What will legal education be like in the significantly deregulated world I’ve predicted in prior posts?

I gave some thought to this question in my recent paper, Practicing Theory. There I pointed out that law schools, and particularly law faculty, have benefited from the same regulation that has benefited lawyers.  Although lawyers now complain that legal education is insufficiently “practical,” they have only themselves to blame for any deficiencies.  The legal profession has established law school accreditation as a costly barrier to entry, and then effectively delegated control over what was taught in law schools behind the regulatory walls.

I also argued in the above paper that the debate over the content of legal education in a deregulated world is not the one that we seem to be having — that is, between “practice” and “theory.”  When deregulation comes the market will control content.  It’s far from clear that the market will demand that lawyers keep doing what they’ve been doing, which is what lawyers mean by “practice.”  It follows that law schools should not necessarily train students to do what lawyers are doing right now.  New lawyers’ roles will require new types of education.

My article outlines some future roles of lawyers, and how law school can help train for these rules.

Lawyers as collaborators:   In the new world of legal services, the more menial tasks will be done by machines or non-professionals, leaving lawyers for the more sophisticated stuff.  This will require collaborations across the physical and social sciences.  For example, lawyers might work with psychologists to incorporate the tools of behavioral psychology into creating and applying consumer, securities, and other regulation. Legal experts also will have to learn to work with (or be) computer engineers to produce the powerful technological tools I’ve discussed in previous posts.

The lawyer as manufacturer: Lawyers will not simply be applying old cases to new fact situations to advise clients what they should do. Rather, they will be designing the products discussed in previous posts such as contracts and compliance devices.  As designers they will need to delve into basic theories of contract production, deterrence and the like.  While automation handles many legal tasks, designing the tools for these tasks will require experts who understand their basic architecture.

The lawyer as lawmaker: Lawyers, freed from simply applying the law, may be increasingly involved in designing it.  This entails an understanding of how and why laws, constitutions and procedural systems work.  The theory taught in law schools, including economics, philosophy, history and comparative law, was often not very relevant to routine law practice.  When software and low-paid workers take over those tasks, the legal experts who remain will need this theory.

The lawyer as information engineer: Lawyers and scholars might be able to use data to predict the future.  But to do that they will need theories from such fields as economics, psychology, sociology, decision theory, and political science to construct the models that make sense out of the raw data.  This work also provides another reason why lawyers will need to learn how to collaborate with (or be) computer scientists.

The lawyer as capitalist: Lawyers can make a lot of money in the capital markets from being able to predict legal outcomes that determine asset values. The demand for this expertise could increase the demand in law schools for training in securities and finance law. It also could refocus the study of such basic areas as contract, property, and tort law from advising and litigating to handicapping the results of litigation.

Global legal education: Legal educators increasingly cater to law students from outside the United States. They therefore need to focus on the basic principles of American common law and system of government.

Private meets public law. The theories legal experts will need to learn to move from applying existing law to creating new legal structures will have to meet market demands rather than educators’ preferences. While legal experts no longer may be able to ignore such fields as constitutional and administrative law, they will have to take with them into these fields the tools and lessons of private ordering and markets.

Educating business lawyers. Many legal experts will move directly into businesses.  But in-house lawyers’ tasks may change from the current model.  Increasing automation of corporate contracting and compliance may help embed legal work into the basic structure of business.  In-house lawyers will move from talking to business people to being business people.  This suggests that legal education and business education may merge for at least a subset of legal experts.

The end of one-size-fits-all:  Licensing, accreditation and bar exams have locked in a single model of three-years of law school with a fairly standardized curriculum.  The developments discussed in my previous posts make this model increasingly untenable.  The new legal expert must be trained for business, law making, technology design and many other tasks that cannot be encompassed by a single course of study.  Moreover, this world will rapidly evolve in uncertain ways once freed of licensing’s constraints.  Legal educators will have to be free to experiment with a variety of different approaches, much as business schools do today. The accreditation standards that survive as part of the new regulation of lawyers will have to provide this freedom.  This argues for the “driver’s license” approach to licensing suggested in a previous post in which lawyers can use their home state license to practice anywhere. Such an approach could allow for different forms of mandatory training for different types of specialties.  These requirements could evolve as states balance the need for some regulation against the clamor by local consumers for access to cheaper services.

Lessons for today’s law schools:  What should law school faculty and administrators do now?  The top six or so can probably keep plugging away at what they have done:  teaching high end theory to top law students.  These students likely will be the legal architects of the future.  When the new era comes, the top six schools will have the resources and reputation to turn on a dime and embrace the future.

But for the Harvard wannabes that think they can ignore the changes shaking the profession and party like it’s 1899:  you are ill-serving your students and will be fighting for your lives in a few years.  The time to think about the future is right now.

It’s been a great symposium.  Many thanks to all of our outstanding contributors!  This Symposium demonstrated blogging’s potential for productive intellectual discussion of an important current topic.  We expect to have more such virtual conferences.

