Law and economics and the future

“It’s not an easy year for lawyers.” That was a Greenberg Traurig partner in Bloomberg a few days ago. The layoffs and cutbacks are reportedly just a start. Hourly-rate billing and lock-step associate salaries have been eulogized as relics of a gilded era when clients forked over robust legal fees to swarms of document-reviewing drones. Nowadays, clients insist such work be outsourced to India, where lawyers trained in the common law will review documents for $30 an hour. Their law schools are pumping out lawyers at more than twice the rate of American law schools. (If I had any entrepreneurial inclinations whatsoever, I would be on the phone to Mumbai putting together a cadre of NLSIU graduates to grade American law school exams.)

No one who has given any thought to how large firms operate can be surprised at the retrenchment. It’s amazing this has gone on this long. The big-firm business model depended on scores of young associates generating inhuman timesheets in the hopes of being among the ragged few who survive to be anointed partner and reap income from a new generation of drones. As an insightful article by someone named James Smith notes, the legal academy’s disengagement with reality has everything to do with this:

As all lawyers know, law schools do not fully prepare lawyers for practicing law. While many law schools have introduced clinical courses, the reality is that law school can only lay the foundation for a legal career. Thus, good law firms always have provided training to their associates.

But no one wants to pay for that anymore. The seeds of implosion were sewn in the heady ’90s when the drones began fleeing the hive for Silicon Valley and already pretty high salaries became irrationally exuberant, to use the phrase of the day. Guess what happens when you raise associate salaries to ludicrous levels. That’s right: you get a 15% rise in law school enrollment in less than a decade’s time. (Previously, it took more than 20 years to see that kind of growth.) And now the whole thing is collapsing with lawyers being laid off and entire firms closing.

Guess what happens next. That’s right. The pressure to revamp legal education is building like Diet Coke and Mentos. Law schools that don’t deploy an ambitious clinical and experiential curriculum disserve their students and will not survive. As I observed once before: non scholae, sed vitae discimus.