold who apparently had never read a law book. The American Bar Association (ABA) was not impressed. In its view, Arnold had committed a serious ethical violation by misrepresenting himself as a lawyer.

    Arnold was never prosecuted, but in an earlier episode Rosemary Furman nearly went to prison for trying to help people solve their legal problems without having a license to practice...

  5. CHAPTER TWO The Market for Lawyers
    (pp. 9-23)

    According to the Current Population Survey, approximately one million lawyers are currently working in the United States in law firms, government offices, and the legal departments of private corporations. This figure may comport with the conventional view that the United States has too many lawyers, but occupational licensing requirements have in fact constrained the supply of lawyers. In this chapter we provide an overview of the various policies that have affected the supply of and demand for lawyers and then estimate lawyers’ aggregate annual earnings.

    As noted, to obtain a license to practice law, an individual must typically gain admission...

  6. CHAPTER THREE Evidence of Earnings Premiums in the Legal Profession
    (pp. 24-56)

    Previous research provides some empirical evidence that lawyers receive earnings premiums, but this research does not attempt to fully resolve the methodological debate of whether those premiums may simply reflect unobserved skills, abilities, and working conditions. Looking at new entrants to the legal profession, Pagliero (2010) concludes that lawyers’ salaries increase as bar examination pass rates decrease. He also concludes, however, that lower pass rates are not associated with higher-quality lawyers, which suggests that the higher salaries reflect premiums that are unrelated to ability. Rebitzer and Taylor (1995) provide some corroborating evidence rejecting the hypothesis that associates at large law...

  7. CHAPTER FOUR Sources of Lawyers’ Earnings Premiums
    (pp. 57-72)

    Katz and Summers (1989) concluded that workers in some industries appear to receive wage premiums that could not be explained by differences in skills or in working conditions. The efficiency wage literature suggests that wage premiums persist because firms may find that the gain in profits from reducing wages may be offset by lower productivity. This argument, however, does not seem to explain lawyers’ earnings premiums because law partners share ownership of their firm—that is, their pay derives from dividing up the firm’s profits—and, as noted, Rebitzer and Taylor (1995) concluded that associates are not paid efficiency wages....

  8. CHAPTER FIVE Welfare Costs
    (pp. 73-81)

    Theoretical and empirical evidence indicates that entry restrictions created by occupational licensing and the increased demand for legal services caused by certain inefficient government policies have enabled lawyers to earn premiums that result not merely in lump-sum income transfers but also in a substantial deadweight loss to the U.S. economy from inflated prices for legal services. In all likelihood, lawyers’ inefficient earnings premiums are shared with law school administrators and faculty because the existence of those premiums enables law schools to sharply raise their tuition to students, who envision large lifetime earnings.¹ Generally, entry barriers capable of generating earnings premiums...

  9. CHAPTER SIX The Case for Deregulating Entry into the Legal Profession
    (pp. 82-94)

    Competition in legal services is currently restricted in two ways. First, an individual who wishes to practice law must satisfy an occupational licensing requirement. This requirement clearly bars some aspiring attorneys from joining the legal profession because they are unable to gain admission to an accredited law school or pass the state bar examination and deters others who find the out-of-pocket and opportunity costs of a formal legal education to be prohibitively expensive. Second, because legal services can be provided only by law firms that are owned and managed by lawyers, other nonlawyer entrepreneurs are prevented by American Bar Association...

  10. CHAPTER SEVEN Toward Policy Reform
    (pp. 95-99)

    We have argued that occupational licensing requirements for attorneys and restrictions on the organizational form of firms that can provide legal services have reduced competition in the legal profession, resulting in large costs and few benefits. Those costs have been expanded by inefficient public policies that have increased the demand for lawyers. Accordingly, we have recommended deregulation of the legal profession to spur competition that would enhance economic efficiency.

    From a distributional perspective, concern has developed in the past few decades about growing income inequality in the United States, which has been fueled by strong growth at the upper tail...

  11. References
    (pp. 100-106)
  12. Index
    (pp. 107-110)
  13. Back Matter
    (pp. 111-112)