Does America Need More Lawyers?

September 28, 2011

Does America need more lawyers? We might, argues Clifford Winston, co-author of First Thing We Do, Let’s Deregulate All the Lawyers (Brookings, 2011). Winston says restrictions on the number of lawyers are killing innovation in the industry. By eliminating barriers to entry, the price of a lawyer can indeed be reduced without sacrificing the quality and that a private sector solution, like an Angie’s List, would ensure real information is shared about lawyers to allow legal customers to determine their competence. Instead, today’s licensure requirements may create only the perception of quality.

Why not examine lawyers as a monopoly?
“I got into this topic as an extension of a book I wrote a number of years ago on government failure versus market failure. That book looked at the efficacy of government policies in trying to correct market failures, and generally had negative findings on things that tended not to work out. I wanted to get a deeper look at the sources of where we had problems, particularly with interest groups. Lawyers were an obvious interest group to me, although they actually have not received as much attention. I thought it would be interesting to take a look at policies that benefit them, and types of ways that they influence policies.”

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Having more lawyers would be good for consumers, lower prices.
“The standard characterization of the legal profession is that there are too many lawyers already, and the last thing we need is a policy like deregulation that is going to lead to more lawyers. Well, the real problem is that you have got to correlate the supply with the prices. At this point, there are probably too many lawyers getting very high wages. When you starting lowering prices (which you will get with competition and deregulation) you will wind up getting an increase in demand for lawyers. Now couple that with additional services, or new services, then you will even get more employment in legal services. Contrary to beliefs that there is an excess supply of lawyers, what we actually could really have in a more competitive and innovative legal industry is a lot more employment in such an industry. This is exactly the same kind of thing that happened under deregulation of other industries – lower prices and new services lead to more demand and more employment.”

We already have quality problems; we need private market solutions.
The argument for occupational licensing in the legal profession is based on informational equality.  That is people don’t know, or really cannot judge, the quality of lawyers and so we need to attack this policy by insuring that those who practice in the profession have met a particular standard. That is passing a Bar exam.

Our recommendation that we liberalize entry and allow people to practice is met with a response ‘if you do that, you will get all sorts of unscrupulous and incompetent people that will ruin this profession.’ First – you have got these [types] of people now. You don’t have to look too far to hear stories about this lawyer being indicted for participating in some financial scam or this lawyer being indicted for unethical behavior, and so on and so forth. There is a lot of that now. It is not necessarily keeping out bad people. I might add that it is not so much incompetence, it is people just don’t understand what they are doing.

What people overlook is that when there are information problems, there is a private sector solution to them. Instead of erecting an entry barrier there are market mechanisms that could easily come in to place – a Zagat, if you will, or an Angie’s List for lawyers. Certainly there will be rating agencies. If there really are problems with quality, you will find people who actually say ‘look, we are going to keep track of lawyer’s performance.’ These are the kinds of things that can be used. Also, there are general business laws! We don’t establish deregulation and then say ‘oh by the way, you are allowed to practice here, and you can swindle people and we will not prosecute you!’ There are also things of that nature. I think a combination of market responses and existing laws would certainly be enough to hold down the kind of incompetence and fraud that would be excessive. We are going to get that as we do in all sorts of industries.

There is a policy solution: state experiments.
It is one thing to recommend a policy that you think would be socially beneficial. It is another to then face the political realities of this. I think the interesting thing about deregulation of lawyers is it is not something that we need to have an act of Congress or something that we need enact immediately at the national or federal level. This is something that the states can do in terms of experimenting, and that is probably the way to do it. First, it would be nice if a few states explored the possibility of people who are not lawyers but legal practitioners (paralegals, etc.) providing simple legal services without the assistance of a lawyer (the same way we have physician’s assistants now providing these kinds of services). That would, at least, open people’s eyes to the fact that there are a number of things you don’t need three years of law school for. Once we start moving in that direction then I think that kind of policy can be expanded,  even training for people who want to do those things (again, opening up occupational and online law schools,etc.), and we can start slowly building momentum for the benefits of deregulations through these small experiments, [eventually] building these things up until we have a few states that moved to full deregulation which will show the benefits for other states. That is how we are going to get this policy enacted. I think [we should] take it slow and do it incrementally, but I think that will open people’s eyes, and eventually that is what is going to carry the day.”