Get documents about "We welcome letters from readers_ particularly commentaries that
Document Sample
LETTERS
sure. For example, it is possible that
licensure benefits larger, more special-
ized law firms at the expense of the
small, generalized law firms that are
overrepresented in our data. A review of
the literature, though, demonstrates that
the impact of licensure, both legal and
for other professions, has an inconsis-
tent impact upon prices and professional
We welcome letters from readers, of Economics 106:503-30, 1991). income. At times, or for some profes-
particularly commentaries that reflect In our research, which used data on sions, licensure has the price/income
upon or take issue with material we the prices of various services (adoption, enhancing effects implied by Stigler’s
have published. The writer’s name, DUI defense, simple divorce, will) from capture theory. At other times, however,
affiliation, address, and telephone a sample of over five hundred small as indicated by our study, no such
number should be included. Because of firms in forty-eight states from 1986- effects are found.
space limitations, letters are subject to 1988, we were impressed by how inex- Theoretical extensions of Stigler’s
abridgment. pensive many of those services had early work (e.g., Gary Becker, Quarterly
become. Lawyers, at least for routine Journal of Economics, 98:371-400, 1983
DON’T RAZE THE BAR procedures, are no more expensive than and Sam Peltzman, Journal of Law and
As the authors of two articles on the reg- a plumber. For example, in our data the Economics, 19:211-244, 1976) lend cre-
ulation of lawyers (Journal of Regulatory average hourly rate was just $55 and the dence to a complex view of licensure
Economics 7:63-85, 1995 and George average price of a will was only $48. where competition among different inter-
Mason University Law Review 14:253- Leef implicitly relies on Nobel laure- est groups, including consumers and
286, 1991), we read with great interest ate economist George Stigler’s “capture lawyers in general, as well as coalitions
George C. Leef's article, “Lawyer Fees theory,” which was, arguably, a crucial of lawyers, would be expected to have an
Too High?” (Regulation, Vol. 20, No. 1, starting point in the economic theory of impact upon the outcome of licensure.
Winter 1997). While there is, no doubt, regulation but one that ignores the forces Empirically, it is Becker’s and
some truth to the cartel theory of the of competing interest groups and the role Peltzman’s more complex view of licen-
legal profession, we believe the article of bureaucracy. In fact, as we prepared sure, rather than Stigler’s simple view,
overstates the effects of state bar regula- our study, we were struck by the lack of that seems more likely. Their view of
tions on the prices of legal services and empirical support for the capture theory licensure is further supported by the
in the process, oversimplifies the regula- in the literature on regulation even observation that lawyers have been less
tion of the legal profession. though it has almost become folklore able, in the recent past, to control licen-
Leef's basic thesis—that lawyers have among many economists. In our own sure. Two examples include the recent
a monopoly on legal services that great- study, we found almost no effect from loss of the ability to restrict advertising
ly increases their prices—can and state bar restrictions on in-state residen- for legal services by bar associations as
should be taken to task. As we note in cy requirements, bar exam pass rates, well as the successful attempt by con-
our research cited above (not cited by reciprocal licensing rules, or on the sumer groups, title insurers, and real
Leef) the most striking thing about the prices that lawyers charged for basic estate groups to block bar association
legal profession is the dramatic entry legal services. Instead, we found that attempts to extend legal licensing to title
into the profession in the past thirty-five variables that approximated relative sup- searches in many states.
