Cato Policy Analysis No. 322 October 9, 1998

Policy Analysis

The Case for a Free Market in Legal Services

by George C. Leef

George C. Leef is president of Patrick Henry Associates in East Lansing, Michigan, and adjunct professor of law and economics at Northwood University.


Executive Summary

Every state except Arizona prohibits the unauthorized practice of law (UPL); a person must possess an attorney's license to hold himself out as a lawyer. UPL prohibitions restrict the right to pursue a legitimate occupation and the right to contract with others. By imposing a costly barrier to entry, they distort the market for legal services. Consequently, consumers face higher prices and fewer choices.

UPL prohibitions are part of a wider phenomenon: governmental limitations on freedom to engage in voluntary economic transactions. Before the New Deal, the Supreme Court regarded economic liberty as worthy of constitutional protection. Since 1937, however, the Court has drawn a distinction between "fundamental" and "nonfundamental" liberties, with economic liberties consigned to the latter category.

Governmental interference with fundamental liberties faces "strict scrutiny" from the courts and is frequently invalidated, whereas interference with economic liberties receives only minimal scrutiny, implying that legislatures may do virtually anything in the field of economic regulation. That distinction is without any constitutional basis.

UPL prohibitions are neither necessary nor sufficient to protect consumers from incompetence. A competitive market, reinforced by remedies for fraud, breach of contract, and negligence, offers the optimal combination of price and quality.

Because they infringe upon individual freedom and serve no legitimate public purpose, UPL prohibitions should be repealed or struck down by the courts as unconstitutional.

Full Text of Policy Analysis No. 322 (PDF, 48 pgs, 148 Kb)

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