Russ Roberts

Winston on Lawyers

EconTalk Episode with Clifford Winston
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Clifford Winston of the Brookings Institution talks with EconTalk host Russ Roberts about the market for lawyers and the role of lawyers in the political process. Drawing on a new co-authored book, First Thing We Do, Let's Deregulate All the Lawyers, Winston argues that restrictions on the supply of lawyers and increases in demand via government regulation artificially boost lawyers' salaries. Deregulation of the supply (by eliminating licensing) would lower price and encourage innovation.

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0:36Intro. [Recording date: September 1, 2011.] Title of book is takeoff on Shakespeare's Henry VI, Part II: "First thing we do, let's kill all the lawyers." You have a much more modest proposal, which is to deregulate all the lawyers. Essentially in the book you make the claim, shocking to many, that America has too few lawyers. Why is that? I want to be a little careful here. I'm not sure whether it had too few or too many. There has been a debate about that. Our position is, whatever the number, we have too few of them competing as intensely as they could be. Probably too many that are getting paid very high wages, that with competition those kinds of premiums fall. In the end, whether we are going to have more or less is not really so much the focus of the book as much as the competitive changes we'd like to see. At this point I probably speculate that we may get more. What's the evidence? Why do you make the claim that there's inadequate competition? What's holding it back? Let's first start with the institutional setting. There are interesting things here that are different from other markets that appear to have these features. The key part about lawyers is what we call occupational licensing. That is presumably of information quality--that people can't really tell in advance whether they are going to get a lawyer that's competent, honest, reliable. The way policy makers have tried to address this problem is have a certification or licensing that someone has reached a particular threshold in terms of an examination that has passed and therefore is certified, provides a service, giving you some certainty that you what they do will be of reasonable quality. That's sort of an entry barrier there. It comes in two forms. One, for most states, and this is a state-by-state matter, you have to go to a law school that's accredited by an association--the American Bar Association (ABA), the accrediting institution--you have to go to that law school; after finishing and getting a degree, you've got to take a bar examination given by the state. Most states won't even let you sit for the bar unless you've gone to an ABA-accredited law school. So, that's sort of a constraint on the supply side. Not everyone gets into an ABA-accredited law school. We estimate were about half those who tried to get in were able to get in, and even that number underestimates because there are a little of people who are discouraged from applying and spending the money on going to law school. So, that's your classic entry barrier on the supply side. That argument that you made very nicely, that there's an information asymmetry, perhaps--it's hard to know what a good lawyer is, and so what licensing does is make sure that a certain minimal quality of lawyer skill is available in the market. That's a nice story. One of the effects as you point out in the book is when you do that, restrict the supply, you have an effect on the wages of lawyers. An alternative story would be that these license requirements are in place to enhance the income of lawyers. I want to preface all of my remarks--many of my best friends are lawyers; I have a lot of friends who are lawyers and I like them all. I don't think I know one I don't like. They are fine people. So nothing we are talking about here is to impugn the character or skill set of any of the lawyers you or I know personally. But you make the claim in the book that--and this is where the burden of proof is on those who would impose licensing--the question is whether it actually does protect folks, whether there are skills that a person could acquire without law school that could be helpful but that person's not allowed to hang up a sign saying: Legal services for sale. They have to go through those two hoops in almost every single state of attending law school and graduating, and then passing an exam. Yet we know there are many people capable of giving useful legal services without those hoops. What's the evidence for that? Let's backtrack and put it in historical context. These requirements are obviously not things that happened overnight. It's really many years back when they started doing this. The ABA began its influence over licensing and the legal profession and the occupational licensing that we have today--at that time, and we talk about that in the book--there wasn't any evidence whatsoever that there were real problems with the quality of legal services to begin with. Actually, the notion of accreditation took a while to take hold in many states, because those were lawyers who weren't accredited themselves and hadn't gone to an accredited law school. So they would be saying they themselves were not qualified. That's a charming point you make in the book. Somebody had to be the first group of lawyers to say: We are not accredited. That took some doing; took a while. It wasn't like they said: We have a real quality problem identified. Getting a lot of complaints from consumers, lawyers don't know anything. Nothing like that. No evidence that there was a problem. This kind of organization took place, and slowly but surely the accreditation took place and we had this thing. It took time. There was never any retrospective assessment to say: Look how the quality of legal services has improved. That would have been a nice thing to measure over time. We certainly know that we continue to have many different types of problems with lawyers in terms of disciplines, scandals, all sorts of things. That's mostly anecdotal. At the same time we have something called the unauthorized practice of law, where we do have people that are providing useful services but they come under this very broad umbrella of unauthorized practice of law, which is like helping with a will, a divorce, or a company like Legal Zoom that tries some of these things online. They are providing helpful services, but they are shut down or there are efforts to have them shut down. That's the kind of information at this point where we are suggesting that it appears to be not everything requires a Ted Olsen [?] or a David Boyd [?] to do. Not the kind of thing you need years of law school; somebody could go to locational school for a year or so and provide that kind of service. As we now are seeing in the medical profession, where you have a Physician's Assistant. That's the idea in terms of intuition into why we think that now you don't really need this kind of training. More competitive at that end.
9:36The book is about the legal profession, but of course this problem is pervasive in all the occupations that are licensed. There's a bootlegger and baptist problem, to use a metaphor we've used many times that comes from Bruce Yandle--you have a high-minded idea for why this regulation might be good, which is protecting the consumer; and then you have a venal, self-interested motivation. And whenever you impose these licensing restrictions you never say it's important to have them so people can keep their salaries high. They of course say it's to protect consumers. Whether that's true of course is an empirical question. It's also a conceptual one. Another point I want to add--this is sort of an unusual style of policy. To the extent that we are talking about an information problem, most information problems are presumably addressed with information policies. Directly. The idea is: We're concerned about transparency, so why don't we have policies that are more directed toward transparency. How about a sign on your wall of a certain size that says: I did not go to law school. Exactly. Or inspections, or ratings. Or suing people. Or general business law. We have a whole range of information policies that are in place in other areas where we have concerns about information. But in this area, somewhat surprisingly, the attitude is: Well, we really don't want to focus so much on transparencies. As a matter of fact, the ABA really frowns on that--they don't like ratings of law schools; they don't endorse them; they don't endorse ratings of lawyers. They are all good, and we don't want to support that kind of information dissemination. But what we really want to do is just say: Don't worry about it. You don't have to know anything about them. We'll certify they are good by making them go through certain hoops. That is a very strange way to deal with an information problem. The only point I wanted to add, though, to generalize this: This occurs in many other occupations and some of them are way below the radar. Others are very much on the radar, which would be something like teacher certification, where high school or elementary school teacher is required to get an education degree. Whereas I'm allowed to teach at a university without an education degree. Somehow, incredibly--maybe I'm doing a horrible job, my students are abused by horrible teaching skills. When you look at what goes on in education schools, you realize it isn't necessarily helping people become better teachers. Going to law school, which is an interesting intellectual experience perhaps, doesn't necessarily help you very much in a lot of the practical things that lawyers have to do, and certainly in terms of judgment and other issues they are not necessarily so helpful. I think clients are quite clear about it, and so are law firms: we've got to teach these guys what they need to do. Increasingly clients are saying: We're paying big money for these people and they don't know how to do anything yet. The motivation there would be: Why not a vocational school? Why not an online school that is clearly directed toward training people to do certain things? Let the market sort it out whether that kind of training is particularly useful. Of course there's a wide range of things called lawyering, which would vary a lot in how much skill, talent and education might be required. So you've got writing a will, filing for divorce--the whole filing idea, the idea of interacting with the legal system, real estate, all the things that we if we are normal law-abiding citizens those are the things we have to use a lawyer for often. Then there's general counsel for Microsoft, for example. Then there's all the other things lawyers do. Obviously there's a wide range of skills a person could acquire that might be useful in the market for lawyer services.
