A response on lawyer licensing

Jonathan Wilson responds affirmatively to my question, Is Lawyer Licensing Necessary? I'm still not convinced.

Wilson argues that

lawyer licensing is necessary because legal services are precisely the kind of good for which the market is an inefficient method of regulation. . . . Consumers are generally ill-equipped to evaluate their own legal needs and are generally unable to evaluate the merits of competing producers. Consumers cannot evaluate competing price proposals (and in many consumer decisions their is no realistic price competition) and consumers are often left to the tender mercies of their lawyers when it comes to price and service levels. . . . . The current state of lawyer licensing may be flawed, but it is better than the state of affairs that would exist if lawyering was utterly unlicensed. If the doors to the practice of law were completely unlocked by any licensing requirement, any charlatan with a website and a business card could hold himself out as qualified. Consumers could be easily bamboozled into trusting their money (and their legal rights) to smooth-talking salesmen (and women) who know nothing at all about lawyering.

In my paper on lawyer licensing referred to in my post, I discuss both theory and data that raises serious doubts as to whether lawyer licensing provides cost-effective quality control. 

The costs of lawyer licensing are not only high in general, but highest for precisely those Jonathan seems most concerned about.  Many low-income consumers can't pay the high fees that lawyer licensing preserves, so they do without any legal advice. Milton Friedman observed long ago that requiring practitioners to have licenses is like requiring people to have Cadillacs or no cars at all.

And no defense of lawyer licensing is complete without asking why we don't require licensing, or have much lower licensing standards, for other services that involve a risk of bamboozled consumers.

The general lesson here is that merely identifying a problem (that people might be bamboozled) is a long way from defending regulation that purports to address this problem.

Comments

[William Henderson]

Larry,

Perhaps you have done this elsewhere, but what is the new equilbrium that emerges from scuttling lawyer licensing?

For example, if we get rid of licensing, then by implication there would be no need to graduate from an ABA-accredited law school (a current precondition of taking almost every bar).

We could have a lot of fun speculating what such a world would look like, including how a typical law professor would allocate his or her time. Arguably, law professors benefit as much or more from the licensure requirements than practicing lawyers. Robert Stevens, Law School: Legal Education in America from the 1850s to the 1980s (1983) chronicles how the ABA and the AALS worked together to implement these standards.

[Larry E. Ribstein]

Yes, I agree. I have discussed the implications of lawyer licensing for law schools both in my paper and on the blog e.g, http://
busmovie.typepad.com/ideoblog/2006/02
/law_schools_and.html. Among other things, lawyer licensing is an impediment to true diversity in legal education.

[David Lee]

Prof. Ribstein, two points;
1) the link from your 3:39 comment is broken.

2)being in the middle of finals, it's not quite feasible to take the time to read your full article on the issue, but I have a quick thought. Consider practice before the IRS. There are several "levels of certification", as it were, where the IRS will allow others to represent a taxpayer in his/her dealings with the IRS. Each level has distinct privileges, and distinct requirements.

Attorneys, CPAs, and Enrolled Agents (essentially an individual who passed an exam that only tests tax knowledge, a bar exam for tax preparers/specialists) are all the granted the same level of privileges, they can represent the individual/business in any dealings with the IRS.

Unenrolled return preparers, can only deal with the IRS regarding a return they actually prepared, and even then can only handle limited matters.

And then other limited categories (partners, officers, fiduciaries, actuaries, and immediate family members) have different abilities to represent the taxpayer before the IRS.

If the IRS finds a system like this acceptable, why would the courts not? After all, dealings with the IRS can be just as important as dealings with court systems.

While this is not directly analogous to lawyer-licensing requirements, it could provide a decent template to build from. To paraphrase Prof. Ribstein's quote of Friedman, why require a Cadillac when a Chevy will do?

[Larry E. Ribstein]

I agree that levels of licensing is a possible compromise. The real question is whether these levels could be better accomplished voluntary certification than by licensing. I think so -- the market is much more flexible than regulation. Alternatively, we might reserve licensing only for a specific class of representation. The metaphor would be requiring Cadillacs only in some cases. But I'm at a loss to define such cases, and have no reason to believe that the legislative process would get us to some optimal level.

[Peter]

As frequently happens, professions seek government-issued licenses to protect themselves from competition. For instance, how many unauthorized practice of law statutes actually define "practice of law?"

Further, a license proves next to nothing, since you get one merely by graduating from school and passing the test. It is by no means, in law or many other fields, a guarantee of competence to handle any particular matter.

Would you entrust your heart bypass surgery to a recent medical school graduate? After all, the person has the required license. Would you trust your complex legal case to a recent law school graduate who just passed the bar?

Of course not! In both cases, there are private organizations that provide some assurances that the professional does have the requisite experience. If there were no medical or law license, one or more private organizations might enter the field (think Underwriter's Laboratories).