Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers? • Hacker News Board

Re: Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

#81

Post by jcfrei » Tue, Mar 06, 2012, 10:42 PM UTC

jonnathanson wrote: post #30

To some extent, lawyers (or, more accurately, law firms) are Veblen goods -- meaning that their services are perceived as being better if they're more highly priced and exclusive. There's a general perception that a high-priced lawyer is a top-notch lawyer, and that skimping on such lawyers carries a huge deal of legal risk. This dynamic plays out particularly in the BigCorp world, and especially if there's ever a pe…

my point exactly (and the author seems to have missed it). there's such a thing as adverse selection in the market (of lawyers) which means that information asymmetry prevents the formation of a correct market price. in this case people just won't hire a cheap lawyer with discount rates, because they have no insight in the capabilities of a lawyer (or in the field of law) appart from a few if any references and the price.

Re: Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

#82

Post by larrys » Tue, Mar 06, 2012, 10:43 PM UTC

The article doesn't address what could be the most important factors.

First, your relationship with a lawyer is a personal relationship. And it's hard to break a personal relationship over a yearly price increase of single digit %.

And lawyers regularly wine and dine and become "friends" with their clients. The client really thinks that the lawyer likes them. If you've ever worked in sales you know what I mean by this. Lawyers are nice and friendly and that insures the loyalty of the client. When I was in high school I delivered gifts to the clients of a small law firm. I remember the partner deciding who got what gift (based on amount of work). This wasn't a bribe. Just a thank you to insure ongoing loyalty. (Maybe some were bribes of course).

Remember rates aren't doubled they go up a little each time they are raised. If you are already paying $400 per hour you aren't bolting for $425/hr. It's not like rates are doubling in a year.

The other reason is FUD. People convince themselves and rationalize that a certain lawyer at a certain rate will get the job done. They are afraid of switching lawyers and having a bad outcome.

So the above is certainly one of the things that keeps legal rates high.

What about new startup lawyers? Well the way any professional service works you start out with whatever work you can get at whatever price you can get (let's say). Then as you gain clients you slowly wean yourself from the low priced clients (by taking longer, not returning calls etc.) and they get the message. This leaves you with the best clients who you can raise rates on (because they like you and are fearful of changing).

So even if there was a group that charged low rates (to corporate buyers) over time their rates would rise as well. Because of the person factor I mentioned in the first paragraph.

Finally, even though lawyers can now market (I remember when they couldn't) they won't "sell" in the traditional sense. If I sell a service (like web hosting web design or unix sysadmin) I can pickup the phone and call people. I can go door to door. I can place ads. Lawyers can place ads of course but that's not the most effective way to sell personal services. Then you are waiting for someone to contact you. Selling is selling. If lawyers were ethically allowed and it was acceptable practice to "cold call" I believe you would see rates dropping in certain types of work.

Re: Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

#83

Post by thinkcomp » Tue, Mar 06, 2012, 10:44 PM UTC

nknight wrote: post #75

thinkcomp wrote: post #59

Earlier quoted context omitted.

If I want to represent myself or my company at trial, I should have that right.

You have the right to represent yourself, but not another person or entity, which is what you would be doing if you attempted to represent your limited liability entity in court. It doesn't matter if you're the sole shareholder or not, you and the company are not one and the same.

Except that such logic seems to vanish in small claims court (where I can represent my corporation), and before the USPTO Trademark Trial and Appeals Board (where I can represent my corporation)...which means that it's really not very logical at all.

Re: Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

#84

Post by ktizo » Tue, Mar 06, 2012, 10:44 PM UTC

javert wrote: post #69

ktizo wrote: post #53

Earlier quoted context omitted.

Here's a nice definition from the OECD website's glossary of statistical terms; "A free market economy is one where scarcities are resolved through changes in relative prices rather than through regulation. If a commodity is in short supply relative to the number of people who want to buy it, its price will rise, producers and sellers will make higher profits and production will tend to rise to meet the excess demand…

That's a description of a free market, but not a definition . (The OECD saying it's a definition don't make it so.) A proper definition is: A market wherein all exchanges are voluntary, i.e., no force is involved. But yeah, it's far from a free market. I'm with you there. That doesn't mean we can sunder the term "free market" and say it's not a free market for a bunch of made-up reasons, which is what I was counterin…

"That's a description of a free market, but not a definition.

(The OECD saying it's a definition don't make it so.)"