14:33What's the evidence that this is a serious problem? It could just be there is not much effect. Yes, they restricted a little bit; do we know whether they restricted a little or a lot? The one part is the supply side; that is common to other occupations, too. But what also is interesting about lawyers is they have a demand effect that a lot of the work they do is generated by the government, and in particular by government policy and laws that generate increases in demand for lawyers. So, they have a very nice situation which arguably is pretty much unique to the legal profession, which is you have a restriction on the supply side because of these licensing requirements, yet you also have pressures on the demand side to use lawyers--for regulatory purposes, liability, all sorts of different litigation. Obviously that combination of a restriction in supply and increase in demand is putting pressure on wages. And a lot of what we do in this book is try to see what evidence is there that lawyers are earning more--we call it an earnings premium because at this point we can't really call it rents or some sort of inefficiency because there may be reasons they are earning these things that may be related to unobserved ability, unobserved skills, working conditions and so forth. So, the bulk of the book is first concerned with estimating earnings equations and these earnings premiums, which could come from two forces which admittedly we can't really decompose. But theory indicates two things going on, on the supply and demand side. And then working through all the various alternative explanations for why these premiums might exist and why they might actually reflect efficiency effects, not inefficient restrictions or government induced demand. In the end we come out that the bulk of this amount to inefficiencies and large increases in earnings premiums with an associated increase in deadweight loss in the billions of dollars; but also then other distortions like increases in labor force shifting to legal work when they might have been attracted to another profession. And then other associated restrictions with regulations on competition in terms of innovation. Before we get to the demand side, though, I want to just talk a little more about the supply side. The bar exam is administered by the ABA--is that correct. The states do it. And what determines how hard it is and the pass rates? That varies by individual state. California is unusual in that they let anybody sit for their bar exam. They are one of the few states that says you don't have to go to an ABA-accredited law school. You just have to pass the test. It's thought to be one of the hardest tests that are out there. Strangely enough. Just a coincidence. But that's to protect the consumer--it could be. Their argument is that it's a screening device and that's how we're going to run it. We're going to let people with uncertain promise take it. If they can pass it, they can practice. But it's a harder exam. Harder pass rate. How they vary by the states I really don't know. Although Wisconsin is unusual--the University of Wisconsin, if you go to and graduate from their law school, then you don't even have to take a bar exam. Certified that you are ready to practice law. My point is that one bottleneck is that exam, and presumably lawyers write that exam. And they have a kind of conflict of interest in that they have an incentive to make the exam hard. Obviously if they make it so hard that almost nobody passes there would be a political uproar and there would be costs to that. Some balance there. The other bottleneck for most states is the accredited law school and it's hard to start a new law school. But it's not impossible. They do get started. I'm curious whether that's a constraint or not. Do we know? There's another interesting aspect to the bar exam. Really goes to show how markets look for opportunities that are sometimes created by regulation. That's the bar review course. Here you have a private sector response where virtually everybody, large numbers of people take these bar review courses, which are not cheap and which the company that does this has run into questions about what sort of monopoly they have on this. Obviously these things are quite helpful because they do extremely well and a lot of people do it; and they help these people pass the exam. In some sense you have this interesting conflict--if lawyers who write the exam want to keep people out, there's obviously some sort of private sector response to try to help these people get in. It's like a mini-law school, a semi-law school for just passing the exam. They teach to the test. That's part of how they remain in business. You take them and you have an increased chance of passing. But what about starting a law school? They do get started. They have to then go through an accreditation process and that can also put you on probation--the ABA can look at how you are doing. We do see that new law schools do get in, but they don't react or respond necessarily to people who want to go to law school and demand in general. But they would unless the ABA made it really hard. So the question would be--there's a tension for the ABA. The members might have a self-interest in having no new law schools and having current law schools get smaller. Obviously that would enhance their salary as lawyers. But if they do that it's embarrassing. People would notice that and it would look gauche and there would be political pressure on them to act a little more leniently. But maybe you are making a mountain out of a molehill here. Maybe the ABA accreditation is mainly a pro forma thing to make sure they go through the basics and there's really no restraint on the supply of lawyers. Oh, it's hardly pro forma. It's a big deal. It's not a month process or anything. This stretches out for a number of years. They don't make public the people they turn down, but it's clear they do turn people down. They obviously don't let online law schools become accredited. They do not let foreign law schools become accredited, even if that was just very specialized work where it would make sense to have a law school education where you are working with some foreign country. They are clearly having an effect, but interestingly you are right that people in the profession think they are not having a big enough effect. If anything they say: Look, we just have too many lawyers, too many law schools, and we shouldn't be accrediting any more. Or slowing down the rate at which we are accrediting law schools. Reminds me of when I tried in 1976--I was in a shopping mall in North Carolina trying to get the Libertarian candidate, Roger McBride, on the ballot. One of my few forays into politics. I would accost passers by and ask them if they would like to see a third party and have another choice, and many of them would say: We have too many already. Two? Too many law schools already; maybe we should shut some of them down for malfeasance.
23:47Let's move to the demand side. One of the most interesting, thought-provoking sentences in the book, for me--sort of tangential but I found it thought-provoking--was the observation of how many politicians historically have a legal background. Yes, presidents, and obviously a big chunk of Congress. And it's not just current, right? No. It goes way back. Why is that? I think the standard answer is wrong. The standard answer is: Legislatures legislate, and legislators therefore a legal background is very useful because they are writing law. There is something to that. But that would be why you'd want your staff to have a legal degree. I'm worried there's another side to the equation: Who has the biggest incentive? Thinking in the most cynical terms, which you do in the book with lawyers as a special interest, lawyers have the biggest gains perhaps from writing legislation. That's a horrible thought. You want to comment on that? Yes. What we point out is there is certainly self-selectivity about who wants to be in government, but it's not permanent in the sense that you have people that go into government, obviously people making public policy; and these are public policies which they themselves could be affected by in other lines of work. Certainly you have sort of a rotating situation of people who are in government and then in the private sector and could obviously be affected by the law. They interact with people who are lawyers even if some of those lawyers never go into the public sector; it can be summed up as: They speak the same language. They are comfortable with each other, comfortable about thinking about issues in a certain framework; certainly they enjoy the self-regulation that lawyers have. When you think about it, this is a very powerful interest group, which is really what got us onto the topic, that is fundamental for shaping and implementing public policy. It's in a profession that we really have never looked at very closely in terms of how they go about affecting things. Certainly one thing is their benefits as a group. One example of that which is deeply depressing to me is tax policy, which is labyrinthine, complex, and opaque; and of course generates a lot of work for tax lawyers. And when you talk about tax reform, and simplifying the tax code--which is a perennial empty rallying cry for politicians--most citizens want simpler taxes; of course, they want lower taxes too. Generally. Higher for other people, lower for themselves. But the biggest interest group that fights tax simplification isn't the ideologues on one side of the size-of-government debate on one side or the other, it's the people who benefit from the system, which are accountants and tax lawyers. I think we forget about the role that the tax lawyers play, both the private and the individual level in that process. And they are going to provide input into the laws. A lot of these discussions take place, as all regulatory policy we know, in any area. The airlines, the Federal Aviation Administration (FAA), they talk with people in the industry. Some of these people go back and forth between the private sector and the government. Obviously when people are making laws they are going to be talking to people the laws are going to be affecting; the people in the legal profession are going to have some pretty powerful input into things that affect them. As private citizens we are going to encounter the legal profession when we go to buy a house, need a lawyer to close on a real estate deal or something similar in our daily lives. But so many lawyers are doing things we don't notice or see. One I'd like you to comment on is writing regulations. When Congress passes an environmental law, for example, the actual details aren't written by Congress but are hammered out by the agency and then fought over in these weird judicial proceedings that most of us never encounter and don't know anything about. But it's a big employment source for lawyers, and it's the way we do public policy at the ground level. It's a big--these are intense negotiations. You get inputs from competing teams in the private sector and public sector, or representation of the public sector. These things are complicated; they take a long time; they can be challenged, give you another round of negotiation before these things are hammered out. Generating work that has to be done. Then the legal profession needs people that will help you understand this law. We wrote it; we are hired to tell you how it works. One thing you are not hired to do is stand back and assess: Is this a good law, in terms of economic efficiency or social welfare or what have you? Something I think is an area of concern, since really we are talking broadly about public policy, and we basically have a major group who have input to public policy where they see their major job--and this is true--is to basically just understand what that policy is. But never step back and say: Is this really a good thing I am doing in terms of promoting welfare for the country. I don't even think the training is that way when you are in law school. I've never been. The same thing can be said about economists. For better or for worse--I think for better--we are unlicensed. Anybody can claim they are an economist. You don't need a Ph.D. in economics and you don't have to get a Ph.D. from a first-rate place. Anybody can be an economist and offer opinions; and within public policy circles, often economists are advocating for one particular position or another not necessarily based on whether it is good for the country but whether it is good for them. On the better parts of the profession, let's hope that when economists do advocate policies, they do have a grounding in welfare. I like to think that's the standard that's been set--that the contributions we do make to public policy are things that are genuinely thought of as improvements in welfare and we are doing this with an analytical and scholarly foundation with results that are testable and refutable. Nice idea. Traditions within the profession. Let me put it this way. I think there is clearly abuse and clearly people who don't have those standards, but at the same time, we know the earliest empirical assessments and regulation were carried out by first-rate people with the right kind of ideas on why we are doing this stuff.
