Doctors and lawyers

Steven Brill of The American Lawyer and CourtTV fame has a very long story in the new issue of Time on some of the more absurd financial dysfunctions of The Best Health Care System in the World(tm). In short, TBHCSITW has managed to do to society at large approximately what law schools have done to their students:

When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?

This is same question that ought to be asked of the many law school apologists who treat the increase in the cost of legal education as something akin to a law of thermodynamics, as opposed to a fabulously successful exercise in
rent-seeking by people who have captured a regulatory process.

Critiquing that exercise highlights how the law school cartel has managed to do something which has completely eluded the bar as a whole. A question well worth investigating is why the licensed members of The Best Legal System in the World(tm) have, in comparison to their medical brethren, been so unsuccessful at using their own cartel to protect the economic position of lawyers, as opposed to that of law schools.

Consider some numbers:

In 1989, legal services accounted for approximately $157 billion, in 2005 dollars, of US GDP. In 2011 that same figure (again in 2005 dollars) was $156 billion. Over this time GDP increased by 68% in constant dollars, which means that, as a share of the economy, the legal sector shrank by approximately 41% over the past two decades.

Meanwhile law schools have increased graduate output by 24% over this same time frame, while the cost of private law school tuition doubled in real terms, and that of resident public law school tuition increased by a factor of nearly five. In other words, we’ve radically increased both the price and the supply of something (a license to practice law) whose relative economic value has been collapsing.

The situation in the medical profession has been the precise opposite. After medical school admissions
rose rapidly from the mid-1960s through the 1970s, the AMA reacted to warnings that there would soon be a “glut” of doctors by essentially freezing medical school graduate totals for three decades (Medical schools graduated around 16,000 to 17,000 people every year between 1980 and 2008. Finally, in reaction to new warnings that the country is facing a severe shortage of doctors, medical school admissions began to rise again about five years ago).

The most striking contrast between the situation in law and medicine is, that while economic demand for legal services has, relatively speaking, been contracting radically (note to law school administrators: economic demand = people having enough money to pay for something they’re willing to use that money to pay for), that for medical services has gone through the roof. Between 1980 and 2008, the proportion of American GDP devoted to the health care sector increased by an astounding 77.8%.

Now of course doctors only captured part, and perhaps a relatively small part, of that increased demand in the form of their direct compensation. But what the AMA has been remarkably good at ensuring is that, with trivial exceptions, everyone who graduates from medical school gets to be a practicing physician for more or less as long as they want to be. That is, in the context of capitalism’s gusts of creative destruction, an extraordinarily valuable benefit — and it’s why comparisons between the “average” compensation of doctors and lawyers, or, more far more accurately, between graduates of medical schools and law schools, are essentially meaningless.

Here’s Brill’s description of the plight of large numbers of patients within the contemporary American health care system: “They are powerless buyers in a seller’s market where the only sure thing is the profit of the sellers.” That would also make for a good description of large numbers of law students within the contemporary system of legal education. Of course law school apologists would respond that buyers of legal education are not powerless in comparison to, say, buyers of health care who are suffering a medical emergency or from a serious illness. And that’s true — which is precisely why, now that the power of better information has been placed into their hands, applications to law school are collapsing even faster than the economic demand for legal services.