When Americans think about governmental regulations meant to protect them against harm, they are prone to making two mistakes in judgment: first, they tend to overestimate the benefits that are supposed to result from regulation (including mandatory licensing) and second, they tend to underestimate (and usually to completely overlook) the costs and problems created by it.
I believe that governmental regulation of the legal profession is a good example of that. We see both mistakes in that people think that the system of licensing lawyers ensures competence (which it does not) and fail to see that leads to higher than necessary fees, as well as considerable waste of resources.
Licensure is neither a necessary nor a sufficient condition for competence in the legal profession. It is quite possible for an individual who has not gone to law school and not passed a bar exam to render competent legal assistance. Indeed, the legal profession is occasionally embarrassed by instances where someone who had been doing exactly that is “found out” and exposed as an illegal (or “unauthorized”) practitioner. On the other hand, there are also plenty of cases of incompetence by licensed attorneys. In such cases, the aggrieved consumers usually find out that the bar’s system for handling complaints does them little or no good.
And what about the hidden costs?
Prospective lawyers are required to graduate from a law school in almost every state. That demands three years of course-taking at high expense, but very little of that information will be retained or ever put to any use. What is clearly of benefit – learning legal research and writing – could easily be learned elsewhere. As a result, lawyers have so much invested in their degrees that few can afford to handle cases with small values. Many Americans therefore cannot afford or find legal representation when they need it.
We also waste resources by keeping too many law professors employed, but that’s a minor matter.
Under a laissez-faire approach to professional services, the natural free-market incentives and disincentives produce generally good results for consumers. Practitioners want to satisfy customers and build good reputations; they want to avoid the reverse. That leads them to undertake the optimal degree of learning and training for the kinds of work they intend to do and to limit themselves to work that is within their capabilities.
The fact that licensed attorneys sometimes foul up cases for clients shows that those incentives don’t work perfectly, but it also shows that licensure does not work as advertised. I doubt that attorney licensing adds anything in the way of consumer protection over and above free-market incentives and disincentives. All that it adds is cost.
Laissez-faire does an excellent job of regulation in many other services fields, ranging from florists and interior decorators to accountants and tax preparers. There is no reason from the standpoint of consumer welfare why it would not be just as beneficial in the market for legal services.