32:12Let me just put in a small example of why I think that's overly cheerful. How many economists alive right now who think they have potential to be on a short list for Chair of the Fed? In terms of their ability. That they have a shot at it. Because they've done a lot of good work on public policy. Maybe a hundred. I was going to say anywhere from 50 to 150. There could be 1000 of which 900 are deluded. But it's not more than 1000. Then you'd have to ask the question: Of the top 100 monetary scholars, how many of them think they have a decent shot, and the answer might be 112% of them. I think most of them think either that they have the capability or the potential or a real shot at it. What's their incentive to speak honestly about the Fed on the U.S. economy? I'd say it's muted. I think there are pressures that can influence a scholar to get him or her off track, where there are private sector opportunities with consulting, that they have ambitions for political appointments. I've certainly thought about that in real life, that there's no reason for me to worry about it any more--cost too much for me. So, I've put that out of my mind. I'm sure that does go on. Milton Friedman was sort of a purist in that regard; Paul Samuelson, too, made it clear they were not looking for that kind of life and kept on with their academic work. People in economic theory aren't and in econometric theory aren't. There obviously is a distribution out there of people that are influenced by external forces like government or private sector. I've come to believe it's a very serious problem. It exists. I wouldn't go as far as saying it's pervasive in the profession. I think there are scholarly and doing things that attempt hopefully to build a core of scholarly understanding on the efficacy of public policy. To turn it back to the legal profession, I think that in many ways is one of my concerns. They are so wrapped up in actually trying to execute these laws; and certainly a lot of them benefit either by giving them work or raising their salaries, that they don't step back and say: Really is there a way once and for all that we could greatly simplify the tax code, at least on the transactions cost side of it, and start reducing that. Mergers and acquisitions: do we really have to be spending the kind of money we are for these kinds of things. Let's set aside whether these things are useful investments for the acquiring firm--the process of it is extremely costly. Patent policy. You go down the list, where we could save billions in transactions costs, inefficiencies, if we changed things. I just don't see the incentive there. The flip side would be: that isn't the lawyers' job. No it isn't. Let me ask the question a different way. I'll use intellectual property (IP) because I have a number of good friends who do IP, and they all tell me how important it is that we keep the current regime. And they could be right. But let's ask the question: there are many economists who have started to question whether the current IP regime of copyrights and patents is too restrictive. Or does anything good. That the incentive effects are outweighed by the costs and restrictions on innovation that result. Obviously there's a tradeoff. When you give people a monopoly with a patent, the idea would be you are creating an incentive for innovation and you are willing to accept some monopoly pricing in the short run. The same for copyright. What I'd be worried about, and tell me if this is a worry, is the role those lawyers would play in attempts by others to liberalize that system. So, many economists say now we need to liberalize the patent and copyright regime; and my worry would be not so much that lawyers don't think about it--what role do they play as lobbyists and push back on that kind of reform? I think there are indications that they do have an active role--in raising questions whether we do want to have this kind of extensive patent reform, make things simpler, get down to litigation costs. There is this possibility that we are going to change from first to invent to first to file. But even then it would be nice if the legal profession could weigh in a say: We see this as a good move toward reducing transactions costs instead of setting things up: Well, we don't see a problem here because we are going to be dealing with these large firms and we'll be helping them to generate tons of applications to beat it on the first to file and we still think we'll be heavily involved in litigation whether we've really been first to file, whether we have something that got there first and is being infringed upon. I don't see the incentive in the legal profession for that and I don't see major areas of reform that are going to improve that area of economic activity. And they certainly as a group, lawyers make large contributions to politicians. Liability and tort reform presumably have been hampered or killed by that effect. Certainly there is circumstantial evidence, hard to get direct correlations between these campaign contributions and the policies we observe. There's work on that. Difficult to pin it down completely. A status quo bias. The legal profession has supported certain people and we don't see the reforms of actual public policies where we might see efficiency improvements, whether it's patent policy, liability. Instead we have a status quo bias, which I think benefits the legal profession.
39:54Let's go back to the book. The book is quite short, a monograph, 110 pages I think. Under 120. A chunk of it tries to estimate empirically the premia that lawyers earn due to these effects of reducing supply and increasing demand. Obviously it's a challenge, which you point out in the book--a lot of factors are hard to measure. Give me the bottom line of what your best estimate is of these impacts. Premiums in the legal profession have been anywhere from 20-25% at the beginning of our sample; but the interesting thing is they've grown. As there have been tighter restrictions on entry, as more people want to go to law school but the spaces haven't opened up; and at the same time growing demand for legal services, we see the premia growing over time. Which would be consistent with the theory and is not something that is replicated by many other professions. Up to close to 50%. And then we convert this into deadweight losses--certainly in the billions of dollars. Associated deficiencies of labor supply distortions and also restrictions on innovation. When you say 50%, you are saying that lawyers earn 50% more than they would in a "free market"? Yes. You are not trying to measure the demand side, then. We are confounding both the supply and demand effect, simultaneously. Because a lot of people would say that a lot of things that increase the demand for lawyers, regulatory policy, many people would say those are important, they produce good public policy and lawyers are the beneficiaries of it, just like upward sloping supply curves. Anything that pushes up the demand is going to mean they make more than they otherwise would, and that's good. So why is there something to worry about? That's a fair argument. The key thing we do in the book is we don't just estimate the premium. Then we ask the question: What seems to be determining these premia? We look at particular policies and try to quantify and characterize their effects over time. That's what we want to do, see what's been changing over time. The ones we seem to find influence the change and growth in the premia are ones that arguably are not things where there's clear evidence that they are generating social benefits, like liability policy, where clearly we have demonstrated huge costs and questions about whether offsetting benefits exist. Areas of regulation, again generating costs; hard to see that you are getting compensating benefits; even the Obama Administration is looking to try to curb regulatory excesses. Good luck with that. Patent policy. It's not like we are seeing things you could point to--criminal law, other areas where you think are clearly generating benefits. There are things where if you look at the external academic evidence assessing the efficiency effects of these policies, it's very hard to make a strong case that these things are generating positive net benefits. So, in a sense you get it both ways--you are getting premia benefiting lawyers and then you've got a situation where you've got a status quo bias of lawyers having incentives to keep these policies which are not doing things that are particularly helpful for social welfare. The question I had--and I think it's very difficult to measure these things, but the direction seems clear--is one of magnitude. My question is the following: the real problem here is the demand side, regulations that aren't good regulations. For example, it's true that because of law school restrictions and licensing, then buying a house, getting divorced, these daily life uses of the legal system are more expensive than they otherwise would be. If law schools expanded by say 20-25% in terms of the number of slots available and the number of applicants accepted, I assume that would help keep the price of those services relatively low. But I don't think it would have much of an impact on antitrust legal activity, mergers and acquisitions, the regulatory sparring as these regulations get written and codified. The marginal 10-20% of rejected law school applicants--they would not be going into those applications and pushing down the premiums. When you talk about the premiums, my suspicion is you are overwhelmingly picking up the demand for lawyers via regulation; then it's just a question of regulation, not just the way the legal profession is structured. Well, we are trying to get at this through the back door, so to speak. You are certainly correct--the real payoff would obviously be if we lived in a world with efficient public policy. We'd eliminate all the inefficiencies for those policies, and then we sort of eliminate the incentives for the legal profession to behave in particular ways to try to preserve its status quo bias. I think since we are obviously guided by what policy recommendations we are going to make, we are realistic in saying: People have been trying forever to improve these policies; that's obviously a tough nut to crack. I think we peel back a bit and focus on the profession and say: If we could reduce their incentive for keeping status quo bias, possibly with competition in a number of these areas--not all but some--that might be an effective first step. So that's why we focus on deregulating entry. Through that mechanism we start seeing far less that government can deliver in terms of premium to lawyers, that they then turn and say: There's no point in our trying to support these things any more. Perhaps we can see a positive direction in reform. You are trying to lower the premium in hopes that that would change the incentives to lobby accordingly. That's right.
