Edward's right that state bars are barriers to entry that raise legal fees, but that doesn't explain the disparity between the client's bill and the associate's salary. I don't see any explanation aside from "market forces" (like the ones I describe above).

So why shouldn't new market forces restructure the firms? It's circular reasoning to say "because firms ignore competitive pressures." Change is driven by customers. Globalization is giving them more attractive alternatives to doing business in America. Securities litigation won't be so rich when companies list in Europe to avoid our accounting rules. M&A's will heat up in countries that compete for corporations by lowering the corporate income tax. When manufacturers target consumers in China or India, to save on discovery and products liability class-actions, our politicians will protect their taxes by lowering the the costs of doing business in America. The costs of compliance and litigation are low-hanging fruit.

Gideon points out that outsourcing will be led by "smaller firms trying to save money to compete and from American corporations looking to shave costs in their legal departments." If so, the smaller firms that steal market share from the old big firms will BECOME the new big firms.

Our preference for "old big firms" is another market force that keeps firms afloat, lowering our salary by lowering the supply curve. That's OUR reluctance to change. (Eben, you like?) If Ivy League law schools don't teach us any differently, won't the "old big firms" stay on top? No: those "new big firms" will just be led by the lawyers from "second tier" schools. I make a similar argument in the last paragraph of the [revised and summarized] DeathofGiantFirms.

-- AndrewGradman - 27 Jan 2008