Is that definitive? As the description of the definition of the noun 'definition' from http://thesaurus.com/browse/definition defines definition as a description, of this I am definite. ;)

Re: Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

#85

Post by johngalt » Tue, Mar 06, 2012, 10:45 PM UTC

chollida1 wrote: post #39

the way I had lawyer, dr, etc. fees explained was that they can charge so much as you often don't get a second chance. If your life is on the line for an operation, you want the best doctor available. Your life on the line in a trial, you get the best lawyer available. This has a trickle down effect. Or put another way, if you don't get a second chance, things had better go right the first time. Fear is a powerful mo…

This is the #1 reason, and the common explanation, but lets examine it further.

You risk your life getting into your car every day. You don't pick the most expensive car? Choosing air travel is commonly an exercise in finding the lowest price, despite the inherent risks/fear of traveling 4 miles up at 500mph. Why are these commodities while preparing a will is not?

There are transactions/disputes that require highly skilled people to direct/settle, but I wonder how many legal systems have been specifically constructed to require guidance. How can we tell when something is costly because it is complex or merely complex to make it costly?

Re: Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

#86

Post by learc83 » Tue, Mar 06, 2012, 10:46 PM UTC

andylei wrote: post #68

learc83 wrote: post #48

Earlier quoted context omitted.

>More lawyers could afford to charge reasonable market rates, and not work for large firms, if it weren't for the ABA mandating that you have to attend a law school (that results in huge piles of debt) or clerk for years (four in California) in order to join the bar. That's exactly the problem, regulatory capture of government protected guilds. It's exactly the same with Doctors and the AMA, or electricians, hell in…

> regulatory capture of government protected guilds this just doesn't align with evidence. if it were true, there would be too few lawyers, not too many lawyers. i'm not saying the effect you describe never happens, but when it does, there is not enough supply, driving prices up (this is probably the case in medicine, where there are not enough doctors, driving prices up)

It's not just about the number of lawyers, but also the cost to become one.

In the US, unlike many other countries, practicing law requires a graduate degree from an accredited school. This dramatically adds to the cost of a legal education, and drives up the price for everyone. This is the direct result of "regulatory capture of government protected guilds."

Re: Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

#87

Post by wtvanhest » Tue, Mar 06, 2012, 10:48 PM UTC

Anechoic wrote: post #52

wtvanhest wrote: post #14

The unobvious but major thing missed is that hiring the wrong lawyer is far more expensive than an additional $300 per hour. Since the only way to know if you are hiring the right lawyer is to base it on brand, top firms have a lot of pricing power and middle firms dissapear.

The unobvious but major thing missed is that hiring the wrong lawyer is far more expensive than an additional $300 per hour You could say the same for any number of industries - hire the wrong structural engineer and that bridge or building will collapse, hire the wrong nuclear engineer and attack sub might run out of power while engaging the enemy, hire the wrong electrical engineer and the airliner's control system…

Your point is well worth discussing. The primary difference I see is the nature of the outcome and the way checks and balances work in those processes.

In each of your examples, the person you are referring to has a ton of oversight and proceesses in place to catch errors. (I don't know about nuke engineer, but in general the military avoids paying market wages by recruiting then training then placing).

In the lawyer situation picking the wrong guy can be financial suicide.

Re: Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

#88

Post by [deleted] » Tue, Mar 06, 2012, 10:49 PM UTC

ShabbyDoo wrote: post #74

There is one restriction in particular which I believe has a huge effect on the legal industry's slow pace of change -- only lawyers may own companies which provide legal services to clients (vs. in-house counsel). So, want to start an online, virtual law firm? Either act as a referral service or make sure you never want a non-attorney to have equity in your company. Why does this rule exist? I haven't a clue.

[deleted]

Re: Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

#89

Post by masebase » Tue, Mar 06, 2012, 10:53 PM UTC

nextparadigms wrote: post #8

Any way this market can be disrupted? Maybe through some more efficient/decentralized/AI-based services that would do much of the lawyer's jobs, forcing them to reduce their billing rates?

This space is really starting to heat up. There are already a good number of new legal startups, and I think it's only beginning.

Re: Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers?

#90

Post by baddox » Tue, Mar 06, 2012, 10:59 PM UTC

jerrya wrote: post #34

baddox wrote: post #27

Earlier quoted context omitted.

I don't think that becoming dependent on a particular product, service, or supplier makes it "not a free market."

http://en.wikipedia.org/wiki/Free_market#Overview Adam Smith believed that an economy should be free of monopoly rents If I can keep you from switching lawyers, if I can keep you from interviewing other lawyers, if I know your choice is not "lawyer or no lawyer", but "which lawyer", then I can keep my prices artificially (not a free market) high.

How do you distinguish between "keeping you from switching" and "it being inherently difficult to switch?" If you buy an expensive car that only runs on expensive and rare fuel (thereby restricting your choice in fuels), is the free market somehow violated? If you buy a Gillette razor that only works with Gillette blade cartridges, is the free market violated? I find the distinction rather fuzzy.