Monday, October 11, 2010

Legal services and the fox in the henhouse

The disgrace of the legal services market � Truth on the Market:

“You can hardly find a lawyer who charges less than $150 per hour, which is out of reach for most people. The U.S. is unusual in how restrictive the rules are on who can give you assistance in court. Many of the lawyer-less are too rich for legal aid.” Indeed, the head of the Legal Aid Society in New York City says it “can only help one out of every nine people who solicit our help.”

Even the middle class struggles to afford a lawyer, even for simple transactions and disputes.  I have never met a lawyer who only charges $150 per hour.  Perhaps I am talking to the wrong people.

The July story focuses on a 70-year-old Florida non-lawyer retiree who helped a lawyer-less church friend petition for workers’ compensation benefits by typing legal documents and answering questions in court. The Florida Bar charged the retiree with engaging in the unlicensed practice of law and sought a $1,000 fine. Its counsel says the bar needs “to protect the public from incompetent or unethical representation.” The story concludes by noting that the retiree is defending herself from the unauthorized-practice charges without a lawyer.

As a non-lawyer, it is difficult to predict the restrictions on licensing.  I'm sure the church participants had no idea they were breaking the law.  More illuminating, 8 out 10 lay people in all likelihood would draw the line much differently than reality.

The solution is eliminating the lawyer licensing bottleneck and enabling the development of a legal information market that can serve the millions of people who now have little recourse but self-help. Such a market would give the middle and lower-middle class ready access to paralegals trained to handle lower-level cases and expanded legal offerings of legal software and forms.

The restrictive licensing bottleneck is not the only issue with the legal market, although constraining supply is an old and tired ploy to control markets.

The largest issue is the law itself.

Consider the absurdity of the current state of affairs.  To argue virtually any dispute in a court of law, citizens are at at distinct disadvantage, not because they have no sense of fairness or an ability to communicate, but because the rules are so complex!   It is a warren by now, with no recourse, no pathway for renewal and simplification. The average citizen could not hope to understand the law, much less how to plead their case. 

Markets can not function with byzantine rules. There are two reasons.  First, nuanced and over-complex rules kill participation in the market.  Its vagary dissuades investment and acts as a barrier to entry.  Imagine a football game where most viewers and players could not understand the rules.  No one would watch.  Fewer would play.

The cost of the overhead (lawyer fees) as described in the article is really a symptom of the underlying issue of the over-written laws themselves.

Second, over-built rules take the play off the field.  The game is now won and lost not on the merits, but in the back room. The rules of the game, not the game, become the fight. The parasite takes over the host. The overhead becomes the most important person in the room.

The law is purposed to uphold the principles and mores under which individuals can self-actualize and conduct their affairs in the manner in which suits them in a fair and just society. We wish to keep our laws, like our morality, very simple, and allow the complexity to enter the game itself, along with our psychology or interaction between the participants.

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