47:30At the end of the book you talk about what policies you think would make things better. Talk about that; if you'd like, you can give me a quick estimate of how politically plausible they are. The heart of our policy recommendation is just outright deregulation. Let's let lawyers compete at a number of different levels. Certainly those entry-level people would be able to enter and compete. You don't have to go to law school; we would see private sector responses. The key part of everything I say here is people will statically look at the legal profession and don't anticipate that when you open things up in deregulation you start seeing other parts of the economy change to account for that in ways that are difficult to anticipate under regulation. My point being that in this case with deregulation we'd probably see more active online law schools, vocational law schools. I don't think people would think: I'm going to come out of high school and practice being a lawyer. Though at the beginning of the book we mention one guy that actually did that. He was 15. He was quite successful. Wasn't even finished with high school. Giving advice on a website that people seemed to like, it was useful. He's the starting point for the book. Here's somebody who hasn't even finished high school who is reading law and saying here's my advice on how to handle a particular problem. Our expectation with deregulation is we'd see people going to online law schools, vocational schools; maybe even going to fancy law schools but going for one year. We think there'd also be a supply response. In more of the traditional things, we get competition there. At the higher end that people don't realize is you can have a law firm that is owned and run by lawyers, but if you are a corporation the only legal services that you are able to have are through a general counsel advising you. You can't be an investment bank and say: Not only do we help your banking but we'll also provide extensive legal services with that. Or a financial company. So we see other parts of the economy competing in legal services--corporations. Who knows what kinds of things might develop there, which I think might compete at the high end and reduce the premiums that exist. We see throughout the legal profession there could be a dramatic change in the services that are offered and the way the people are trained. Once you open the floodgates, the biggest payoff, as we have now learned, is innovation, which is so hard to anticipate, though we are starting to see some cracks in the system now. Could basically lead us to saying there are ways of doing these things that are so much more efficient, so much more transparent, so much more accessible to people in all walks of life that it's just a dramatically different profession. I want you to emphasize the institutional point you just made in passing. I didn't know this till I read the book. You have to be a lawyer to run a law firm. Right. If you are looking to do that as an economist, it's not going to happen. Or even an MBA. To take an analogy: Walmart and CVS and Walgreen now offer a legal but innovative--took a while to get it to be legal--where you can walk in and get a flu shot. Right. Administered by somebody who is not an MD. I've got them. They work fine. It's not a difficult thing to administer a flu shot. Though I'm sure that when it was proposed a lot of doctors explained why it was dangerous, because there could be a complication, etc. The question would be: When you go to Wal-mart or CVS, you could have a legal window where you got services for a real estate deal. That's not legal right now. That's interesting. That's the kind of innovation we could imagine if this market were allowed to be a little more free. Yes. And the way people would be trained and how they would interact with other people providing these services, sure. We are trying to talk about distortions of the labor market that occur because of this--all the rejected lawyers who don't go into law school could go into these kinds of things. But now they have to go into something else. Which pushes down the wages in those fields, which makes those activities less expensive; which means we do too much of those things. Possibly. I think the general--people who are lawyers or not who look at this, if they fear the chaos and commotion as people did with deregulation with transportation, energy, finances--obviously they look at the disturbances we've had which often have nothing to do with deregulation but they are external shocks. They get nervous, if not terrified. What you've got to realize is that there are responses that are creative parts to the market, both on the demand and supply side, to generate things that you can't see that will lead to changes so it won't be that we have too many lawyers now and it will bring in this flood of unqualified, incompetent people. There will be changes in the types of services offered, the way people are trained, the way they deal with customers. The marketing of law I think will be dramatically different. How firms compete. All these kinds of things will change to meet these kinds of objections. Quality--concerns that you are just going to let people in who are incompetent; we have enough problems with lawyers now, people who are indicted, involved in fraud. Just think what you are going to get now. What do you think is going to happen? There's going to be a private sector response to that. There's going to be a Zagat's, an Angie's List. There are going to be ways that the private sector, if this is going to be a problem, will say: We are going to give you ways of determining quality and getting some sort of rating. Important if there really is a problem in determining the quality of lawyers. These are things that will happen in the overall response to deregulation, as they have in other industries. People that will turn and point to: Look at what financial deregulation gave us, the crisis--of course we know it's far more complicated than that. We know that when we come out of all this, these institutions will be stronger. It's understandable that there is a lot of fear about all this, but what people sometimes don't appreciate is that there is a lot of opportunity for just dramatic changes on both sides of the market. Imagining those responses is what the study of economics is about. It's a huge part of what makes economists economists, right? Yes. For the non-economist, or the self-interested lawyer, those responses are harder to anticipate or see or notice. Or to think about objectively. I think they'll look at it and only see bad things happening. Incompetent people who are worse than what we have now; and this cannot possibly work, horrible idea, will ruin the profession and ruin consumers, who are not even self-interested. But as we pointed out in an op ed I think in the 1970s, the people who thought when we deregulated airlines that it would result in a monopoly by United Airlines--it didn't quite work out that way. Let alone the prices. Another thing, too, that I think is a benefit of the United States in thinking about regulatory reforms is that we have a possibility of experimenting. Airlines was not a national deregulatory option at first. We could learn from the states that had basically a form of deregulation. California, Texas--important experiments. We could do this in the case of the legal profession. I hope we'd see some individual states experimenting with relaxing entry requirements or at least being more open to having paralegals actually practice law and certain services in the same way physicians' assistants are. We can just have these people do; they don't even need the supervision of a lawyer. See that prices are lower, and lower-income people now have access to legal services. Moving incrementally at the state level is obviously the way to go to show people they are not going to be the horror stories you think. This can happen in a positive way.I think what we should do is if you don't have a law degree, call yourself a lawyur--you have to spell it l-a-w-y-u-r. That way it would distinguish the folks. Or a legal practitioner, like a nurse practitioner.
58:08One reform that has taken place, that surprised me that it happened; and it was treated with a great deal of anxiety, which I suspect turned out not to be true, was the legalization of advertising legal services. That was a big deal, right? Oh, yes. So, when you are watching late night TV or not so late-night TV and you see an ad for lawyers, people thought it was a bad idea--it's going to lead to higher prices because all the advertising is going to be wasted expenditure; it's going to be an arms race between law firms, all it will do is raise costs and lead to higher prices. Economists said no. Can they advertise price? I'm not aware of any restrictions, but to be honest with you I've never seen anyone do it. Apparently it seems like the information content of legal advertising is just more the existence of certain services, people trying to say we can help you. I've not seen prices explicitly. But I assume that was very controversial. But it happened anyway. And that gives us hope that perhaps some reforms encouraging competition could actually happen. I think that with all of the deregulatory movements, once you, when you see cracks in the system--again, this is the power of the private system looking for ways to be innovative--you see firms that are not the traditional firms trying to do things differently. I think we need to see more of that. Low cost law firms, online services, those are the kind of cracks. Those are the Freddie Lakers of airline service, thinking we can do this at lower cost. That instead of getting people upset should get people to say they are really trying to tell us something, that we can do things differently, do things in a more efficient way. Instead of being scared of it, the strongest people who are currently in the profession say: This might even help us, expand our way of doing things and thinking. That's what we should be looking at, and hopefully going to show demonstrations and experiments. Once things start to move in a particular way and are positive, then we get momentum and then we get policy change. Your mentioning of Freddie Laker brought a smile to my face. Google, folks, if you are not old enough to know who he is.

