The Failure of the Lawyers’ Cartel

In some ways, I think the most interesting part of Annie Lowrey’s article on the apparent oversupply of people with JDs is the aside about medical schools:

The demand for lawyers has fallen off a cliff, both due to the short-term crisis of the recession and long-term changes to the industry, and is only starting to rebound. The lawyers that do have jobs are making less than they used to. At the same time, universities seeking revenue have tacked on law schools, minting more lawyers every year.

That has caused some concern among lawyers who think the accrediting organization, the American Bar Association, is doing the profession a disservice by approving so many new schools. (Contrast that with medical schools. They come with much higher startup costs and tend not to be money-makers. Relatively few students get medical degrees every year, and demand far outstrips supply.)

Whenever I talk to people who are considering applying to law school, I always advise them not to do it. Just keep working or go to business school unless you have some very specific passion for lawyering. The days when acquiring a JD as a kind of generic life plan made sense are over.

So that’s advice. But from a social point of view, the fact that the lawyers’ cartel has failed to erect giant barriers to entry is a good thing. Falling real wages for lawyers is an egalitarian, pro-growth measure. And lawyers still earn above-average incomes — it’s not like people are being forced into penury. These are trends that are making legal services more affordable for productive businesses and improving the quality of legal talent the public sector is able to attract without adding to taxpayers’ burden.

Contrast this, as Lowrey urges us to, with the medical school situation. Here the American Medical Association is succeeding where the ABA fails. There’s no evidence that American doctors are wildly more competent than Finnish doctors but they sure do get paid more. Indeed, they’re paid much more than doctors anyplace else in the world. That contributes to high health care costs, and low supply.