The Legal Profession and the Efficacy of Microeconomic Policy

Trouble at the Bar points out that the legal profession has more influence on public policy than any other profession. It also suggests that its influence on microeconomic policy may be harmful based on circumstantial evidence in my 2021 Brookings book, Gaining Ground: Markets Helping Government, and Yale Law Professor Peter Schuck’s 2014 book, Why Government Fails So Often and How It Can Do Better, which documents that pervasive microeconomic policy failures have generated huge costs to American society. Before indicting the legal profession, it is important to consider how government policy failures could be linked to the profession’s influence, and, if so, what could be done to make its influence more constructive.

Law and lawyers are essential for formulating and applying public policy, but both have features that sow the seeds of government policy inefficiencies. The strength of law is that it establishes boundaries—that is, identifies illegal behavior—and governs interactions among and between people and firms. Its weakness is that proposed laws that offer constructive change can be vetoed. For example, the Senate and the House of Representatives are veto players because, without their consent, no bill can become a law. The more veto players in a political system—and the United States has an exceptionally high number of them—the more difficult it is to avoid status quo bias and to adopt socially beneficial policy reforms.

Lawyers understand and respect the policymaking process and account for a large share of policymakers, especially in Congress, where 42 per­cent of the seats in the House and 59 percent of the seats in the Senate in the 113th Congress were held by lawyers. However, lawyers, like economists, can be slaves to their training and professional culture. This adversely affects policy. For example, lawyers in government emphasize procedure and advocacy and the prosecutorial style of congressional hearings instead of a systematic, collaborative search for truth.

Lawyers also have a predilection for writing laws and regulations and producing huge volumes that run in the thousands of pages yet nonetheless result in ambiguities and a constant stream of legal challenges, instead of initiating clear and effective policies that help to resolve social problems. Administrative lawyers are especially comfortable with, and, indeed, may welcome, highly detailed regulations and statutes. For example, the Federal Register exceeds 70,000 pages; the Dodd-Frank Act spawned an additional 14,000 pages on top of its initial 2,300 pages; and the Affordable Care Act amounted to 2,700 pages and 1,327 waivers. Some lawyers can be so preoccupied with administering regulations that they neglect to consider whether the regulations are enhanc­ing or harming social welfare.

Phillip Howard’s critique of the legal profession argues that law­yers share a philosophy of the correctness of the law, such as compliance with a rule, regardless of the law’s actual economic and social effects. For more than three years, the Veterans Benefits Administration intentionally stopped redacting names, Social Security numbers, and other personally identifiable information on third-party individuals in claims records provided to veter­ans. Although people could face substantial harm if their information were misused, the Veterans Affairs’ General Counsel’s Office said there was legal support for not redacting the data.

Trouble at the Bar argues that the pervasive role of lawyers in all levels of government has had an adverse effect on the efficacy of public policies in general because lawyers’ training, career development, and policy perspectives have oc­curred in an inefficient environment shaped by regulations that reduce competition and innovation. In addition, legal training and practice does not encourage policymakers to acknowledge and correct policy inefficiencies by subjecting previous decisions to rigorous retrospective cost-benefit analyses and by subjecting new decisions to rigorous prospective cost-benefit analyses. Precedent is, well, precedent. Period.

To be sure, economists have a comparative advantage in performing quantitative studies, but an economic analysis must usually go through lawyers if it is to have any influence on policy. Often such work is simply ignored or dismissed as “gobbledygook” unless the lawyers participating in the policy process believe its message supports their strongly held views.

For example, the available scholarly empirical evidence does not indicate that antitrust policy and enforcement has benefited consumers by promoting competition and by preventing firms from engaging in anticompetitive behavior. Nonetheless, such evidence is not acknowledged by lawyers Tim Wu and Lina Khan who advocate breaking up Big Tech and abandoning the consumer welfare standard in favor of “leveling the playing field” for any and all competitors. This is troubling because Wu and Khan are likely to have considerable influence on the future direction of antitrust enforcement given that President Biden is supporting their appointments to the National Economic Council and the Federal Trade Commission, respectively. One might hope that leveling the playing field promotes consumer welfare, but that is certainly not a given.

Trouble at the Bar also presents evidence suggesting that policy may be compromised because the government does not attract the most able lawyers graduating from the nation’s leading law schools, and when it recruits top lawyers from the private sector for a few years, the effectiveness of those lawyers may be limited by the government’s resource constraints. Although access to justice is a problem of most ordinary Americans, those individuals and firms with the resources to have access are likely to have an advantage in the quality of their legal representation when they oppose the government in a policy dispute.

The shortcomings of the legal profession in government policymaking that I have summarized contribute to status quo bias, which is the strongest explanation for government policy failure. Status quo bias inhibits learning and vision about the long-run effects of a policy, enables significant inefficiencies in part of the economy to persist and interact with inefficiencies in other parts of the economy, and makes it extremely difficult for the government to reform inefficient policies by implementing efficient ones.

Importantly, reforms that do occur may make things worse instead of better because of a lack of learning and vision. Society, of course, has other goals besides economic efficiency, but persistent inefficiencies make it much more difficult for society to accomplish those goals.

The deregulatory reforms of the legal profession that I recommended previously to increase access to justice also could help the legal profession’s influence in policymaking to be more constructive. First, deregulation that generates more competition and reduces the government earnings penalty should help the government to attract more able lawyers. Second, greater competition among legal service providers that improves the culture of law firms to make them more efficient, innovative, and congenial toward all employees could help government performance if lawyers from those firms impart those values when they take leave from the private sector to work in government.

Finally, the development of new specialized legal education programs, which result from eliminating the ABA’s monopoly control over legal education, could greatly im­prove the training of lawyers who pursue specific career paths that lead to long or short-term positions in government. For example, law schools in combination with other university departments could develop programs that blend:

• Law, economics, political science, and policy analysis for lawyers who want to work in government to help formulate and implement social science-based policies. Such a program would enable lawyers to develop skills to assess and possibly initiate empirical policy analyses that are relevant to their area of responsibility.
• Law, policy analysis, and STEM disciplines for lawyers who want to advise government officials and judges on policies based on science and engineering.
• Law and medicine for lawyers who want to work in government on health-related policy issues.

Other programs that could better prepare lawyers who work in government to contribute more effectively to public policy also are likely to be developed.

Lawyers who obtain a broad analytical, multidisciplinary education are likely to be more effective at helping public officials appreciate rigorous policy-based arguments and they may be more likely to advance those arguments when they are able to do so. Lawyers with such an education also are likely to take a less ideological approach to resolving cases; thus, if they become a judge on a lower court or a justice on the Supreme Court, they could help to reduce ideologically based decisions by their own (less ideological) perspective.

Lawyers who oppose deregulating the legal profession reflect status quo bias that benefits a special interest at the expense of society. Those same lawyers, when they occupy influential positions in government, are also likely to enable government policy inefficiencies to persist. If lawyers change their mindset of how they self-regulate the legal profession, they could contribute more effectively to policy reforms that greatly benefit society when they serve in government.