The Paradox of Lawyer Supply

Abundant commentary on the Gilded Age

As followers of the Discourse likely know, Ezra Klein and Derek Thompson have published a new book, Abundance. Although I have not yet read the book, I am broadly sympathetic to Klein & Thompson's argument and have a good sense of what it's about from reading abundance-adjacent writers for awhile. If you want the synopsis, this New York Times video essay from Klein himself is a good place to start; at the most general level, Klein and Thompson are calling for Democrats to embrace a "supply-side" liberalism ("a liberalism that builds").

As I've gestured at here and here, what American lawyers euphemistically call an "access to justice" problem can be modeled as just this kind of scarcity, or supply-side, problem. The competitive market for lawyers is highly regulated, demand for lawyers outstrips supply, and many average people go without legal services.

So, no, I'm not turning this into a national politics blog, but I am interested in what Klein says in his essay here on scarcity:

The answer to a politics of scarcity is a politics of abundance, a politics that asks what it is that people really need and then organizes government to make sure there is enough of it. That doesn’t lend itself to the childishly simple divides that have so deformed our politics. Sometimes government has to get out of the way, as in housing. Sometimes it has to take a central role, creating markets or organizing resources for risky technologies that do not yet exist.

Abundance reorients politics around a fresh provocation: Can we solve our problems with supply? Valuable questions bloom from this deceptively simple prompt. If there are not enough homes, can we make more? If not, why not? If there is not enough clean energy, can we make more? If not, why not? If the government is repeatedly failing to complete major projects on time and on budget, then what is going wrong, and how do we fix it? If we need new technologies to solve our important problems, how do we pull these inventions from the future and distribute them in the present?

Discourse about the book has gestured at this issue. In his contribution to a Niskanen Center symposium on the "law of abundance," David Schleicher, a law professor at Yale, writes:

[T]his [state] capacity has been hobbled, not only by a failure to hire enough civil servants but also by the procedural limits on the energy of government planners.

One could go through many other issues and largely say the same thing. For instance, occupational licensing protects the interests of lawyers and doctors against the more numerous but less concentrated interests of consumers and people who need medical services.

On the other hand, lawyers and other white-collar professionals (notably management consultants) are stock villains in the world of abundance. In his essay, Klein's focuses on the failure to build high-speed rail in California as an exemplar of a failed liberal project that could use a fresh coat of Abundance. Although lawyers are not named specifically, he attributes the failure of the project to, in essence, an excess of legalism that driven by either litigation or the threat of litigation.

Other examples abound. Jennifer Pahlka's (excellent) book, Recoding America—about why government technology is so bad—is full of anecdotes about well-meaning government technologists whose commitment to the users is thwarted by lawyers concerned about lawsuits and full of pedantic interpretations of Congressional requirements. At the Transit Costs Project, an NYU effort to study why it costs so much to build trains in America, the authors of the final report found that "soft" costs related to procurement, namely the costs associated with hiring white-collar professionals, explained why American transit projects are so expensive relative to pretty much every other developed country.

Notably, it's not the lawsuits, but the the threat of them that creates a ready market for lawyers. In another essay for the Niskanen symposium, Dan Davies, the author of a recent book called The Unaccountability Machine (more to come on that), writes that Anglophone countries are uniquely prone to NIMBYism because of a "quasi-judicial" planning system (rooted in the common law approach) that is "one of [these countries] great sources of economic strength—the vibrant and active legal and professional services sector."

If you read the websites of law firms and environmental consultancies, you will find numerous white papers, case reports and opinion pieces, all setting out different kinds of problems and objections to infrastructure planning projects. But it quickly becomes obvious that they are not aimed at protestors or environmental groups. They are “content marketing,” for firms that work primarily in a business-to-business market. And the main customers of the industry are the developers of infrastructure projects themselves.

We have a paradox. The average person facing eviction is overwhelmingly unlikely to have a lawyer represent them in their case while the average public servant cannot get coffee without bumping into one.¹

The occupational licensing scheme Schleicher alludes to is the "rules of professional conduct." Although euphemistically known as "ethics" rules, I'd argue they are in fact a broader set of rules that govern the economics of their profession. Because lawyers are licensed by state agencies, usually controlled by the state supreme court, each state has its own rules that govern lawyers who practice in their state. But, in practice, most states follow the model rules set by the American Bar Association.

The place to start when thinking about supply is the restriction on the "unauthorized practice of law," which really describes a mix of scenarios governed by different rules. For our purposes, we'll define "unauthorized practice" as prohibitions on:

1. A layperson doing the work of a lawyer;

2. A lawyer sharing fees with a nonlawyer for legal work.

The first scenario is generally prohibited under ABA Model Rule 5.5: You need to have certain credentials to "practice law" in the first place. The second is restricted through fee-sharing prohibitions at Model Rule 5.4: In general, a lawyer cannot share money they earn through practicing law, either by paying a non-lawyer with fees they collect or allowing an investor to take equity in their law practice.

For now, I'm going to heed Davies' advice and "start[] from a position of respect for the problem." Which means I'm talking about the Gilded Age.

The Age of (Lawyer) Abundance

Probably because its presidents were unremarkable (and the single good one was assassinated for no good reason), no one ever talks much about the Gilded Age, the period in American history from (roughly speaking) the end of the Civil War to the end of the 19th century. It's fashionable recently to talk about the present as a "second Gilded Age," which is probably not wrong. But viewing the Gilded Age in only this way understates its importance in American history.

Indulging in some armchair history, I'd argue that it's the period when America became "America" in a form that would be recognizable to us today. The Gilded Age marks the rise of industry, commerce, in corporations in a form that would be fairly recognizable to us today. And the related urbanization and growth in living standards also marked the rise of many cultural and social customs like "paying money to watch professional sports" that are entirely normal today but would be incomprehensible to an American who came to visit from 1840.

