A Half-Hearted Defense of the Legal Services Cartel

Cartels are bad because they restrict the supply of a good or service to increase its price.  Not nice huh?  Neoliberals’ solution is to increase competition from outside the cartel to bring prices down.  Consumers reap the savings.  This is why neoliberals argue for free trade: foreign workers provide the same goods and services for less.  The American legal system is a cartel because from the LSAT to the bar exam, and the limited number of seats at law schools, only a small portion of the population can be lawyers.  The ABA, however, is not like OPEC.  There are reasons to give law some leeway in the market.

(1)  Competency.  You only want dentists to remove your teeth, mechanics to repair your cars, and plumbers to fix your pipes.  Legal services aren’t simple, they require legal knowledge, process knowledge, and research and writing skills.  Competency doesn’t come for free, and we want all lawyers to start at the same competency standard.

(2)  Accountability.  It may sound counterintuitive, but having a single body setting competency standards gives consumers a face to the industry whenever things go wrong for them.  For instance, if law students are oversaturating the legal market in some regions rather than others, the ABA is in a better position to shut those schools down rather than the market, which would shut down schools based on rank.  More on this below.

(3)  Justice isn’t empirical.  Doctors can run tests to see if something’s causing pain in your abdomen.  If they find nothing, they can refer you or call you a hypochondriac and leave it at that.  Justice, which is law’s virtue (did I mention I did philosophy in my undergrad?) isn’t as empirical.  A lawyer can’t pronounce you “just” at the end of a case, even if you win.  Whether a person has received justice is wholly subjective.  Now maybe some opium-addicted 19^th century positivist thought otherwise, but you ain’t getting that at the Law School Tuition Bubble.  Diagnosing legal problems takes more than just looking at test results.  Obviously, there’s no skilled profession short on incompetent practitioners, nor one that is purely empirical, but law is far more interpretive than medicine or plumbing.

(4)  Justice doesn’t entail obvious solutions.  Dentists can look at your teeth, test weird growths for bacteria, and prescribe discrete remedies based on their observations.  Because you can’t measure injustice, lawyers can’t as consistently look at your case and give you a prescribed solution.  Lawyers are more likely to have different opinions as to how to proceed.  Some may be more litigious, others may eschew courtrooms for mediation.  Consequently, the legal profession is more sensitive to oversupply shocks.  When there’re too many attorneys, they’ll be more willing to litigate because it makes them more money.

(5)  More parties involved.  Dentists don’t have to schedule hearings with plaque’s representatives and neutral arbitrators.  More time makes it slower and more expensive.

(6)  Billable hours.  Similar to the last two points, because legal practitioners can’t tell clients how long cases will take (the results being subjective), they bill by their time rather than a salary.  There’re exceptions like corporate counsel and civil servants, but they only have one client: the corporation or the state, respectively.  Hopefully the billable hour will die the death it deserves, but that’s a different issue.

(7)  More variability in practice.  A dentist from one practice can walk into another’s and probably do the exact same work there without knowing much about the patients to begin with.  Legal practices can range in areas of law covered and in size of the practice.  Attorneys can also charge different rates based on their prestige, particularly because results are determined subjectively and some attorneys have different skills that’re more beneficial than others, e.g. oral persuasion skills.

(8)  Locality.  Law is a fundamentally local phenomenon.  This is probably the most important defense of the legal services cartel.  You can’t outsource it outside the country, and you can’t immigrate non-American lawyers without substantial retraining.  Sure, doctors need to speak the local language, but law requires knowledge of local language, local processes, and local history.  Doctors without Borders will always be able to provide more practical on-the-ground help than Lawyers without Borders (which I should consider joining…) because medicine is universal.  Law is parochial.

Frickin' hate positivism.

Given my above arguments, I return to Matthew Yglesias’ response to Mark Greenbaum’s op-ed piece beseeching the ABA to shut down law schools.  Yglesias writes, “[A] ‘continual flood of graduates’ that ‘only suppresses wages’ actually does a lot more than suppress wages, it reduces the cost of legal advice,” [emphasis original]. True, but (a) attorneys typically give free first consultations anyway, so the advice isn’t at issue, but (b) even if we assume he meant “services” instead of “advice,” he conflates market saturation with market oversaturation.  Hey, I agree with market saturation of legal services, even if that means I’ll never make cashsacks as general counsel to Sony, but that doesn’t mean I agree with dumping unemployable people with unserviceable debt on the labor market, especially if satisfactory legal outcomes are in the eyes of the beholder.

Moreover, Yglesias doesn’t mention the tuition bubble.  Remember, the tuition bubble is bad for everyone except law school faculty and lenders.  The public may be paying less in legal services, but it’s also paying more to public universities to finance the bubble, to public servants in their loan forgiveness programs (whose existence I support), and ultimately to lawyers and banks when the system needs to be bailed out.  I agree that merely shutting down law schools won’t kill the bubble, but it at least addresses the oversupply problem.  Yglesias’ neoliberalism doesn’t.

Where to compromise?  Professor Bainbridge agrees with Greenbaum, “Assuming we aren’t going to have real free markets for legal services, but will continue to have such barriers to entry as ABA law school accreditation, bar exams, and so on, which presumably would solve the problem, we need to constrict supply.” [Emphasis mine.]  No, we do not, will not, and I believe should not (for the reasons above) have real free markets in legal services, but if we change the bankruptcy laws, how we finance legal education, and deliberately reduce law student concentrations wherever they are, we’ll reduce the cartelization Yglesias loathes while eliminating excess lawyer supply.