September 22, 2010
Economics Department
Making Lawyers Pay
There's one bad policy pattern that politicians tend to repeat over and over, and according to Nathan Koppel at the Wall Street Journal, this time they're inflicting it on lawyers:
The Mississippi Supreme Court is considering a proposed rule to require lawyers in the state to provide at least 20 hours of pro bono work.
The rule has been proposed to try to help the thousands of low-income residents in the state who can not afford a lawyer in civil matters, according to this article in The Clarion-Ledger.
This is one of those proposals that seems at first like common sense: Lawyers are empowered by the state to do things that allow them to make a lot of money, therefore they should be required to give some of that back to the community. As is often the case, however, common sense is a poor guide.
The key to understanding why this is a bad proposal is to recognize that forcing someone to work is economically almost the same as paying them a free-market wage to do the work while at the same time raising their taxes by exactly enough to cover their wages. In other words, a proposal to force lawyers to provide legal services to poor people is logically nearly equivalent to two simpler proposals: (1) The indigent should receive free legal services, and (2) lawyers should pay higher taxes.
Now, both of those policy proposals might be good ideas. What I object to is the unnecessary linkage of these two unrelated policy proposals. If it's a good idea for the government to provide more free legal services to poor people, then it doesn't matter where the money comes from. And if there's a good reason lawyers should pay a larger-than-currently-normal share of taxes, then it doesn't matter how the money is used.
The sensible way to provide legal services to poor people is to pay for them out of the public treasury. Then you let the ways-and-means folks figure out where to get the money. Maybe they can cut spending somewhere else, or maybe they can raise taxes. Heck, maybe they can even raise the cost of a law license. But these are two separate decisions. Linking them is a purely political maneuver.
(Since it's the Mississippi Supreme Court that's doing this -- and make no mistake, you don't get to be a judge without politics -- there's also the fact that the courts don't have the power to levy taxes. That's a pretty good reason for them to want to combine these issues, and also a pretty good reason why they shouldn't be allowed to do so.)
I hedged above, saying this proposal was "almost the same" and "nearly equivalent" to the pair of simpler proposals because there's one crucial difference: The judges' proposal requires payment in kind. Rather than simply paying additional tax money equivalent to 20 hours of billable time, the lawyers are required to work it off.
Scott Greenfield gives a wonderful explanation of why this is stupid:
The problem, unfortunately, is that mandatory pro bono doesn't necessarily match up well with the public need. Let's say a civil litigator takes on, pro bono, representation of a poor litigant. The 20 hour obligation won't get the litigant to resolution, but could get him in deep enough to make his life a serious mess. It could get the lawyer to go the quickie route rather than litigation, knowing that his 20 hours will end long before anything can be accomplished. It could leave the indigent defendant worse off than he started.
Then there are transactional and criminal lawyers being asked to provide civil representation. They may have some knowledge of diverse areas of law, but sufficient to provide meaningful representation? Hey, it's not like these are paying clients. So what if we're nothing more than warm bodies in the well? Is this really what the Mississippi Supreme Court has in mind?
The core problems with forced pro bono is the disconnect between the lawyers' competencies and the clients' needs and the number of hours mandated versus the number of hours required to see a matter to completion. It's the difference between providing real services and the appearance of services. Lawyers aren't fungible, and one size does not fit all.
That's exactly right. Lawyers aren't fungible. But you know what is fungible? Money. In fact, solving problems like this is why money was invented.
This sort of taxation-in-kind policy is the public policy version of a barter system, and it has all the same coordination problems. In a barter system, if you want to buy a good or service, you have to find someone who has that good or service to sell, and who also wants something you have to sell. If you're coming to ye olde towne square looking to trade candles for horseshoes, you better hope that there's a blacksmith who needs candles. If he's already got all the candles he needs -- which may be none at all -- then your candles are worthless to him, and he'll probably hang on to his horseshoes until he can get something better for them.
The Mississippi lawyer plan is like that, only worse, because the lawyers are being forced to sell services they may not know how to provide to people who may not really want them. It's as if the king declared that horseshoes could only be bought with candles and nothing else. If you're a chicken farmer, you're going to have to waste a lot of time making some pretty crappy candles in order to get your horseshoes.
Actually, the Mississippi plan is even worse than that, because if you're a chicken farmer looking to buy horseshoes from people who can only take candles in trade, you can at least go find a candlemaker and trade your chickens for his candles.
This suggests an improvement to the Mississippi plan that might make it workable: Establish a system of tradable pro-bono credits. I'm sure there are plenty of mergers-and-acquisitions lawyers who would happily pay a few thousand dollars a year for somebody else to fulfill their pro-bono work for them. And I'm equally sure there are plenty of lawyers who would love to spend their whole year helping low-income people if they could pay for it by selling their excess pro-bono credits to the mergers-and-acquisitions lawyers.
This would do everything the Mississippi plan would do -- the poor people would get their legal assistance, and the lawyers would be paying for it, just as the proposal's authors seem to want -- but it would provide better service, and probably at a more reasonable cost to the lawyers. The original policy idea is so bad that this really is a case where a few changes can be a win for everybody.
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