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Home Publications Blogs Beat the Press Lower Cost Legal Services: Why Isn't That a Good Thing?

Lower Cost Legal Services: Why Isn't That a Good Thing?

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Wednesday, 27 October 2010 20:22

Low cost factory labor allows consumers to benefit from cheaper shoes, clothes, and toys. (These days it also means cheaper computers, aircraft parts, and windmill turbines.) Low paid immigrants from Latin America reduce the price of restaurant meals, hotel rooms, and child care.

The media routinely tout these benefits from globalization. The U.S. workers who may face cuts or unemployment as a consequence are told to get more training and learn to work harder.

This raises the question as why we don't see a similar celebration at the prospect of an increased supply of lawyers driving down the wages of lawyers and the price of legal services. In fact, a lengthy Slate piece on the increasing supply of lawyers never once mentioned the potential economic gains associated with lower prices to consumers. The prospect of too many lawyers driving down wages in the profession was presented as a problem that should trouble right-thinking right thinking people.

Well, the logic is the same. Those who celebrate the low cost imports from China and the benefits of cheap immigrant labor should also be celebrating the fact that legal services should be costing us less in the future, unless of course they are partial to the relatively affluent types who tend to up as lawyers.

Comments (13)Add Comment
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written by izzatzo, October 27, 2010 11:12
Cheap legal services now available online at LawyersForMassescom. Beat any price that contains economic rent and billable hours. Foreclosure, bankruptcy and divorce as package deal discount for the unemployed with cash on hand. All bills, no coins allowed.
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written by jps3, October 28, 2010 12:48
hey, don't throw us lawyers under the bus! many of us are on your side! I get your argument, but not all of us are affluent corporate lawyers.
Class bias and schadenfreude
written by apachecadillac, October 28, 2010 1:23
It has nothing to do with economics, but the explanation is very simple.

Journalists in the mainstream media can relate to lawyers in a way they would never even bother trying to when it comes to latinos or autoworkers or skilled craftsmen. They can feel their pain. Those others, not our class, dear. But lawyers, that could be us.

And as for the professoriat, well, it's nice to see those overpaid lawyers taken down a peg, now, isn't it?

In unrelated news...
written by Clark Griswold, October 28, 2010 1:40
Law firms representing banks in foreclosure actions are alleged to have cut corners.

Nevermind that these attorneys are paid a low flat fee to do a foreclosure, mandated by the FanFred cartel's fee schedule. Nevermind that half of that fee has to be paid to some third party that the bank mandates the lawyers use - and is not reimburseable as a cost.

If you really want to think cheap legal services are a good thing, you might want to talk to the heads of some major banks and servicers about how that strategy has worked out for them. Or maybe some victims of the shoddy legal work.

You get what you pay for. Period. Your assumption is that all lawyers are the same, like a widget. I'm sure you apply the same assumption to doctors when shopping for a triple bypass you need, right?
@Clark Griswold
written by J, October 28, 2010 3:18
Your assumption is that when lawyers have to compete on price, they suddenly don't have to compete on quality any more. The pressure of a higher supply could possibly cause them all to compete on quality, but only if there was more give there rather than in the outlandish prices caused by the intentional tightening of supply and protection from foreign competition.
cost of lawyers
written by busy bee, October 28, 2010 4:46
I wonder whether having more lawyers available really makes their services cheaper. It seems to me that at least some of them are quite creative at finding preposterous things to make money from, without requiring any a priori demand for their services. A posteriori, however, their efforts require everyone else to hire more lawyers to deal with the collateral damage to society. Thus, sometimes an idle lawyer doesn't add one lawyer to the supply pool of lawyers, but creates a demand for several more lawyers from said pool, resulting an a net decrease in the supply of lawyers available to do the things lawyers are actually useful for.
Actually the same argument holds for bankers, and for politicians, bureaucrats, military-industrial complexes... If we allow *them* to make up the rules of the game that determine how many of *them* *we* need to pay for, we're setting ourselves up for a thorough fleecing. I'm not saying they're all vermin or that society would be better off without them. I'm just saying that supply and demand of labour doesn't capture the full dynamics of their roles in society. Is there any empirical evidence that when there are more lawyers, their fees go down?
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written by Bob Lucore, October 28, 2010 5:58
Clearly there is a severe shortage of lawyers, or else their price wouldn't be so high. I see no reason why, if we were to remove some market restraints, we couldn't subcontract a large amount of legal work to India.
The law school tuition bubble is the bigger issue
written by Law School Tuition Bubble, October 28, 2010 8:48
Dean, the reduced price of legal services to the end-users doesn't outweigh the problems.

(1) Legal services aren't in demand yet law schools keep increasing their tuition. The result is a tuition bubble that saddles graduates with non-dischargeable student debt and slows economic recovery. Income-based repayment plans merely shift the ballooning cost of legal education to taxpayers.
(2) With no outlet for legal professionals to make income commensurate with their debt, legal education leads to structural unemployment.

These are bad things.
Small Number of Quality/Skilled Attorneys
written by jeff, October 28, 2010 9:28
Law school does not provide actual legal training, merely a foundation to build upon. It can take anywhere from 3 to 5 years of on-the-job apprenticeship (working as an associate attorney) to become a truly skilled attorney. Because experienced attorneys and firms are not hiring, the pool of skilled attorneys is not growing at the same rate as the growth rate of graduates.

The longterm solution is for the law profession to adopt the practice of residency that medical schools have. There needs to be a period of on-the-job training required before becoming fully licensed to practice independently.

Despite the large number of attorneys, legal fees will not drop significantly because people know that it is penny wise but pound foolish to use an inexperienced attorney, just like no one would go to an independently practicing doctor fresh out of medical school who hasn't completed his/her residency.
Experience
written by Stealth, October 28, 2010 11:37
Jeff is right about the lack of practical training. Law schools produce people with JDs, not practicing attorneys. Increasing the supply of the former will do little to lower the price for the latter.
Errr...
written by LLK, October 28, 2010 12:19
I agree with last few comments. I'm all for lower cost legal services, and greater competition among professionals via globalization, and not just because I am a groupie who thinks Dean Baker is awesome (though I am that). But, um, Prof. Baker, can I at least get my law school loans discharged in bankruptcy before the market is flooded with affordable lawyers? I've already used up all my deferrments. :( Let's change the law to allow that, and then also maybe address the obscene amount of money I was charged for my J.D.
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written by Bloix, October 28, 2010 11:00
The problem is that law schools are cash cows for universities, so they like to build them and fill them up, and students have been willing to borrow the $150,000 or so to attend because high starting salaries have made the cost a reasonable deal. With salaries falling, new grads are finding themselves saddled with student debt that they cannot pay. But because the government insures student debt, market forces that regulate lending (lender does not lend to borrower who has no chance of repaying) do not apply, and many students are suckered into taking out large loans that will certainly impoverish them for years.
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written by boxer, November 03, 2010 6:29
NO people, the problem isn't the problem it's a symptom. Capitalism is the problem, it thrives on inequity and reproduces it like a cancer. The system is about aquiring wealth and power. These most malevalent motivators can't produce morality or justice, which is what lawyers are for, right? Oh, this was about money, again, sorry.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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