Read the full piece here.

My previous post in this symposium argued that deregulation is upon us.  Here I’ll discuss what that could entail.

The legal information expert:  I summoned up the specter of computers practicing law.  There is in fact no doubt that computers can practice law as that term is defined by some courts and regulators: giving personalized legal advice.  Clearly computers already can process a lot of data and come to fairly accurate determinations of many types of legal questions.

This does not, however, mean that computers can replace lawyers.  It means that lawyers will have to learn to work with technology.  The “legal information experts” of the future will have to provide the human insights about the world of law that computers must have to do their jobs.  They must also make the choices that computers can’t. For example, what types of contractual structures work best with the new types of arrangements that arise in a constantly changing business world?  What choices should individual clients make among the alternatives that a computer provides?

This is good news for lawyers.  Lawyers can focus on the more sophisticated tasks that require human ingenuity as computers take over the routine.

The policy architect. Freed by technology from routine, lawyers can increase their involvement in designing laws and other legal structures.  Computers may be great historians but they are not yet equipped to make judgments about what the future should look like.  Lawyers need not leave lawmaking to legislators, but can participate in a private market for law. Kobayashi and I discuss in a recent paper the potential for such private lawmaking and the changes in the law that could make it happen.

The death of the law firm.  Although I’ve written the obituary for Big Law, regulation continues to sustain a semblance of the big law structure.  These firms are sustained by rules restricting referral fees and non-lawyer financing of firms engaged in the practice of law.  At a more basic level, law firms address clients’ costs of obtaining information about lawyer quality.  Law firms presumably can help by monitoring, mentoring and screening lawyers, so that the client just needs to choose a firm with a good reputation.  But as big law weakens, so does its ability to provide these services.  More importantly, the markets and technologies discussed in my previous post can step in and solve clients’ information asymmetry better than can today’s law firms.

The future of licensing.  It’s unlikely that lawyer licensing will completely die.  It will be hard to reconcile complete deregulation of law practice with continued licensing of doctors, tour guides and horse dentists.   But there’s an important difference between lawyers and these other professions:  the prodigiously powerful lawyer interest group has managed to restrict access to the extremely broad field of human activity called the “practice of law.”  This regulatory monolith is bound to fracture.

It’s not clear what will remain.  Certain types of services to consumers may require a license, on the theory that ordinary consumers can’t fully protect themselves from lemons. Also, courts may insist that licensed lawyers conserve public courts’ scarce resources.  Licensing may reflect something like the traditional British distinction between barristers and solicitors.

Another approach to licensing may be to change how it is done.  Lawyers now must be licensed in every state where they practice law.  This enables states to erect regulatory walls that impede national law practice.  It also forces professional rules to be uniform in order to accommodate our mobile and global society.

A better option, similar to a system I’ve suggested for law firm regulation, is a “driver’s license” approach, where lawyers get a license in the state of their principal residence which they can use to practice anywhere in the country. Unlike the internal affairs doctrine for corporations, states could issue licenses only to their residents.  Because lawyers are likely to practice mainly where they live, this helps ensure that the licensing jurisdictions will have a stake in good regulation and prevent a potential race to the bottom.  At the same time, the drivers’ license approach would enable more jurisdictional competition for lawyer regulation than we have today, and thus help pave the way for the developments discussed in my previous post.

Much of the writing on deregulating the legal profession asks skeptically whether it could or should happen.  It was logical to wonder what could change when the profession was locked up tight by the lawyers themselves. What opposing political interest group was comparably well-organized or well-informed? Consumers could sue to break up the regulatory monopoly, but who would represent them? They could boycott lawyers, but then would have to face law’s complexity on their own.  Besides, who could argue with lawyer licensing when so many other professions also had to be licensed?

Today unlocking the law is no longer political science fiction.  A number of forces have created alternatives to traditional U.S. lawyers and law firms, and therefore interest groups positioned to push their way into the competitive arena.

We are not alone:  Once U.S. lawyers lived in an impregnable fortress, surrounded by vast oceans, possessing the sole keys to their superior legal system and incomparable access to the world’s largest clients.  Now transportation and communication developments have shrunk the world and produced global trade and corporations.   The world demands global lawyers, and firms have responded by establishing global practices.  U.S. lawyer regulation now must compete with the rest of the world.

The UK Legal Services Act 2007 provides a glimpse of what is to come.  The Act, instigated by consumers seeking cheaper legal services, allows “alternative business structures,” including publicly traded law firms and firms combining legal advice with other services, including banking and finance.

In short, U.S. lawyers will be forced to compete with their deregulated counterparts in other lands.

Meet the new law firms.  Even within the existing U.S. regulatory structure, new kinds of law firms are arising.  I don’t mean just new versions of the traditional lawyer-only firm. Non-lawyer-owned firms, such as those managing legal process outsourcing, are selling a different but competitive product.  Such firms are already deregulating the U.S. legal services market.

