A Free Market in Legal Services

MB writes in to ask what I think of bar exams, and the answer is: not much. More generally, I think we ought to have a much freer market in legal services. As Dean Baker memorably put it “The ‘free-trade’ crew want to have a single set of standards for all forms of merchandise traded all over the world, but it has apparently escaped their attention that a lawyer from New York can’t practice across the river in New Jersey.”

It hasn’t escaped my attention! I just think we shouldn’t cling to this as a hypocrisy talking point. If someone in New Jersey wants to hire a New York lawyer to represent him in some matter, that should be between them. If a bunch of New Jersey lawyers want to form a membership organization called the New Jersey Bar Association and give people a test that you need to pass in order to call yourself a New Jersey Bar Association Certified Lawyer more power to them. But for them to get the project off the ground, they’d have to do something to turn the test into some kind of reliable indicator of quality. If you look at actual behavior of law firms, they don’t seem to indicate current bar exams in this light — you don’t need to pass the bar to get hired by a major firm out of law school. Similarly, I get that New Jersey and New York have different laws. But New York has different laws in 2010 than it had in 1990 and yet there’s no requirement that you need to retake the bar exam to check if you’ve been up to speed.

In general the failure to re-test incumbents is a good sign point that you’re looking at an arbitrary barrier to entry rather than a real indicator of quality. I’m not sure how big a deal this particular brand of licensing abuse actually is since I don’t get the sense that inadequate supply of lawyers is driving any particularly pressing social problems. A lot of lower-end legal services does, however, seem like it would be amenable to outsourcing to foreign clerical workers and I understand that there’s already a trend in this direction.