Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

http://www.forbes.com/sites/quora/2012/03/06/why-are-lawyers-so-expensive-even-with-the-excess-supply-of-lawyers/

by mirceagoia • 14 years ago

302 209 14 years ago

forbes.com

puppop4• 14 years ago

Because there are no H-1B lawyers.

mirceagoia6• 14 years ago

Do you think lawyers from other countries know US law? I don't think so. You will pretty much have to start over in US.

simonbrown2• 14 years ago

They would probably be prepared to learn it, if it paid. IANAL, but I'm guessing the main problem would be legal limitations.

ig12• 14 years ago

You realize there are huge outsourcing industries (in the legal and accounting sector among others) where workers in India, China, etc. are trained to learn American standards, etc.

retroafroman• 14 years ago

Do accountants in other countries know US tax law? According to this source [0] at least some do. I don't see how general law would be much different.

[0] http://www.nysscpa.org/cpajournal/2005/605/essentials/p54.ht...

geebee2• 14 years ago

I think they'd be able to learn. In fact, I'd say I'm sure they could learn.

Keep in mind, there isn't much incentive to learn US law when it's illegal for you to practice in the US. If the US allowed foreign graduates to sit for the bar and provided a visa and path to a green card to anyone who managed to pass and hold down employment, I think many foreign law schools would appear. Many would fail, but many would pass, and some would be very talented. Honestly, I don't think it would be all that different from software development, though I suppose the bar requirement would probably establish a higher floor than you see in programming.

antonej2• 14 years ago

Lawyers from other countries can and do come to practice in the US. It typically means getting an extra degree (LL.M.) and taking the state bar exam, but I've known a few people, particularly transactional lawyers from Canada, who seem to have made this transition. In general it would be easier coming from a common-law country like Canada, UK, Australia, etc.

geebee2• 14 years ago

A few states allow this, but I don't think most do...

From

http://www.americangraduateeducation.com/articles/en/post-ma...

"In order to sit for the bar examination, most states require an applicant to hold a Juris Doctor (J.D.) degree from an American Bar Association (ABA)-approved law school. For those individuals who have not earned a J.D. degree from an ABA-approved law school, bar admission authorities have developed varying requirements and criteria to ascertain if such individuals meet the minimum educational requirements for bar admission. In most U.S. jurisdictions, individuals who lack a J.D. are ineligible to take the bar exam..."

simonbrown2• 14 years ago

Surely that's an opportunity for a new firm? The demand is obviously there (plenty of people don't see a lawyer for financial reasons), as is the supply (apparently).

bane5• 14 years ago

There's a service that used to be called "Prepaid legal" with essentially a small retainer, and a minimum guarantee of services, with favorable rates when the service was used beyond that. It operated basically as a kind of legal insurance.

http://en.wikipedia.org/wiki/LegalShield

puppop4• 14 years ago

Yes, some company offer that. Cheap, but you lose the case with cheap lawyers. Penny wise, pound foolish.

jerrya3• 14 years ago

This may not apply to the world of corporate lawyers the answer seems to be about, but at a smaller level, there are enormous switching costs involved in moving away from, and training a new lawyer.

And it's not a free market. In a free market, the consumer can walk away from a purchase. Most times individuals or small businesses need a lawyer, they are in no position from walking away. They need a lawyer. And they need to stop spending time searching, and get on with resolving.

So a lot of claims from lawyers that they operate in a free market are really not true. They mistake what are basically extortion/price gouging rates for free market pricing.

And the search is expensive too, with few (?) lawyers willing to offer 30 min to an hour of their time to discuss your needs for free. This is another factor in increasing switching costs for the consumers.

And of course, price is used as a signal for quality in a market in which quality is very hard to measure by most consumers. Sure I got a great deal on a lawyer, he only charges $150 per hour. Hmm, Your lawyer charges $400 per hour? Now, I'm not so confident.

bane5• 14 years ago

"They need a lawyer. And they need to stop spending time searching, and get on with resolving. So a lot of claims from lawyers that they operate in a free market are really not true. They mistake what are basically extortion/price gouging rates for free market pricing."

It's interesting because the same fundamental problem is true of health care in the U.S.

It's essentially, "they need a doctor. And they need to stop spending time searching, and get on with not dying"

The market dynamics and model are entirely different with these sorts of emergency industries. It's almost always "first available" and not "best cost". Even with shopping around (when the luxury is available) the decision is perceived quality first, cost second (or lower).

dantheman2• 14 years ago

There are both things that can be dealt with through a bit of planning. I.e. determine a pool of potential lawyers you will use and in the same regard determine a pool of potential hospitals/doctors you want to use. Then if you need one, you've done the leg work and know where to go.

circa• 14 years ago

I hope your username is for the band and not the batman character. :)

anamax3• 14 years ago

> The market dynamics and model are entirely different with these sorts of emergency industries.

Would you call auto-repair an emergency industry? After all, if you break down on the side of the road, you need assistance immediately?

The vast majority of medical care is NOT given in an emergency situation. The same is true of legal services. And yes, auto repair as well.

baddox2• 14 years ago

I don't think that becoming dependent on a particular product, service, or supplier makes it "not a free market."

jerrya3• 14 years ago

http://en.wikipedia.org/wiki/Free_market#Overview

Adam Smith believed that an economy should be free of monopoly rents

If I can keep you from switching lawyers, if I can keep you from interviewing other lawyers, if I know your choice is not "lawyer or no lawyer", but "which lawyer", then I can keep my prices artificially (not a free market) high.

javert10• 14 years ago

So a lot of claims from lawyers that they operate in a free market are really not true.

A free market isn't defined by whatever arbitrary criteria you make up.

You can't claim it's not a free market because it's a hassle to switch lawyers, or because it's expensive to do so, or because searching for lawyers takes time.

jerrya3• 14 years ago

That's not the claim I made, and you didn't address the claim I made.

I said: the consumer cannot just walk away. If I am buying a stereo, my choice is between a) do I need a stereo or not, and b) where do I buy it. The purchaser of law services usually does not have the option of walking away from the deal entirely. His/her choice is limited to: which of these expensive lawyers do I go with?

dantheman2• 14 years ago

The fact that there is a bar and licensing means that it's not a free market.

ktizo10• 14 years ago

Here's a nice definition from the OECD website's glossary of statistical terms;

"A free market economy is one where scarcities are resolved through changes in relative prices rather than through regulation. If a commodity is in short supply relative to the number of people who want to buy it, its price will rise, producers and sellers will make higher profits and production will tend to rise to meet the excess demand. If the available supply of a commodity is in a glut situation, the price will tend to fall, thereby attracting additional buyers and discouraging producers and sellers from entering the market. In a free market, buyers and sellers come together voluntarily to decide on what products to produce and sell and buy, and how resources such as labour and capital should be used."