One of the things I like about living in Chicago is that, more than anywhere else, it's a living monument to the Gilded Age. In 1850, 30,000 people lived here and by 1900, the population was 1.6 million and had convincingly overtaken Philadelphia as the "second city." Thus, I recently had lunch with a friend who is a member at the Union League Club in Chicago, an outgrowth of the "Union League," founded during the Civil War to promote the cause of the Union and Abraham Lincoln. In the Gilded Age, it continued its support of the Union cause while morphing into an elite social club for men of status who also earnestly cared about public affairs and the civic good. To this day, the city is full of institutions like the Union League Club that reflect the heady ambition of a time when the city was adding, on average, 25,000 people a year. The modern bar association is a product of, literally, this same context.

The Rules of Professional Conduct were not handed to us from the Founding. Although lawyers were informally regulated during the colonial era, for much of the first part of the 18th century (influenced by the populism of Andrew Jackson) until 1870, states placed very few restrictions on the practice of law.

Per Barlow Christensen, in his 1980 history of unauthorized practice restrictions:

Even in the older states, where the standards had been highest, educational requirements for admission to practice were substantially eliminated. Thus, by 1836, legislation in Massachusetts required the courts to admit applicants of good moral character who had read law for three years in an attorney's office and permitted them to admit applicants without any previous training. Legislation in New Hampshire in 1842 provided that every citizen over 21 years of age might practice law, without any other qualifications. In 1843 legislation opened up the practice of law in Maine to every citizen, and a similar Wisconsin law of 1848 gave the privilege of law practice to every resident. A provision of the 1851 Indiana constitution extended to every voter the privilege of practicing law. As a practical matter, then, by the time of the Civil War there were no significant restrictions on admission to law practice.

After the Civil War, things changed; Christensen describes 1870 to 1920 as the "seminal period" in the legal profession's campaign to prevent the practice of law by nonlawyers. As law professor Laurel Rigertas writes in her more recent history of this exact period:

After the Civil War, corruption permeated New York City, the nation's financial capital. The city was under the corrupt influence of the Tweed Ring, a group that had obtained the power to appoint judges who would then protect it. "As the collaboration between unprincipled entrepreneurs and corrupt lawyers and judges became more conspicuous, the legal profession was once more in disgrace." In 1869, The New York Times called on lawyers to break their "guilty silence," reawaken their "public spirit," and "help us back to a better state of things." From this call came the organization of the New York City Bar Association on February 1, 1870—the first modern bar association. Two hundred thirty-five of the four thousand lawyers in New York formed the organization to "sustain the [legal] profession in its proper position in the community, and thereby enable it in many ways to promote the interests of the public."

Not to be outdone, Chicago formed its own bar association in 1874, as did nearly every other major northern city in the 1870s. And by end of the 1870s, the American Bar Association had formed.

Despite the lofty rhetoric, the the parallel formation of these associations is more intuitively explained by the fact that commerce was becoming more complex. By the 1870s, cities were too big to sustain an informal system of regulating the profession. More formal information channels were necessary for business, especially for the most successful lawyers who may have succeeded previously on their reputation alone.

Thus, one of the first tasks of the New York and Chicago bar associations was to develop lists of licensed attorneys. In New York, such a list did not exist, so the New York bar lobbied the legislature to create one. In Chicago, the Illinois Supreme Court did maintain a roll of attorneys, and the Chicago Bar Association set out to enforce disciplinary proceedings against attorneys who were not on that list but were in Sullivan's Law Dictionary, a private directory which began publishing in 1876. (The emergence of a private, consumer-facing directory like Sullivan's, created at the same time as the bar associations, is further evidence of the commercial demand for authoritative information about who was a good lawyer.)

The same phenomenon of urbanization that increased the complexity of lawyer marketing also increased the complexity of commerce in general, which necessitated the rise of entities to manage that complexity—namely, the corporation. The "practice" of law thus evolved, as these corporations sought advice for managing the legal affairs of their ever-more complex entities. While this represented a potential business opportunity for lawyers, that business could not be earned passively.

As Christensen writes:

Another highly significant group of cases that appeared during this period were those dealing with the practice of law by corporations. As has been noted, the rise of the modern business corporation and its activities in fields that lawyers had regarded as their exclusive province, or which they thought ought to be their exclusive province, was probably the source of much of the unauthorized practice concern of the period. This concern generated much of the unauthorized practice literature of the time, and as mentioned above, it produced the first legislation prohibiting law practice by corporations. It also produced some significant litigation. Generally, these cases had to do with business corporations engaged in commercial activities closely related to the practice of law, and the issue, typically, was whether certain specific activities of these corporations did in fact constitute the practice of law. The collection agency cases, for example, held corporations to be unlawfully practicing law when, in addition to their legitimate collection efforts, they offered their creditor-clients the service of collection through lawsuits or free legal advice. Similarly, trust companies were held to be practicing law illegally when they offered their customers will-drafting services, even when the will was in fact drafted by a private lawyer retained by the trust company. The activities of a business corporation in prosecuting and adjusting claims arising out of condemnation proceedings were also held to be the unlawful practice of law by a corporation.

Whatever challenges society faced during the Gilded Age, scarcity was clearly not one of them. As illustrated by the efforts of the bar associations, lawyers—like all other commercial actors of the era—were fighting for the biggest piece of an already abundant pie. Our present circumstance shows that the bar associations were extraordinarily successful at achieving what they set out to do, which was to secure economic advantage for the profession and exclude the competition through regulation.

1. Anecdotally, I’m given to understand that the workers in large companies face similar office hazards.