“Lawyers And Big Law Firms Were Paid More Than They Could Justify”

July 24, 2013 in Excerpts, Science/Tech, Urban Studies | Permalink

Noam Scheiber of the New Republic just did an Ask Me Anything at Reddit about his recent article which predicts the collapse of Big Law. A couple of exchanges follow.

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Question: 

Why do you think the business model is collapsing? 

How can you show that the current biglaw downturn is not just the product of a big recession that will subside? 

Why do you think that corporations will pay less for legal services in the future in a systematic way? 

Noam Scheiber:

I think the business model is collapsing because of increased transparency in billing/pricing. Corporations are able to see what they’re paying for in more detail than ever before when it comes to legal services, and they don’t love what they’re seeing. Increasingly over the past decade or so, but especially since the recession, they’re simply refusing to go along with it. The best example is paying $300 an hour for the continued legal education of a first or second year associate who just doesn’t know anything. That is a dying institution. It’s of course possible that the current downturn is a product of the recession, but certain numbers suggest otherwise. According to NALP, the percentage of law grads who find a job where bar admission is required within 9 months is at its lowest ever – significantly lower than it was midway through the recession.

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Question:

Is the collapse of the biglaw model generally good, bad, or neutral for society as a whole?

Noam Scheiber:

From a purely economic perspective, it’s probably a good thing. it was economically inefficient – because of the irrationalities in the system, lawyers and big law firms were paid more than they could justify, output wise. which attracted to many smart, productive people into the legal profession and siphoned them away from other professions, where it would have been more efficient to deploy them. on the other hand, as i note in the piece, the beauty of the big law model was that it served as a psychological safety night for generations of college grads. you could go off and try your true passion, knowing that a respectable upper-middle class existence awaited you via law school if things didn’t work out. the loss of that safety net is a bit of a bummer. but it’s hard to say it justified the bigger economic distortion.

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