Given this definition, it is hard to see how there could ever exist a free market in professional legal services and surely only a fool (or possibly a lawyer), would seek to argue that there is one in existence already given the overwhelming evidence to the contrary.

rayiner8• 14 years ago

> And it's not a free market. In a free market, the consumer can walk away from a purchase. Most times individuals or small businesses need a lawyer, they are in no position from walking away. They need a lawyer. And they need to stop spending time searching, and get on with resolving.

You're conflating two different concepts. You're talking about transaction costs (not being able to walk away once you've hired a lawyer). Markets with high transaction costs can still be free, in the sense you can choose whatever lawyer you want and supply and demand aren't artificially restricted.[1] Markets with high transaction costs are, on the other hand, not efficient.

[1] Supply in the legal field is regulated, but I'd argue it's supply in corporate law is not artificially restricted to any substantial degree.

bonesinger• 14 years ago

This article misses one point, law school is expensive!

Students generally will want to pay their 6-figure debts with a matching salary.

When you don't have to worry about a huge debt, it allows you to be riskier and try other avenues, such as public interest, or work in small lesser known industries

tikhonj• 14 years ago

The article did mention student loans. Also, I can't help thinking that the reason law school can be so expensive is that the students can then get overpaid jobs and pay it back.

mirceagoia6• 14 years ago

The law school is as expensive as the medical school, or almost. While at medical school you can understand the infrastructure you need to teach people, what infrastructure you need when learning law?

viscanti• 14 years ago

Desired salary is inelastic. Everyone would like to make as much as possible, regardless of debt level or career/education.

If anything, a higher debt load should make someone risk averse, and more willing to take on more lower paying jobs, rather than waiting around hoping for a high paying job. In a situation where there's more supply than demand, those risk averse people should be pushing the overall price lower (there will still be niche situations where price isn't affected).

Having a higher debt load might make you desire a higher salary, but it's real debt and needs to be paid off. Unless you're a member of a cartel who is fixing an artificially high price, competition should come into play and prices should drop.

nextparadigms• 14 years ago

Any way this market can be disrupted? Maybe through some more efficient/decentralized/AI-based services that would do much of the lawyer's jobs, forcing them to reduce their billing rates?

mirceagoia6• 14 years ago

There are services like legalzoom.com ...but they didn't seem to make a scratch in this world. Or at least not big enough.

scott_s• 14 years ago

The author is doing just that. He talks about it at the end.

antonej2• 14 years ago

Lots of people are trying (including me) in many different ways. No doubt technology can help in various ways, but I think the single most promising change is top-notch lawyers breaking away from megafirms to start their own smaller shops with a much leaner cost structure. That's what I did, but I didn't want to make the article all about tooting my own horn.

wavephorm• 14 years ago

Docracy was posted to HN recently:

http://news.ycombinator.com/item?id=3666478

It's really limited or just starting out, no EULA's or anything that I can personally actually use.

ubervero• 14 years ago

Yep, we're getting started, but we might get an EULA soon, stay tuned

masebase• 14 years ago

This space is really starting to heat up. There are already a good number of new legal startups, and I think it's only beginning.

rprasad10• 14 years ago

You mean like Lexis, Westlaw, LoisLaw, LegalZoom, and RocketLawyer have been doing for the past decade or so?

The problem is that at some point, you're paying a premium for a lawyer's skill in knowing what to do and for taking on the risk of being wrong, since you can sue the lawyer for malpractice if they fuck up.

Think of it like programmers: with all that open source code out there and all those GUIs, programmer's rates should be going down. Instead they're going up (at least for the good-to-great programmers): once the market has corrected for reduced costs, it readjusts upwards to correct for increased competition for talent.

rprasad10• 14 years ago

The irony is that BigLaw was the disruption -- the standard legal model until the 1960s was to have small, local firms. What we think of today as mid-tier firms would have been considered behemoths in those days.

noonespecial• 14 years ago

Part of the reason might also be that the law has become so complex (as well as, in my opinion, intentionally obfuscated) that it demands a certain amount of resources to engage it at all. If you can't meet that level, its best not to engage it at all.

You can't launch a satellite halfway into orbit to save a few bucks. You go all the way, or stay home.

wtvanhest3• 14 years ago

The unobvious but major thing missed is that hiring the wrong lawyer is far more expensive than an additional $300 per hour.

Since the only way to know if you are hiring the right lawyer is to base it on brand, top firms have a lot of pricing power and middle firms dissapear.

roc• 14 years ago

> "top firms have a lot of pricing power and middle firms dissapear"

This is generally true. However, there's increasing pressure from clients, not to simply push billing rates lower, but for flat-fee arrangements.

While in many areas of law the billable hour is secure [1], in many others there not only isn't a strong argument in favor of it, but clients are increasingly pushing back against it [2].

And I'm not surprised to see a successful lawyer completely ignoring it, even in a post that serves largely as a setup for his pitch about coming disruption. IME every lawyer who hasn't seen his primary clients insist on flat-fee billing would prefer to pretend the issue didn't exist. And those that are dealing with flat-fees, would prefer not to talk too loudly about it, for many of the prestige/traditional reasons behind the ever-increasing billable rate itself.

Now, most firms are structured in a way that can wrap their minds around a $400 billing rate and remain profitable without changing things too much -- indeed they likely already have attorneys making the firm money charging "only" $400/hr.

But a flat-fee is not only anathema to their pride, but largely unsustainable given their structures. Between the lines of those comments about "overhead" is the fact that most of it is unnecessary, legacy nonsense that has persisted solely because the billable hour warps incentives. [3] Most law firms are simply not ready for pricing that will require them to so optimize their internal operations. And this is where the real disruption will appear and where middle firms have an opportunity. [4]

[1] Mergers, acquisitions, litigation, etc.

[2] Legal zoom-type work, some ip registration, etc.

[3] Hourly billing rewards inefficiency. If an attorney can generate enough business to keep themselves and their billable staff busy for as many hours per day that they care to work, cutting the time it takes them to perform their tasks by 20% means they bill 20% less. Which means they need to go scare up 20% more work to merely maintain their previous revenues. And as generating new business is not itself billable, Attorneys tend to treat "increased efficiency" as "more work for the same money".

[4] They have some experience, less 'pride' clouding their vision, but sufficient revenue to fund experiments in innovation.

Anechoic• 14 years ago

The unobvious but major thing missed is that hiring the wrong lawyer is far more expensive than an additional $300 per hour

You could say the same for any number of industries - hire the wrong structural engineer and that bridge or building will collapse, hire the wrong nuclear engineer and attack sub might run out of power while engaging the enemy, hire the wrong electrical engineer and the airliner's control system may fail, etc - and yet only very few people in those industries can ask for over $250/hr.

newman314• 14 years ago

Well, if you think about it, when you deal with a lawyer, it invariably has to deal with the law whereas the other professions only deal legalities as a result and not primary purpose. So the relative consequence is not the same.

Similarly, with the police, because they are charged with law enforcement and being equipped with guns is very different than dealing the local surly person at the market.

