Larry Ribstein responds to my post on law as a mature industry:
Steve says law has the characteristics of a mature industry: growth of large firms squeezing out smaller ones; stiffer competition and price-cutting; less innovation. The result will be permanent oversupply, a problem that law schools refuse to confront. Ultimately the market will shut down the lowest ranked schools.Larry's wrong about me being wrong. You see, I think we're both right. Or, more precisely, I'm right and Larry has the potential of becoming right.
Plausible but wrong. The real problem is that law is an immature industry. Constricted by heavy regulation of the legal profession and the absence of conventional property rights in legal knowledge, not only has it not matured, it has not really even achieved full-fledged existence. Innovation has not declined – rather, it has not really even begun. Also, as I argued in Death of Big Law, this absence of a viable business model has led to the demise of large firms, and the industry’s devolution into smaller ones – the exact opposite of Bainbridge’s symptoms of “maturity.” Big Law’s relatively brief period of success owed to a confluence of macroeconomic factors with the licensing-enforced monopoly. When this vein played out, the prospectors went bust.
Innovation and entrepreneurship can create the first legal information industry. Studying how this can happen is my next project, as I discussed a few weeks ago. More specifically, Bruce Kobayashi and I will be focusing on the creation of formal and informal property rights in legal knowledge. Tentative title: “Owning the Law.”
This has obvious implications for legal education. The winners will not necessarily be the current first tier, but the law schools that find a way to train the first generation of legal entrepreneurs.
You see, we're talking about different things. I'm talking about the legal industry as it is today, with what Josh Wright aptly calls "sub-optimal economic performance because of state-imposed barriers to entry and lack of property rights in legal information, both leading to weak incentives to innovate."
Larry's talking about an entirely different legal industry, freed of "state-imposed barriers to entry" and empowered by enforceable "property rights in legal information" (that, ironically, would probably have to be created by the state).
Maybe the legal profession can reinvent itself to become the immature industry Larry describes, just as a mature caterpillar transforms itself to become a young butterfly. Maybe. Personally, I think that hoping for such an outcome requires one to embrace the Nirvana fallacy, but YMMV.