Deregulation touted for growth, innovation in legal profession

To revitalize the legal profession, an economist and Yale law student are calling for an end to the rules and regulations that require bar exam passage, prevent nonlawyers from practicing and prohibit anyone who does not hold a J.D. degree from owning law firms.

Brookings Institution senior fellow Clifford Winston and Yale Law School student Quentin Karpilow have co-authored an article just published in the American Economic Review that advocates deregulation of law schools, lawyers and law firms as the way to spark growth and innovation in the profession.  

The article, “Should the U.S. Eliminate Entry Barriers to the Practice of Law? Perspectives Shaped by Industry Deregulation,” argues loosening the rules and requirements on the airline, trucking and telecommunications industries led to lower prices and more services that met consumer demand. Deregulation could have the same effect on the legal profession.

“It is time for the ABA to abolish its counterproductive regulations on legal practice and to encourage states to eliminate occupational licensing or conduct experiments by deregulating certain legal services,” the authors write. “The legal profession would then be able to begin its adjustment to deregulation which, based on previous industry experience, would produce social benefits that are considerably greater than expected.”

Primarily, the authors see deregulation as bringing competition into the legal market which would force the participants to be more responsive. They assert that removing the barriers to entry will impact everything in the profession from technology to paychecks.

“…(W)e argue that eliminating entry barriers in legal services would generate benefits that are similar to those resulting from network industry deregulation,” Winston and Karpilow write. “Specifically, prices would fall as competition from incumbent firms and new entrants intensifies; in the long run, competitive forces and operating freedom would incentivize firms to produce innovations that significantly benefit consumers and the broader economy.”

The authors maintain that limiting the rules and regulations would reduce the disparity of salaries between the private and public sectors. They contend deregulation would more closely align the paychecks of private practice attorneys and government lawyers and, therefore, balance the talent between the two sectors, improving “the quality of the government’s legal representation and advocacy for the public interest.”

Also, Winston and Karpilow push for opening the profession to individuals with “modest legal training.” In addition, law schools might then expand the curriculum to include more analytical skills that will prepare their students to interact better with individuals from business, economics and science disciplines.  

The authors dispute the oft-repeated argument that regulation ensures practicing lawyers are qualified and will not endanger their clients’ interests. Winston and Karpilow counter the bar exam is nothing but memorization and state bar associations do little to protect consumers against the incompetent practice of law. Deregulation will give more information about attorneys to consumers by increasing advertising and encouraging more “legal information services,” like Avvo.

“Importantly, in a deregulated environment, many providers of legal services would still attend and graduate from law school, sit for a bar examination, and obtain a certification for a particular specialty,” the authors write. “But consumers would no longer have a false sense of security about a lawyer’s quality based on those signals. Instead, greater flows of information would determine which signals indicate greater ability and better service, and would award lawyers accordingly.”