Lawyers, Markets and Regulation

Lawyers, Markets and Regulation

Frank H. Stephen

Frank H. Stephen’s evaluation of public policy on the legal profession in UK and European jurisdictions explores how regulation and self-regulation have been liberalized over the past 30 years. The book surveys where the most recent and radical liberalization involving the ownership of law firms by non-lawyers is likely to lead, and appraises the economic literature on the costs and benefits of regulating markets for professional services. It challenges socio-legal views on professional legislation and highlights the limitations of regulatory competition, as well as the importance of dominant business models. The author reviews the empirical work underpinning these theories and policies. He also evaluates the effectiveness of regulatory competition as a response to regulatory capture.

Chapter 6: Evidence on effects of deregulation

Frank H. Stephen

Subjects: economics and finance, industrial economics, institutional economics, law and economics, law - academic, law and economics, regulation and governance


In Part I of this book the case for regulating the legal profession was examined. In the course of that examination it was argued that the self-regulation of the legal profession had been called into question since it could be operated in the interests of the profession rather than in the interests of consumers of legal services or indeed society as a whole. In Chapter 4 it was seen that there was strong evidence that members of the profession and also their regulatory bodies responded to incentives in ways that were consistent with lawyers’ self-interests influencing their behaviour and of self-regulatory bodies regulating in the interests of their members. In Chapter 5 the process of liberalization of regulatory regimes for lawyers in the countries of the European Union has been described. Much of the discussion both in policy and in academic literature has been based on a priori reasoning with only limited recourse to empirical evidence. In the present chapter such empirical evidence as is available on the effects of regulation or its relaxation will be examined. First, however, the requirements of good empirical research in this field are discussed.In evaluating regulation (or any other institutional system) care must be taken to avoid what Harold Demsetz (1969) has described as ‘nirvana’ economics, in other words, comparing a real world set of institutions (such as regulation) with an abstract idealized alternative.

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