years, more than doubling the number ply and demand forces were the most We would be remiss if we did not
of lawyers per capita in this country. In powerful explanatory forces. It should acknowledge some of the important
raw numbers, lawyers increased from be noted, however, our study focussed points made by Leef. For example, he
286,000 in 1960 to 757,000 in 1988 and on relatively small firms whose practice notes how the bar has often, but not
to more than 800,000 by 1991. Indeed, was generally concentrated in the provi- always, been able to prevent nonlawyers
many scholars have lamented that there sion of routine legal services such as from providing simple services such as
are too many lawyers, encouraging too uncontested divorces and simple wills, real estate conveyances. Indeed, many
many frivolous lawsuits and that, in so our findings may not hold for other, recent political battles have been fought
effect, the standards of “professional- more complex legal services. over the extent of services for which a
ism” have declined. Some economists Though our study did not support lawyer is required. Leef provides a ser-
have gone so far as to argue that eco- Stigler’s simple capture theory, it vice by indicating how professional asso-
nomic growth is inversely related to the remains possible that a more complicat- ciations can limit entry into markets, but
number of per-capita lawyers in a coun- ed interest group story does explain the he does not carefully consider the bene-
try (K. Murphy et al. Quarterly Journal existence and persistence of legal licen- fits of such associations or look in detail
2 REGULATION • SPRING 1998
LETTERS
at the tremendous recent entry into the prices for at least some legal services ly paid for. I find that morally repugnant
legal profession. He states: “UPL would fall (as was the case in England and incompatible with the proper role of
statutes, however, are still a major barrier when nonlawyers were permitted to government in a free society
to competition in legal services.” In our enter the conveyancing market) if it
view his “Global Warming” style crisis were not for the mandate that you must G EORGE C. LEEF
East Lansing, MI
call seems unwarranted mainly because be a bar member, with all the human
his policy recommendations are not tied capital investment that entails, before
to a compelling study of the regulation of you can legally offer any service.
the legal profession but, instead, are Lueck, et al. may well be correct in CHECK THE SOURCE
based upon simplistic theory. finding that the prices of some legal ser- Bridgitte Madrian, in her winter 1998
vices are no more expensive than hiring article, considered in detail the available
D EAN LUECK a plumber, but that is quite compatible alternatives for insurance portability
Montana State University
with my argument that they would be under current employment-linked insur-
R EED O LSEN lower still if we had a freer market in ance. In conclusion, she demonstrated
Southwest Missouri State University legal services. They are also indis- that there are no good alternatives. She
M ICHAEL RANSOM putably correct in saying that there has proposed medical savings accounts, but
Brigham Young University been a great deal of entry into the legal failed to elaborate.
profession over the last few decades. The nature of employment-linked,
That is not surprising, given the enor- rather than individual-based insurance,
LEEF RESPONDS: mous volume of legislation and regula- goes against a free market approach to
Professors Lueck, Olsen, and Ransom tion that creates a demand for legal health care and health insurance.
criticize my article on the grounds that I assistance. But again, that fact does Employment-based insurance gives sub-
did not develop or defend a more com- nothing to rebut my argument that the scribers little or no choice of policies,
plete theory of regulation, but instead nation would have been better off if the and shields them from their own
based my attack on the legal profession’s training of those legal practitioners had expenses. In short, employees get the
UPL barrier to competition on a “sim- occurred under the efficient standards of best deal when they use their employer-
plistic” theory. In fact, it was not my the market rather than under arbitrary sponsored insurance the most.
intention to develop any theory of regula- political standards demanded by the bar. Employers are left to handle the expens-
tion at all, but only to argue that occupa- They maintain further that I failed to es, but are not allowed to discriminate
tional licensure backed up by legal sanc- consider the benefits of professional asso- among employees, such that each
tions against individuals who offer their ciations. The possible benefits of profes- employee would more closely con-
services without having gone through the sional associations was beyond the scope tribute his own costs.
bar’s prescribed pathway into the legal of my article, but I did argue that con- Portability problems are inherent to
services market is neither necessary nor sumers derive no benefit from the restric- an employment-linked system for the
sufficient to achieve any legitimate pub- tion on entry into the legal marketplace— simple reason that the employer, not the
lic policy objective. Nothing in their let- UPL prohibitions—that professional subscriber, owns the policy. Under
ter argues to the contrary. associations of lawyers have labored to employment-based policies, subscribers
As I noted—although, I submit, with- have enacted. If there are, in fact, benefits cannot purchase a policy that would
out any hint of “Global Warming style to consumers from contracting for ser- protect them from exorbitant rate hikes
crisis” rhetoric—prior to the days of vices with the members of a professional following an illness. It is equivalent to
UPL prohibitions, people desiring to association, they will pay the price and do having a life insurance policy that could
enter the market for legal services could so voluntarily. I can see no reason, how- raise rates without limit should the poli-
choose among various training options. ever, to limit their choices to members of cyholder get a terminal illness.
