Do lawyers do more harm than good?
Pat Brown and Henry Fraser run Codepact, a tool that helps you custom build powerful contracts like a pro. They penned this piece sharing their thoughts on practice and how we can improve the delivery of legal services through better technology.
An 80,000 hour career
A few weeks ago, we came across an interesting article by Natalie Cargill about the legal profession on the 80,000 hours blog. The article is about whether it’s worthwhile for people who want to do good in the world to pursue a career in commercial law.
Cargill concludes that, “unless you are an unusually good fit… there are likely to be better options available”, even if your goal is ‘earning to give’. The commercial legal profession plays an important role in upholding justice and the rule of law, she writes, but it is plagued by problems of cost and inefficiency.
Just one more lawyer?
Cargill is right. Adding ‘one more lawyer’ to the legal profession, without changing the way that law works in everyday practice, may do more harm than good, simply because of the opportunity cost. A clever new lawyer could do more good elsewhere.
That said, we want to emphasise the future potential of commercial law - it’s still one of the most influential tools for shaping the incentive structures that direct wealth, talent and effort in our society. We should treat problems with commercial legal practice as opportunities for positive change.
Pursuing a career where you make improvements to the way that the legal profession works can reduce the costs of commercial law and expand its benefits. We think the way forward is for commercial lawyers to gain technical skills and combine them with commercial legal expertise.
What's wrong with commercial law?
Cargill gives a careful and balanced account of the pros and cons of commercial law, but two of her criticisms in particular caught our attention. One was an argument that commercial lawyers are ‘rent seekers’, who increase their share of wealth without creating new wealth. The other was an assertion that having too many lawyers may stifle innovation and economic growth. One study found that a 10% increase in the share of students concentrating on law was associated with an 0.78 slower annual growth per capita GDP.
We can go most of the way with Cargill. Lawyers’ fees are high, and often don’t correlate with the value contributed. Money spent on lawyers is money that isn’t spent on innovation or other socially beneficial activities. Officious lawyers may slow down or stop productive deals. High legal costs also reduce access to law and increase inequality. People who need legal help can’t afford it, while the wealthy and powerful use law to their advantage.
Law’s benefits are hard to measure
We’re cautious of the idea that too many lawyers necessarily stifles innovation and growth. As Cargill acknowledges, a strong legal profession is central to well-functioning societies. Countries that adhere strongly to the rule of law tend to have influential commercial legal sectors.
We think there are a few important things to add. An ‘incommensurability’ problem gets in the way of properly appreciating the contributions of commercial law. It is fairly easy to quantify the ‘transaction costs’ that red tape adds to business. It’s even possible to measure the relationship between the number of lawyers and the growth of the economy. But weighing the benefit of the institutions and culture promoted by the commercial legal profession is much harder.
Commercial law at its best promotes trust, respect, predictability, effective risk sharing and accountability. It is no accident that a nation like the United Kingdom has become a business hub. The stability of the law, the expertise of lawyers, and the quality of the courts are all mutually reinforcing; and they all create a good environment for business.
The legal costs in a single transaction may be disproportionate to the value of a transaction (we all have horror stories), but it’s hard to be sure what would happen across the whole system if there were fewer lawyers, less legal intervention, and more handshake deals. It’s possible that everything would go smoothly and we’d see more economic growth. Or maybe there would be less accountability, and the wealthy and powerful would profit even more at the expense of everyone else.
We should be careful not to forget what is good about the law just because it is hard to measure.
Harnessing the power of the law with technology
To maximise the benefits of commercial law, lawyers should be working much harder to reduce legal costs. Reducing costs would help solve the problem of rent seeking and improve access to useful legal tools like contracts.
Better and cheaper ways of creating new legal arrangements will allow for the creation of new business structures (with better incentive engineering). The corporation has served us well to date, but we should be looking for other collaboration structures that remain undiscovered. The industry in its current form makes the cost of that exploration too high (and uncertain).
The people best placed to understand and harness the future potential of the law are commercial lawyers with the right tools.
In other words, we still need talented people to go into commercial law. But, as Cargill says, if you want to maximise the good you achieve in your career, it doesn’t make sense to become a commercial lawyer in the current mould. People with a disposition for commercial law and a desire to do good should consider combining their legal skills with technical skills like coding, data analysis and design. If they are creative, ambitious and disciplined, they will find themselves in an area where a little innovation can go a long way.
By Henry Fraser and Pat Brown