Lawyers, the economy, and society

Lawyers, the economy, and society

Lawyers and litigation really ruining the American economy.


Are lawyers and litigation really ruining the American economy? Presumably not, as the early 1990s have been flush with economic growth in the United States. But wouldn’t we be doing even better if we didn’t have so many lawyers suing over every suffered slight? Perhaps so, but the jury is still out on that claim. This article strives to advance the discourse on law in the economy and provide information on other, non-economic effects of lawyers and the legal system. The article employs empirical data and statistical methods to investigate whether the U.S. economy has been harmed materially as a consequence of lawyer numbers or litigation.

A recent flurry of empirical research has examined the effect of lawyers upon economic growth. This scholarship has focused centrally upon the question of whether a large number of lawyers undermines the economic growth of nations. Some economists have found evidence that nations with large numbers of lawyers have lower rates of economic growth.(1) Other researchers have reanalyzed the issue and disputed these conclusions.(2) The debate has now been closely joined in Law & Social Inquiry between Steve Magee of the University of Texas (arguing that the United States has too many lawyers) and Charles Epp of the University of Wisconsin (arguing the contrary).(3)

The debate began with a unpublished paper by Magee, to which Epp responded.(4) Magee’s paper contended that a certain optimal number of lawyers were necessary to the functioning of an economy, but that the United States had a substantial supraoptimal excess that was draining economic growth potential. He supported this claim with studies of economic growth rates across nations. Epp countered with a new set of estimates on lawyer numbers among nations and used a cross-national comparison to show no such negative effect to lawyerification (an excess of lawyers).(5) Magee responded to this critique by using different numbers and different variables to demonstrate a continued association between the supraoptimal excess of lawyers and economic growth.(6)

This past research has involved cross-national empirical studies of economic growth, without much theoretical analysis of precisely how relative numbers of lawyers might affect a nation’s economy.(7) Given the widespread sense that lawyers are frustrating business activity, however, any statistical confirmation of a negative effect is likely to be persuasive to the populace and policymakers. Indeed, Magee’s quantitative conclusions have found a receptive public audience. The public perception is significant, as politicians have called for sweeping legal reforms in response to the perceived effects of lawyers on the economy.(8) This perception does not necessarily correspond with reality, however.

Given the importance of the legal system and the economy, further analysis is required to ascertain whether lawyerification or litigation indeed undermines economic growth. I scrutinize Magee’s claims more closely in this article, varying the samples studied, the models tested, and the dependent variables considered. Such closer examination does not support the Magee Curve. There may be some negative effect of an excess of lawyers, but it is so weak as to be nearly indiscernible. Moreover, this effect may well be due to the contributions made by lawyers to the production of valuable but non-marketed goods, such as democracy and individual liberty.

This article’s first section reinvestigates the economic evidence. It includes an attempt to replicate Magee’s findings with new and larger data sets on lawyers and consideration of different independent variables. This new analysis helps to evaluate the robustness of past results. The second section is also meant to check the results of Magee and others by considering other dependent economic variables. I go further than the previous research by investigating the effect of lawyerification on not only gross measures of economic welfare (GDP growth rate) but also on the components of such growth (for example, savings and investment). If the theoretical explanations of lawyer effects are accurate, an association should appear between lawyerification and these other variables. I also test the effects of lawyerification on noneconomic variables, such as freedom and human welfare. This analysis is prerequisite to any assertions about the effect of lawyers on societal “wealth,” which includes much more than simple income.

To date, empirical research has focused almost exclusively upon the correlation between lawyer numbers and overall economic growth rates among various nations. This research has shown that certain sets of data and variables and a particular time frame will reveal a significant negative association between lawyers and growth, while other data, variables and times will find no such association. My study uses different sets of data and variables to test for the association. This is not meant to be “just another study,” as the different sets of data and variables can enable a check on whether the association is robust or a coincidental artifact of a single test formula.


Like the tests in most previous studies, the test used here employs cross-national comparisons of lawyerification (the relative number of lawyers in the population of each country). Some have criticized this approach as unlikely to yield meaningful results.(9) Indeed, the crossnational method has numerous shortcomings, which I have already explicitly recognized.(10) Attempts to compare the effect of lawyers among nations may be confounded by cultural differences, different definitions of lawyers, different roles of lawyers, political differences, and any number of other factors.(11) Given the growing importance of international trade, U.S. lawyers may have an effect on foreign economies, as well as our own.

All the confounding variables certainly interfere with a clean test to identify the effects of lawyers. Nevertheless, there is reason to proceed with the investigation. Magee used this methodology, and the crossnational procedure is the best approach to test the claim of critics that the United States suffers vis-a-vis Japan and other Asian nations because of our greater number of lawyers. Moreover, such crossnational research is a common and accepted tool for economic investigations of many other variables.(12) Finally, even flawed empirical evidence represents a considerable advance over the anecdotal basis of much of the prevailing analysis of lawyers and litigation.(13)

Indeed, there is a considerable economic literature seeking to explain divergent growth rates among nations. Studies have found relative national economic growth rates explained by too large a government share,(14) too small a government share(15) fertility rates,(16) education,(17) culture(18) various components of government spending,(19) savings rates,(20) inflation,(21) composition of exports,(22) civil instability,(23) luck,(24) and other factors. A review of the literature indicated that “over 50 variables have been found to be significantly correlated with growth in at least one regression.”(25) After subjecting these studies to sensitivity analysis, the authors of the review found that most associations were “fragile,” and probably spurious.(26)

A correlation between lawyers and economic growth may be likewise fragile and dependent upon a particular set of data or variables. If the results thus lack robustness, it seems likely that the findings are more likely an artifact than a description of reality. However, it is certainly plausible that lawyers and the law could have a significant economic effect. After all, R.H. Coase’s Nobel acceptance speech observed that “the legal system will have a profound effect on the working of the economic system and may in certain respects be said to control it.”(27) Given the importance of legal rules, Magee’s hypothesis is not unreasonable.


Much of the rancor among the differing lawyer studies centers around the varying estimates of how many lawyers practice in each country. Steve Magee based his conclusions of a negative effect of lawyerification on a set of lawyer numbers that was criticized by Charles Epp, who claimed to have a better set of estimates.(28) Magee responded that the two sets of numbers were quite similar and that Epp’s numbers produced the same results as his own.(29) Their debate has become increasingly embroiled in pleniloquence over minutiae, as they dispute the actual number of lawyers in Germany, Korea, etc.(30)

In fact, both Magee and Epp rely on data sources that have serious and unavoidable reliability problems. There are no highly reliable numbers for international lawyer numbers, and there is no global definition of lawyer. The primary source for the prior research is a Bar Foundation directory.(31) This source never professed to measure the number of lawyers across the globe. The Directory reports on lawyers in various countries, giving estimates of bar association membership in some countries (which may be compulsory or noncompulsory) and estimates of lawyer numbers for other countries, without any explanation of methodology. For some countries, it is not clear whether the Directory is reporting total numbers or bar association numbers. In recognition of some of the shortcomings of the Bar Foundation data, Marc Galanter sought to improve and supplement the data base with additional lawyer numbers from a variety of outside sources, including press reports.(32) Magee too has turned to additional sources for more data and has even gone so far as to “extrapolate” lawyer numbers to expand his data base.(33) These efforts may have yielded more accurate lawyer numbers, but they lack the careful investigation and crosschecking characteristic of many international financial variables. Moreover, there is some noncomparability problem, as the varying sources may have used different definitions of lawyer and employed different methodologies in their counts.