Until the organized bar succeeded in a bar association only. A free market Employment-based insurance grossly
locking in place the current standard of backed by remedies for the occasional distorts the medical system. The med-
the three-year law school, many schools instance of incompetence, negligence, ical customer is essentially split into two
offered only one-year to two-year pro- breach of contract, or fraud provides con- entities—the patient who seeks services
grams. Moreover, a majority of lawyers sumers with at least as much protection and the employer who directly pays
learned their trade in law offices. In the against bad legal practice as do UPL pro- most of the costs. Employers respond by
days when law school had to pass the hibitions, without limiting their options. sharing the costs among all employees,
test of the market, only a tiny percent- Beside all of that, UPL enforcement nec- via wage reductions and equally distrib-
age of lawyers chose as optimal the now essarily means the sanctioning of coer- uted insurance expenses. The incentives
mandatory three-year investment. cion against individuals who have done are reversed—thrifty patients with ill-
My contention is that we would make nothing more than render services to oth- nesses lose out because they cannot get
better use of resources and that the ers; services that were sought and willing- protection from rate hikes, and often
REGULATION • SPRING 1998 3
LETTERS
become locked into their job. ving consumers to lower tar and nico- behavior include: smoking more, faster,
Caregivers face distortions as well. tine (T/N) yield products, (3) advancing closer to the butt; pinching and defeat-
They are responsible to patients for care, public health as the result. Each of those ing the filter effectiveness; and covering
and to insurers for costs. Rationing of three necessary premises is in serious filter vent holes (often invisible and
care is done by distant third parties, doubt. When the industry and its advo- placed were fingers naturally fall).
rather than the caregivers and patients cates sing “Hallelujah,” others should Those product designs and compensa-
familiar with the situation and circum- shout “Humbug!” tion behavior undermine any potential
stances. Similarly, insurers are responsi- Because the author has consulted health benefit that otherwise might
ble to subscribers for their coverage, and with R. J. Reynolds has been on the result from low yield products.
to employers for costs. Policy selection FTC staff, and has been active in, and Calfee ignores all health conse-
is based on the employer’s situation, in recognized by, consumer behavior and quences but lung cancer. The narrow
a one-size-fits-all manner, rather than marketing academic associations, read- focus helps make any movement toward
the subscriber’s desires. ers might wrongly suppose that his is a lower T/N products more intuitively
The system is inherently flawed. well informed, thoughtful argument, appealing, but we now know that is an
Regulations cannot change these incen- integrating and balancing supplemental illusion. He ignores the more numerous
tives—an overhaul of the system is nec- perspectives. His evidence is flawed and rates of death and disease from circula-
essary. Current regulations have served there are serious omissions in his argu- tory effects (strokes and heart attacks),
to worsen the situation, with major ment. He errs in describing cigarettes as and other lung diseases like emphyse-
breaks given for group policies (primari- a “mature” market in the 1920s, when ma, and cancers in myriad sites other
ly ERISA protections and tax treatment), sales to women were just taking off and than the lungs. Smoking low T/N prod-
which are denied to ordinary citizens. would grow substantially over the next ucts may change the relative incidence
Medical Savings Accounts answer decades. He also ignores recent low-tar of those various afflictions, but Calfee
those problems well. When individually competition. But more important than never establishes any public health ben-
owned, policies are selected and owned by those sorts of errors is what in his article efit for that. Calfee naively accepts, like
subscribers, who are financially rewarded is misconstrued or totally missing. He countless millions of duped smokers,
for thrift, and can purchase protection misconstrues the health benefits of low the premise that lower yield products
from rate hikes. Caregivers and insurers yield tobacco products. Most amazingly, are healthy, or least healthier than high-
are then responsible to subscribers for he ignores addiction and related con- er yield products. He is grievously
both care and costs. MSA’s would pro- sumer behavior, the oligopolistic and inconsistent on that point, however,
mote competition to provide value. collusive nature of this industry, and the admitting at one point to “no epidemio-
The transition from employer-based dynamic and adaptive nature of its mar- logical evidence that reduced tar meant
to individual responsibility for health keting strategies. Industrial organization improved health” while none-the-less
care (MSA’s) would leave the ill, with- and marketing, and consumer behavior holding elsewhere that lower yield prod-
out rate hike protections, in a bind. That would seem to be domains of his exper- uct forms were “improvements.”
