CHAPTER 3A
The PURPOSE of LAWYERS
"For plaintiffs as well as defendants the whole ordeal of litigation is usually miserable, disruptive, painful and froth with potential for stigma." (Galanter & Epp 1992)
The use of the legal system is the best cure for holding others accountable when they affect one's life. The very fact that the law gives remedies to the average person will reduce the need to exercise those remedies due to a steadily rising educational level of the entire population, and knowledge among the transgressors that law will penalize them in many instances.
Many studies focus on the cost to society of litigation or the alleged cost per lawyer by reduced GDP, without looking at the alternative. The alternative to law in the civilized society is taking a dispute to the street, the result of which is recorded in history.
Only a very small number of those wronged actually sue. The economic effects of uncompensated injury is not felt in a society inwhich the missing producer is quickly replaced with some unemployed individual seeking work. (Epp 1992). If the group which consumes lawyer's services is still undersupplied, that is, still not consuming all of the service which it would find itself "entitled" to . . . . the price must be too high, limiting access.
Does what may occur and does not because of a lawyer have a value ? (possibly having positive or negative results depending on where you stand). These direct costs and externalities are very difficult to quantify. "Does the ex ante (from before) effects of prospective disputes promote efficient economic and social behavior, that otherwise would not occur." Rosen (1993) at 244 . Uncertainty and apprehension increase the desire for reassurance, as from a lawyer.
It is an economic reality that in a world of legal theft production activity decreases and leisure expands, because one way to minimize theft is to have little or nothing to steal. The higher the value of the property protected, the more efficient the use of the resources used in it's protection.
We must never lose sight of the ball - the misallocation of resources is the loss - the productivity which might have been, and will never add to properity, rather than the misallocation called "tunnels to nowhere w/ the profit money".
Strategic litigation - that is, litigation which is intended not to vindicate a right but to secure a business advantage - is prohibited already. This type of litigation creates dead weight loss when allowed to progress in court. (Olson 1992)
Lawyers have a task to prevent inappropriate litigation (when entitlement is not due), and when litigation occurs they must facilitate cooperative behavior. (Olson 1992) but entitlement is the name of the game in law.
First the law determines who has an entitlement. ( Calabresi & Melamed 1972) . Polinsky (1979) describes that once the entitlement is established, we apply one of three approaches :
• Property rights approach - entitlements protected by injunction.
• Liability rule approach - entitlements are determined, and the net entitlement is superior, but limited; after which damages are determined by a collective body if the net entitlement is exceeded by the superior party.
˚ Full information liability rule (the optimal economic model)
˚ Incomplete Information (the realistic real-world reality)
˚ Almost Cooperative -
˚ Uncooperative -
˚ Destructive -
• Tax subsidy approach - determine the marginal external damage; applies well to large numbers; especially good when there is a positive transaction cost.
˚ Full information tax subsidy(the optimal economic model)
˚ Incomplete Information tax subsidy (the usual reality)