Tuesday, May 22, 2012

Lawyers without Licenses?

I wrote a few days back about how widespread state-level requirements for occupational licenses limit the job market opportunities for many low-skilled workers. But of course, many other occupations are licensed, too. In their book  First Thing We Do, Let's Deregulate All the Lawyers, Clifford Winston, Robert Crandall, and Vikram Maheshri make the case for lawyers without licenses. (The Brookings Institution Press page for ordering the book is here; the Amazon page is here.) Cliff Winston has a nice readable overview of their argument "Deregulate the Lawyers," which appears in the Second Quarter 2012 issue of the Milken Institute Review (which is ungated, although a free registration is required).

Just to be clear, the proposal here isn't for abolishing law schools or law degrees. Instead, the proposal is that it should be legal, if the buyer so desires, to hire people without such degrees to do legal work. Here are a few of the points they make:

  • The U.S. has about one million lawyers. [T]oday, all but a handful of states – the notable exception
    being California – require bar applicants to be graduates of ABA-accredited law schools. And every state except Wisconsin (which grants free passes to graduates of the state’s two major law schools) then requires them to pass a bar exam.
  • "State governments (and state appellate courts) have also gone along with the ABA’s [American Bar Association's] wish to prohibit businesses from selling legal services unless they are owned and managed by lawyers. And not surprisingly, the group’s definition of the practice of law is expansive,
    including nearly every conceivable legal service, including the sale of simple standard form
  • In the book, Winston, Crandall, and Maheshri attempt to estimate how much more income lawyers are able to receive, above and beyond the alternative jobs for those with similar levels of education, as a result of these licensing rules. They argue that about 50% of the income of lawyers is a result of the licensing limits. I view this number as closer to an educated guess than a precise valuation, but given that the U.S. spends about $200 billion per year on legal services, even half that amount would be a very large dollar value. 
  • In usual markets, more supply drives down the price. But when a society has more lawyers, and more of those lawyers end up in political and regulatory jobs, it is plausible that under the current regulatory restrictions that lawyers as a group are making more work and generating billable hours for each other. 
  • It's never easy to predict what would happen if it became legal to hire those with less than a three-year law degree from an accredited institution to do legal work. But it seems plausible that a lot of jobs done by lawyers could be done by someone with fewer years of education and fewer student loans to pay off: basic wills; criminal defense in simple cases of DWI or public intoxication; basic divorce and bankruptcy; simple incorporation papers; real estate transactions; and other situations. One can imagine that the skills needed in these cases might be taught as part of an undergraduate major in law, or law schools might offer one-year and two-year degrees along with the full three-year degree, or even as part of an apprenticeship program. National firms might seek to establish brand names and reputations in these areas, like H&R Block does for tax preparation services. In some cases, like certain kinds of legally required corporate disclosure filings, perhaps sophisticated forms and information technology could substitute for a lawyer filling in the blanks. 
  • Certainly, some of these steps might drive down wages for existing lawyers. But on average, lawyers receive pay that is well above the U.S. average, with unemployment rates below the U.S. average. Indeed, the U.S. economy as a whole might be better off if some of those who now work as lawyers entered other parts of the private sector--perhaps starting and managing businesses. "There is little doubt that some people who become attorneys would have chosen to work in other occupations – and possibly made greater contributions to society – if they were not attracted to law by the prospect of inflated salaries."
  •  Many people with low-incomes end up without legal representation because of cost. "Surely, many of the currently unrepresented litigants would be better off even if they gained access only to uncredentialed legal advocates."
  • Perhaps the quality of legal representation would decline without the licensing laws, but it isn't obviously true. "[T]the American Bar Association’s own Survey on Lawyer Discipline Systems reported that, in 2009, some 125,000 complaints were logged by state disciplinary agencies
    – one complaint for every eight lawyers practicing in the United States. Note that this figure is a lower bound on client dissatisfaction because it includes only those individuals who took the time to file a complaint." A deregulated environment for lawyers might well produce other methods of ensuring quality: warrantees; money-back guarantees; brand-name reputation; and firms that monitor or rate providers of legal services. 
  • Deregulation in the airline industry back in the 1970s occurred partly because it was possible to observe how airline competition was actually working within the states of California and Texas. Might there be some example of deregulating the lawyers that would have similar effect? "One state – perhaps Arizona, whose legislature has declined to re-enact its unauthorized practice statute, or California, whose bar indicated it would not initiate actions under its statute – may realize benefits that build support elsewhere. And perhaps England’s and Australia’s recent efforts to liberalize regulation of their legal services will attract attention here."
My own sense is that while the U.S. economy does need a certain number of big-time lawyers, but many law students spend years of class-time and tens of thousands of tuition dollars on classes that bear no relationship to the law that they will actually practice. Back in college, one of my economics professors used to have a nice pre-packaged rant against regulations that were intended to ensure high quality, because he believed that everyone should have the right to buy cheap and low-quality stuff if it was what they wanted--or all they could afford. The legal services that most of us need most of the time could be provided far more cheaply, and at least as reliably, without requiring that every provider get a four-year college degree and then spend three more years in law school.