“Time to Deregulate the Practice of Law”

August 22nd, 2011

From WSJ:

The reality is that many more people could offer various forms of legal services today at far lower prices if the American Bar Association (ABA) did not artificially restrict the number of lawyers through its accreditation of law schools—most states require individuals to graduate from such a school to take their bar exam—and by inducing states to bar legal services by non-lawyer-owned entities. It would be better to deregulate the provision of legal services. This would lower prices for clients and lead to more jobs.

Occupational licensing limits competition and raises the cost of legal services. But those higher costs are not justified when the services provided by lawyers do not require three years of law school and passing a particular test. One example is LegalZoom.com, an online company which sells simple legal documents—documents that should not require pricey lawyers to prepare—like do-it-yourself wills, uncontested divorce documents, patent applications and the like.

The competition supplied by new legal-service providers, who may or may not have some type of law degree and may even work for a non-lawyer-owned firm, will not only lead to aggressive price competition but also a search for more efficient methods to serve clients.

Every other U.S. industry that has been deregulated, from trucking to telephones, has lowered prices for consumers without sacrificing quality. . . .

Allowing accounting firms, management consulting firms, insurance agencies, investment banks and other entities to offer legal services would undoubtedly generate innovations in such services and would force existing law firms to change their way of doing business and to lower prices.

Entry deregulation would also expand individuals’ options for preparing for a career in legal services, including attending vocational and online schools and taking apprenticeships without acquiring formal legal education. Established law schools would face pressure to reduce tuition and shorten the time to obtain a degree, which would substantially reduce the debt incurred by those who choose to go to those schools.

In related news, Truth on the Market will be holding a symposium on deregulating the legal profession.

Licensing and regulation of lawyers, long questioned by scholars, is emerging as an important public issue.  Legal costs are rising for individuals and firms with increases in litigation and regulation.  These costs tax business growth and entrepreneurship and impede ordinary Americans’ access to the civil justice system.  Meanwhile, the development of new business structures and technologies and significant regulatory moves toward opening up competition for legal services in the UK and elsewhere are forcing policymakers to address lawyer licensing and regulation.   A new book on deregulating the legal profession by Crandall, Winston and Vikram Maheshri should also help to focus scholarly and public attention on this issue.

Truth on the Market is planning an online symposium that will take place over two days, SEPTEMBER 19 and 20, covering these issues, and building upon our successful “Free to Choose?” symposium last fall on behavioral law and economics.   The “Unlocking the Law” symposium is designed to start an intellectual dialogue on this topic, bringing together legal scholars and economists with a variety of views and perspectives on the law and economics of the legal profession, regulation, antitrust.

Some questions the Symposium will consider are:

  • Should lawyer licensing be abolished?
  • What alternative regulatory approaches or structures should be considered?
  • What would a deregulated market for legal services look like?
  • Does lawyer regulation raise issues different from those of licensing and regulating other professions?
  • Does delegating to lawyers the power to restrict the right to practice law violate the antitrust laws?
  • What are the First Amendment implications of regulating what non-lawyers can say about the law?
  • To what extent can national or global competition alone break down barriers to law practice even without deregulation?
  • What are the implications of deregulation of the profession for law schools?
Also relatedly, Larry Ribstien has this on the “mirage of law firm profits.”