The Potential Benefits of Deregulating Lawyers

In this interview with Saïd Business School at the University of Oxford, Clifford Winston discusses the potential benefits of deregulating the legal profession – namely increased competitiveness leading to affordability.

Winston first establishes his view that a need for government regulation indicates some market failure that needs to be addressed. In this case, occupational licensing such as passing a state bar exam is meant to assure a minimal level of quality. Winston argues that such occupational licensing would not be necessary if we could apply crowd-sourced reviews of lawyers, through services such as Angie’s List or Yelp. This would offer the opportunity for markets to decide what kind of certification and education is required to provide legal help.

Deregulating the practice of law would drastically increase competition along a spectrum of legal services as the supply of legal-service providers rise as regulations drop; for example, individuals who might require someone with just a background understanding of legal procedures would find approaching a “legal consultant” to be much less expensive than consulting with a bar-licensed lawyer.

The costs of the such deregulation—such as a loss of income for those in the legal professions—would be offset by the consumer benefits of more services provided more cheaply. More economic gains may even be found if third-party review services arise or expand that would help correct any market failures, i.e. review services could weed out individuals providing poor services.

The primary obstacle to such deregulation, though, is getting states to adopt these policies in the face of the tight relationship between policymakers and lawyers. However, if one state successfully pursues a deregulatory policy, it makes it likely for other states to follow, particularly given the success that other countries, such as the United Kingdom, have had in loosening the requirements needed to offer counsel.

The general principle behind legal deregulation is grounded in the idea that there are not serious information problems in determining the quality of a professional service firm. Therefore, whether a firm provides legal advice, accounting advice, or automotive services, Winston feels that markets would determine the credentials and certifications service-providers need to practice. Increasing this supply of service-providers would allow competition to flourish. Additionally, information-providers and guides could offer more resources for consumers who seek quality help. These market forces lead Winston to believe that there is little need for occupational-licensing regulations in many service firms.