That's why I'm of the opinion that certain professions need a lot more oversight and avenues of recourse than others. One would be foolish to think otherwise.

wtvanhest3• 14 years ago

Your point is well worth discussing. The primary difference I see is the nature of the outcome and the way checks and balances work in those processes.

In each of your examples, the person you are referring to has a ton of oversight and proceesses in place to catch errors. (I don't know about nuke engineer, but in general the military avoids paying market wages by recruiting then training then placing).

In the lawyer situation picking the wrong guy can be financial suicide.

sethg• 14 years ago

When you hire a structural engineer to design a bridge, you aren’t worried that your enemy has hired his or her own structural engineer to undermine your bridge at its weakest points.

DevX101• 14 years ago

|Since the only way to know if you are hiring the right lawyer is to base it on brand

I suspect there's an opportunity for disruption here. Google doesn't hire most of their engineers based on 'brand'. They hire based on ability.

If one were to create an efficient way to identify GOOD lawyers from middle tier firms and these solo outfits, this may wrest a good amount of business from top tier firms.

wtvanhest3• 14 years ago

Google doesn't hire most of their engineers based on 'brand'. They hire based on ability.

Someone who works at Google could have better input, but my understanding is that they choose top brand name schools to recruit from. And they recruit from top startups that they acquire.

Also, the discussion about lawyers is not about hiring individuals, it is about hiring an individual within a firm. A firm which has resources to back that lawyer.

--But, you are right that being able to identify great lawyers at mid tier firms would lead you to a very interesting business. If you can figure it out, please recruit me and give me options. :)--

rprasad10• 14 years ago

This will not happen, and it is a poor avenue for "disruption".

There are plenty of good lawyers from middle tier firms, solo outfits, and boutique (i.e., specialty) firms. These practitioners already service the vast majority of people needing legal assistance (including small-to-medium businesses).

Corporations choose BigLaw not because they're the best (boutiques and specialized mid-tier firms generally produce higher-quality results in any given area of law), but because BigLaw firms have the resources and capabilities to handle anything that a large corporation can throw at them. When you're dealing with dozens or hundreds of litigation cases across the country in a dozen or more areas of the law, you go with a BigLaw firm b/c that one firm can handle all of your legal matters, reducing complexity and cost.

shingen• 14 years ago

It's why Legalzoom is doing so well.

Duff• 14 years ago

A: Because they get other jobs that meet their income requirements.

People who make it through law school usually aren't idiots. So if they fail to achieve a satisfactory career in Law, they move into other areas. Attorneys work in government as political appointees, lobbyists and policy people; they work as corporate managers; they run businesses in areas other than law, etc.

Also consider that the barriers of entry for lawyers are high. Referrals are a huge source of business, so it's difficult to start a new firm without alot of capital.

kwekly• 14 years ago

"Back to Econ 101. What happens when you double the price of something? Demand for it decreases."

Pretty sure what he's describing is sliding the supply curve straight up, which has exactly the opposite effect.

sp332• 14 years ago

I think you have marginal utility confused with marginal cost. For a given supply, as demand increases, that causes an increase in price. But obviously, increasing the price does not (usually) cause an increase in demand.

jerednel• 14 years ago

If we're rationalizing this with economic principles, I think we can chalk it up to "imperfect information".

Also demand is static regardless of price changes. Quantity demanded is what changes. Apologies for the pedantry but don't want anyone reading too much here and making that mistake on a econ test :)

Symmetry2• 14 years ago

A doubling in the price can either be due to an increase in demand or a decrease in supply. In this context, though, its pretty clear that the author is talking purely about shape of the demand curve, not about the supply curve at all.

ktizo10• 14 years ago

Perhaps it is because lawyers are, by definition, the experts at defending dubious practices.

pak• 14 years ago

So, Forbes is republishing Quora answers now? This must be part of that new strategy where they try to gain more traffic (http://www.forbes.com/sites/kashmirhill/2012/02/16/how-targe...) with other people's content (http://www.nytimes.com/2012/02/19/magazine/shopping-habits.h...).

flyt2• 14 years ago

These answers are republished by Quora to Forbes, with permission from the original authors. See this for more info: http://www.quora.com/How-does-Forbes-decide-which-Quora-answ...

mirceagoia6• 14 years ago

Indeed, that's the situation. There is a partnership.

gersh• 14 years ago

I asked the original question, and I was never notified that they were posting it to Forbes. I guess it is kinda cool. I suppose they only notify/ask permission from the people, who write the answers.

lionhearted• 14 years ago

Having worked some recently with lawyers, their chief value is similar to that of the historical value of having assassins on the king's payroll. The power is not in using the assassins, which is expensive and dangerous, but in that people are more scared to provoke and escalate with someone known to employ assassins.

andrewtbham• 14 years ago

The supply of lawyers is high, but the supply of good, experienced lawyers with good reputations is lower.

jonnathanson• 14 years ago

To some extent, lawyers (or, more accurately, law firms) are Veblen goods -- meaning that their services are perceived as being better if they're more highly priced and exclusive. There's a general perception that a high-priced lawyer is a top-notch lawyer, and that skimping on such lawyers carries a huge deal of legal risk.

This dynamic plays out particularly in the BigCorp world, and especially if there's ever a perceived threat of litigation. (The idea that a competitor would hire "the best of the best," or "an army of lawyers," or "top guns," drives your own desire to pay for same).

cobrausn• 14 years ago

It seems to me that lawyers have a captive market - I mean, you're not going to not hire a lawyer when you need one, yes? And with the truckload of new laws that enter the books every year, there will likely be no shortage of need anytime soon.

It seems to me this 'salary matching' is basically price-fixing, even if unintentional. If my only option is a $650 / hour lawyer or a more prestigious $750 / hour lawyer, why not pay the higher price? I mean, legal matters can be scary to those not well versed in the intricacies of the law.

rayiner8• 14 years ago

> It seems to me that lawyers have a captive market - I mean, you're not going to not hire a lawyer when you need one, yes?

It's not any more captive than any other sort of market. If you live in LA and need a car, you're not going to not buy a car, right?

Corporations hire expensive lawyers for the same reason they get expensive architects to do their interior design. It's a signaling mechanism.

jcfrei• 14 years ago

my point exactly (and the author seems to have missed it). there's such a thing as adverse selection in the market (of lawyers) which means that information asymmetry prevents the formation of a correct market price. in this case people just won't hire a cheap lawyer with discount rates, because they have no insight in the capabilities of a lawyer (or in the field of law) appart from a few if any references and the price.

msluyter• 14 years ago

My girlfriend (a lawyer) tells me that if I ever need a lawyer I should get the most expensive one I can afford, because price does roughly reflect quality.

And, I'd note that we have little else to go on. After all, we can't discern the quality of a given lawyer by the outcome of our particular case. Say your lawyer lost. Were they a bad lawyer, or was it simply that your case was poor? As a non-lawyer, you don't have the expertise to judge. Furthermore, lawyers won't discuss the qualifications of other lawyers for various reasons, so it's difficult to get any sort of objective ranking.

lallysingh• 14 years ago

There are a few things to add in here (IANAL, but I'm close to quite a few).