transition, instead of propagation of tise, but apparently are not. Calfee ignores current policy prefer-
employer-based health care, should be Calfee ignores recent low tar ads. ences. The public health community has
the focus of policy analysis. Low-tar advertising in the 1980s by seen the folly of simply switching
brands such as Now, Cambridge, and smokers to lower T/N products. That
S USAN A TKINS, MD Carlton did not seem to have the effects policy objective was always conditional
Mechanicsville, VA
he finds salutary. Some of those cam- upon the premise that if, and only if,
paigns were misleading in an ingenious smokers were too addicted to quit that
and invidious way—by advertising a they might be better served by smoking
BAH HUMBUG! product variety with very low tar and lower yield products. That hopeful con-
Like Dickens in his Christmas Carol, nicotine data for image purposes, e.g. ditional advice is now dated, as the evi-
Calfee tells tales of “The Ghost of 70mm in a hard box, but then selling dence accumulates on the high inci-
Cigarette Advertising Past” (Regulation, consumers other varieties soft packs dence of diseases among smokers of
Spring 1997, Vol. 20, No. 3) to scare us with literally hundreds of times as much such products. Only the industry prefers
into reforming our ways. He would have T/N e.g. 100mm. that smokers switch rather than quit.
us be more charitable toward the tobac- Calfee ignores consumer behavior. Calfee ignores industry learning. He
co industry, rejecting regulatory He fails to recognize the addictiveness takes no account of the possibility that
restraints on their advertising to allow of nicotine and the resulting well docu- industry learned lessons from “The
them to engage in “unbridled” activity. mented set of compensation behaviors Ghost of Cigarette Advertising Past.”
Using experiences four decades old, he that maintain nicotine intake for smok- The tobacco and advertising trade presses
holds that: (1) deregulated competition ers even when they use lower yield both exhorted the industry to recognize
will produce “fear” advertising, (2) dri- products. Examples of compensation the folly of hectoring the public with
4 REGULATION • SPRING 1998
LETTERS
health claims. Their commissioned moti- ing and promotion, is, by definition, is more likely to advance the public inter-
vation research studies taught them that drug pushing with deadly delayed con- est—the cigarette industry or public
verbal health claims were akin to saying, sequences. If done expertly and with health regulators. We shouldn’t conclude
“I don’t beat my wife.” They mean to media weight, much less with license to from the regulatory failures of the 1950s
reassure, but ultimately they raise doubt lie, how can we expect the net conse- that all regulations from the FTC or oth-
and keep the health criterion salient. Far quence to be beneficial? Consider the ers are inevitably doomed, however.
better, they counseled, to use pictures of following satirical ad copy (written in Perhaps only those regulations the indus-
health and implied healthfulness that are the Christmas season) glorifying a low try willingly accepts are flawed.
taken in at a glance with minimal cogni- tar product. Regulation endorsed by the industry is
tive processing and counter-argumenta- GLORY TO THE LOW-TAR KING almost certain to be in its self-interest
tion. Small wonder that in their “secret Hark! The herald angels sing: and necessarily in conflict with the public
negotiations” the industry lawyers draft- Glory to the Low-Tar King interest. That simple fact is all too easily
ed and agreed to advertising regulations Best on earth, and oh so mild overlooked in the rush to legislate the
to create a cease fire in the tar wars. Health and pleasure reconciled. current national settlement.