Efforts to improve the data bias have produced a new, investigator bias problem. Given the many sources and different numbers, the researcher himself has sometimes chosen the appropriate “best estimate” of lawyer numbers for any given country. This is not a desirable situation. Despite researchers’ scrupulous efforts to choose the best data for each country, one cannot guarantee that some subconscious investigator bias did not infect a choice among numbers, in order to produce a desired result.(34) It is too easy to dismiss a certain number for, say, Japan, while subconsciously recognizing that the number would likely contradict one’s hypothesis. This is precisely why medical researchers insist that studies be double masked, or double blind, due to the demonstrated presence of unconscious researcher bias.(35) Magee’s study is not double blind, it is not single blind, it is not even myopic. In his studies, the investigator bias may even be an open and conscious one — Magee likes Galanter’s numbers for Japan and Germany precisely because they better fit his new hypothesis.(36)

In fairness to Magee and Epp, their research and other prior studies suffered from the noncomparability and subjective bias problems largely because they were unavoidable. There was no identifiable, consistent source of international lawyer numbers for a significant number of countries. Now, however, a new source of information is available. A journal published by Euromoney PLC provides estimates of the number of lawyers in a broad range of nations.(37) While this source also contains flaws, it provides some check on the Magee/Galanter estimates and may help add to our understanding.

The use of this source reduces the noncomparability problem at least somewhat because it is a single internally consistent source.(38) It averts the subjective bias problem because these estimates were not prepared with an eye to research on the economic effect of lawyers. These Euromoney numbers have the added benefit of providing data for a larger number of countries than all of the previous sources combined. This new data set undoubtedly contains inaccuracies(39) (perhaps significant ones) but offers some advantages over earlier data sets for statistical purposes and can also be used to test the sensitivity of preceding studies. I use both the new Euromoney numbers and the Galanter data set, which enables an investigation of how sensitive the results are to the lawyer numbers used.

Descriptive statistics for the two data sets on lawyers are presented in Table 1. In addition to the statistics for the two full samples, the table shows the statistics for the 36 nations that the two samples share in common. The two sets are reasonably comparable, though the Euromoney numbers are consistently a little higher than those estimated by Galanter. The relative ranking of relative number of lawyers in the countries is similar for the two sources, except for the nations of Belgium, Finland, and Venezuela.(40)

TABLE 1 Descriptive Statistics on Lawyer Numbers

N Mean Min Max SD

Full Sample

Galanter 38 .782 .017 2.62 .674

Euromoney 70 .817 .006 4.0 .852

Joint Sample

Galanter 36 .805 .017 2.62 .681

Euromoney 36 .973 .035 3.11 .884


The debate to date on the effect of lawyers has also dwelt extensively upon the methodology of the studies. Once again, this debate has become rather picayune and arcane, focusing on such issues as the proper time period for growth statistics or the effect of specific countries (Does Chile alone explain the correlation?)(41) Most of the early studies involved a common statistical technique of regression of lawyerification (expressed by lawyers as a percentage of some group of white collar workers)(42) against the chosen period economic growth, without consideration of potential confounding factors.(43) More recent studies have sought to consider other factors, and Magee employs a distinct set of independent control variables. I hope to escape some methodological arguments by consistently using Magee’s time period and other methods, as well as my own.

The following variables are used in this study.(44)

LAWPOP = percentage of lawyers in the population according to Euromoney

LAWPOPSQ = the Euromoney percentage of lawyers squared

GLAWPOP = percentage of lawyers in the population according to Galanter

GLAWPOPSQ = the Galanter percentage of lawyers squared

GDP60 = real per capita GDP in 1960

SEC60 = secondary school enrollment ratio in 1960

GDP85 = real per capita GDP in 1985

SEC 85 = secondary school enrollment ratio in 1985

REVCOUP = number of revolutions and coups per year from 1960-85

HSGOV = the ratio of government consumption expenditure to GDP averaged from 1960-85

TRADE = the relative proportion of international trade to GDP in 1985

INV = the ratio of real domestic investment to GDP averaged from 1960-85

The present study uses the following equations:

(1) A + [B.sub.1](LAWPOP) + [B.sub.2](LAWPOPSQ) + [B.sub.3](GDP60) + [B.sub.4](SEC60) + [B.sub.5](HSGOV) + [B.sub.6](REVCOUP) = X

(2) A + [B.sub.1](LAWPOP) + [B.sub.2](LAWPOPSQ) + [B.sub.3](GDP85) + [B.sub.4](SEC85)+ [B.sub.5](HSGOV) + [B.sub.6](REVCOUP) = X

(3) A + [B.sub.1](LAWPOP) + [B.sub.2](LAWPOPSQ) + [B.sub.3](GDP60) + [B.sub.4](TRADE) + [B.sub.5](INV) = X

(4) A + [B.sub.1] (LAWPOP) + [B.sub.2](LAWPOPSQ) + [B.sub.3](GDP85) + [B.sub.4](SEC85) + [B.sub.5](HSGOV) + [B.sub.6](REVCOUP) + [B.sub.7] (TRADE) + [B.sub.8] (INV) = X

In these equations A is a constant, B represents the coeffcients for the independent variables for each test, and X is the effect on economic growth. The first equation is the multiple regression employed by Magee in his most recent study of lawyers and the economy.(45) The second equation is Magee’s equation, with independent variables on GDP and education updated to 1985, to provide greater simultaneity with the data on lawyers. The third equation adds lawyer numbers to the variables identified by Levine and Renelt as robustly significant determinants of international growth in their review of the research.(46) The fourth equation combines Magee’s variables with those found significant by Levine and Renelt.

None of the equations is independently dispositive, but judgment should be applied to the varied or consistent results of each of the four. While the variables in the Magee equations have a rough correspondence with those found significant by Barro, Magee provided no justification for selecting his set of variables and excluding others found significant by Barro.(47) The first two equations offer a check on Magee’s results. The third and fourth equations incorporate additional critical variables that are almost certainly linked with economic growth.

In all four equations, the null hypothesis is that lawyers have no measurable effect on the economy, or whatever other dependent variable is being studied. Consequently, the study cannot prove the absence of an effect of lawyers but is designed to discover provable effects of lawyerification.(48) Given the relative crudeness of the available tools and the presumption of no effect, statistically significant results should provide reasonably persuasive evidence of some lawyer effect.


Magee and others contend that a supraoptimal excess of lawyers is undermining United States economic growth, at a cost of about $640 billion in 1990.(49) Even in the U.S., lawyers are only .003 of the population, and Magee’s purported excess represents only .001 of the population. This group of lawyers must be working with great vigor and malice to produce such substantial costs. I have previously argued that Magee’s supraoptimal excess position makes little theoretical sense.(50) He maintains that many lawyers perform productive functions, while others are nonproductive. His quadratic equation erroneously assumes, however, that reduced lawyer numbers would mean keeping the productive lawyers and eliminating the nonproductive. In reality, fewer lawyers would probably mean a reduced number of efficient, productive lawyers as well as a reduction in the inefficient lawyer group.(51) Magee does have supporting data for his quadratic hypothesis, though, so this section reanalyzes the empirical evidence.

Lawyers and Economic Growth

Before assessing the effect of lawyers on economic growth, an investigator must first determine the time period of growth statistics to be used. Magee and Epp have used different periods of growth, including 1960-1985, 1960-1980, and 1980-1988. A case can be made for use of any of these periods. Magee is the leading commentator about lawyers and the economy, however, and I shall let him set the terms of this analysis. Consequently, this analysis uses the 1960-1985 growth period employed by Magee and focuses upon his equation. Tables 2 and 3 display the results of multiple regressions of the four equations for this time period.(52) Table 2 provides results for the Euromoney sample and Table 3 uses the Galanter sample.

