The Economics of Courts and Litigation

The Economics of Courts and Litigation

New Horizons in Law and Economics series

Francisco Cabrillo and Sean Fitzpatrick

Dissatisfaction with the working of courts is ubiquitous. Legal inertia and maladministration are the norm in many countries and have significant social and economic repercussions. No longer a theme relegated to the peripheries of economic analysis, the administration of justice is now recognised by most economists as being of fundamental importance for economic development, a factor increasingly being acknowledged by policymakers at all levels. The departure point for this book is the authors’ belief in the need for a systematic analysis of the incentive structures facing key players in the courts and litigation process. They focus not only on structures pertaining to the common law tradition, but offer analysis of issues not normally found in the North-American literature, such as the Latin notary and the selection and values of judges in civil law systems. They further propose an ample list of considerations for a reform agenda.

Chapter 5: Lawyers

Francisco Cabrillo and Sean Fitzpatrick


1. INTRODUCTION The market for legal services is large and increasing. In 2006 the two largest firms by revenue in the world, Clifford Chance and Linklaters – both British based – had turnovers of £1030.2 million and £935.2 million respectively.1 Global revenue for the top 25 firms was £14 813.7 million. Four law firms, Wachtell Lipton Rosen, Cravath Swaine and Moore, Sullivan and Cromwell, and Paul Weiss (all American based), generated revenue per partner of over £3 000 000 in 2005.2 And law firms are getting larger and going global; in 2006, for instance, Clifford Chance had 3695 lawyers operating in 29 global offices.3 In practically every developed country, one can observe a substantial increase in the number of lawyers in recent decades. This has often led to lawyers receiving an uneasy welcome in society. This is not new. Comments on the legal profession throughout history have often reflected its uneasy reception among contemporaries in society. Most American and British lawyers have at one time or another heard Shakespeare’s reference to their profession in Henry the Sixth, Part II: Dick: The first thing we do, let’s kill all the lawyers. Cade: Nay, that I mean to do. Bentham was rather short in the flattery department when he commented that ‘Lawyers are the only persons in whom ignorance of the law is not punished.’ Today, complaints generally emphasize the role of lawyers in promoting litigiousness as well as their often significant role in both increasing costs and excessive delays in litigation. One of...

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