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COMMENTS (26 to date)
Robert Kennedy writes:

It was not clear in the podcast when licensing & accreditation of lawyers was initially introduced. Anyone know?

Douglas M Dillon writes:

[Comment removed for irrelevance. --Econlib Ed.]

Nick writes:

Surely Mr. Winston realizes that there is already a massive oversupply of lawyers and due to this oversupply, a large percentage of current students can no longer find jobs. The ABA has failed to "control supply" meaningfully for years, there are new law schools popping up in every part of this country everyday. Many are now for-profit, if that distinction makes any difference. Additionally, states like CA and MA allow essentially anyone to sit for the BAR exam, regardless of whether their school was accredited.

The salaries for lawyers is extremely misleading, in so far as the numbers are extremely bimodal, with a number of lawyers (generally attend top 14 schools, graduated in the top 25 percent of their class) making the biglaw market rate (160k) and then the vast majority of attorneys making sl law wages which are closer to 30k-50k.


I am student at a top 25 law school, in the top quarter of class, on moot court/journal- and I will be lucky to be employed at the end of this. If I do get employed, I will be starting at 40-50k despite having an education that theoretically could of cost 150k (luckily I had a full ride). Now imagine students below the median or those that have to pay tuition or those at the hundreds of schools ranked lower. If that doesn't speak to the critical oversupply of lawyers, I don't know what will.

