Professor Gillian Hadfield has a lengthy post about the future of the legal profession, and specifically how non-lawyers should be able to compete in this market.

It’s not that lawyers aren’t smart or committed enough to produce good quality legal services. The problem with the way in which U.S. markets for legal inputs are structured is that they are entirely closed off to the potential quality-improving and cost-reducing innovations that might be produced by people who are not already heavily invested in our existing ways of handling legal problems. Those existing approaches are the problem: too costly, too poorly informed about rapidly changing business and regulatory realities in a global economy, too risk averse, too slow and cumbersome.

So why not let people other than JD-trained, bar-examined lawyers and organizations that aren’t 100 percent lawyer-owned and -financed compete to supply advice about managing legal and regulatory risks, complete required document filings, design documents and organizational policies, negotiate contracts and manage legal disputes? Certainly, there are some things for which only the most experienced and conventionally trained lawyer will do. But there is also a huge landscape of legal work that could be better done by differently trained lawyers, lawyers trained out-of-state, lawyers working in partnerships with nonlawyers, and companies that are owned, managed and financed by business-minded folks, rather than (or in addition to) legally minded folks.

Interestingly, most legal work is done for businesses, and has nothing to do with traditional legal tasks we study in law school, and are more broadly viewed as economic advice:

For reasons that are central to my point — that law is too important to leave to lawyers — we have very little hard data about what lawyers actually do because lawyers don’t like to collect data. But based on my own research, I estimate the share of legal work geared to achieving economic objectives is on the order of 60 to 70 percent. Depending on how you count, it may be more: In one of the few studies of the distribution of legal work (this one conducted in Chicago in 1995), researchers found that only 16 percent of legal effort was devoted to representing individuals in civil rights, criminal defense, divorce, family or personal injury matters. Only 8 percent of all lawyers work in government and 1 percent in legal aid or public defender offices. Most legal work is performed for businesses and organizations. Among large law firms, which scoop up the top law school graduates, the percentage of corporate clients is pretty close to 100.

Instead of thinking of work for lawyers, Hadfield views them as “legal inputs” that need not be provided by those with a JD and who passed a bar:

The potential for corporate provision of legal inputs on a national or international scale opens up many possibilities for creating legal services that match the needs of the global economy. Expanded scale, together with the more robust financing that corporations attract, could spur the development of large-scale data analysis that could be incorporated into business decision-making in any number of areas, including: how to respond to liability or regulatory risks; how much effort to put into negotiating contractual detail; and how to assess the risks of a target company in an acquisition or a new financial vehicle.

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Once you start to think about legal inputs in the economic sphere as essentially economic inputs, you get to an idea we adopt in most other economic markets: Don’t regulate who can provide goods and services without good reason to think that the regulated market will do better than the unregulated market. And there is no good economic rationale for lawyers to have exclusive rights to supply and control all legal inputs. If the idea of allowing people and organizations other than lawyers and law firms to supply legal inputs sounds pie-in-the-sky, consider what is happening in the U.K. right now.

This breakdown is already happening in the U.K., and the US is falling behind the curve.

But the U.K. went further still, striking down restrictions on the organizational form and financing of legal entities. So now it is entirely possible for nonlawyers to partner with lawyers, or to form entities financed by either private equity or publicly held shares, or to delegate management of the organization providing the services to nonlawyers.

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But the U.S. cannot dangle the prospect of access to the New York or Silicon Valley legal markets to induce reciprocal access to India. Indeed, the U.K. is several steps ahead strategically on this count, precisely because it has made legal policy an element of national economic policy. In the U.S., policy is not merely vested in lawyers; it is vested in the lawyers and supreme courts of the 50 individual states, acting independently. There is no national policy role in legal markets in the U.S. With one of the most expensive legal systems on Earth, the U.S. is putting itself even further behind the global competitive curve by letting lawyers, and only lawyers, call the shots.

Here is an example of how a legal service provider could work:

What if private companies were allowed to compete to provide the rules and procedures governing business negotiation? Maybe Private Contracting Inc. would come up with a good package: For a price, PCI will provide a set of rules and adjudicators to decide when and if a contract comes into existence. Its rules, the company advertises, are simple and clear, and adjudication costs never exceed a set price. Perhaps Modern Contracting Services offers a different package. It reaches an agreement with the negotiators up front to have all communications stored in MCS databases, where MCS’s patented algorithms — constantly updated based on large-scale data analysis — search for indications that particular commitment thresholds have been crossed, generating specific obligations for one or both parties. New Age Contractors might provide ongoing counseling and mediation services to help negotiators recognize when their level of commitment is growing out of step with the written agreements they have reached. And so on.

So if these arrangements are so profitable, why don’t we have them? The bar cartel and its prohibition on the unauthorized practice of law.

Almost any alternative system — particularly in a nascent new industry of private legal production — would have to incorporate elements of existing legal systems. A company that reviews communications, predicts liability based on large-scale data analysis and adapts contractual instruments or informs the parties accordingly is probably engaged in what bar associations would deem “the practice of law.” A mediation system that monitors commitments and formal agreements to give advice about legal mismatches almost definitely is. Even an entity that offers a set of clear alternative rules for contracting may well find itself skating close to the edge with bar associations if it is offering this to the public and not just its own members.

An unfortunate byproduct of this cartel is a lack of intellectual diversity–all lawyers tend to think alike, and work with other similarly-trained lawyers. Non-lawyers could bring in new and novel ideas to diversify the practice.

Almost all lawyers work in environments in which their co-workers are also lawyers — meaning there is little opportunity to learn how other types of specialists see and solve problems. But diversity in problem-solving approaches is an essential feature of any robust system of innovation. So one reason lawyers don’t invent better systems is that they all think more or less alike. (It is generally with some pride that law schools talk about teaching novitiates how to “think like a lawyer.”) And if they do anything that involves the practice of law, lawyers cannot partner with nonlawyers who bring the diversity in problem-solving that they need to be truly creative.

An important takeaway-

Indeed, Mark Chandler’s insight is dead-on. Law is too important to leave to lawyers because legal policy is in many respects economic policy. Although lawyers are good at lots of things, they aren’t particularly good at economic policy. If they were, after all, we’d be happy to have lawyers and courts set wages and prices in the same way we now let them control the legal infrastructure and markets that constrain — and in some cases even kill — our most promising and innovative businesses.

Professor Bainbridge (who gets a HT here) comments:

Great idea. Anybody who even halfheartedly believes in markets ought to think that a freer market for legal services, in which non-lawyers can compete, will result in more innovation, lower prices, and more widely available services. Indeed, as Hadfield details, the UK is doing okay with a much more competitive legal market than we have in the USA.

Stay tuned.