Jim,

We both favor fee regulation where there is no bargaining between lawyer and client but we favor this for different reasons. I think fee regulation could modestly reduce some heavily padded lawyer fees. You think that fee regulation would substantively improve the tort system.

Movie stars also work on contingent fee (they get paid a share of the gross). Using your argument this causes them to go for films with a low probability of a high payoff – the potential blockbuster that alas is usually a dud. If we regulated fees so that movie stars could be paid only a straight salary that would certainly change how movies are financed. The studios (big law firms), for example, would become more important. A few actors (lawyers) would make less money but the average actor would make more (if you don’t give people a lottery ticket you have to increase their average salary). But would changing how actors are paid really improve the quality of the movies? I doubt it.

If you want better movies there’s only one solid method, attack the source of the problem, and raise the taste level of the public. If the public demands Armageddon that is what they will get. The same is true of improving the tort system – fiddling around with fees won’t do it – we need to address the substantive issues that give judges and juries a taste for bad law.

The unsophisticated plaintiff abused by the sharp lawyer is a classic rhetorical device. I’m sure it happens but there is a real tension in claiming on the one hand that contingent fees are so powerful they motivate lawyers to flood the courts with thousands of manufactured cases (and the plaintiffs are “happy to sign up”) and on the other hand argue that contingent fees are a form of plaintiff abuse.

If contingent fees really were a form of plaintiff abuse then we would expect sophisticated plaintiffs not to use contingent fees but in fact both the rich and poor, corporations and individuals, repeat players and one-time suers use contingent fees. In fact the trend today is to structure defense contracts on a contingent basis.

I agree that Lester Brickman has done very interesting work on contingent fees but, as you note, it is hard to believe his theory that there is collusion in the market for lawyers.

Brickman is also wrong about some of the facts. He likes to say, for example, that the return to contingent fee lawyers has increased by 1400 percent since 1960. As I showed in my paper “The Problem of Contingent Fees for Waiters” (The Green Bag, Summer 2005) this is implausible.

Brickman does not calculate lawyer income and its growth directly but reasons that “increases in average verdicts, adjusted for inflation, translate into proportionately higher annual incomes.”

A growth rate of 1400 percent since 1960, however, appears to be inconsistent with what we know about lawyer income today. The Bureau of Labor Statistics estimates median lawyer income in 2002 of $90,290. If lawyer income had grown by 1400 percent since 1960 this would imply a real ($2002) income in 1960 of just $6019. But GDP per-capita in 1960 was $15,075. Thus Brickman’s growth estimate implies (implausibly) that lawyers in 1960 were earning substantially less than the average person.

In contrast, Wolff (1976) estimated that income for “Deans, Lawyers, and Judges” in 1960 was $56,680 (in $2002 dollars) nearly ten times the figure implied by Brickman’s calculation. Using Wolff’s more realistic estimate I calculate that real income for lawyers has increased by 59 percent since 1960. Substantial, but a far cry from 1400 percent.

Let me end this part of our debate by quoting your wise comment:

Far too often, those with too little respect for limited government ignore the cautions of public choice theory and the law of unintended consequences and rush to "correct" market imperfections with cures that are worse than the disease.