A major element is billable hours.

When you want to reduce a bill for a client, during bad times or whatever, you can always under-bill the number of hours spent. Or change the mix of high-low-rate hours expended. Reducing the number of hours billed doesn't (necessarily) reduce the number of billable hours you can credit the attorneys.

While you can have equal salaries across departments, you have bonuses, which depend on how many hours you billed. Also, #billable hours is a great sort criteria for who's first on the shit-list and first on the promote-list.

chollida14• 14 years ago

the way I had lawyer, dr, etc. fees explained was that they can charge so much as you often don't get a second chance.

If your life is on the line for an operation, you want the best doctor available.

Your life on the line in a trial, you get the best lawyer available.

This has a trickle down effect. Or put another way, if you don't get a second chance, things had better go right the first time. Fear is a powerful motivator.

Want that dream house?

Better make sure the paper work from the forclosure is done properly. Sure you can try to do it yourself or with a budget firm, but what if they make a mistake. Your dream house is gone.

Want to make sure your kids are protected in case of your death, better get the best lawyer you can to do your will. Sure, you can print a form off the internet, but we've all seen that go wrong. Don't your kids deserve peace of mind during the troubling times surrounding your death?

johngalt• 14 years ago

This is the #1 reason, and the common explanation, but lets examine it further.

You risk your life getting into your car every day. You don't pick the most expensive car? Choosing air travel is commonly an exercise in finding the lowest price, despite the inherent risks/fear of traveling 4 miles up at 500mph. Why are these commodities while preparing a will is not?

There are transactions/disputes that require highly skilled people to direct/settle, but I wonder how many legal systems have been specifically constructed to require guidance. How can we tell when something is costly because it is complex or merely complex to make it costly?

chollida14• 14 years ago

> You risk your life getting into your car every day. You don't pick the most expensive car? Choosing air travel is commonly an exercise in finding the lowest price, despite the inherent risks/fear of traveling 4 miles up at 500mph. Why are these commodities while preparing a will is not?

That's easy. The expense of a car or plane doesn't indicate it's safety, infact it's usually the opposite, the more expensive the car or plane the faster it goes and less safe it can make your trip.

With a doctor or lawyer more often than not the more you pay the better the service/advice you get.

> There are transactions/disputes that require highly skilled people to direct/settle, but I wonder how many legal systems have been specifically constructed to require guidance. How can we tell when something is costly because it is complex or merely complex to make it costly?

Completely agree with this.

thinkcomp6• 14 years ago

There are all sorts of reasons, but first and foremost is the lack of transparency in all things legal. This is why I'm working on PlainSite (http://www.plainsite.org). The opacity creates the illusion of difficulty, the need for (arbitary) specialized knowledge, and uncertainty as to the real price because so many factors are hidden from view.

For example: you're expected to follow the law even without knowing what the law says. When you want to find out what the law says, it's not easy--it's certainly not available in a standardized format. When you want to interpret what you find, assuming you find it, that's not easy either. Courts interpret things in new ways all the time.

The federal court system charges you to access public information contained in court proceedings, with limited exceptions--that is, if you even know where to look for it. See http://www.thinkcomputer.org/20120209.pacer.pdf. The interface is terrible and hard to use. The way in which you write lawsuits is obscure, counterintuitive, and creates additional needless work.

In addition to all of these factors, and perhaps because of them, lawyers (especially at big firms) have institutionalized fraud. It's taken for granted that legal billing is often fraudulent. If you charge $500 per hour and your system only resolves to the tenth of an hour, that means if you spent four minutes writing an e-mail, you can charge for 0.1 hours, or $50. But really you only did $33.33 of work. That's a nice cushion. But what actually happens is that an attorney might do 45 minutes of work and round it up to an hour--even though that work is formatting in Microsoft Word that the client could have done; or printing out a Word document in order to scan it in as a PDF. Still seem worth $500 per hour?

For those lawyers not at large firms, they're covering expenses (such as law school) that are enormous. High rates are a necessity, and who would charge far lower than market rates anyway? It might be interpreted as a signal that something is wrong.

Of course, don't for a minute think that paying $800 per hour will get you a better lawyer than paying $300 per hour. It might. Either way, you'll be paying someone in a staggering number of cases to unscientifically guesstimate What The Government Might Do, when the answer is, "who knows?". That doesn't mean all lawyers are the same; some are definitely better than others. But it has nothing to do with price.

More lawyers could afford to charge reasonable market rates, and not work for large firms, if it weren't for the ABA mandating that you have to attend a law school (that results in huge piles of debt) or clerk for years (four in California) in order to join the bar. See http://www.nytimes.com/2011/10/25/opinion/are-law-schools-an....

Lawyers know, too, that you can't get rid of them (also thanks to the ABA), and so you're locked in. There's a monopoly on business representation, for example. See http://www.plainsite.org/issues/index.html?id=137. It's absurd.

learc838• 14 years ago

>More lawyers could afford to charge reasonable market rates, and not work for large firms, if it weren't for the ABA mandating that you have to attend a law school (that results in huge piles of debt) or clerk for years (four in California) in order to join the bar.

That's exactly the problem, regulatory capture of government protected guilds. It's exactly the same with Doctors and the AMA, or electricians, hell in some places even interior decorators.

If you've ever had to hire a commercial electrician, it's absolutely terrible. Once they pull a permit and start working, it's extremely difficult to replace them, and they know it.

Recently the general contractors in Georgia convinced the state to raise the net worth requirement for contractors. They are already required to have massive insurance coverage, so the only reason was to protect the incumbent contractors from new competition.

Anywhere you end up with government sanctioned guilds ran by industry or ex-industry people, you're just asking for regulatory capture and the resulting protectionism.

nickik• 14 years ago

Absolutly agree with this. There is a nice episode of the Econtalk podcast that talks about the "guilds"-Problem.

Here is the Abstract: "Clifford Winston of the Brookings Institution talks with EconTalk host Russ Roberts about the market for lawyers and the role of lawyers in the political process. Drawing on a new co-authored book, First Thing We Do, Let's Deregulate All the Lawyers, Winston argues that restrictions on the supply of lawyers and increases in demand via government regulation artificially boost lawyers' salaries. Deregulation of the supply (by eliminating licensing) would lower price and encourage innovation. " --> http://www.econtalk.org/archives/2011/09/winston_on_lawy.htm...

rodyancy• 14 years ago

Without a regulatory body it would be too easy for an unqualified person to pose as an electrician, doctor, dentist or lawyer. Do you really want someone with no experience or training wiring your house, pulling your teeth, operating on your knee, or defending you at trial?

andylei2• 14 years ago

> regulatory capture of government protected guilds

this just doesn't align with evidence. if it were true, there would be too few lawyers, not too many lawyers.

i'm not saying the effect you describe never happens, but when it does, there is not enough supply, driving prices up (this is probably the case in medicine, where there are not enough doctors, driving prices up)

mfaustman3• 14 years ago

So you do not need to go to law school to be a lawyer. Anyone can take the BAR and be a lawyer. Again, as Antone points out, this all comes down to a perception of quality. Many people (and I am not saying you) would not hire a lawyer who did not go to law school.

dctoedt2• 14 years ago

Thinkcomp, I agree with almost everything you say about the economics of the legal profession, but I think you miss out on something crucial.

