The Government Shouldn’t Decide Who May Practice Law

Occupational licensure is a species of political favoritism, invariably enacted to protect incumbent practitioners by restricting competition. People can usually see that when it comes to everyday service work such as hair styling or pool cleaning. The “we have to protect the consumer” rationale is plainly bogus in such instances.

But what about the legal profession?

State governments license lawyers and enforce prohibitions against anyone who is not licensed from doing anything that comes near the vague concept of “the practice of law.” You can’t become a licensed attorney unless you pass the bar exam, which is very hard and that keeps out people who don’t know the law. The organized bar claims that it only wants to protect consumers from incompetence and isn’t at all concerned about the loss of billable hours if unlicensed people were allowed to intrude on its turf.

Don’t believe it. The bar is acting in classic guild style, using the law to limit competition for the betterment of its members.

I have been making the case against mandatory government licensing of lawyers for a long time. In 1997, I wrote an article for Regulation magazine entitled “Lawyer Fees Too High?” where I argued that consumers would benefit from a liberalization of entry into the market for legal services.

Every so often, someone with serious credentials in the legal academy fires a shot against the organized bar’s anti-competitive stance.  Yale law professor Stephen Carter recently stirred up the legal profession with a Bloomberg article where he argued that the Law School Admission Test ought to be dropped, and that the same reasoning applies to the bar exam.

Carter offers the view that the bar’s entry restrictions “function as classic barriers to entry, easily manipulated to keep the supply of lawyers low.” He contends that the bar exam serves no public purpose, and has the bad side effect of a decidedly disparate impact on minority takers. He thinks that the bar exam ought to be optional.

Carter’s article spurred a response from Professor Ilya Somin of the Antonin Scalia Law School. He has also advocated the elimination of the bar exam as a needless barrier to entry into the legal profession.

Somin writes that he would “support a plan under which the bar authorities would follow the medical profession in requiring a certification process before members can market themselves as specialists in particular fields. But there’s no persuasive justification for forcing graduates of accredited law schools to jump through yet another hoop before they’re allowed to practice their trade.”

Far from proving that you know “the law” (which is so vast that nobody knows more than a tiny slice of it), all that passing the bar exam proves is that you’re good at memorizing a lot of information. As Somin says, “the bar exam is not a good indicator of the test taker’s competence in handling legal issues. Most of the thousands of petty rules tested are ones most lawyers never actually use when they practice law.”

That’s true—and also true about law school itself. To accumulate enough credits to graduate, a student must pass enough courses where the key is learning lots of rules that they can then forget because whatever field of practice they go into is not going to require that knowledge.

In fact, it’s possible for an individual to provide perfectly competent legal services without ever having stepped foot in a law school. Consider the case of Robin Smith, who began a business called The People’s Paralegal in Oregon. Her firm stated that they were not attorneys, but were able to help people with legal documents. No customer of the firm complained about their services—but the State Bar of Oregon did. It sued Smith for violating the state’s unauthorized practice of law statute and won. When bar organizations find people competing with their members, they come after them with the ferocity of junkyard dogs.

Legal licensure wouldn’t be a matter of concern if it were not backed up with the power to exclude and punish anyone who dares to compete with the guild. Lower-cost providers must be stopped. That’s the function of unauthorized practice of law statutes.

Bar organizations claim that you can’t really be capable of offering competent legal services unless you’ve proven your knowledge by passing the bar exam. But as Professors Carter and Somin attest, the bar exam doesn’t prove that you know everything, just that you memorized enough stuff to pass it back when you took it.  A paralegal or other non-licensed individual has a very strong incentive to learn what he or she needs to know to establish a good reputation in the field. That’s precisely the same for licensed attorneys.  They don’t rely on bits of knowledge they learned in order to pass the bar exam; they rely on current information about their particular practice area.

What the bar’s self-interested crusade for “perfect” legal representation does is to make legal services unaffordable to many Americans. In fact, the American Bar Association admits as much. In this release, it praises the “Justice Gap” report of the Legal Services Corporation (LSC), showing that millions of lower income Americans are unable to afford legal assistance when they need it.

But the ABA is in favor of closing that gap by more government-subsidized legal help (the mission of the LSC), not in opening up the market to competition so that people can offer their services even though they haven’t spent three years and huge amounts of money on law school, and then more time and money on passing the bar exam. The entry barriers that the legal establishment has erected costs so much that most lawyers can’t afford to do low-fee work from poor people.

Instead of further burdening taxpayers, it would be far better to deregulate the legal profession and allow individuals with less costly education and training to do work they’re capable of.

In the market for accounting services, no law says that  only Certified Public Accountants can offer to do accounting-related work. A small business that just needs basic bookkeeping work can contract with anyone who knows such work, quite probably someone who has never thought about trying to master all the material covered on the CPA exam. And accountants have every reason to take only work that’s within their capabilities, because doing a bad job on work that’s outside of their skill set is apt to lead to bad reviews and a loss of reputation.

Without attorney licensure and unauthorized practice prohibitions, the market for legal services would work just as well as the market for accounting work.  Those barriers do nothing to ensure competence, but merely drive up the cost of being allowed into the profession.

If we could tear down the barriers to entry and have a free market in legal services, legal education would change greatly.

Very few students would think that three years of study was optimal, since many of the courses they now have to take are ones that they’ll never need to know anything about. Many would probably just take a one-year program covering the standard “nuts and bolts” curriculum: property, torts, contracts, civil procedure, criminal law, and constitutional law. A happy consequence of that would be that a large number of law professors whose teaching and writing consists only of left-wing advocacy would have to look for other jobs.

Exactly what training for legal work would be like in a free market is impossible to say, because it would be governed by competition and discovery, not by the desires of an interest group for protection.

Most importantly, there would no longer be a “justice gap.” The market for legal services would expand to cover the needs of poor people, just as markets for other goods and services do.

But what are the chances of deregulation in the legal profession?

Courts have sometimes struck down other kinds of occupational licensure on the grounds that the laws do not serve the public interest, but instead deprive people of the right to pursue a livelihood. And sometimes, state legislatures have repealed or modified such laws. (The organization that has been most active in fighting occupational licensing is the Institute for Justice; you can read about their cases here.) 

So far, however, no court has ruled against licensure in the legal profession. That’s not surprising, since judges are almost always pillars of the legal establishment, steeped in the belief that only “real” lawyers should be allowed to practice law.

The best hope for change is through legislation. That could be done by passing a bill making it legal for unlicensed people to provide legal services, or just by amending the unauthorized practice statute so that only aggrieved consumers could bring an action—not the bar.

Lawyers undoubtedly have a lot of legislative clout, but it might be possible for a coalition of free market advocates and leftists who actually want to help their poor constituents to prevail. It would be lovely to watch the bar try to defend its monopoly.