Since then, industry lawyers (not the
FTC) have killed health ad claims and Joy! The brand we sanctify. RICHARD W. P OLLAY
Professor of Marketing, Faculty of
new product development projects lest Joy! The triumph of our lie. Commerce, University of British
they impugn the balance of the products Joy! Angelic ads proclaim Columbia; also Curator, History of
by implication. Smoke in peace—no fear, no phlegm. Advertising Archives.
Calfee ignores potential collusion.
With only five current participants, this Hark! The herald angels sing:
oligopoly finds it relatively easy to act For God’s sake smoke the Low-Tar WRONGING THE RIGHTS
in concert. That is illustrated by their King. We recently read the informative and
history pricing, the jointly acquired PR There are lessons to be learned. interesting piece on “The Politics of
activities of Hill and Knowlton, the Calfee is or should be highly familiar Public Lands” by Dale Arthur Oesterle
industry wide Tobacco Institute, the with tobacco industry structure, market- in the fall 1997 issue of Regulation.
Center for Tobacco Research, their lob- ing practices, and relevant consumer However, we were surprised to read, at
bying activities, their shared defense behavior. Ignoring those seems to be a the very end, the characterization of the
strategies against law suits, the phalanx willful blindness and a dereliction of bulldozing of roadways through wilder-
of CEOs asserting the nonaddictiveness intellectual and public duty. Those sorts ness study areas ordered by County
of nicotine to Congress, and on and on. of errors and omissions have been point- Commissioners in three Utah counties
In the rare event of defections, such as ed out to Calfee by others and myself in as a “blatant trespass on federal land”
Ligget’s recent admissions regarding response to other publications a decade and that the Commissioners’ arguments
standard industry practices, the industry ago, giving him ample time to at least concerning their justification for bull-
can punish the renegade. Clauses puni- attempt an improved analysis. dozing those roads were based upon an
tive only to “nonsigners,” i.e. only Despite my utter rejection of Calfee’s “obscure statute from the Civil War
Liggett, is part of the draft national set- limited analysis and interpretation, I era.” The article then suggested that
tlement agreement being considered for agree that the history of the tar wars “torturing the language of old statutes is
congressional endorsement. might have important lessons for us a game all can play.”
Calfee ignores primary demand today. The industry played the FTC We believe the article refers to public
effects. That was then—this is now. process like a fiddle, just as they have rights of way established across public
How confidently can we expect the tran- frequently befuddled Congress. They lands under RS-2477. We live in rural
sient changes seen four decades ago to frustrated the FTC complaints of the 40s Nevada and are very familiar with RS-
be replicated today? In the 1950s filters with very protracted litigation, resulting 2477 rights of way, public roads estab-
were a novel technology just becoming in trivial fines and sorely belated deci- lished through public use and custom
a popular product form. Today filters sions with limited precedent value. They under Revised Statute 2477 (recodified
already totally dominate the market. In co-opted to the agency in the 1950s as 43 U.S.C.§ 932). That Act of 26 July
the 1950s the majority of adults were through its Bureau of Consultation, so 1866 stated simply that “The right of way
smokers, whereas today a far smaller that the FTC ended up being the mecha- for the construction of highways over
and harder core of smokers persists. nism for the establishment and enforce- public lands, not reserved for public uses,
Think—for God’s sake. Enactment of ment of the cartel-like advertising stan- is hereby granted.” This right to create
Calfee’s position would allow the indus- dards drafted by the industry committee public rights of way over public lands by
try total license to engage in the most of Washington lawyers for what Calfee use and custom was in effect until the
misleading and egregious of health calls “secret negotiations.” passage by Congress, in 1976, of the
claims for cigarettes. Cigarette advertis- A bottom line policy question is who Federal Land Policy and Management
REGULATION • SPRING 1998 5
LETTERS
Act (FLPMA). Though, under the tained by a public agency or by mechan- the Department of the Interior, tried to