Peter P. writes:

Dr. Roberts,
The podcast made me realize there is actually a show on USA called "Suits" about a college dropout who goes to a top law firm yet has never stepped foot in a law school. Who would of known there would be a show about occupational licensing.

Bradley Calder writes:

I thought the podcast was good overall. A more interesting question than the one addressed by Winston though is whether occupational licensing is ever efficient relative to certification.

Also, Physicians Assistants were mentioned briefly as an example of a mid level position below a MD and above a nurse. Can you talk about some effects of the introduction of PAs into the healthcare market?

["Wilson" changed to "Winston". --Econlib Ed.]

William Love writes:

Dr. Roberts,

This Podcast seemed to be a bit lacking (unlike the majority of your Podcasts) because it does not address why there is demand, how lawyers would compete better, or how regulation hinders this very well, but rather depends upon a not very well nuanced argument (my opinion).

For instance, it might be wise to actually define what a lawyer does. It isn't just pushing papers around or being an interpreter for governmental action. Things that are profitable only b/c of the lack of personal action by the populous to apply it to themselves. In fact most good lawyers state that politicians have an obligation to make laws clear and accessible to people. The problem with the unauthorized practice of law generally has to to with the willingness of people to accept a proxy for their own judgement rather than see for themselves. For instance no one would have a problem with a "form" lease (yes you can buy these legally), if they didn't ignore the law and bind people into really really bad and unclear contracts that have illegal portions in them. The problem comes when a proxy doesn't actually address the situation at hand even if that solution is "general"

I think it is assumed here that there is no reason to have a lawyer other than this interpretation or form function, and I think that b/c of this you miss the point why people hire lawyers (demand).

A few other comments:
Being a lawyer is good preparation for being a politician b/c of the lack of regulation as a politician (people do not censure a politician who is a lawyer despite ethical obligations the politician may have as a lawyer) allows the use of learned persuasiveness in a public context (the Greeks knew this).

Transparency suffers since even if a lawyer is extremely skilled and do their job, if they lose a case (or even win it), then it is to the best interests of the client to not only to blame that lawyer (or take credit), but also to make sure that the lawyer maintains their secrets.

Most lawyers (ironically) detest regulation by the government as a proxy for law. Not only does it make their difficult since regulations are hard to look up, but also make it hard to litigate certain matters (a real problem if there is massive injustice/fraud/etc. done). That said look over the model for lawyer regulation, could this be actually put into law (I question I have myself) rather than upheld via regulation? http://goo.gl/vkUSl

drobviousso@gmail.com writes:

Nick - you are missing two incredibly important aspect in your first paragraph (note - going to law school hammers these blind spots into most students, so don't feel bad about it.)

No matter how many or few people go through the law school / bar track, students right out of college are not the only source of labor in a free labor market.

Imagine a skilled real estate agent or banker with 10 years of experience, including buckets of local knowledge in mortgage transaction law, and with an idea about a new, better way to offer that service. They are prevented from starting up a company that takes advantage of that innovation.

Imagine a subject matter expert with say 10 years in almost any field. A law firm is prevented from bringing that person in as a lawyer-in-training. The firms only option is to get a lawyer and then train them in that subject matter.

Further, there is probably an oversupply of generalist legal theoreticians, but an undersupply of specialized legal practitioners. Almost no lawyer I know (I work in biglaw now, I am not a lawyer) does everything. Almost every lawyer I know comes out of law school completely useless at actual lawyering. They know the theory behind what they are doing, but they are completely useless without additional training. This is total overkill for many of the jobs that lawyers end up doing. My IT person, who is great at his job, probably doesn't know much about Dykstra or high dimensional data searching, which is fine because he's great as fixing and recommending computer systems.

These new grads need to be trained in the practical aspects of lawyering. This takes years, and the failure rate is depressingly high. This drives down your starting salary, and increases costs.

Nick writes:

Oh, I am not suggesting legal education is either necessary or useful. In fact, the harvard caselaw method is a ridiculous exercise in the profession's general arrogance. Most law professors seem to believe they are here to toss ideas off their students for their "legal scholarship" rather than actually practically teaching their students anything about practice.

As a profession, lawyers have been remarkably poor at rent seeking if their ultimate goal was to restrict lawyer supply. The ABA lost control years ago and we see law schools popping up all over the country. These new schools take students that have LSAT scores that indicate they are not fit to practice (see Cooley). This stands in stark contrast to the medical, dentistry or pharmacy professions (apparently better rent seekers). The demand for these new TTT attorneys are not present. So why do these schools exist?

What people fail to consider here is government student loans. The new Gradplus program essentially allows the student to take the full cost of attendance out from the federal government. These government loans essentially unleash unlimited demand not in line with any realistic supply. Schools pop up left and right to take advantage of these sweetheart government loans and tuition increases every year because of the inelastic demand government loans create. We get more crony capitalism: the government bears the risk of student default, while the schools make huge money. Even if not-for-profit, there have been scandals in recent years of public schools making money from the law school and putting it toward undergrad costs. (http://abovethelaw.com/law-school-deans/)

Right now we have the worst of both worlds. If you want to get rid of the law schools, make the JD like a CPA license. If you want to keep the law schools or think the market will want specific legal education, get rid of government loans and watch tuition and supply fall in line with actual demand.

drobviousso writes:

Instead of CPA, I'd like to see it more like engineering, where anyone at any time with sufficient knowledge and a business plan or willing employer can do it.

Though I'm hardly a fan easy, public credit that distressed borrowers have no realistic chance of discharging through bankruptcy... That's not a recipe for responsible behavior by anyone, and I hope the book addresses that as well.

David Yosifon writes:

Interesting podcast, as always. I agree it would have been helpful if the discussion had directly addressed the present oversupply and under-employment of lawyers. Perhaps the book does this. Or perhaps events have overtaken the analysis in the book.

Anyway, as a Legal Ethics teacher in California I would like to point out that it is not true (as was said in the podcast) that one can become a lawyer in California simply by sitting for and passing the bar. You can become a lawyer without going to an accredited ABA law school, but you must demonstrate satisfaction of very specific alternative routes to legal education (other than ABA schools) before you can gain admission:

http://admissions.calbar.ca.gov/Requirements.aspx

Love the podcast, keep up the great work!

Dan writes:

It would be difficult to argue that there is anything but a gross oversupply of attorneys today. The large firms have all but stopped hiring, and most state governments have hiring freezes in effect or very limited new hiring. Every new attorney position that opens, public or private, is immediately circulated through the desperate alumni e-mail chains, employment websites, and school job fairs and is flooded with hundreds or thousands of qualified applicants. I graduated in 2010 with respectable grades from a law school that was previously Top 5 for firm hiring. I must have sent out around 200 applications and got just a handful of interviews out of it, all of which were for "potential future openings" and ended with "we'll keep your resume on file." I was lucky to get a non-attorney job with the Federal Government at the 11th hour, but even that was through a standardized test program that circumvented the traditional hiring mechanism. I would have been unemployed with no prospects otherwise.

A few observations based upon my personal experience:
- Most of those in my class took out huge amounts in loans from the Federal Government to attend law school. It's likely that this "cheap money" available up front with the possibility of huge rewards down the line artificially inflates the number of law students and the cost of law school tuition. There are also substantial loan repayment programs available for those who do end up working for government - another subsidization of risk and incentivization program.
- Many of these "overpaid" attorneys are working 80 hours per week and sending themselves to an early grave. I don't particularly envy this lifestyle, and I wouldn't trade places. $150k salary looks great until you think of it as analogous to working two full-time jobs for $75k each.
- The bar exam is a protectionist racket for the states to generate revenue and make it difficult for attorneys to leave. It doesn't keep any substantial number of people out of the profession (Massachusets, for example, has something like a 90% pass rate for first time takers), although it does keep some of the most unqualified people out incidentally. $800 administration and grading fee + $150 computer fee + $150 MPRE fee is not a small amount of money when you consider the thousands of graduating attorneys every year and repeat takers. My state also requires annual bar dues, annual court registration fees, and their continuing legal education courses - $, $, $. All of which needs to be recouped by the attorneys once they begin practicing for it to remain profitable, driving the cost up for consumers.
- There are so many new, low-ranked law schools today that basically anyone can attend. Most attorneys I know, right or wrong, are furious that the ABA doesn't strip many of them of their accreditation. The very few who are kept out by the accreditation system probably shouldn't be doing anything resembling the practice of law in the first place. Not that that decision should necessarily be made for them, but somebody with a 140 LSAT is likely a malpractice case waiting to happen.

I don't see any evidence that the high cost of legal services is due to a lack of competition. All signs seem to indicate that there is "too much" competition at the moment, the result of a massive government-fueled bubble in the legal profession and housing market that burst in 2007-2008. The real factors driving up costs right now are the myriad fees and costly requirements that the states force lawyers to complete before they are allowed to practice. In other words, it doesn't keep people out, it just slaps a series of glorified taxes on them on their way in which drives up costs for everybody.

BZ writes:

Great podcast as always Dr. Roberts -- a fascinating guest. I read all the comments, and still can't figure out what an "oversupply" of lawyers is. Overproduction always translates to "more for the rest of us at lower prices!" in my mind, and perhaps that's my problem. Yet some say costs are still high. Is that due to wages? I'm very confused.


Nick writes:

It's not just a lack of pay.

It comes down to the fact that 40-50 percent of my class is going to be either completely unemployed or working in a low-wage non-law field. According to recent estimates, schools are pumping out 1.8 to 2.2 JDs for every legal job.

see:
http://lawschooltuitionbubble.wordpress.com/original-research-updated/law-graduate-overproduction/

Thanks again to the fine folks at the Department of Education and the "everyone needs to go to college" ideology. It's just like Fannie/Freddie and the "everyone needs to have a home" ideology. More government caused distortions.

Chris writes:

A few points about the podcast:

(1) Lawyers can advertise on price. This happens most often on well-defined matters -- preparing a simple will, real estate closing, etc....

(2) The prohibition on the corporate practice of law is based on something the podcast didn't touch on: the lawyer's fiduciary obligation to his/her clients. The concern is that allowing non-attorneys to share in profits generated by attorneys will put pressure on the attorneys to breach that duty. You can imagine going into that Walmart clinic and having the Attorney try to upsell you. (It's bad enough when car mechanics do it.)

(3) You can't look at Walmart's current success with Nurse Practitioners giving flu shots and say "Oh, see, this means that it's ok for Walmart to practice medicine [or law]." First of all, that's very limited -- Walmart isn't hiring the doctors. And, secondly, it's still very early in that experiment. The argument has always been "If they start off with that, then they will move to X," and there hasn't yet been time to see if X actually happens.

(4) I agree that absent regulation, the cost of legal services would probably be lower. But, I think Prof. Winston overestimates the extent to which this is true. After all, there is a lot of competition and innovation among lawyers currently, and that competition and innovation also helps to drive down prices.

(5) Dan is right -- there are a LOT of unemployed lawyers out there.

DD writes:

This episode was really frustrating. It was full of free market concern trolling and theorycrafting, but had basically nothing in the way of actual facts to back up the claims. It is one thing to have a condensed version when you have a 5 minute interview, but with an hour you should actually be able to go into some meat about actual numbers. Instead there is just a bunch of handwringing about innovation, and not a single mention about the actual supply of lawyers (mentioned many times in the comments already). There is lots of discussion about the failings of the high end of the legal profession, but no real discussion about why deregulation would have a noticable affect on that particular segment. I'm sure there are legitimate problems with the legal profession, but the comments here are basically more insightful then the podcast.

emerich writes:

The title of this econtalk instantly depressed me. Why? Because I was pretty certain Winston would make a persuasive case for deregulating legal services, but I also know that the chances of it happening are slim to nil.

Seth writes:

I enjoyed the podcast. I think we have too much formal and informal credentialism in our society and this podcast provides some good examples.

I was reminded of working as a young engineer, fresh out of a state university with my BS degree.

I worked with older engineers who had received their engineering education (certificates) decades prior from small trade schools that no longer existed.

Back then, I thought it was odd that you could learn engineering in a trade school. I thought that somehow my 'college' education made my training superior.

Then I learned I was wrong and discovered that much of what I learned at the university was useless and most of the knowledge that I used on the job was acquired on the job and a trade school was as good a place as any to start out. You probably didn't even need that. An internship/apprenticeship, starting in high school (much like electricians have), would probably be better.

We've been fooled by credentials for years. I call this managing the inputs, rather than the outputs. I'd love see that trend go in the other direction.

Jim Feehely writes:

As an Australian Lawyer I was very interested in this podcast. However, like other commentators on this blog, I found the discussion wholly inadequate. The discussion proceeds under the delusional hegemony in the West that 'economy is life' and nebulous ideas about 'efficiency' which, in context, really only means price.

What is very often overlooked in any discussions about the legal profession (and regrettably by many lawyers) are the crucial social justice and public aspects of the systems of civil and criminal justice. In Australia, for example, as is the case in most common law regimes, the lawyer's primary duty is to the court, not the client. No other profession is subject to this split duty. And the split is crucial to the administration of both criminal and civil justice.

Certainly, the price of legal services is crucial to the effectiveness [not mere economic 'efficiency'] of any justice system. And most Western legal systems have allowed most citizens to be priced our of participation in civil justice. But to attack that price barrier with the usual barren free market bazaar ideas simply demonstrates the extent to which economics can be at once irrelevant and determinative.

Lawyers are the practitioners of the system that defines any nation's sovereignty. Simply attempting to influence the way the market works completely misses the point.

