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Old-timers in all walks of life commonly lament that things are just not what they were in the “good old days.” Sometimes, it is easy to refute that charge. When people pine for the simpler United States of 50 years ago, they often suffer from selective amnesia. They remember the nice evening chats with neighbors on the front porch, but conveniently forget battles over segregation, McCarthyism and the Cold War. Yet the charge seems to ring true in the fast-paced world of legal practice. Many adherents of this view attribute this decline to the rise of the law and economics movement with its preference for free markets, including advertising. But this facile account misapprehends the academic mission of the field. Law and economics is a tool that seeks to understand how self-interested individuals will respond to incentives. The movement is not responsible for greed, which, like corruption, is part of the human condition that will manifest itself when the opportunity arises. But law and economics can help explain both the insight and error in this familiar lamentation. Start with the sensible proposition that individuals respond to both legal and social incentives, both for better and worse. Yet beware: The constant professional emphasis upon statutes and case law can wrongly foster the belief that legal sanctions with their immense coercive power are the dominant drivers of individual behavior. Most routine disputes about the practice of law don’t call for legal intervention precisely because the wide range of low-level social sanctions works remarkably well to keep people in line. The success of these sanctions, however, varies inversely with the size of the target group. In small communities and businesses, individuals are constantly under the watchful eye of family and friends; any small deviation from some deeply held social norm is likely to prompt a pointed response. Similarly, the stability of traditional legal practice in close-knit communities also meant that lawyers and firms did not risk losing clients just because they lost a case or a motion. But when 20-person firms morph into global conglomerates, sanctions based on observation and censure weaken, so that partners who are losing cases may find themselves flirting with the idea of perjury, and harried associates pad their billable hours. Competition exacerbates cheating in the practice of law just as it does in high-level sports. Yet the full picture is a good deal more complex. First, nothing limits the problem of corruption to private firms. Indeed, free markets do not have any monopoly on bad conduct. Government at all levels has also grown vastly in size. For example, prosecutors are subject now to political pressure to push dubious legal theories to browbeat private parties into submission. A few decades ago, committee staffers at the federal and state level were often praised for their technical expertise and institutional independence. Today these same staffs often operate under a heavy political thumb, with resulting accusations of partisanship. The increase in size of government makes it harder to develop long-term norms of respect. Just consider the massive stonewalling on judicial nominations by both parties-far greater evidence of pathologies than any supposed decline in the private practice of law. It’s not all bad news Second, this glum assessment misses some of the positives of the new legal environment in the private sector where the greater openness of legal practice has also led to some lasting social improvements. The once-comfortable clubiness often excluded women and religious and racial minorities from many firms. It often created cozy relationships where major corporations stuck with the same tired outside counsel through thick and thin. Today’s competition has led to an enormous explosion of professionalism and vitality in legal practice (even in the government sector), gains that are easily overlooked when all the hoopla is directed to the tiny fraction of cases with serious ethical lapses by lawyers. But such cases are bound to be more common because the practice of law is so much larger now than a generation ago. Third, there are strong counterpressures to shady practices both in the private and government spheres, because people adapt to the new environment. Unseemly and unethical business practices not only damage the reputation of the legal profession, they also impose real costs on the clients and adversaries of lawyers who misbehave. For example, today, corporate general counsel no longer meekly pay bills, but routinely subject them to organized scrutiny. And evidence of internal misconduct that might have been shrugged off a generation ago often produces prompt and thorough internal investigations. And yet all is not well with the practice of law. Massive fraud has been uncovered in the administration of workers’ compensation and in vast portions of asbestos litigation. But it would be a mistake to attribute these solely to market forces, for these cases are brought in such profusion in part because legislatures and courts have fashioned unsound rules on liability, damage and evidence that have invited the current wave of litigation. For this unhappy news, the law and economics approach offers a positive explanation, but not a justification. When states create legal rules that reward private misconduct, then some (but not all) lawyers and clients will energetically take advantage of the openings afforded to them. Self-interest is a fact of life. Litigation is a deeply coercive form of behavior that only sound legal rules can control. No amount of sentimentality can gainsay the inescapable nonmarket elements in the practice of law. Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law at the University of Chicago Law School and a senior fellow at the Hoover Institution at Stanford, Calif.

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