Before I went to law school, I unconsciously thought of law as a branch of engineering: Learn the rules, twist the right dials, and things will happen as you expect. That was naive. Law does have rules, and dials to twist, but for socio-political reasons I won't go into here, the rules and dials aren't tightly locked to outcomes. As a result, law has long struck me as being more akin to weather-guessing than to engineering.

repsilat2• 14 years ago

The article "The Myth of the Rule of Law"[1] has been linked a few times on HN, and I think it sums up this idea pretty well. It basically says that in many (most?) cases the law is subject to interpretation that depends on the politics of the interpreter (be they a lawyer, judge or member of a jury). The "letter of the law" isn't nearly as simple as people believe, ambiguity is the name of the game.

1: http://faculty.msb.edu/hasnasj/GTWebSite/MythWeb.htm

law9• 14 years ago

As an engineer, that's why I went to law school. I thought law could be represented deterministically...but that's a naive assumption. A stochastic model fits much better, which is why I'm now extremely interested in artificial intelligence.

philwelch6• 14 years ago

In parts, law is probably closer to sales than meteorology.

law9• 14 years ago

I appreciate the passion with which you advocate for decreased barriers to legal information. In many respects, I could not agree more; U.S. jurisprudence is synonymous with hyper-technical mutability, and the public is kept in the dark because of pay walls. But, that marks the full extent to which you and I agree on this matter.

In terms of "institutionalized fraud," you are totally wrong. The legal profession is one of the most heavily-regulated professions that exists today. The duties imposed on lawyers--which are legal obligations to act or refrain from acting--should not be taken lightly. For example, Rule 8.3 of the Model Rules of Professional Conduct[1] (adopted in whole or in part by 49 states) provides:

  (a) A lawyer who knows that another lawyer 
      has committed a violation of the Rules 
      of Professional Conduct that raises a 
      substantial question as to that 
      lawyer's honesty, trustworthiness or 
      fitness as a lawyer in other respects, 
      *shall* inform the appropriate 
      professional authority.

(emphasis added). Note the word "shall:" it means that a lawyer who has actual knowledge that another lawyer (regardless of jurisdiction!) violated the rules MUST report the violation to the appropriate authority.

The reason I explain this rule in particular is because of Rule 1.5, which provides in excruciating detail a lawyer's ability to collect fees from a client.[2] Everything you said is wrong.

Here's the short, plain English version of Rule 1.5: the lawyer must communicate the fee arrangement to the client before the start of representation (except when charging an ongoing client the same rate in subsequent matters). There's a blanket prohibition against "excessive fees" and "minimum fees," and a set of factors used to determine whether a fee is reasonable.

Reasonable fees are judged by time and labor, the issues' difficulty/novelty, the lawyer's experience/reputation/abilities, the nature and length of the lawyer-client relationship, whether the lawyer must turn away other cases, whether it's a fixed or contingent fee basis, and the customarily charged fees. When dealing with contingent fee arrangements, they MUST be reasonable and signed by the client, but may not be used in criminal cases. Similarly in criminal cases, a lawyer may not ask for incentive fees, and is proscribed from taking a percentage of publication rights (i.e. Casey Anthony's lawyer asking for a percentage of any subsequent book deal in exchange for his time) until after all appeals have been exhausted. Contingent fees also may not be used in domestic relations.

When dealing with division of fees in law firms, it's not actually a "division of fees" in the legal sense. The lawyers are salaried employees of the law firm, which is hired to represent the client. Again, when you hire a law firm, you are not hiring a single lawyer; you're hiring the entire firm. Division of fees occurs when a single billing client is covering the fees of two or more lawyers who are not in the same firm. When this happens, division is permitted as long as it's proportional to the services each lawyer (or firm) provides to the client, and the client must agree to this allotment in writing.

Further in this thread, you announced that you should have a right to represent your company in litigation. That's absolutely ridiculous, and in criminal matters in the United States, is dissonant with the Sixth Amendment. In such cases, the corporation has a right to assistance from counsel. Because corporations are fictitious entities incapable of self-representation and thus incompetent, corporate pro se representation is impossible.

But, there are good reasons why a client shouldn't have a right to non-lawyer representation. The Model Rules of Professional Conduct attach an enormous burden to lawyers by compelling them to disclose to the authorities another lawyer's violation therefrom. Without strong industry self-regulation in this form, there would be no way to protect clients from invidious representation.

---

[1] http://www.americanbar.org/groups/professional_responsibilit...

[2] http://www.americanbar.org/groups/professional_responsibilit...

law9• 14 years ago

And, just to be clear, lawyers' fees are reasonable because lawyers have a duty to report fraudulent billing practices. If they don't, they can be disbarred. That duty to report covers all of the rules (excluding Rule 1.6 and information gained by lawyers participating in approved lawyers' assistance programs), and the reasonableness of fees absolutely includes consideration for this duty.

thinkcomp6• 14 years ago

As much text as might exist around the subject, it looks like the "blanket prohibitions" aren't working and everyone knows it. There's a small loophole in the rule you describe--what happens if a non-attorney learns of an attorney's misconduct? Nothing, that's what!

It's not ridiculous for me to want to represent my company without having taken the bar exam--you're using a legal fiction to argue that even though I pay my company's taxes, I should not be allowed to represent its interests in court if I so choose. But even if I didn't pay my company's taxes, I would still want that option because the fictitious entity you describe is a creation of my capital and my labor and in every other respect its Board of Directors has the ability to guide its direction.

mbell• 14 years ago

Only two words come to mind: plausible deniability

dctoedt2• 14 years ago

> But what actually happens is that an attorney might do 45 minutes of work and round it up to an hour--even though that work is formatting in Microsoft Word that the client could have done; or printing out a Word document in order to scan it in as a PDF. Still seem worth $500 per hour?

I might charge $X00 per hour as a "blended" rate, taking into account that:

A) some of my $X00 time might be spent doing $15 per hour clerical tasks, but then I won't have to spend as much $X00 time instructing a $15 per hour person, then reviewing his work to be sure he got it right; and

B) some of my time will be spent doing work that's worth $1,000 per hour or more. (Cue Hedley Lamarr in Blazing Saddles: "My mind is a raging torrent, flooded with rivulets of thought cascading into a waterfall of creative alternatives.")

So it averages out, or at least that's the rationale. (Of course, that doesn't justify time-sheet padding.)

rprasad10• 14 years ago

You're not paying a lawyer $X00/hour to do word processing; you're paying them to figure out what laws apply to your situation, how those laws apply, and the best course of action given the legal consequences.

