First, Let's Deregulate; G. Leef

Occupational licensure is the technique most often used by professional groups that wish to restrict competition. Since the legal profession has alwayshad a uniquelypowerful position to influence the law, it is not surpris ing that it has been one of the most success ful at the game of cartelization. Lawyershave maintained that their learned profession is somehow above ordinary marketplace com petition, which is fine for plumbers and dry Mr. Leef, president of Patrick Henry Associates: Liberty Consultants in East Lansing, Michigan, is book review editor of The Freeman, and also this month's guest editor. He earned a J.D. from Duke UniversityLaw School in 1977. cleaners, but undignified in so cerebral a calling as theirs. To suppress the indignity of competition, the legal profession erected internal barriers against it-mandatory fee schedules and prohibitions against advertising were long a part of the bar's canons of "professional ethics"-and obtained protec tion against external competition from state legislatures in the form of "Unauthorized Practice of Law" statutes. These statutes, in effect in every state except Arizona, make it illegal for anyone who is not a licensed attorney to engage in the "practice of law,"

thus protecting lawyers against competition from people who have some legal knowledge, but aren't licensed. For decades, this scheme worked beauti fully-for the lawyers, anyway. But the legal profession's fortress has been crumbling since the 1970s, when the Supreme Court ruled against both mandatory fee schedules and advertising prohibitions on antitrust grounds. Only the unauthorized practice of law (UPL) statutes still stand. The question I wish to explore here is whether there is any reason to retain these laws. I conclude, both on eco nomic and moral grounds, that there is not. Protecting the Public? Supposedly, UPL statutes are necessary in order to protect the public against incompe tent provision of legal services. The assump tion upon which this rests is that no person 339 340 THE FREEMAN • JUNE 1997 who has not successfullycompleted the three years of law school and passed the bar exam (the obligatory rite of passage for aspiring attorneys) can be competent to assist another person with a legal problem. Or, to put it another way, the law assumes that the only way to acquire the knowledge necessary to help others with legal problems is by going through the very costly, time-consuming process of earning enough course credits in law school and then memorizing enough of the smattering of legal knowledge that is tested on bar exams to pass. Is this assumption true?

No, it is not true. A law school education is very broad, but shallow. A law graduate has some knowledge about quite a few, but by no means all, fields of the law, but usually is not ready to handle cases on his own. After entering legal practice, he will develop a specialty. The broad study of the law under taken in law school is not necessarily a waste, but neither is it indispensable. People can learn as much about the law outside of law school as they can in one. Throughout much of our history, most lawyerslearned the law as apprentices rather than as students; gradua tion from law school has been obligatory in most states only since the 1930s. Some aspects of the law are exceedingly complex and require many years of study to master-the tax code for instance. Many accountants, however, are just as conversant with the IRS code as are the best lawyers and they are more conversant than lawyerswhose expertise lies elsewhere. But there are other aspects of the law that are not particularly hard to learn. Drawing up a will,for example, is not necessarily difficult and can be compe tently done by someone who has invested less than three years' training.

By requiring that legal services be per formed by (or at least "overseen" by) licensed attorneys, the price of those services is driven up. There would be a larger supply of people willing to provide relatively simple legal ser vices if UPL statutes did not arbitrarily set such high standards for entry into the field. A larger supply of practitioners would mean lower prices and more options for consumers. Studies done by the American Bar Association show that significant numbers of people, mainly the poor, are priced out of the market for legal help. That would occur less fre quently if we didn't have UPL statutes. But if we didn't have these laws, wouldn't that lead to a lot of incompetent, even dis honest, legal practitioners preying upon the poor? Might that not be even worse than getting no help at all? This counterargument seems to have some plausibility, but both theory and history collapse it.

Poor people are seldom foolish shoppers. They, like nearly all humans, try to protect themselves against bad contracting decisions by acquiring information about the other party before parting with any of their money. Reputation, references, location, advertis ing-these and other sources of information about a practitioner's honesty and reliability help the consumer to filter out questionable service providers. But the self-interest of the consumer is not the only filter at work here. The self-interest of the provider is also important. It is very much in the interest of providers of services that they not fail at their tasks and leave dissatisfied, angry, even litigious clients in their wake. To enter into a field and then fail to live up to expectations is very costly. You are likely to lose what you have invested and harm your future business prospects if you undertake work that you are not capable of doing. Markets, therefore, do not just filter out incompetents after they have proven themselves so, but to a great extent also filter them out prospectively.So when you put these two self-interest filters in place, as the market does, you would expect to find very few instances of consumer harm due to incompe tence.

Experience confirms this. In Arizona, which has had no UPL statute since 1986, there is a robust market for legal services. People who have (or think they have) simple legal needs can and do patronize legal clinics staffed by non-lawyers who know how to do certain kinds of legal work. They charge the market price, which is often significantly less than licensed attorneys charge for the same service. There is no indication that consumers who obtain help from non-lawyers FIRST, LET'S DEREGULATE ALL THE LAWYERS 341 are more dissatisfied with the service they receive than are consumers who deal with lawyers. UPL statutes, the Arizona experi ence demonstrates, do not protect consumers; they simply take away from them the option of contracting with people who would like to serve them but haven't gone through the steps necessary for licensure. You don't make people better offby taking options awayfrom them.

The question is not whether there will be competency standards or not. The question is how they will be established. UPL (and other occupational licensure statutes) work on the theory that government knows the optimal level of training. The market also sets stan dards, however. The standards of the market are not articulated as are legislated standards, but they are none the less real and far more useful than are arbitrary, politically driven standards. That is because the market's stan dards focus on results (can you do this to the satisfaction of customers?) whereas govern ment standards focus on credentials(have you completed the required studies?). Attorney licensing evidently adds only to cost for con sumers, not to their protection against incom petence. If we allowed a free market in legal serv ices, would every transaction with an unli censed practitioner turn out satisfactorily?