Another kind of non-lawyer-owned firm is the litigation hedge fund.  As discussed in my Death of Big Law (at 801), “[h]edge funds investing in litigation are changing the traditional lawyer-client model of litigation.” Despite (or perhaps because of) prohibitions on outside-owned law firms, funding of litigation is increasingly coming from the capital markets.  The hedge fund’s lawyers provide the expertise as to how to value the lawsuits, but not the capital.  As discussed below, it’s not clear how long these lawyers will be human.

Non-human lawyers. As I’ve discussed repeatedly on TOTM, and in a recent article with Bruce Kobayashi, lawyers are increasingly having to compete with faster, cheaper and more accurate computers.  In other words, the information revolution is finally coming to law.  This of course is already happening with e-discovery, and more generally data management systems that feed into litigation.  It is also happening with automated contracting (e.g., here, here and here, and discussed here).  Computers can work with corporate data to provide high-tech compliance that reduces the need for litigation in the first place, or help firms make accurate litigation management decisions. Computers and the web also can help clients hire lawyers and price their services.

More interesting legal technologies are on the horizon.  If computers can play Jeopardy with the champions or write news articles, why shouldn’t they be able to argue cases in briefs or in front of judges, or predict the outcomes of cases?

The key insight here is that what we call law is basically information.  A judicial decision relies on information from prior judicial decisions.  These decisions collectively, as well as litigation information available from Pacer and other sources, processed by powerful computers, can predict future decisions at least as accurately as computers now predict the weather.  Future computer advances could leave humans far behind in what we now refer to as “legal reasoning.”

Non-human clients.  A skeptic might argue that while many alternatives to traditional legal services are already available, they all run up against a stone wall of regulation which lawyers are unlikely to dismantle.  Again, my point above is that these superior alternatives and technologies create their own interest groups that compete with lawyers not only in markets but in politics.  But there is an even more powerful force for change:  corporations.

Corporations have their own lawyers working in house.  These lawyers, who are backed by extensive resources and motivated to reduce legal costs, can buy and use whatever tools will help corporations deal with the law, including powerful software and computers.  In-house corporate lawyer-executives do not have the same incentives as lawyers in private practice to resist technologies that could put them out of business.  And corporate users of legal services do not confront regulatory impediments to these new technologies.

The immediate future might be a world bifurcated between corporate and individual clients.  This might seem to be another case of the haves coming out ahead. But how long can such an equilibrium persist?  With the cost of legal services soaring and the poor and middle class increasingly denied access to legal services, how long will lawyers be able to hold their fingers in the regulatory dyke?  Lawyers can’t resist change forever as long as the market produces more and cheaper and better alternatives to traditional legal services.

As discussed in my Death of Big Law, developments like those discussed above already have contributed to the demise of the traditional Big Law model.  While Big Law’s empire crumbles, new businesses and business models are rising from its ashes.  They are already invested in the future and have reason to fight for its deregulation.

Lawyers’ choice is simple:  (1) try to block change, refuse to engage in the debate, and increase the likelihood and extent of their future obsolescence; or (2) meet the competition head on and demonstrate how they can continue to add value in the new age of legal information (more on that in my next post).

I thought I’d aim my opening post at the question that motivated my interest in this symposium:  is behavioral economics leading us to the end of free markets and the takeover of the regulatory state?

Consider how far we’ve come since the days of “caveat emptor,” when sellers had a legal right to fool and cheat buyers, and consumers were free to be fooled and cheated.

Read the full piece here.

Now that Dodd-Frank is law people are focusing on the details buried in it. This includes the broad new whistle-blowing provision for 10% to 30% bounties to people who alert the Securities and Exchange Commission to securities law violations that result in million-dollar-plus SEC recoveries.

Read the full piece here.

When we leave our houses, cars, money, children and bodies in others’ hands we might worry whether they will be there when we return or wake up. We can protect ourselves, as did primitive societies, by never leaving, bolting the doors or sticking with a small circle of friends and relatives. But delegating responsibility and control frees us to do what we enjoy or do best. Expert professionals and business people find new ways of keeping us healthy and making us money. Our willingness to buy and use the unfamiliar–to expand our circle of trust–encourages innovation.

As Congress moves toward likely passage of the colossal Dodd-Frank Wall Street Reform and Consumer Protection Act, it’s worth reflecting that many of the bill’s 2,315 pages have little to do with preventing another financial meltdown and leaves considerable collateral damage in its wake.

Read the full piece here.

Lately, business could really use a friend. Regulatory panic has followed fresh on the heels of the financial meltdown. Grand political ideas that competing interest groups can smother in good times tend to burst out in post-bust regulatory orgies. Legislators tend to focus on reining in unbridled business with little concern for how laws might reduce the economic blessings business can confer. When reform’s fires rage, rhetoric rules, difficulties melt away and compromises suddenly materialize, wrapped in vague statutory language that grant broad discretion to regulatory agencies.

Read the full piece here.