Why Deregulating the Legal Profession Makes Sense

08/25/11

Everyone, it seems, is up in arms lately over the dismal employment situation in the legal market, from law school scam bloggers, to the students who are suing their alma maters, in the cases of New York Law School and the Thomas Cooley Law School in Michigan, in which students are claiming the schools lured them and others with false post graduation employment statistics. Even an investigation is underway by the Senate Judiciary Committee as the American Bar Association (ABA) has come under the microscope regarding its standards for testing and accreditation, in relation to the whopping debts new law school graduates carry, and their high risk of default.


This article explains what's really going on at Thomas Cooley Law School: Thomas Cooley Law School Exposed (and Why Much of the Legal Profession is a Scam)

On the surface, perhaps a change in ABA standards makes some amount of sense, as it may serve to put demand back in balance in a glutted market. However, it is, upon closer examination, a kind of backwards logic, and perhaps a narrow minded approach; it could take years and fails to address the big picture. In essence, it serves only as a band aid, and may in fact serve only to make the problem worse.

However, deregulation may be a solution that sees the forest for the trees. According to the wsj.com article, the main benefit of deregulation, overall, is lower prices for customers and an increase in jobs. So, how can deregulation be accomplished? By removing barriers to entry to the legal profession - and this includes barriers regarding who, and how, legal services are provided.

Currently, the industry, as it is regulated by the ABA ''artificially restricts 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,'' per the wsj.com article.

This restriction on licensing, per the wsj.com article, is to ensure high levels of integrity and competency in the profession, which makes sense, but only to a point. As the article points out in comparison, physicians' assistants now abound in the medical profession, and successfully diagnose and treat less serious health issues. The same opportunity should exist in the legal field.

For example, online legal service companies, such as LegalZoom and Rocket Lawyer are becoming more the norm for 'routine' legal needs. These companies are the equivalent of buying clothing at big box stores like Sam's or Costco, versus Neiman Marcus. In other words, not every legal need requires a high priced lawyer - although high priced lawyers have their place, and always will. Clearly, these types of companies have experienced a great deal of success in the market, and have done so, sometimes with the support of staff who possess law degrees, and sometimes not. The type of competition companies like these present is the very thing upon which capitalism was built, and serves to drive down prices, and spurn innovation.

The wsj.com article points to the fact that history has proven deregulation an effective method of stimulation time and again, as in the airline industry, and uses Southwest as an example. Prior to being deregulated, many large airlines flew routes at less than full capacity. Deregulation of the airline industry allowed smaller carriers like Southwest to offer service on any route, which resulted in a decrease in fares, fuller planes and more airline jobs.

In summary, the quality of resulting products and services has not decreased as a result of deregulation, as critics purport, but has in fact improved, as well as flourished. Additionally, the article encourages entry by other industries that would be well suited to serving clients with legal needs, so as to beget further innovation and competition, such as management consulting firms, accounting firms, insurance agencies, and investment banks.

Another benefit of deregulating the legal profession would ultimately be an expanded selection of choices for those interested in a legal career. Perhaps students could be educated online or through vocational schools, or serve apprenticeships. The cost for this type of education would be significantly less, as would the time investment - the two things that make getting a legal education in the traditional manner a huge risk these days; many students are graduating with debts in the upwards of $150,000, and that may be in addition to undergraduate debts.

Overall, deregulation of the legal industry, while not a magic wand, would seem to offer a more timely remedy to the currently troubled job market, as well as provide opportunities for long term growth and health for the entire industry.