If they're doing word processing, it is because the language matters. Consider that the City of Cleveland lost the Cleveland Browns to Baltimore over a comma which completely changed the meaning of the exit provisions in the contract. The owner of the Dodgers likewise lost a $500 million stake to his ex-wife based on the language in his prenuptial.

Finally: if you want easy access to documents in the court docket: go to the courthouse where they are kept. It costs a lot of money to implement and maintain a digitizing system, and most courts simply do not have the resources to maintain such systems.

shawnee_• 14 years ago

Traditional supply-demand economics just doesn't explain the behavior of "middleman" industries, such as lawyering, real estate agenting, etc.

Traditional supply-demand economics assumes a 1:1 ratio where there is one buyer and one seller and there is some amount of economic surplus that the two parties play tug-of-war with. Traditional supply-demand economics works great when buyer and seller negotiate directly.

But in middleman industries, the middlemen can hop on either side, and play for either team. They are able to effectively scope out surplus from either or both sides, predatorize the weaker side with almost _no risk_ to themselves, and destroy a lot of the potential realized value between the original parties in their process.

So basically it creates a "parallel" economy where prices aren't determined by supply or demand, but rather by fear and a kind of high-stakes prisoner's dilemma between buyers and sellers where buyers and sellers bear all the risk and lawyers and agents reap all of the rewards.

anigbrowl• 14 years ago

Traditional supply-demand economics assumes a 1:1 ratio where there is one buyer and one seller

That's not what 'ceteris paribus' means.

monochromatic• 14 years ago

In what way are lawyers middlemen?

pbreit• 14 years ago

The fee overage acts as insurance. Since the downside of legal services (no matter the competence) is significant, consumers believe the extra money they are paying will help mitigate any unfortunate circumstances.

jriley• 14 years ago

I would add:

1) Pay can be high with win/lose stakes

2) Different pay models (contingency)

mfaustman3• 14 years ago

This whole argument that this is "not a free market" is silly. None of the factors pointed to here would actually limit choice or restrain price movement. It is a free market, but that does not mean that the market lacks information asymmetries that would artificially morph prices.

As Antone points out, there is a strong quality perception issue. Ironically, it is the Bottom Line Law Group that is fighting this perception of quality on a daily basis (vs a Wilson or Fenwick). Thus it does not matter if the supply increases if the consumer perceives the bottom-end as an inferior good.

This skewed perception is rooted in a total lack of transparency in the legal industry. This lack of transparency limits the consumer’s ability to find lawyers like Antone, and keeps the cost of standard information and a simple opinion high.

I agree with Antone that the industry is on the brink of change, but it is a BIG messed up industry. Change will come in many forms within the industry's mirco verticals. It will come from networks of smaller more specialized law firms such as the Bottom Line Law Group, and from innovations which create more transparency in the industry to find qualified attorneys and access quality information.

ShabbyDoo2• 14 years ago

There is one restriction in particular which I believe has a huge effect on the legal industry's slow pace of change -- only lawyers may own companies which provide legal services to clients (vs. in-house counsel). So, want to start an online, virtual law firm? Either act as a referral service or make sure you never want a non-attorney to have equity in your company. Why does this rule exist? I haven't a clue.

joshuaheard2• 14 years ago

This is true for most state-licensed professionals like doctors and accountants. There are two main reasons for this.

The first is that a non-licensed person could easily bypass the license rules by affiliating with a licensed person in name only and doing all the work requiring a license.

The second is that licensed professionals have ethical and professional duties to their clients that they are taught as part of their licensing eductation. A non-licensed person may not know these duties, or be aware of their rationales, and may try to influence the licensed person to violate them.

physicslover2• 14 years ago

I don't believe this is true for doctors, although, I could be wrong but I think HMO's get around the restriction. The bottom line is that lawyers are a protected guild with rules like the one mentioned above that artificially inflate the value of their services.

larrys• 14 years ago

The article doesn't address what could be the most important factors.

First, your relationship with a lawyer is a personal relationship. And it's hard to break a personal relationship over a yearly price increase of single digit %.

And lawyers regularly wine and dine and become "friends" with their clients. The client really thinks that the lawyer likes them. If you've ever worked in sales you know what I mean by this. Lawyers are nice and friendly and that insures the loyalty of the client. When I was in high school I delivered gifts to the clients of a small law firm. I remember the partner deciding who got what gift (based on amount of work). This wasn't a bribe. Just a thank you to insure ongoing loyalty. (Maybe some were bribes of course).

Remember rates aren't doubled they go up a little each time they are raised. If you are already paying $400 per hour you aren't bolting for $425/hr. It's not like rates are doubling in a year.

The other reason is FUD. People convince themselves and rationalize that a certain lawyer at a certain rate will get the job done. They are afraid of switching lawyers and having a bad outcome.

So the above is certainly one of the things that keeps legal rates high.

What about new startup lawyers? Well the way any professional service works you start out with whatever work you can get at whatever price you can get (let's say). Then as you gain clients you slowly wean yourself from the low priced clients (by taking longer, not returning calls etc.) and they get the message. This leaves you with the best clients who you can raise rates on (because they like you and are fearful of changing).

So even if there was a group that charged low rates (to corporate buyers) over time their rates would rise as well. Because of the person factor I mentioned in the first paragraph.

Finally, even though lawyers can now market (I remember when they couldn't) they won't "sell" in the traditional sense. If I sell a service (like web hosting web design or unix sysadmin) I can pickup the phone and call people. I can go door to door. I can place ads. Lawyers can place ads of course but that's not the most effective way to sell personal services. Then you are waiting for someone to contact you. Selling is selling. If lawyers were ethically allowed and it was acceptable practice to "cold call" I believe you would see rates dropping in certain types of work.

grellas• 14 years ago

A few quick thoughts (am about to go into a meeting):

1. Lawyers are not immune from market forces. This is easily seen at the micro level: a new practitioner with no established reputation can charge $800 per hour and see where that gets him (of course, precisely nowhere). On the macro level, law has been a boom business ever since at least the 1960s when expansive liability theories came to be widely adopted by the legislatures and the courts. So, what used to be regarded as a dispute over garbage at the local dump becomes a massive environmental enforcement action by which dozens of parties face multi-million dollar liabilities; what used to be a distribution chain in which only the end-point seller typically bore liability to the consumer becomes massive product liability suits going back to the manufacturers and imposing strict liability on them in ways that can ruin a multi-billion business; what used to be the $.25 that a cab driver overcharged you because of some shifty trade practice becomes a major class action in which all the vendors in the area are swept in to face a protracted legal fight and potentially substantial damage exposure; etc., etc., etc. The point being: the legal landscape has changed dramatically and, for example, the Big Law firm that I worked at in the early 1980s grew from 23 lawyers in 1965 to about 250 in 1980 and is today over 1,000 lawyers. Demand is up in a huge way over the decades and law remains a boom business in this respect (certainly Big Law remains so) notwithstanding the recent economic calamities that have beset us all. That is the main reason why the very high fees are charged: because businesses are willing to pay them (when they are not, overt or disguised discounting occurs with great regularity).

