Epp, Charles R., “Let's Not Kill All the Lawyers,”Wall St. J., 9 July 1992, p. A13(“Epp, Wall St. J.”;). I responded in the Wall Street Journal with Magee, Stephen P., “How Many Lawyers Ruin an Economy?” (Letter to the Editor), Wall Street J., 24 Sept. p. A17. Epp's part in the interchange continues with Charles Epp, “Do Lawyers Impair Economic Growth?” 16 Law & Soc. Inquiry
585 (1992). This reply is a longer version of my Wall Street Journal response.
Magee, Stephen P., “The Optimum Number of Lawyers: Cross-national Estimates”(University of Texas at Austin, February 1992; presented at the universities of Chicago, Texas, and Wisconsin, and at the White House) (“Magee, ‘Working Paper’“).
Magee, Stephen P., The Invisible Foot and the Waste of Nations: Lawyers us. the US Economy (forthcoming).
Epp claims that he gets rid of my optimum lawyer curve by using Marc Galanter's data. He claims that his data set generates no observable relationship between Galanter's “corrected lawyers” and growth: see Epp's fig. 2. In Epp's Wall Street Journal attack on my finding that lawyers create both benefits and costs, he stated: “How could Mr. Magee draw those conclusions, while we [Epp and Galanter] found no such effects? The most likely reason is that his data on lawyers are simply wrong.” Later in the piece, he obliquely suggests that a less likely reason for the difference in my results and theirs is that lawyers did hurt growth in the period I studied (1960-85) but did not in the 1980s. He then says that neither explanation “supports Mr. Magee's case that our large legal profession saps the economy.” How can he conclude that there is no support for my finding that lawyers both help and hurt economies when he concedes that I could be right for the period 1960-88, but he is right for 1980-86? We just have different results.
For a comparison of the countries in the three samples, see appendix 2.
Marc Galanter, “The Debased Debate on Civil Justice,” Disputes Processing Research Working Paper, No. 10-10, Revised, May 1992, University of Wisconsin (“Galanter, ‘The Debased Debate’“).
My work on the economic effects of lawyers across US. states in my working paper (cited in note 2) which Epp cites was very preliminary. I would agree with him that my results were not particularly robust across states. I have fewer reservations about what Epp did in his state study than about his international work. There are problems with his state findings, which I will spell out when I have completed my own state study. For now, I will not challenge Epp's state lawyer results.
Barro, Robert J., “Economic Growth in a Cross Section of Countries,” 106 Q.J. Econ.
Brock, William A. & Magee, Stephen P., “The Invisible Foot and the Waste of Nations,” in David Colander, ed., Neoclassical Political Economy: The Economics of Rent See king and DUP Activities 170–85 (New York: Ballinger, 1984) (“Brock & Magee, ‘Invisible Foot’“).
In Epp's Wall Street Journal piece, he stated that Magee's view that lawyers had only negative effects had changed to the view that lawyers had both positive and negative effects only after Magee had been “proved wrong.” On this point, Epp was uninformed, inaccurate, and wrong.
Galanter, “The Debased Debate.”
I could not get the instrumental variable adjustment to work using Galanter's lawyer data.
I do not wish to suggest that the larger estimates of the benefits and costs of lawyers that I get are due to my data base. I suspect that it is almost all due to the instrumental variable correction. The reader should also note that my technique only measures net benefits of lawyers to the left of the optimum lawyer density and net costs to the right of this point.
Abel, Richard L. & Philip S. C. Lewis, eds., Lawyers in Society, vols. 1 & 2 (Berkeley: University of California Press, 1988) (“Abel & Lewis, Lawyers in Society”;).
Historically, national bar associations acted like monopolists, limiting entry into the profession to reduce the supply of legal services and keep fees high. But for the past several decades, lawyers have lost control over limiting entry because that function was relegated to law schools and law school output has exploded. Japan is one of the few countries in which growth in law school output has not been accompanied by a similar explosion in admissions to the bar. As country bar associations have lost control over supply restrictions, a number of them have turned to demand creation. This is a form of monopoly behavior that few professions can emulate. Demand creation reduces the erosion of legal fees caused by the rapid entry of lawyers. Demand creation occurs both in the legislative and in the judicial branches of government.
Examples of demand creation for lawyers are legislative bodies creating overly complex laws, complex regulations requiring the use of attorneys, judge shortages, and inefficient court procedures such as excessive discovery. When this happens, economic and social well-being are harmed. In a world in which lawyers can artificially generate their own demand, the usual forces of supply and demand do not protect us from too many lawyers. Why? Because our lawyer monopoly can create artificial demand at the stroke of a pen.
For an early contribution in this area, see Stigler, George J., “The Theory of Economic Regulation,” 2 Econ, Bell J. & Mgmt. Sci. 3 (1971).
A country with 42% lawyers in its lower house grows 0.5% slower per year than those at the 18-country average of 15% lawyers; within one decade, this decreases GDP by just under 5.5%, which is nearly $300 billion per year (1990 dollars).
Pedersen, Mogens N., “Lawyers in Politics: The Danish Folketing and United States Legislatures,” in Patterson, Samuel C. & Wahlke, John C. eds., Comparative Legislative Behavior: Frontiers of Research (New York: John Wiley, 1972) (“Pedersen, ‘Lawyers in Politics' “).
Olson, Mancur, The Logic of Collective Action (Cambridge, Mass.: Harvard University Press, 1965).
Magee, Stephen P., Brock, William A., & Leslie Young, “The Invisible Foot and the Waste of Nations: Lawyers as Negative Externalities,” in Black Hole Tarifis and Endogenous Policy Theory: Political Economy in General Equilibrium (New York: Cambridge University Press, 1989) (“Magee et al., Black Hole Tariffs”;).
Olson, Mancur, The Rise and Decline of Nations (New Haven, Conn.: Yale University Press, 1982).
Brock & Magee, “Invisible Foot” (cited in note 9), reprinted as chap. 8 in Magee et al., Black Hole Tariffs 111–21. The first paragraph of this article explicitly states that we build on Olson's 1982 book. Other chapters in the book explain the “compensation effect” whereby the optimal amount to spend on politics increases for economic groups that have experienced economic setbacks. Since income per lawyer has been generally declining since the 1970s, lawyers have compensated by resorting to greater political activity, e.g., lobbying the political system to increase the demand for lawyers.
Christopher Ocasal, “Pick Again, Professor,” a comment on Marc Galanter's Japanese lawyer data contained in his Feb. 17, 1992 article, Texas Lawyer, 20 April, 1992, pp.1415.
My earlier estimates were slightly lower than these, approximately 30%.
If an optimum lawyer density does not exist, we are back to his “lawyers-are-worthless” theory above.
Pedersen, “Lawyers in Politics” (cited in note 17).
Abel & Lewis, Lawyers in Society (cited in note 14).
Magee, Wall St. J. (cited in note 1).
Rhyne, Charles S., Law and Judicial Systems of Nations (Washington: World Peace through Law Center, 1978).
Abel & Lewis, Lawyers in Society.
Barro, 106 Q.J. Econ. (cited in note 8).
Magee, “Working Paper” (cited in note 2).