No. That is an impossibly high standard, one not attained by licensed attorneys or anyone else. What we can conclude, however, is that most would turn out satisfactorily and that many people would be able to obtain legal assistance for a lower price than they would be able to under the market-restricting status quo. Pro Bono Work and Legal Subsidies Spokesmen for bar organizations readily admit that there is a problem with affordabil ity of legal services for poorer people, but rarely will they consider the solution of open ing the market up to individuals who haven't gone through the proving grounds of law school. Instead, they usually suggest remedy ing the problem by increasing pro bono work (i.e., work done by lawyers for free) and increasing governmental subsidies for legal services for the poor. Neither is a good solution. If a lawyerwants to donate some of his time to doing work for poor people, there is nothing wrong with that, but the poor would be much better served if they could shop in a free market and contract for what they need.

A practitioner with whom they contract is going to be more accountable and more motivated to do a good job than is a lawyer who is grudginglyputting in his pro bono time. He also will probably be more competent in that particular field. A paralegal who handles lots of landlord-tenant disputes, for example, is likelyto do better work than is, say, a patent lawyerwho remembers little if anything about this field of the law, if he ever learned about it at all. Government-subsidized legal services (such as the Legal Services Corporation) are both questionable and morally objectionable. Subsidizing legal services is an inferior solu tion because the funds are apt to be (and clearly have been) drained awayinto left-wing advocacy, but even if that weren't true and every dollar appropriated actually went to ward providing legal services for the poor, subsidies would still be objectionable. Tax payers should not be forced to give up any of their money to subsidize anything. It is an abuse of governmental power to take money from Citizen A to giveit, directly or indirectly, to Citizen B. Perhaps B does need legal assistance that he "can't afford" (read: re gards as less important than other potential uses of his money). But his "need" does not justify taking money away from Citizen A, who has needs of his own and is entitled to it.

Besides, once an entitlement to subsidized legal services is established, the level of "need" for them will rapidly rise. It is easy to see why the legal profession advocates legal subsidies! But, again, a free market would do poor people more good. Certification There is a noncoercive alternative to licen sure that is far superior, namely, certification.

342 THE FREEMAN • JUNE 1997 Certification is an informational device that helps consumers to find the practitioner they want more easily and also helps the practi tioner market his services. Consider, for ex ample, the designation "Certified Public Ac countant." It is not mandatory that people who wish to do accounting work first obtain C.P.A. status. There is no Unauthorized Prac tice of Accounting law. But people who desire to establish themselves as having attained a high degree of competence in the field of accounting voluntarilytake the C.P.A. exam. Earning this certification helps to differen tiate them from accountants with a lesser degree of (demonstrated) knowledge. People who have accounting needs that are simple don't bother callingon a C.P.A.,whose added expertise isn't worth the added cost of hiring him; those whose accounting needs are very complicated don't bother with non-C.P.A.s, who presumably aren't capable of handling the work.

Certification is widely used in other pro fessional fields, such as insurance and invest ment counseling, and the legal profession relies upon it once an individual has obtained his license. If a lawyer wants to be known as a good trial attorney, he can (but does not have to) seek certification from the National Board of Trial Advocacy. There is no law against Unauthorized Trial Practice and a bad trial lawyer can do a client at least as much harm as, for example, an unlicensed will drafter (usuallya lot more), but the profession relies on incentive-driven voluntary action by lawyers to obtain the highly specialized knowledge they need to capably represent clients in court. Why, then, can't we rely upon incentive-driven voluntary action by non lawyersto obtain the knowledge they need to assist their clients? If we repealed UPL statutes, a system of voluntary certificationwould almost undoubt edly arise. Membership in the bar might survivethe test of the market as a worthwhile certification, but so might others. Perhaps we would see phrases like "Certified by the National Association of Criminal Defense Advocates" by names in the yellow pages.

Consumers would be guided thereby in nar rowing their search for the right person to handle their problem, but they would always have the option of contracting withwhomever they wanted. Legal Education Repeal of UPL statutes would have a major impact on the market for legal education. These laws set in stone the existing mode of legal education, since you can't take the bar exam unless you first graduate from an "ap proved" law school. That requires three years of study covering a wide assortment of sub jects. There is no other way of becoming a lawyer, so the law schools have, as Judge Richard Posner has put it, a captive market. How do we know that three years of study is optimal as the minimum to enter the field of law? In the nineteenth century, before we had attorney licensing and law school accred itation, the number of years spent in law school ranged from zero to two. Many people who wanted to become lawyers learned the law as apprentices or read it on their own.

Some chose to attend law schools, but the course of study was in almost all instances, between one and two years. The American Bar Association's three-year standard is protected from the test of the marketplace. If we repealed the UPL statutes, people intending to enter the field would have to ask themselves, "Is the cost of an additional year (or semester) of study here worth it? Does the present value of my ex pected increase in earnings exceed my costs for this additional period of study, or not?" I surmise and am reasonably confident that many would answer no at some point short of three years. The law's insistence that individuals must put in three years of law school to become a licensed attorney almost certainly leads to an overinvestment in legal education that in creases both the cost of such education and, subsequently, the cost of hiring a licensed practitioner. It is impossible to say just what effects the market's discovery process would have if it were allowed to work in legal education, but it would certainly lead to a more efficient allocation of resources than currently.