2. That said, I am no fan of the Big Law model and have expressed my criticisms at some length elsewhere (see, e.g., http://news.ycombinator.com/item?id=1648342). I also have stated in some detail why I think the large firms have been left reeling from the recent economic shock and how this has caused a general revulsion against the billable fee structure used in these firms (see http://news.ycombinator.com/item?id=1649507).

3. In reality, the legal field is pretty diverse and price does matter for those who consume legal services (why shouldn't it?). The providers of those services who remain stuck in old ways will need to adapt to the short-term problems but they obviously hope to keep the old structures in place in hopes that the good old days will return. For the broader legal market, however, there is already wide variety in the range of services and pricing offered. As a consumer, you need to do your due diligence and shop around. In the broader market, lawyers want your business and will adapt as needed to get it.

Iv• 14 years ago

The laws of market implies rational actors and decisions aimed at maximizing revenues. Lawyers, especially new ones, may consider reputation more valuable than cash. A begginer charging $800 an hour will get nothing. To maximize profit should charge any price to get his first clients then go upward. However, if he has the patience of trying to find clients for several months and sticking to his initial price, he will end up getting one (there are many irrational actors out there). That is not a profit maximization strategy but a shortcut to high reputation and a gamble many lawyers may be tempted to do, especially those that have a high self-esteem.

tsotha• 14 years ago

The same reason professional athletes make so much money even though high schools and colleges are full of kids who want to play for a living. Just having a good lawyer isn't enough - he needs to be better than the lawyer on the other side.

JackC• 14 years ago

Before we talk too much about why lawyers are so expensive, it's worth checking out how much they actually get paid. It's the weirdest salary chart you'll ever see:

http://www.nalp.org/salarydistrib

Basically it's the sum of two separate curves -- a bell curve centered around $45,000 a year, and a sharp, sharp peak up at $160,000.

What's going on here? Well law is two separate markets -- the bell curve is the 90% of lawyers who compete on cost in a more or less normal market, and the sharp peak is the 10% of lawyers who work at BigLaw firms that march in lockstep at $160,000 for new associates.

So for the 90%, the answer is that law is a highly competitive market. You're paying $150,000 in tuition to get a job that averages $45k a year when you start, and won't go up too fast. You're doing largely hard, boring work, it sucks to do without support staff, and it's time-consuming to do right. If the product costs a lot, it's not because the lawyer is overpaid -- it's because that's how much it costs to produce. Lawyers who drop below that price go out of business.

For the 10%, they're in a weird parallel universe where the cost of their service is almost totally irrelevant to their clients. They're handling international mergers, billion-dollar divorces, and Federal indictments of entire financial firms. The question of whether the lawyers charge $300 or $600/hr is like the question of whether your parachute costs $50 or $100 before you jump out of a plane. If there's the slightest chance that the $100 parachute is safer, you go for it. That's why the starting salaries march in lockstep -- no BigLaw firm can afford to let people think that the cream of the crop from Harvard Law is being hired by their competitors. They'd lose all their business if anyone else had a clear edge. But this only relates to a small minority of lawyers.

...

To disclose my own bias, this article/conversation is strange to me because I took a big pay cut to go from programming (which I could do before I graduated from college) to law (where most of my lower salary goes to student loans). I knew I would. I didn't join the BigLaw 10% (which I would have hated), but I'm getting to work on things that matter to me, and I'm proud I made that call. But to see a bunch of programmers talk about why lawyers have it so good ... yeesh.

This isn't to say that law can't get easier or cheaper. There are huge wins to be had from automation here, and I always turn into the resident tools guy wherever I work. I've had to get pretty good at VBA of all things, and 1000 curses on that misbegotten tongue. (Jashkenas, are you listening? Need a project after CoffeeScript?) I also think law school needs to get a lot cheaper -- like college tuition in general, it's been growing at twice inflation for decades, and that can't be right.

One other thought -- the bar is indeed a protected guild, and I'm not sure where I stand on that, but there are reasons for it. First and foremost, you will never know whether your lawyer has done a good job. If you hire a programmer, there may be problems behind the scenes, but you can more or less tell whether they've done what you hired them to do. If you hire a lawyer, and you lose your case, you will often have not the slightest idea whether they were competent -- there's just not enough signal for most laypeople to analyze in most cases. Even my own supervisors often have no idea whether I've done my job right. They ask me a question, I answer it, and without repeating the work I did they have no way of telling whether I'm right or how long it should have taken to complete.

Requiring education, examination and licensing is one way to address that problem. It definitely raises the price. In theory it also lowers the chances that you're buying snake oil. Something to consider anyway.

jasonkester• 14 years ago

Same reason so many of us here can bill out at several hundred dollars an hour even though there is an unlimited supply of people calling themselves computer programmers who will happily try to do the same job for $7/hr.

Valuable stuff is worth paying more for.

johnnygleeson• 14 years ago

For anyone interested there is a good book called 'The End of Lawyers?' by Richard Susskind, a visiting Professor at Oxford, that discusses the ways in which technology will gradually commoditize many elements of traditional legal practice.

http://www.amazon.com/End-Lawyers-Rethinking-Nature-Services...

Chapters

1. Introduction - the Beginning of the End? 2. The Path to Commoditization 3. Trends in Technology 4. Disruptive Legal Technologies 5. The Future for In-house Lawyers 6. Resolving and Avoiding Disputes 7. Access to Law and to Justice 8. Conclusion - the Future of Lawyers.

nwenzel• 14 years ago

Supply Induced Demand. They're out there, so you need one too. The other guy has 2, you better get 2, too. No such thing as an "excess supply."

tomkarlo4• 14 years ago

I used to "hire" law firms regularly for my clients. What's not being mentioned here is that since in most cases the individuals _choosing_ the law firms for large financial and M&A transactions (which represent the real meat of the "big law" business) generally aren't directly paying the legal fees, there's relatively little incentive for them to push for lower prices. (And if I remember correctly, if those legal fees are part of a financing transaction, they don't count against the businesses "normalized/adjusted" income, either.)

If I'm the CFO of a company that's doing a $500M financing round, am I really going to choose a lesser law firm to save maybe $100K in bills? I'm already probably paying the bankers $5M or more to do the deal in fees (arguably, that's the real gouging, given that the work doesn't really scale with the deal size but the fees do.) If I choose a cheaper firm, and they mess up (and frankly, all the firms make mistakes, especially when you have junior associates drafting filing docs) it could cost me my job.

(The most cost-conscious clients I've seen were entrepreneurs or at least majority owners of businesses - they saw those fees as coming right of out their own pockets, so they tried to do whatever they could to keep them down)

In-house counsels are definitely trying to push down costs by doing more things internally or offshoring more mundane stuff like day-to-day contracts. But at the same time, most of your in-house counsels come from a big law firm, so they're unlikely to break away completely, either.

rayiner8• 14 years ago

The legal field isn't really amenable to simplistic economic analysis. With all due respect to thinkcomp, the idea that licensing requirements are what is driving the cost of legal services is totally wrong.