FLPMA, new roads can no longer be cre- ical means. Perhaps that is why the change the definition of RS-2477 by
ated over the public lands under RS- Commissioners called out the bulldoz- internal memo, not even bothering with
2477, public rights to continue to use all ers. There are no such requirements in the requirements of the Administrative
RS-2477 rights of way established prior RS-2477 or in the court decisions con- Procedure Act for publishing proposed
to 1976 were explicitly preserved under cerning RS-2477 rights-of-way. In arid rules in the Federal Register and allow-
the “savings provision” of the FLPMA. Nevada, there is usually no need for ing for public comment. This year, the
Since wilderness areas must be, by mechanical maintenance. Moreover, U.S. Forest Service is also using an
definition, roadless, the existence of an RS-2477 roads are generally maintained internal memo to attempt to extinguish
extensive crisscrossing of the public informally by the users of such roads RS-2477 rights of way. We are fighting
lands of the West by tens of thousands rather than by a public agency. those unlawful and unconstitutional acts
of RS-2477 roads established by use and In the West, much of the vital infra- and shall continue to do so.
custom prior to 1976 is a serious hin- structure, such as rights of way for tele-
drance to the creation of more wilder- phone lines, electric power lines, water D URK P EARSON AND S ANDY SH A W
People for the Constitution
ness areas. If the Commissioners of the pipelines, access to private property, and
three Utah Counties referred to in the privately owned water, consists of rights
Oesterle article bulldozed to reopen RS- of way created under RS-2477 prior to
2477 public rights of way that were ille- 1976. If the federal government is able OESTERLE RESPONDS:
gally bulldozed closed (as many are) by to gain control of those rights of way by The letter is correct, I was referring to
one of the U.S. government land agen- extinguishing those rights (without com- Section 8 of the Act of 26 July 1866, 14
cies, then they were entirely justified in pensation), it would be a catastrophic Stat. 253. The 1866 Act granted rights
doing so. If the roads the Commission- blow to the independence of most towns of way for the construction of highways
ers had bulldozed were new roads, not and cities of the West. That applies to over public lands and any rights of way
used as RS-2477 rights of way prior to many towns and cities in the East as established before the repeal of the
1976, then they could not justify their well, though it is not as well known statute in 1976 survive. At issue is what
actions under RS-2477 and the “savings there. The feds could hold all those rights of way predated the 1976 Act.
provision” of the FLPMA. towns and cities up for ransom by The counties are taking a very liberal
There is nothing obscure about RS- demanding all sorts of concessions in view of what is a preestablished right of
2477. Many court decisions into the order for the feds “allow” them to con- way and asserting that anywhere there is
1990s upheld the public right to use RS- tinue using the RS-2477 rights of way. currently evidence of a vehicle track a
2477 rights of way over federally con- The legal and constitutional battle right of way was established in 1976.
trolled lands and defined what consti- over the status of RS-2477 roads is far Even if they are correct on th existence
tutes RS-2477 rights of way. There are from over. Since 1994, we have made of the right-of-ways, the counties have
ongoing attempts by the Bureau of Land public comments over a series of no right to expand them. Moreover, the
Management, the Forest Service, and Bureau of Land Management and U.S. counties are not content to await a judi-
other federal land agencies to extinguish Forest Service proposed new rules pub- cial hearing on whether their controver-
those rights unilaterally, in defiance of lished in the Federal Register concern- sial claims are correct, they are using
an explicit Congressional ban—Sec. ing RS-2477 rights of way that are self-help and blading all roads they
108 of the 1996 Department of the designed to extinguish roughly 95 per- claim, which of course destroys the evi-
Interior appropriations bill—by, for cent of such rights of way. In early dence on the character of the tracks that
example, requiring that roads be main- 1997, Bruce Babbitt, the Secretary of they have enlarged.
6 REGULATION • SPRING 1998