My frustration, admittedly not have read Mr Winston's book, arises from the banal neo-classical free market conclusion that 'there must not be enough lawyers because the price is too high'.

This is simply another example of why we should wake up and wrest control of policy from the economists, where the evidence shows that economists are always [an unqualified ALWAYS] wring about macro economic projection. Economy is the servant of society, not its ruler.

Mike Montchalin writes:

I believe these posters who say there is an over-supply of lawyers. But, where are they? I don't see them hanging their own shingles.

I would love to find an attorney, fresh out of school with no reputation, no office, no overhead, and only a yellow page phone number in his home,... who would be enthusiastic to take on a new case.

I have never been able to find this kind of attorney.

Does school kill the entrepreneurial spirit?

Lewis Kirvan writes:

This sounds like unfounded guesswork. I especially enjoy the comparison between criminal law, which Winston believes is an area of obvious policy benefit and other areas of law. Our criminal justice system, the death penalty, the warehousing of non-violent drug offenders. These are huge wastes of government resources and human capital and probably the most inefficient part of our legal system.

Meanwhile, mostly through the work of lawyers most business disputes are now dealt with outside of the court system via ADR and are quite efficient.

Academics on the other hand don't benefit from the government's inefficiencies. Oh wait, economists whole career are subsidized by the government. Or alternatively many economists are successfully acting as guns for hire. Taking money from private industry to say nice things that may or may not be grounded in empirical fact. See inside job for instance. http://www.nypost.com/p/news/business/school_expose_AQ38kKoNfJePbazB828GlK


These economists ought to be looking at the clearly inefficiencies in b-school. MBA's are just a two year networking jamboree and don't create people with an identifiable skill set.

John Berg writes:

This podcast took-off for me at Minute 38 with the discussion of Patents. As defined by our founders in the US Constitution, a patent grants an intellectual property(IP) right and temporary monopoly to an individual inventor for "publishing" (sharing with others) his invention. Note that the patent grants the inventor the right to sell his invention with all the free market implications therein. Profoundly, the new patent bill is an attempt to change the patent process from the US Constitution's intent to the European model where the first to file owns the "invention."

Will the motivation for invention intended by the founders be diluted?

The next topic was "innovation" with the clouded role of the Patent Office as the place where "innovation" is declared. Should our two Podcast participants be allowed to state which of their innovative examples were patentable?

John Berg

myrj writes:

The article "Feasting on Paperwork" that came out in the 9/8 NY Times which discussing the immense amount of work that the big law firms and other firms are receiving to deal with lobbying and implementing Dodd-Frank further confirms the idea that lawyers are able to push up the demand side.

FC writes:

I was going to make some airy claims about social justice, but then I decided to address the topic under discussion.

Both lawyers and engineers used to be trained as apprentices in the English-speaking countries. This period coincided with the Industrial Revolution, with its scientific and commercial innovation and rise of farmers and tradesmen into the bourgeoisie. As lawyering and engineering (and now even accounting and nursing!) became "professions" requiring degrees and licences, economic growth slowed.

Sisyphus_Esq writes:

Nick,

You make interesting points. As a relatively young lawyer myself, I am painfully aware of the glut of new lawyers in the job market today. In fact, I recently read one statistic that claimed the legal field was the most saturated of any field of employment in the U.S., and that nationally, there are 100 applicants chasing every available legal job. I'm not sure whether this is accurate, or whether it includes paralegal jobs as well as lawyer jobs, but even if it overstates the problem somewhat, you get the point: the picture right now is bleak for recent law school grads. It must be especially difficult to swallow for those who entered law school in 2009 as a way to avoid looking for work in the wake of the financial crisis, only to graduate in 2011 and enter a job market that has gotten worse, not better.

So, there is definitely strong evidence that there are too many lawyers right now. The strange thing is, I also think there is a huge amount of demand out there for legal services among the middle and lower classes that is being unmet. Even now, with so many lawyers unemployed, Joe and Jane Average can't afford the prices charged by most lawyers. Maybe it's sticky prices, and maybe, in the next few years, new lawyers will give up looking for work at established firms and hang out their shingles. Certainly, there have been a lot of technological breakthroughs that have reduced the costs for anyone who wants to practice law "virtually," or from their home.

Still, I have my doubts we will see a huge flood of young entrepreneurs in the legal field. The reason, I think, is related to what you have eluded to in your posts: many new law lawyers graduate with so much debt they can't afford to work for less than $50-$60k. (Also there is the cost of private health insurance, which is another topic altogether.) I definitely agree that the cost of law school is a huge problem, and that the problem is likely exacerbated by cheap credit, many of the benefits of which ultimately accrue to law schools rather than the students who graduate feeling more like indentured servants than the empowered leaders of tomorrow they may have envisioned themselves to be.

Anyway, this is depressing stuff, and I'm not sure what the answer to the profession's problems is, but I sure hope demand picks back up again soon so people such as yourself can find work.

Good luck.

Jerry writes:

This podcast is lame. Legal council is not intuitive...it is a learned skill just like the medical profession. No one says we should deregulate doctors...you'd be laughed at. I believe lawyers have done themselves many disservices that fuels lack of respect: like allowing "Joe Shmo" to sit in a jury seat and decide a case. The legal profession is thus not seen with the due reverence and admiration. Again legal council must be regulated to protect people...similar to medical work. Sure we can have doctors who didn't go to medical school, but that's inefficient to have such characters in society and dangerous to consumers who are risk-loving. It's not about how much lawyers or doctors get paid..it's about their skill that has been, and has to be, learned.

Russell writes:

I have been listening to econtalk for several years now, but I think this podcast may have convinced me never to listen again. As a recently (2009) minted lawyer, this is the first podcast in which I've been intimately aware of the subject matter. The conversation was ludicrously ignorant and was the worst kind of ivory tower-angels dancing on the head of a pin nonsense. As a result, I can only assume that those podcasts dealing with subjects I am less familiar with are equally ignorant of the real world.

As of 2009, only 62.5% of law graduates are employed are employed as lawyers. And Winston says we need LESS barriers to entry?

Neither of you once mentioned the catastrophic debt that one must assume to graduate from law school (or college, for that matter). Surely this is a primary factor influencing rates for legal services. As one commenter pointed out, it's like a $150K-$200K "tax." But you two didn't see fit to mention it. I wonder why? Do you both have an incentive not to point out the astronomical costs of higher education? Hmm....

On a brighter note, much of what was said is correct as to the TOP TOP TOP of the profession. But Winston seems to be wholly unaware that there are thousands and thousands of unemployed lawyers who simply cannot offer their services at anything faintly approaching a market rate due to the ridiculous cost of a legal education.

Russ Roberts: as a professor, I would've hoped you would have called Winston out on this. You should've said: what about the high cost of undergrad+legal education????? But you didn't. I loved this podcast and hate that I can't listen to it anymore (except for the occasional "real world" episode i.e. potato chips). R.I.P.


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