TABLE 2 Euromoney Lawyers and Per Capita GDP Growth 1960-1985

(1) (2)

LAWPOP .675(**) (2.34) .112


LAWPOPSQ -.660(**) -.284

(2.36) (.838)

GDP60 -.779(***)


SEC60 .739(***)


REVCOUP -.418(***) -.264(*)

(3.8) (1.89)

HSGOV -.331(***) -.198

(3.3) (1.63)

GDP85 .05


SEC85 .329




N = 63 N = 62

[R.sup.2] = .703 [R.sup.2] = .319

(3) (4)

LAWPOP .678(*) .539(*)

(1.95) (1.75)

LAWPOPSQ -.573 -.411

(1.67) (1.33)

GDP60 -.273(*) -.735(***)

(1.98) (4.7)

SEC60 .485(***)


REVCOUP -.305(***)


HSGOV -.361(***)




TRADE .202(*) .174(*)

(1.79) (1.84)

INV .576(***) .391(***)

(4.6) (3.3)

N = 58 N = 57

[R.sup.2] = .415 [R.sup.2] = .793

TABLE 3 Galanter Lawyers and Per Capita GDP Growth 1960-1985

(1) (2)

GLAWPOP .747(*) .188

(1.73) (.346)

GLAWPOPSQ -.715(*) -.324

(1.75) (.639)

GDP60 -.809(***)


SEC60 .667(***)


REVCOUP -.446(***) -.267

(3.0) (1.32)

HSGOV -.270(*) -.074

(1.98) (.417)

GDP85 .275


SEC85 .096




N = 37 N = 37

[R.sup.2] = .707 [R.sup.2] = .281

(3) (4)

GLAWPOP -.180 .198

(.371) (.451)

GLAWPOPSQ .238 -.163

(.537) (.403)

GDP60 -.395(**) -.705(***)

(2.55) (4.0)

SEC60 .384(*)


REVCOUP -.328(*)


HSGOV -.230(*)




TRADE .236(*) .212(*)

(1.72) (1.76)

INV .701(***) .441(**)

(2.6) (2.62)

N = 36 N = 36

[R.sup.2] = .525 [R.sup.2] = .673

These results replicate Magee’s findings with new lawyer data, so long as one uses Magee’s precise set of independent variables. Indeed the Euromoney numbers support his hypothesis better than the Galanter numbers. (Equation (3) in Table 2 is also very nearly significant at the .1 level.) This finding has some importance, because it indicates that Magee’s results are not contingent on accepting his own selectively chosen lawyer numbers or a peculiar sample of countries. The statistical significance in Equation (1) adds credibility to the quadratic hypothesis that excess lawyers hinder economic growth.

Significance largely disappears, however, once a different set of variables is used. Once trade and investment variables are added, there is no remaining significant association between lawyers/population squared and growth. Epp has demonstrated that Magee’s theory is not replicable for different time periods of growth.(53) These results suggest that Magee’s findings may be a coincidental artifact of a certain unique constellation of variables that he happened to employ, a problem that is common to many cross-national studies.(54) The results do not permit a conclusive rejection of the Magee hypothesis, however. The signs for the coefficients are in the direction he predicted in seven of the eight tests. The consistency of the signs offers some evidence that at least a weak effect may be occurring. In order to evaluate the reality of the effect, I have looked for an association between lawyer populations and other economic variables.

Lawyers and Other Economic Variables

This section tests lawyer numbers against several other economic variables. Such tests are essential to determine whether lawyers indeed have a material effect on economic growth. Gross experiments mean relatively little without a theory to explain their results. Astrophysicist Sir Arthur Eddington suggested that no experiment should be believed until “confirmed” by theory. There are at least two distinct theories why lawyers may undermine economic growth: the perverse incentives hypothesis and the resource diversion hypothesis.(55)

These rationales can be tested by examining the effect of lawyer numbers upon intermediate dependent economic variables. If the theories are accurate, results should appear for variables other than simple growth rate.

One theory is that lawyers and litigation undermine growth by creating perverse economic incentives. Under this theory, lawyers and litigation redistribute income from the productive sectors of society to the presumably less productive. This is the well-established theory of rent-seeking behavior. It may be difficult to establish whether lawyers cause rent-seeking or simply facilitate the ability of parties to engage in the practice. When designing a solution, it may become important to determine whether lawyers are a cause or a symptom. At this stage, however, we are still investigating whether lawyers are a problem, associated with inefficient rent-seeking behavior.

In a rent-seeking society, the wealthy would be more likely to be sued and found liable. Penalizing the productive thus creates a perverse incentive structure, reducing the returns to wealth creation. If the theory were true, Americans would have relatively less incentive to save and invest, because some of the fruits of saving and investment would be seized by others engaged in rent-seeking litigation or other inefficient activities caused by an excess of lawyers.

The perverse incentives theory implies an effect of lawyerification on gross national savings.(56) Two studies have already been performed to test this hypothesis. The initial study on the theory was conducted by self-acknowledged critics of lawyerification but nonetheless found that “lawyers do not have a significant negative effect on investment, which they would if rent seekers specialized in redistribution of physical capital.”(57) My own previous study similarly found no significant effect of lawyerification on gross national savings.(58) These studies were limited, and the perverse incentives hypothesis continues to have adherents, including the prominent economist Mancur Olson.(59)

To evaluate the perverse incentives hypothesis, I examine the effects of lawyers on a measure of national savings.(60) The results of the analysis are shown in Tables 4 and 5.

TABLE 4 Euromoney Lawyers and Gross Domestic Savings

(1) (2)

LAWPOP -.501 -.675(*)

(1.35) (1.8)

LAWPOPSQ .320 .481

(.897) (1.33)

GDP60 .410(**)


SEC60 -.061


REVCOUP -.145 -.089

(1.04) (.605)

HSGOV -.252(*) -.298(**)

(1.99) (2.34)

GDP85 .225


SEC85 .155




N = 60 N = 60

[R.sup.2] = .226 [R.sup.2] = .249

(3) (4)

LAWPOP -.192 -.493

(.472) (1.17)

LAWPOPSQ -.007 .338

(.010) (.802)

GDP60 .271(*) .396(*)

(.824) (1.90)

SEC60 -.277




HSGOV -.265(***)



TRADE -.079 -.035

(.611) (.275)

INV .410(**) .515(***)

(2.3) (3.3)

N = 55 N = 54

[R.sup.2] = .276 [R.sup.2] =.367

TABLE 5 Galanter Lawyers and Gross Domestic Savings

(1) (2)

GLAWPOP .489 .538

(.977) (1.01)

GLAWPOPSQ -.641 -.637

(1.35) (1.28)

GDP60 .272


SEC60 .184


REVCOUP -.112 -.014

(.639) (.074)

HSGOV -.408(**) -.315(*)

(2.57) (1.92)

GDP85 .596(*)


SEC85 -.167




N = 35 N = 35

[R.sup.2] = .360 [R.sup.2] = .376

(3) (4)

GLAWPOP -.154 .035

(.257) (.058)

GLAWPOPSQ -.072 -.233

(.132) (.42)

GDP60 .373(*) .323

(1.95) (1.37)

SEC60 .035




HSGOV -.364(**)




TRADE -.04 -.012

(.26) (.073)

INV .381(*) .324

(1.95) (1.41)

N = 35 N = 35

[R.sup.2] = .287 [R.sup.2] = .408

These results on savings do not support the perverse incentives hypothesis. Using the original Magee equation, for which there was statistical significance in the economic growth study, there is no significant association between number of lawyers and savings. There is no significance to the associations predicted by the hypothesis in any of the eight tests and the signs were wrong in three of them. These results should cast considerable doubt on whether an excess of lawyers is undermining incentives to save and invest. The perverse incentives hypothesis also ignores much of the reality of legal representation in the United States today.(61) Lawyers may be as likely to protect wealth as to assault it.

Testing the perverse incentives hypothesis can also be done with investment as a dependent variable. The same methodology was used in this test, except that investment was deleted as an independent variable (because it is the dependent variable in these tests). The results are reported in Tables 6 and 7.

