The WSJ law blog asks whether licensing is necessary, citing a post by Larry Ribstein that discusses the Akron School Board case I blogged about a couple of days ago. Prof. Ribstein's post prompts a rejoinder from Jonathan Wilson, who argues that without licensing "Consumers could be easily bamboozled into trusting their money (and their legal rights) to smooth-talking salesmen (and women) who know nothing at all about lawyering." Wilson thinks licensing is not needed to protect sophisticated corporate types.
I don't think Wilson's argument justifies licensing. It is true that sophisticated corporate types are relatively well-positioned to assess lawyer quality. It is also true, however, that these are the people who generally would hire fancy lawyers from fancy firms with or without licensing. In other words, these folks suffer little from the price-increasing effects of licensing.
Consumers, on the other hand, suffer most from such effects. They pay for expertise they may well not need. To borrow from Milton Friedman, to consumers a licensing requirement says in effect that if you have a car at all you must have a Cadillac. Consumers would be better off with free entry and the price competition it would spark than with a state-policed cartel that forces them to amortize costs lawyers incur clearing the barrier to entry. As to bamboozling by charlatans, to do away with licensing is not to repeal laws against fraud, and there is every reason to expect that reputational effects of good and bad service would help weed out fraudsters.
Prof. Ribstein's post suggests he may be backing away from his already well-qualified defense of licensing on the ground that it gives lawyers a stake in making good laws and reforming bad ones. I agree with most of Professor Ribstein's acute criticisms of licensing (my take is here), and I applaud his work on the subject. We would be better off if state regulators read Ribstein.
I was not persuaded by the notion that licensing gives lawyers a stake in making good laws, however, mainly because even bad laws are revenue streams for lawyers, at least where parties cannot choose a particular forum to obtain efficient laws (which is Professor Ribstein's point). That covers a lot of ground. 1960s antitrust law was terrible from an efficiency point of view, but it was great for lawyers on both sides of the caption. The same has been true of securities litigation, both before and after the PSLRA. (Indeed, I recall discussing the then-impending PSLRA with a prominent securities defense lawyer, who worried that the statute would kill the egg-laying goose, but who supported it publicly to curry favor with clients who really wanted it.) Clients have a greater stake in efficient laws than lawyers, I think, and clients can often organize effectively.
Probably the best argument for licensing is that it allows disciplinary officials to hold hostage the premium lawyers can earn because of the barrier to entry: the bar can threaten to take away the premium by disciplinary action. But that imposes costs on everyone to take care of a relatively few bad apples, who could be pursued under ordinary laws against fraud, etc. (I concede that the bar may go after bad conduct that causes too little harm to interest other lawyers--but there are ways of getting at that problem other than licensing.) On a net basis, the case against licensing seems compelling.