First, legal services generally aren't that expensive. If you need someone to help you draft a deed to some property, you can probably get that work done for cheaper than you would pay an engineer to design you a retaining wall on that property. When people say legal services are expensive, what they mean is that high-end corporate legal services are expensive.

Second, corporate legal services is not expensive because of limited supply. There are about 45,000 JD's graduated each year, and maybe 3,000-4,000 are hired at big firms that do corporate work. The rest work for far less money, in the $45-$60k range. If you wanted to start a firm doing corporate legal services at low cost, paying attorneys $80k a year (half the going rate of a first year at a large firm), you would literally drown in job applications. While in a platonic sense there is a supply constraint in the legal field, it has a practical effect more akin to crash safety regulations in cars than something that actually constrains supply to drive up prices.

If the state bars got rid of the requirement that lawyers attend an accredited law school, there would be almost no change in the cost of legal services at the top. Big firms hire the large majority of their associates from only 20 or so schools, out of the 200 that exist. Why would adding a category of potential hires below the huge group of people already not getting hired drive down salaries?

The price of high-end legal services is insensitive to the supply of lawyers for the same reason the price of Apple products is largely insensitive to the number of Korean competitors in the market: 1) brand is tremendously important; and 2) there are actual differences in the quality of the product.

Re: 1) Because it is difficult to tell whether your lawyer did a bad job or whether you just had a bad case, branding and signaling becomes tremendously important. It is that branding and signaling that makes companies keep going to firms that hire primarily from the top schools, even when there is nothing, legally, that prevents them from taking it to firms that have more diverse hiring standards.

Re: 2) The adversarial nature of law means that there is an arms race for the smartest people. While a lot of even high-end legal work can be very routine and boring, some of it can be very complex. That 10% of legal work that requires out-thinking the opposing counsel can have major repercussions for companies, and as such companies are willing to spend the money to ensure that their lawyers are smarter (at least on paper) than the opposing party's lawyers.

rprasad10• 14 years ago

This. Agree that these are the primary factors in the insane legal costs for high-value clients (corporations and high-net worth individuals). Also agree that for most folks, it is possible to find a good lawyer to do a will for under $500, an amicable divorce for under $800, or do all the filing to launch a business for under $400.

Uchikoma• 14 years ago

What I found interesting in dealing with layers: they charge high rates even for standard contracts, EULAs etc. and when asked if one is safe with their advice, only tell you that courts can decide in whatever way they want - so no.

rayiner8• 14 years ago

To respond to one point in the article:

> Associate salaries are not an efficient, free market.

That is probably true, but the evidence supplied in the article supports an inference the opposite of the one made by the author. If everybody in New York pays $160k as an informal arrangement, that suggests artificially low salaries, not artificially high ones. Why would a bunch of firms act informally in concert to artificially drive up their costs?

And associate salaries, of course, have only an indirect effect on legal fees. The price of a good is directly influenced only by supply and the demand curve. The costs of making the good are irrelevant except to the extent they influence supply. Clients, of course, don't care what associates make. The amount they will pay for services is entirely a function of their demand and the supply of law firms willing to do the work.

physicslover2• 14 years ago

My naive understanding is that only lawyers can own and operate a law firm. In other words one can't form the equivalent of an HMO and hire a bunch of lawyers and pay them a salary and offer legal counsel to individuals.

I believe this is mandated by bar associations on ethical grounds, though I find it absurd. This artificially inflates the cost of legal services.

GigabyteCoin• 14 years ago

Who said there is an excess supply of lawyers?

joshuaheard2• 14 years ago

Simple, because government keeps passing more and more laws that create more ways to become liable. While there may be growing supply of lawyers, there is a growing demand due to this explosive growth of new laws. Stop the government from controlling every inch of our lives, and you will see lawyers getting cheaper.

I also agree with the previous reply that this article only deals with the 10% of lawyers who work in big firms. The other 90% of lawyers that don't work in big firms are out there competing everyday for your business and are charging reasonable rates.

itmag• 14 years ago

HN, help me make up my mind: is an abundance of lawyers to be seen as a necessary component of a complex society? Or is it a symptom of decay? Are lawyers necessary agents of the greater good or are they vampiric rent-seekers on a byzantine legal morass?

I'm not trying to be clever; I genuinely want to figure this out.

DanBC2• 14 years ago

(Obviously, IANAL and I have no legal training).

In England people are encouraged not to go to law until they really need to.

People with family law problems (divorce, access to children, etc) are encouraged, strongly, to use mediation before they go to court. This mediation can be lawyer led, but it can also be led by other professionals.

People with employment problems usually need to filter through any internal company policies before they go to law.

Rejecting pre-trial discussions is usually a bad idea.

Solicitors will tell you that going to law is a bad idea, and expensive, and will often not get the result you want. I think, BICBW, that they need to do this as part of their professional codes of conduct. They're tightly regulated, and encouraging people to go to law if they're unlikely to win is frowned upon.

Note that none of this is a barrier to effective law; once you need to go to law you've usually had several discussions with solicitors and you know what's involved and what to expect from your barrister.

There are separate tracks for quick and easy civil "small claims" cases, but even these can sometimes be avoided by using existing legal protections. (The very consumer-friendly "Distance Buying Regulations" or the credit card protections, for example.)

DanBC2• 14 years ago

Here's another reply which tries to better answer your question:

I live in England. We have free health care available to all. But if you want to pay you can buy private medical insurance.

I was debating with some friends. They said that it was wrong for doctors who got free training in the NHS to then go and work privately; they said that doctors should work for X years in the NHS.

I said that doctors didn't get free training; they have large student debts and they work for years in tough conditions for low pay. And then I asked what the difference between doctors (educated and trained at UK tax-payer expense) and lawyers (educated at UK tax-payer expense)? Why is it wrong for doctors to work privately, and not for lawyers? Why are legal-aid lawyers so hard to find in the UK? Why is "pro-bono" so rare?

Some lawyers can be drivers of social change for good (fair pay, anti-racism, etc) but they often get hoovered into creating laws or finding loopholes for weird corporate behaviours.

crusso• 14 years ago

Think about this. If you have too many doctors, they run out of sick people and their prices go down. They don't go out and start injuring people to make business for themselves.

Lawyers do just that. If they don't have work, they can attack innocent citizens to create work for themselves. Frivolous law suits create new market pressure for more attorneys. Whenever you see slip-n-fall attorney commercials, that's just an window into the parasitically-based ecosystem that lawyers operate in.

Failing that, lawyers are the most likely profession to go into politics and create more laws that need what to sort them out? Oh yeah, more lawyers.

It's a troubling profession that needs to be considered carefully when you're making decisions about the economic impact of laws upon society.

Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

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