TABLE 6 Euromoney Lawyers and Gross Domestic Investment

(1) (2)

LAWPOP .331 1.09

(1.07) (.365)

LAWPOPSQ -.311 -.010

(1.04) (.349)

GDP60 -.062


SEC60 .545(***)


REVCOUP -.231(*) -.054

(1.97) (.451)

HSGOV -.009 .155

(.088) (1.51)

GDP85 .383(**)


SEC85 .320(*)



N = 63 N = 63

[R.sup.2] = .429 [R.sup.2] = .495

(3) (4)

LAWPOP .227 .453

(.605) (1.22)

LAWPOPSQ -.227 -.454

(.609) (1.22)

GDP60 .452(***) .014

(3.3) (.072)

SEC60 .469(**)




HSGOV .013




TRADE .213(*) .114

(1.79) (1.0)

N = 58 N = 57

[R.sup.2] = .291 [R.sup.2] = .441

TABLE 7 Galanter Lawyers and Gross Domestic Investment

(1) (2)

GLAWPOP 1.37(***) 1.05(**)

(3.2) (2.47)

GLAWPOPSQ -1.25(***) -.968(**)

(3.1) (2.45)

GDP60 .183


SEC60 .486(**)


REVCOUP -.215 -.065

(1.45) (.414)

HSGOV -.102 .041

(.765) (.299)

GDP85 .420


SEC85 .132



N = 37 N = 37

[R.sup.2] = .518 [R.sup.2] = .563

(3) (4)

GLAWPOP 1.49(***) 1.43(***)

(3.4) (3.5)

GLAWPOPSQ -1.17(***) -1.25(***)

(2.8) (3.2)

GDP60 .160 -.151

(1.0) (1.57)

SEC60 .412(*)




HSGOV -.134




TRADE .289(**) .203

(2.16) (1.57)

N = 36 N = 36

[R.sup.2] = .459 [R.sup.2] = .573

Here the two data bases diverge considerably. The Euromoney results show no association between lawyers and investment. Using the Galanter numbers, however, produces a highly significant quadratic association, just as Magee predicted. The latter result certainly offers support for the perverse incentives hypothesis. The positive results are not very persuasive, though. There is little reason to prefer the Galanter numbers to those of Euromoney, which cover a much broader sample of countries. Thus, the weight of the evidence on savings and investment is negative, but the association between the Galanter lawyer numbers and reduced investment provide some support for the perverse incentives hypothesis.

A second theory to explain negative effects of lawyers is the resource diversion hypothesis. This argument maintains that a large number of lawyers diverts productive human and financial capital from productive endeavours into the legal sector. Under this theory, lawyers may or may not actually cause direct harm to the economy through inefficient incentives, but attorneys necessarily waste human resources because they don’t contribute to growth, as do other professions. The large number of lawyers thus represents an inefficient use of the nation’s scarce human capital stock. At its most basic, the theory argues that the United States would be better off if a number of lawyers became research scientists or engineers.(62) Some respond that most lawyers would not make good engineers.(63) Those who go into law may be ill-suited for other productive occupations. Mancur Olson, however, has more faith in attorneys, suggesting that “lawyers are on average relatively talented and industrious people who would be extremely productive for the society in other endeavors.”(64)

One might question how, theoretically, an economy could have inefficiently large numbers of lawyers in a functioning free market. Such an outcome might be explained if lawyers can create demand for their own services, as sometimes alleged. If lawyers can induce a plaintiff to bring a lawsuit, thereby dragooning a defendant into court, along with its own lawyers, the free market might not find an efficient equilibrium. Yet this scenario relies on the common misconception that most lawyers engage in litigation. In reality, most lawyers provide counseling to businesses and individuals and are bound by the rules of the free market.(65)

The resource diversion hypothesis contains two central assumptions. First, the hypothesis assumes that America’s potential engineers and scientists are being drawn into the practice of law. This implies that nations with more lawyers will have fewer engineers or other scientific personnel. Second, the hypothesis contends that nations with more engineers and scientific personnel will have greater growth than nations with relatively more lawyers. Both assumptions can be tested empirically.

The first assumption implies that lawyers and engineers are fungible, at least to a degree. Too many lawyers produce a shortage of scientists or engineers.(66) If true, one would expect nations with more lawyers to have fewer engineers and scientists. Tables 8 and 9 examine whether such an association exists. The number of lawyers (LAWPOP), the squared number of lawyers (LAWPOPSQ), and per capita gross domestic product (employed as a control variable) are regressed against several different measures of national engineering and scientific resources — national expenditures on scientific research and development as a percentage of GNP (SCRDEXP),(67) the number of scientists and engineers in research and development (SCIENGRD),(68) the number of scientists and engineers per one thousand population (%SCIENG),(69) and the percent of postsecondary students enrolled in scientific or technological fields (%SCITECH).(70) The regression is performed for both the Galanter and Euromoney estimates of per capita lawyers.

TABLE 8 Euromoney Lawyers and Scientists


LAWPOP -1.34(**) (2.2) -1.61(**) (2.8)

LAWPOPSQ 1.50(**) (2.51) 1.86(***) (3.3)

GDP85 .613(***) (4.2) .555(***) (4.0)

N = 26 N = 26

[R.sup.2] = .560 [R.sup.2] = .591


LAWPOP .025 (.037) 1.01 (1.35)

LAWPOPSQ -.153 (.228) -1.49(*) (1.99)

GDP85 .684(***) (4.2) .092 (.503)

N = 26 N = 26

[R.sup.2] = .446 [R.sup.2] = .306

TABLE 9 Galanter Lawyers and Scientists


GLAWPOP -.339 .259

(.663) (.405)

GLAWPOPSQ .566 .039

(1.12) (.488)

GDP85 .568(***) .483(**)

(3.4) (2.8)

N = 26 N = 26

[R.sup.2] = .479 [R.sup.2] = .438


GLAWPOP .769 .275

(1.52) (.397)

GLAWPOPSQ -.792 -.489

(1.58) (.718)

GDP85 .643(***) .063

(3.8) (.276)

N = 26 N = 26

[R.sup.2] = .488 [R.sup.2] = .053

The results are rather confounding. The most dramatic statistical significance is found when the Euromoney lawyer numbers are tested with SCRDEXP and SCIENGRD in Table 8. The plainly significant results are precisely the opposite of those hypothesized by Magee. Rather than his inverted U shape, the results show a U shape and suggest that high levels of scientific research and development is associated with particularly high levels of lawyerification. Rather than diverting resources, large numbers of lawyers are associated with increased resources in research and development. This result is not entirely implausible

It would be premature to conclude from this data that large numbers of lawyers necessarily encourage scientific and engineering research. Only two of the eight equations yield this result with significance, and four of the equations show the inverted U shape of Magee’s work (though the results here are not statistically significant). There is no statistical significance in any of the equations using the Galanter numbers. Thus, the results do not generally support the resource diversion hypothesis that large lawyer numbers hamper economic growth by reducing the number of productive scientists and engineers.

While the results provide little support for the first presumption of resource diversion (the trade-off of lawyers and engineers), the second presumption (greater growth in nations with relatively more scientists and engineers) is also questionable. In the following test, the four variables measuring scientific and engineering personnel and resources are regressed against GDP growth for 1960-1985, using the additional variables that were employed by Magee. The results are displayed in Table 10.

Table 10 Scientists, Engineers and Economic Growth

(1) (2)



%SCIENG .230




SEC60 .683(***) .582

(3.31) (2.53)(**)

GDP60 -.743(***) -.755(***)

(3.99) (3.46)

HSGOV -.404(***) -.378(***)

(3.24) (2.94)

REVCOUP -.402(***) -.441(***)

(2.91) (2.90)

N = 42 N = 46

[R.sup.2] = .524 [R.sup.2] = .440

(3) (4)







SEC60 .797(***) .675(***)

(4.88) (3.44)

GDP60 -.744(***) -.849(***)

(4.54) (4.08)

HSGOV -.375(***) -.317(**)

(3.55) (2.37)

REVCOUP -.411(***) -.406(***)

(3.52) (2.75)

N = 57 N = 39

[R.sup.2] = .498 [R.sup.2] = .493

Table 10 makes clear that the statistically significant negative correlation between lawyers and economic growth is not attributable to resource diversion. Contrary to intuitive popular belief, nations with more scientists and engineers generally do not have higher levels of growth.

A supporter of the resource diversion hypothesis might still claim that lawyerification may not reduce total numbers of scientists or engineers but lowers their quality, as inferior candidates fill the void left by those who became lawyers. This claim is more difficult to test empirically, but it certainly is at odds with some measures of reality. Notwithstanding its large lawyer population, the United States has been preeminent in many scientific fields. In the sciences, U.S. citizens have won 158 Nobel prizes, while Japanese citizens have won but four.(73) I am aware of no evidence that U.S. engineers or scientists are inferior to those of other nations. The available evidence strongly suggests that large lawyer numbers do not harm economic growth by diverting talent from other occupations.

This result is not so surprising and may be a tribute to the free market in labor. If the market is working properly, each nation will have about the optimum number of lawyers and the optimum number of engineers. The size of this optimum will differ among nations, according to the theory of comparative advantage. If each nation is approximately at its own optimum, one would not expect any particular association between either lawyer numbers or engineer numbers and economic growth. On the other hand, if the market is not functioning well and lawyers or engineers are not at their optimum in many countries, it is just as possible that a nation will have too many engineers as that the nation will have too many lawyers.(74) Mancur Olson observes that “lawyers in the right kind of legal system are no less valuable to society — and no less important for economic growth — than engineers.”(75)

With the foregoing statistical analyses, the economic criticism of lawyers has grown much shakier. The negative association between number of lawyers and overall growth appears in one particular equation but not others. There is little significant correlation between lawyerification and investment or savings and what exists is contrary to the pattern predicted by Magee and the GDP growth studies. More lawyers do not mean fewer engineers and, even if this relationship existed, it does not imply lower economic growth. If there is a case to be made that the United States has too many lawyers for its economic good, the critics must explain how lawyers hurt growth. Neither the perverse incentives hypothesis nor the resource diversion hypothesis finds any empirical support in this study. While the structure of the study cannot prove that lawyers do not hamper growth, the evidence is consistent with that conclusion. Magee’s findings may merely illustrate the aphorism of statistics that if you torture the data enough, nature will always confess.

Lawyers, Tort Costs, and the Economy

Even if absolute lawyer numbers are not an economic problem, the legal system is not necessarily absolved of inefficiency. The law is charged with considerable inefficient rent-seeking litigation that may not be correlated with absolute numbers of lawyers.(76) Lawyer numbers provide a convenient and politically attractive foil, but the true objections of the critics may lie elsewhere. The number of lawyers might not seem so bad in the absence of litigation against business that critics perceive as abusive. This section examines whether such litigation may explain adverse economic effects.

Many critics of the legal system focus their attack on the costs of tort litigation against business, sometimes called the “tort tax.”(77) They allege that excessive litigiousness imposes considerable unwarranted costs upon producers, often driving them out of business.(78) Those companies that can bear the costs and remain in business suffer from reduced competitiveness in the global marketplace.(79) If that is the case, then the overall U.S. economy, with its relatively large number of lawyers, would suffer.

The perverse incentives hypothesis generally presumes the use of tort litigation in rent-seeking redistribution. If the presumption is true, the hypothesis might be more accurately tested by a measure of tort litigation, rather than a measure of the total number of lawyers (though larger lawyer numbers are often assumed to yield more predatory litigation). Data on cross-national tort litigation rates is even scanter than on lawyer numbers. Fortunately, Tillinghast, an insurance research group, has estimated cumulative tort costs in twelve industrialized nations.(80)

Consistent with widespread opinion, the Tillinghast study suggests that tort costs in the United States are substantially higher than in any of the other nations studied.(81) The authors used international liability insurance costs as a proxy for tort costs and concede the imprecision of their measures, which might be off by as much as twenty percent.(82) Nevertheless, these are by far the best data available and should be reasonably accurate at least for a relative ranking of tort costs among the studied countries. The Tillinghast data also have the benefit of tracing relative tort costs back as far as 1975. The small sample size of nations for tort costs (twelve) produces obvious limitations for statistical analysis, but these are the only data available, so the analysis seems justified.

Examination of the international tort cost data offers several insights. First, there appears to be no material correspondence between total number of lawyers and tort costs in a country. Though economist critics of lawyers often assume that rent-seeking litigation is the primary function of lawyers, this presumption is demonstrably inaccurate — most lawyers are not litigators.(83) When tort costs are regressed with lawyer numbers, there is no significance (t = .298

Given the preeminence of the U.S. on both scales, some might suggest that there is a “lawyer problem” unique to this country.(85) Perhaps we have a singular adversarial culture in which large numbers of lawyers are responsible for excessive tort litigation. High tort costs do not themselves demonstrate an adverse economic effect, however.(86) The association between tort costs and economic growth can be studied with the Tillinghast data. While the sample size on such tort costs is much smaller than for the earlier studies, a limited regression is still possible with this data.

In this study, the independent variables considered are tort liability as a percentage of GDP in 1975 (TORT75), the increase in tort liability as a percentage of GDP from 1975 to 1991 (TORTINC), and HSGOV, REVCOUP, and LAWPOP.(87) Dependent variables are SAVING, GDINVEST, and the total GDP growth from 1975 to 1990 (GDGGR).(88) This methodology permits an examination of whether high tort costs or the rate of increase in tort costs is correlated with the economic variables. Under the perverse incentives hypothesis, one would expect a negative association with all three dependent variables. The results are reported in Table 11, for two different combinations of the independent variables.

TABLE 11 Tort Litigation and Economic Welfare


TORT75 -.055 .557 3.79(**)

(.177) (.913) (3.57)

TORT91 -2.46(**)


TORTINC .446 2.15(**)

(1.43) (3.66)

GDP75 -.865 -1.66(**)

(1.43) (3.55)

HSGOV .173 .863(**)

(.539) (2.73)



N = 11 N = 11 N = 11

[R.sup.2] = .219 [R.sup.2] = .240 [R.sup.2] = .809


TORT75 -.436 -.724 -.285

(1.45) (1.23) (1.87)

TORT91 1.79


TORTINC .193 -1.19

(.646) (1.41)

GDP75 .227 .869

(.390) (.253)

HSGOV -.210 -.813

(.679) (1.79)



N = 11 N = 11 N = 11

[R.sup.2] = .283 [R.sup.2] = .296 [R.sup.2] = .607

The results do not suggest any particular economic harm from tort litigation. There is no significance or near significance except in the third equation with six variables. This significance is probably spurious. The number of independent variables is unduly large for the sample size of cases, increasing the risk of spurious correlation. Moreover, the direction of the tort relationships appears incoherent and implausible. The relevance of this data are in the absence of an effect and the direction of the coefficients. Tort costs seem as likely to be positively related to growth in GDP or investment as negatively related.

Of course, this study cannot form a dispositive defense of economic effects from tort litigation. The sample size is inescapably small (N = 12) and the underlying data have a relatively large margin of error. The regression does have the benefit of comparing the growth of the comparable wealthiest industrial nations, which have considerable variance in tort litigation. Using the best available data, there is little empirical evidence to support the proposition that tort litigation hampers economic growth.

Any review of the effect of lawyers that addresses only economic variables is incomplete and misleading. Assessment of nonmonetary effects is crucial to an understanding of the impact of lawyers on a society. The non-economic benefits are more difficult to measure, but the following sections attempt to examine the extent to which lawyers promote certain non-monetary benefits.


When measuring human rights and freedom, there is no such convenient metric as money, and such intangible values therefore tend to be overlooked in economic analyses.(89) Yet freedom represents a nonmonetary value that may be promoted by lawyers and that is significant to human welfare.(90) Failure to consider levels of human freedom yields an incomplete picture of the influence of lawyers upon society. Richard Posner has criticized some studies of lawyers and economic growth as “superficial … because they ignore the contributions that lawyers make to nonmarket output.”(91)

Values such as individual freedom are a currency of the law. While lawyers indirectly produce a variety of goods, many of them economic, the direct output of lawyer activity is the vindication of some legal right. If a society recognizes a particular freedom as such a legal right, one might expect lawyers to advance the overall protection of that right. There is considerable

anecdotal evidence to support the position that lawyers advance human rights. Obviously, lawyers are the occupation that brings actions to enforce the Constitution or statute law.

Previous research has indicated that larger numbers of lawyers are associated with higher levels of human rights and democracy.(92) This study builds upon the prior research by using the improved database and a modified methodology. The freedom study uses only one test: A + [B.sub.1](LAWPOP) + [B.sub.2](GDP85) = X, which was the format for the first economic test. The Magee equation is abandoned, as there is clearly no reason to suspect a quadratic association between lawyer numbers and rights. Assuming that larger numbers of lawyers lower the cost of individual representations, the ability to bring cases defending rights would increase linearly with lawyer numbers.

This study uses the following five different measures of freedom: POLRIGHT, a measure of political rights that focuses on democratic elections(93)

CIVLIB, a measure of civil liberties, such as freedom of speech, religion and other negative human rights(94)

DUEPROC, a measure of judicial rights such as due process(95)

HUMANA, a comprehensive measure of human rights including some affirmative human rights(96)

HUMFREED, a United Nations measure of human rights that includes some affirmative human rights.(97)

The results of the multiple regression are presented in Table 12.

Table 12 Lawyers and Human Freedom


GDP85 .498(***) .663(***) .632(***)

LAWPOP .314(***) .204(***) .189(*)

N = 52 N = 52 N = 52

[R.sup.2] = .422 [R.sup.2] = .549 [R.sup.2] = .490


GDP85 .667(***) .725(***)

LAWPOP .159 .119

N = 52 N = 52

[R.sup.2] = .519 [R.sup.2] = .577

The effect of lawyerification on human freedom is rather pronounced and much clearer than the economic results. While GDP has a strong effect on freedom, lawyers have a significant positive effect on freedom that is independent of a nation’s wealth. Three measures (civil rights, political liberties, and due process) had clear statistical significance. The HUMANA result was close to statistical significance (p =. 125), but the HUMFREED result was not statistically significant (p = .219). It does appear that lawyers are much better at advancing negative rights (such as freedom of speech) than positive rights (such as a minimum standard of living).(98)

The conclusion that lawyers promote greater human rights makes theoretical sense. In a sense, litigation is the currency through which individual rights may be defended. Cases advancing voting rights or defending defendants’ rights or other negative constitutional rights are not particularly lucrative for either plaintiffs or their attorneys. Consequently, countries with a larger number of lower-priced attorneys should expect more litigation that is protective of those right.(99) It would be premature to assign clear causation to lawyer numbers in advancing rights

The positive association between lawyers and freedom must color the results of economic research. Even granting the unproved contention that lawyers hinder economic growth, who would not sacrifice some wealth in order to secure basic human rights, such as freedom of speech, freedom of religion, freedom from arbitrary imprisonment, and protection from invidious discrimination. The dimensions of the appropriate tradeoff between wealth and rights is unclear

(assuming that such a tradeoff exists). Given the weak negative economic evidence and the very strong positive freedom evidence, it is more difficult to contend that lawyerification is harming society.


The above results emphatically do not demonstrate that our legal system is functioning perfectly, that tort reform is unnecessary, or that abusive litigation never occurs. The anecdotes cited against the legal system may not be broadly generalizable, but they are extant. The international comparisons herein can give only gross results and are unlikely to pick up marginal adverse effects. Furthermore, the structure of the study is not designed to prove the utter absence of adverse economic effect from lawyers and litigation.

This study does refute those, such as Magee, who claim that litigiousness is so pervasive and perverse that it cripples the economy. Theodore Olsen has analogized the legal system to an insatiable deadly parasite consuming our economy and culture from the inside out, until the host society is destroyed completely.(101) However striking the metaphor, it is not borne out by reality. There simply is no substantial identifiable economic effect of either lawyers or litigation. Magee’s contrary findings are dependent on his clinging to a single equation with particular variables, and he offers no sound theoretical basis for either his results or his choice of those variables.(102)

Thus, it is time to shift away from the position that lawyerification has produced crisis conditions, warranting crude responses such as a moratorium on bar admissions. Similarly, former Vice President Dan Quayle’s civil justice reform effort was premised on the belief that the legal system was in crisis.(103) The absence of such crisis undercuts the need for such sweeping reforms. It does not follow, though, that no reform is appropriate, and some of the Quayle Commission proposals should at least be tested.

There plainly are problems, on a smaller scale but nonetheless serious, with the legal system.(104) Rather than lament a general litigation explosion or crisis, it is incumbent to turn to the “nitty gritty” of specific legal doctrines and procedures and investigate their consequences for efficiency and equity. This suggestion tracks Joel Seligman’s recent empirical analysis of securities litigation, which demonstrates that no radical surgery is required on private securities actions but suggests the need for more limited revisions in the law.(105) Moreover, some experimentation is surely in order. The absence of crisis undermines the call for universal adoption of a loser pays, English system of fee-shifting in litigation. The presence of some shortcomings in the system furthers the case for a limited and controlled evaluation of such a system. Deborah Hensler wisely suggests testing such a system on some intra-business litigation.(106)

Any reforms should respond to reality, not perception. Ironically, both critics and defenders of the legal system typically view the system as a Manichaen world characterized by individuals suing corporations. To critics, litigious individuals bring unworthy claims against innocent businesses and impose troublesome costs. To defenders, innocent victims bring worthy claims against culpable corporations who seek profit at the expense of human life. Both sides agree on the story, they just disagree over the identity of the bad guys and good guys. But what if both are wrong? There is evidence that much of the so-called litigation explosion is attributable to cases brought by one business against another.(107) Contract claims have grown faster than tort claims in recent years.(108) An American Bar Foundation study in Travis County, Texas, discovered that under ten percent of punitive damage awards were personal injury cases and over fifty-eight percent involved financial claims.(109) Perhaps the bulk of objectionable cases are being brought by business plaintiffs who may themselves possess deep pockets. Recognition of this should shift the terms of the debate and make some types of tort reform more palatable to all but those who profit directly from such litigation.

The pursuit of tort reform in furtherance of economic welfare must keep in mind non-economic variables, however. The most significant results of this study are that lawyers tend to further individual liberty. This “good” is not directly captured by economic tests but certainly merits policy consideration. Any reform proposals should also acknowledge this feature of litigation and take care to preserve what is probably the central value advanced by lawyers and litigation.


(2) See Frank B. Cross, The First Thing We Do, Let’s Kill All the Economists: An Empirical Evaluation of the Effect of Lawyers on the United States Economy and Political System, 70 TEXAS L. REV. 645 (1992) [hereinafter The First Thing We Do]

(3) See DEBATE: Do Lawyers Impair Economic Growth?, 17 LAW & SOC. INQUIRY 585-711 (1992).

(4) Id. at 586.

(5) Id. at 616.

(6) The Optimum Number of Lawyers, supra note 1, at 688-693.

(7) While there are theories of why certain legal activities would hinder the economy through rent-seeking, even the critics of lawyers realize that other legal activities enhance economic growth. Some of the critics have not persuasively explained why more lawyers would necessarily shift the balance of legal activity toward more disadvantageous practices. A resource diversion hypothesis could better support a criticism of large lawyer numbers, and this possibility is discussed infra at text accompanying notes 68-81.

(8) See, e.g., President’s Council on Competitiveness, AGENDA FOR CIVIL JUSTICE REFORM IN AMERICA (1991)

(9) See Ronald J. Gilson, How Many Lawyers Does It Take To Change an Economy?, 17 LAW & SOC. INQUIRY 635, 636 (1992) (suggesting that there is no value to “additional cross-national, macro-level research”). Gilson argues that “[t]reating the relevant object of investigation as the number of lawyers in each country simply misunderstands the micro structure that determines the role of and demand for lawyers in each country.” Id. at 638. See also Richard Sander, Elevating the Debate on Lawyers and Economic Growth, 17 LAW & SOC. INQUIRY 659, 661 (1992) (expressing “little confidence that any cross-sectional analysis now or in the near future can give us much useful information about how lawyers affect economic growth”).

(10) The First Thing We Do, supra note 2, at 669.

(11) See Philip Keefer, Lawyers and Economic Growth — A Red Herring?, 17 LAW & SOC. INQUIRY 645, 651 (1992) (stressing the “wide range of confounding variables that can be expected to systematically influence the results”).

(12) See Ross Levine & David Renelt, A Sensitivity Analysis of Cross-Country Growth Regressions, 82 AM. ECON. REV. 942 (1992) (summarizing a number of such studies). While there is a wealth of cross-national research exploring numerous hypotheses as predictors of growth, the leading studies do not even consider the possibility that lawyer numbers might explain differential economic growth rates. See, e.g., Rati Ram, Government Size and Economic Growth: A New Framework and Some Evidence from Cross-Section and Time-Series Data, 76 AM. ECON. REV. 191 (1986)

(13) See Michael J. Saks, Do we Really Know Anything about the Behavior of the Tort Litigation System — And Why Not?, 140 U. PA. L. REV. 1147, 1159-62 (1992) (discussing the use and shortcomings of reliance on anecdotes about the legal system).

(14) Edmund Sheehey, The Effect of Government Size on Economic Growth, 19 EASTERN ECON. J. 321 (1993)

(15) J. Grossman, Government and Economic Growth: A Non-Linear Relationship, 56 PUB. CHOICE 193 (1988)

(16) James A. Brander, Comparative Economic Growth: Evidence and Interpretation, 25 CANADIAN J. ECON. 792 (1992).

(17) Id.

(18) Monojit Chatterji et al, Political Economy, Growth and Convergence in Less-Developed Countries, 21 WORLD DEV. 2029 (1993).

(19) Donald N. Baum & Shuanglin Lin, The Differential Effects on Economic Growth of Government Expenditures on Education, Welfare, and Defense, 18 J. ECON. DEV. 175 (1993).

(20) N. GREGORY MANKIW ET AL., A CONTRIBUTION TO THE EMPIRICS OF ECONOMIC GROWTH (National Bureau of Econ. Research Working Paper No. 3541, 1990).

(21) Kevin Grier & Gordon Tullock, An Empirical Analysis of Cross-National Economic Growth, 1951-1980, 24 J. MONETARY ECON. 259 (1989).

(22) Addington Coppin, Determinants of LDC Output Growth During the 1980s, 28 J. DEVELOPING AREAS 219 (1994).

(23) Robert J. Barro, Economic Growth in a Cross Section of Countries, 106 Q. J. ECON. 407 (1991).

(24) William Easterly & Lant Pritchett, The Determinants of Economic Success: Luck and Policy, FIN. & DEV., Dec. 1993, at 38.

(25) See Levine & Renelt, supra note 12, at 942.

(26) Levine & Renelt, supra note 12, at 943 (finding that investment share and education were robustly associated with economic growth).

(27) R.H. Coase, The Institutional Structure of Production, 82 AM. ECON. Rev. 713, 717-18 (1992).

(28) Charles R. Epp, Let’s Not Kill All the Lawyers, WALL ST. J., July 9, 1992, at A13.

(29) Stephen P. Magee, How Many Lawyers Ruin an Economy?, WALL ST. J., Sept. 24, 1992, at A17.

(30) See Do Lawyers Impair Economic Growth?, supra note 2, at 596-598


(32) See The Optimum Number of Lawyers, supra note 1, at 668, 680 (where Magee criticizes this use of “newspaper sources” and observes the widely disparate estimates that may result). Galanter’s analysis is available in MARC GALANTER, THE DEBASED DEBATE ON CIVIL JUSTICE (Dispute Processing Research Program Working Paper 10-10, 1992).

(33) The Optimum Number of Lawyers, supra note 1, at 683. Magee candidly concedes the weakness of his sources with the confession that he is “not positive” about the source of some of his numbers and that for Korea, he “think[s] he used a Korean source.” The Optimum Number of Lawyers, supra note 1, at 683.

(34) The problems can be illustrated by the fact that the international bar foundation numbers were used by Magee (who found a quadratic association of lawyers and economic growth), Epp (who found no association), Datta and Nugent (who found a linear association), and myself (who found no association). The contradictory results are odd, given that all were relying primarily upon the same source of data.

(35) See, e.g., Edgar Smith, Effect of Investigator Bias on Clinical Trials, 125 ARCH. DERMATOL. 216 (1989) (reviewing empirical evidence on investigator bias in medical studies and urging double blind methodologies).

(36) The Optimum Number of Lawyers, supra note 1, at 679.


(38) According to the Euromoney author, the study relied on communication with government or bar officials in each nation, who estimated lawyer numbers. Id. It is preferable to the Bar Foundation numbers because Euromoney sought in all cases to estimate total lawyer numbers, and the Bar Foundation sometimes estimated only bar association membership. The approach might also be considered more reliable than press reports. However, the Euromoney numbers remain infected with a major noncomparability problem — the differing definitions of lawyers across the globe.

(39) For example, Euromoney estimates Japanese lawyers at 14,200, which is the number of official bengoshi. Id. at 38. This number is generally regarded as too small. See Epp, supra note 2, at 597 (arguing that if “the Japanese definition of lawyer were the same as the U.S. definition, the number of Japanese lawyers would be considerably greater”). The Euromoney publication itself concedes that Japan has “tens of thousands of legal scriveners who perform many functions handled by attorneys-at-law in other countries.” EUROMONEY PUBLICATIONS, P.L.C., supra note 37, at 38. Euromoney did not count lawyers and was necessarily beholden to local estimates. I have made no attempt selectively to adjust the numbers, however, for the noncomparability and subjective bias reasons discussed in the text.

(40) The disparity in estimates is dramatic for these countries. In the case of Belgium, Galanter has 24,000 lawyers, while Euromoney has 7000. For Finland, Galanter estimates 9000 or 10,614 lawyers, while Euromoney estimates 1000. Euromoney estimates that Venezuela has 50,000 lawyers, while Galanter suggests that the number is 15,000 or 31,400.

(41) Magee relies upon economic growth during the 1960-1985 period. See, e.g., The Optimum Number of Lawyers, supra note 1, at 688. Epp examines some of the same period but argues for consideration of the 1980-1988 period economic growth rates. Epp, supra note 2, at 615-616. My prior study examined growth rates for the 1970-1980 period and the 1980-1987 period. The First Thing We Do, supra note 2, at 673-675.

(42) The regression is a statistical method designed to identify correlations between different variables (such as lawyer numbers and economic growth). Early studies employing simple regressions used lawyers as a percent of white collar workers as their independent variable to take into account the collinearity of lawyer populations and national wealth. Once GDP is introduced as an independent variable in a multiple regression, the need for this adjustment disappears. This study employs a multiple regression, in which more than one variable is included in order to evaluate their relative effects on economic growth.

(43) This includes Datta & Nugent, supra note 1

(44) The data on lawyers are from the sources cited above. The other data are taken from Robert J. Barro, Economic Growth in a Cross Section of Countries, 106 Q.J. ECON. 407 (1991). This is also the source for Magee’s analysis.

(45) See The Optimum Number of Lawyers, supra note 1, at 688-89.

(46) Levine & Renelt, supra note 12.

(47) Magee never explained why he selected this particular set of independent variables.

(48) See The First Thing We Do, supra note 2, at 673.

(49) The Optimum Number of Lawyers, supra note 1, at 673.

(50) See Frank B. Cross, Law versus Economics?, 17 LAW & SOC. INQUIRY 653, 655-656 (1992) (attacking quadratic association)

(51) The First Thing We Do, supra note 2, at 653-68.

(52) Statistical significance is given when there is a low probability that an association is attributable to random distribution of points or chance. As per convention, * means p [is less than] .10 (less than 10% probability that results are due to chance), ** means p [is less than] .05 (less than 5% probability that results are due to chance), and *** means p [is less than] .01 (less than 1% probability that results are due to chance). The t-values to enable precise probability determinations are in parentheses.

(53) Epp, supra note 2, at 603, 615.

(54) See Levin & Renault, supra note 12.

(55) See, e.g., Mancur Olson, Do Lawyers Impair Economic Growth?, 17 LAW & SOC. INQUIRY 625, 628 (1993) (setting forth both hypotheses).

(56) The First Thing We Do, supra note 2, at 637.

(57) MURPHY ET AL., supra note 1, at 527.

(58) The First Thing We Do, supra note 2, at 637.

(59) See, e.g., Olson, supra note 55, at 627-28 (setting forth the theory and contending that with too many lawyers, “the already great risks of the innovations, investments, and long-term transactions that are the main sources of economic growth are made even greater”).

(60) The measure of average national saving comes from GEORGE T. KURIAN, THE NEW BOOK OF WORLD RANKINGS (1984).

(61) The First Thing We Do, supra note 2, at 662-63 (contending that lawyers are at least as likely to protect the interests of the wealthy and productive investment as to attack these interests).

(62) See Derek C. Bok, A Flawed System of Law Practice and Training, 33 J. LEGAL EDUC. 570, 573-574 (1983) (contending that too many intelligent Americans become lawyers rather than engineers)

(63) Robert A. Kagan & Robert E. Rosen, On the Social Significance of Large Law Firm Practice, 37 STAN. L. REV. 399, 401 (1985)

(64) Olson, supra note 55, at 628.

