April 7, 2011

A Case for Deregulating the Law Industry

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State governments have made law one of the toughest professions to break into. New York prohibits anyone from practicing law unless he graduated from an ABA-accredited law school, gained entry to the state bar through the bar exam and meets a series of bar-defined ethical requirements. As the New York Court of Appeals noted In re Co-operative Law Co., “The practice of law is not a business open to all but a personal right … [It] is in the nature of a franchise from the state, conferred only for merit.”  But the practical effect of such restrictions is to limit the supply of lawyers, thus driving up the costs of legal services far beyond market price. This is good for practicing lawyers. But it is bad for everyone else. And in a time of rising unemployment and personal debt, it is time to re-examine any regulation that increases the costs of consumer goods — even the state bar requirements. It is time to allow free entry into law.

Of course, legal lobbies do not justify these regulations in terms of naked self-interest. Indeed, anyone who thinks that the practice of law should be “a business open to all” will be immediately accused of trying to lower legal standards. Why flood the market with attorneys who couldn’t meet the old requirements? After all, law can be deadly serious; hiring a bad lawyer could mean the difference between going home with the family and spending 25 years in Auburn Correctional Facility.

But it is precisely because legal services are so important that we should oppose all restrictions on professional entry. The compulsory bar associations purportedly believe that ensuring quality is preferable to offering low-cost services. Such notions might sound idealistic, but one of their effects is to make legal services essentially inaccessible to the poor. Lower-income people have little recourse but to rely on the state for public defenders or court-appointed attorneys when accused of crimes. Unlike lawyers at profit-making firms, who may be fired if they develop a losing trial record, such state attorneys’ paychecks do not depend on consumer satisfaction. Since the state will pay them the same regardless of how well they do, their only incentive to providing quality services is their good intentions.

Creating a free market in law would help destroy these income disparities. True, the poor would still be unable to afford a Johnny Cochran, but by increasing the supply of private lawyers, we would tend to see a fall in prices, thus expanding choices for low-income groups. Expanding supply could also open up a market in no-frills, discount legal services for those who cannot litigate valid claims because of prohibitive legal fees. In fact, this is how the airline industry developed. By expanding consumer choice, deregulation turned what had been a luxury service into one accessible to all classes.

Some purists may balk. Aren’t we vulgarizing law by reducing it to mere economics?  Well, even under a free market, these purists would be free to blow their retirement funds on a top-notch lawyer, if they find economics too vulgar. But to force the same choice on everyone is shameful.

The free market could also provide a voluntary accreditation process in place of the current state-mandated monopoly. The state bar associations perform an important service by branding lawyers with a public seal of approval. There is, therefore, no reason to expect it to disappear once bar membership becomes voluntary. Just like a Zagat sign outside a restaurant indicates quality food, so a bar certification may indicate a good, ethical lawyer. But abolishing the compulsory bars and allowing for freely competing accreditation agencies would help provide consumers with this same information in a non-coercive and cost-effective way. For instance, the state bar associations only require lawyers to take the bar exam once, at which point they are accredited for life. This is an absurd model that would attract no customers without a state-enforced monopoly. Imagine if Zagat continued to recommend restaurants just because they were good in 1973!  But unlike the state bar associations, which are mainly concerned with restricting competition, private agencies’ very existence would depend on providing reliable information cheaply, and most lawyers would have an economic incentive in gaining their endorsements. Of course, a lawyer could also reject accreditation altogether and rely on his firm’s reputation or his discount services to attract customers. Likewise, attending law school would increase a lawyer’s bona fides, but it wouldn’t be required. Indeed, it might give way to cheaper methods of learning, like apprenticeship.

Abolishing the state bars could actually have wide appeal. Regular consumers, laissez-faire conservatives, liberal anti-poverty activists and students who just want to practice without assuming massive law school debt could unite for a free market. They would face the mighty legal lobby. But what that lobby has in political power it lacks in logical appeal. “Higher costs for lawyers” is not a cause likely to draw anyone to the barricades.

Kelse Moen is a first-year law student at Cornell Law School. She can be reached at khm81@cornell.edu. Barely Legal appears alternate Fridays this semester.

Original Author: Kelse Moen