Rising Legal Costs

A continuing, oft-expressed concern about the legal system, in the English-speaking world at least, is the rising cost of legal services, whether civil or criminal. Given the labour-intensive nature of legal services, this is not surprising to an economist, as we discuss below. In order to be effective, policy must be informed before reforms are considered, lest reforming zeal be dissipated ineffectually. This is underlined by J. Michael McWilliams (1992), then President of the American Bar Association, writing in a special issue of Business Economics devoted to the costs, both out of pocket and in delays, of civil litigation in the U.S.A. He argued that, whether lawyers or business economists, advisors of those who must make decisions involving future activities “must be able to predict the consequences of their choices in order that they [the advised] may act with fiscal prudence, legal correctness and moral propriety. Both the passage of excessive time between event and resolution and the accrual of excessive costs to vindicate a course of action render the predicted consequence less palatable and less certain” (pp. 19–20). In another paper in the special issue, Hoadley (1992) argues that in the U.S. the direct and indirect costs of litigation including damage awards had reached such a level that they could “no longer be ignored or downplayed by business economists in their analyses and forecasts” of the U.S. economy. He believes that the accompanying burdens on managerial planning and decision time are reducing American productivity and competitiveness. Hoadley gives several reasons (p. 10) for the heavy use of the legal system in the U.S.: