My last post provided an overview of my draft article The cost of justice at the dawn of artificial intelligence and explained the basic logic of Baumol’s disease costs for the practice of law. Just like in any other market, if lawyer productivity increases at a slower pace than the rest of the economy, legal services will become more expensive. And if technology like artificial intelligence causes legal productivity to increase at a faster rate than the rest of the economy, then legal services will become cheaper.
In this post I address the question of whether law has remained stagnant, i.e. whether legal services have become relatively more expensive due to low productivity gains. Legal actors and audit literature usually ignore cost disease. More generally, legislators and other actors have all but ignored my main inquiry: how changes in legal productivity and therefore costs over time might make the legal system more or less efficient and thus have implications for a wide range of legal doctrines and practices. But some commentators have wondered whether the law suffers from cost disease, and all unanimously concluded that it does. I tend to agree, but the case may be harder to prove than they allow.
Bill Henderson, for example, carefully documents that legal services cost indices have risen faster than the consumer price index. Similarly, Emery Lee and John Brooks have argued that Bureau of Labor Statistics data support the conclusion that the legal sector is stagnant. Eric Helland and Alex Tabarrok argued that cost disease has plagued the law, as well as “other labor-intensive, highly skilled services.” Several bloggers have concluded that the law suffers from cost-related illnesses without detailed evidence. With all this agreement, any believer in Condorcet’s Jury Theorem should assign a fairly high probability to the claim that law is stagnant.
The problem is that it is very difficult to measure changes in the quality of legal services over time, and changes in quality that have occurred may therefore not be reflected in Bureau of Legal Statistics data. Even though hourly billable rates have risen more than general inflation, if an hour of legal services made much more today than in the past, law could be a productive industry. Indeed, over the decades, lawyers have benefited from labor-saving technologies such as word processing, online legal databases, and e-discovery software.
Furthermore, the legal system itself develops more and more precedents. Perhaps the accumulation of precedent means that an ever-increasing percentage of problems that arise can be easily resolved. If so, the legal system as a whole is becoming more productive. But it’s possible that new legal precedents generally create more issues for lawyers to argue about. And while precedent tends to clarify things, the accumulation of precedent may not keep pace with the ever-increasing complexity of our legal world.
What is at stake in the question of whether law is stagnant? Stagnation means that the apparatus of the legal system is becoming less and less capable of making relevant legal distinctions in a convenient way. An increasing number of cases will depend on the dynamics of negotiations in the shadow of the law, and while increasing costs will lead to the resolution of more cases, the bargaining outcomes could deviate far from what a hypothetical inexpensive legal system would require . Deserving defendants may pay nuisance settlements, deserving plaintiffs may accept a small dollar amount, and variables such as relative risk aversion and status as plaintiffs in the litigation can greatly influence the amounts paid.
These changes are not easily measurable. Data on how many cases are settled is not always readily available, and even if it were, there is no way to know what the outcomes of those cases would be at trial. Some have envisioned a system of randomly selecting some cases for trial, but in the absence of such a system, we cannot easily observe how the high cost of litigation is introducing noise or error into the judgment. And any gradual increase in this noise could easily go unnoticed. In the first installment of this series, I noted that no previous scholar has ever linked the “disappearance trial” to cost disease. This highlights that the scant amount of commentary on law and cost disease has been sidelined and that the possibility of stagnation has failed to penetrate the general legal consciousness. In my opinion, the disappearing process is the strongest empirical evidence of cost disease, unless one believes that the law is rapidly becoming much clearer and easier to apply.
The legal system still provides for some processes, but their shadow becomes increasingly larger and less defined. Continued stagnation would have implications for class actions, arbitration, trial procedure, and the choice between rules and standards. But past trends toward stagnation do not demonstrate that the law will continue to stagnate. In the next installment I will consider whether we should expect AI to reverse stagnation, if indeed the law has remained stagnant, and then I will turn to the question of how the legal system can prepare for the possibility that productivity may shift in one direction or the other. other.