(65) See The First Thing We Do, supra note 2, at 655-57.

(66) The theory strongly suggests that the United States, with its great lawyer population, has a shortage of qualified scientists. Press reports suggest, however, that we may have a surplus of scientists, as even graduates of the top technological institutions are having difficulty finding jobs. See Peter T. Kilborn, Top Graduates in Science Also Put Dreams on Hold, N.Y. TIMES, June 6, 1993, at 1.

(67) THE NEW BOOK OF WORLD RANKINGS, supra note 60, at 378.

(68) Id. at 382.

(69) Id. at 380.

(70) Id. at 379.

(71) Cross, supra note 50, at 655 (suggesting that the marginal work undertaken by additional lawyers may be “incorporating and representing entrepreneurial small-business interests”).

(72) See B. Peter Pashigian, The Market for Lawyers: The Determinants of the Demand for and Supply of Lawyers, 20 J. L. & ECON. 53 (1977)

(73) Issac Cohen, Kaisha: The Japanese Corporation, J. INT’L BUS. STUDIES, June 22, 1989, at 375.

(74) See Olson, supra note 55, at 629 (noting that there is an optimal number of engineers just as as there is an optimal number of lawyers). Mancur Olson also observes that “lawyers in the right kind of legal system are no less valuable to society — and no less important for economic growth — than engineers”. Id. See also Tom Peters, Quantity No Answer to U.S. Engineering Woes, CHI. TRIB., July 31, 1989, at 7 (America’s problem is too many engineers, inefficiently organized). Press reports indicate that the United States has a “chronic, systemic oversupply of scientists,” and engineers are suffering increased unemployment. Peter T. Kilborn, The Ph.D.’s Are Here, But the Lab Isn’t Hiring, N.Y. TIMES, July 18, 1993, at E3.

(75) Olson, supra note 55, at 629. Richard Posner describes a functioning rule of law as a “public good of immense value.” RICHARD POSNER, OVERCOMING LAW 20 (1995).

(76) See Cross, supra note 50, at 654-56 (contending that proportion of inefficient lawyer activities should not be expected to correlate positively with absolute numbers of lawyers).

(77) “Tort tax” was coined by Peter Huber to express the increased costs of products that he attributed to litigation. The tax was “measured” to be $300 billion and popularized in Leslie Spencer, The Tort Tax, FORBES, Feb. 17, 1992, at 40-42. The precise figure is methodologically suspect. See, e.g., Mark M. Hager, Civil Compensation and Its Discontents: A Response to Huber, 42 STAN. L. REV. 539 (1990). The general concept, though, remains persuasive to many.

(78) See, e.g., Theodore B. Olson, The Parasitic Destruction of America’s Civil Justice System, 47 SMU L. REV. 359 (1994).

(79) See, e.g., Alfred W. Cortese & Kathleen L. Blaner, Civil Justice Reform in America: A Question of Parity with Our International Rivals, 13 U. PA. J. INT’L BUS. LAW 1 (1992)

(80) TILLINGHAST, TORT COST TRENDS: AN INTERNATIONAL PERSPECTIVE (1991). The nations are Denmark, the United Kingdom, Japan, Australia, Canada, France, Switzerland, Spain, Belgium, West Germany, Italy, and the United States.

(81) Id. at 14.

(82) Id.

(83) See The First Thing We Do, supra note 2, at 654-61.

(84) See, e.g., Robert A. Kagan, Do Lawyers Cause Adversarial Legalism? A Preliminary Inquiry, 19 LAW & SOC. INQUIRY 1 (1994).

(85) This position is contrary to that of the empirical lawyer critics, however. The methodology employed by Magee and others assumes that lawyer roles and effects are comparable across countries.

(86) Indeed, tort litigation may even promote economic efficiency. See The First Thing We Do, supra note 2, at 655 (noting that tort litigation can efficiently internalize externalities, create efficiency-enhancing private rights, protect against expropriation, and facilitate markets, such as that for corporate control).

(87) TORT75 and TORTINC are taken from Tillinghast, and the others are taken from the earlier studies.

(88) SAVING and GDINVEST are drawn from the earlier study. GDPGR is a measure of GDP growth from 1975 to 1990, taken from the Tillinghast report.

(89) See Cross, supra note 50, at 657.

(90) See The First Thing We Do, supra note 2, at 658-61 (describing the role of lawyers in promoting human rights).

(91) POSNER, supra note 75, at 89.

(92) See The First Thing We do, supra note 2, at 676-78.

(93) Freedom Around the World: 1990, FREEDOM AT ISSUE, Jan.-Feb. 1990, at 12, 18-19. 94

(94) Id.



(97) Lisa Berndt, Measuring Freedom? The UNDP Human Freedom Index, 13 MICH. J. INT. LAW 720 (1992).

(98) As shown in the following section, lawyers do not advance positive rights and may interfere with their advancement. Had the positive rights been removed from the HUMANA and HUMFREED variables, they too might have been significantly associated with lawyer numbers.

(99) See STUART A. SCHEINGOLD, THE POLITICS OF RIGHTS 211 (1974) (noting the success of litigation in advancing rights such as civil rights but noting the shortage of “activist lawyers” dedicated to such ends).


(101) Olson, supra note 78, at 359.

(102) Interestingly, Magee has conceded that his results are not robust and are highly dependent upon his particular set of variables. The Optimum Number of Lawyers, supra note 1, at 669. Many would consider this a serious problem with his results but he passes over the lack of robustness quite blithely. Levine and Renelt note that one should place little confidence in the conclusions of a study so lacking in robustness. Levine & Renelt, supra note 12, at 944.


(104) See, e.g., Butler & Miller, supra note 79 (observing problems of delay, transaction costs, and unwarranted discouragement of valuable products).

(105) Joel Seligman, The Merits Do Matter, 108 HARVARD L. REV. 438 (1994).

(106) Deborah R. Hensler, Taking Aim at the American Legal System: The Council on Competitiveness’s Agenda for Legal Reform, 75 JUDICATURE 244 (1992).

(107) See, e.g., Marc Galanter, Law Abounding: Legalisation Around the North Atlantic, 55 MODERN L. REV. 1, 10 (1992).

(108) See Saks, supra note 13, at 1198-1201.

(109) Bruce Hight, Questioning Tort Reform, AUSTIN AMERICAN-STATESMAN, Jan. 8, 1995, at J4.


Lawyer Numbers by Country

Argentina 40,000

Austria 3,000

Australia 45,000

Bangladesh 15,000

Belgium 7,000

Brazil 300,000

Bulgaria 7,000

Canada 60,000

Chile 9,000

China 40,000

Colombia 40,000

Cyprus 1,000

Czechoslovakia 2,500

Denmark 3,500

Dom. Republic 9,000

Ecuador 11,000

England 83,300

Egypt 40,000

El Salvador 2,750

Finland 1,000

France 23,000

Germany 65,000

Ghana 2,500

Greece 20,000

Guatemala 3,000

Haiti 300

Honduras 2,000

Hong Kong 2,500

Hungary 8,000

Iceland 1,000

India 100,000

Indonesia 1,230

Iran 2,500

Ireland 4,950

Israel 13,000

Italy 53,000

Jamaica 800

Japan 14,200

Jordan 1,600

Kenya 1,600

Kuwait 300

Malaysia 3,700

Mauritius 200

Mexico 150,000

Netherlands 5,700

New Zealand 7,500

Nigeria 17,500

Norway 3,270

Panama 1,200

Paraguay 5,000

Peru 20,000

Philippines 33,000

Poland 2,500

Portugal 9,250

Senegal 300

Singapore 2,000

South Africa 8,750

Spain 60,000

Sri Lanka 3,500

Sweden 2,500

Switzerland 4,000

Taiwan 2,500

Thailand 19,340

Tunisia 1,420

Turkey 26,650

Uganda 520

United States 777,100

Uruguay 2,500

Venezuela 50,000

Zambia 300

Zimbabwe 500

FRANK B. CROSS, Herbert D. Kelleher Professor of Business Law, University of Texas at Austin.