The challenges of calculating the benefits of providing access to legal services.

• Author: Prescott, J.J.
• Position: 2008 ABA Section of Litigation Access to Justice Symposium

Introduction I. "Optimal" Allocation of Public Resources II. Identifying and Measuring Benefits (and Costs) of Legal Services Programs III. Previous Attempts to Measure the Value of Expanding Legal Services Programs IV. Assessing the Criticisms of Legal Services Funding V. Improving the Benefits Measure? Conclusion INTRODUCTION

Many academics, public interest lawyers, and politicians consider it a platitude to say that public authorities underfund civil legal services for the poor. (1) Others have argued for years that the public provision of legal services is, almost by definition, wasteful and possibly counterproductive. (2) This disconnect has its roots in deep disagreements about the role of government in the lives of its citizens. But the confusion between these camps in their policy debates stems more directly from the use of amorphous terms that have multiple meanings and are thus opaque rather than helpful. Specifically, because words like "underfund" and "need" have different meanings to different people in different contexts, discussions over the proper approach to evaluating the advantages and disadvantages of publicly funding legal services have become muddled.

To proponents of expanding legal services, underfunding happens when people in need of legal services cannot access these services because there are too few low-cost lawyers available. (3) "Underfunded" is thus taken to mean simply that a person "would benefit from" the greater availability of free or subsidized legal aid. To opponents of the public provision of such services, however, programs that misalign incentives or that lead to the misuse of taxpayer money or knock-on costs elsewhere in the legal system are, at the end of the day, necessarily "wasteful" and "counterproductive" and should be reduced in size or eliminated, second-best arguments notwithstanding. (4) The advantage of both of these approaches to thinking about the problem is that they are easy to apply.

From a policymaker's perspective, however, these strategies are unhelpful. Public resources are limited, and so the fact that people are "in need" or "would benefit from" additional funding is not sufficient to justify a shift in the allocation of public monies toward legal aid. (5) After all, applying the same analysis to other public services, we would of course learn that there are plenty of other people and institutions (e.g., the homeless, the educational system, community health centers, etc.) that are "in need" of scarce resources. (6) At the same time, expanding government involvement in the provision of legal services certainly can lead to real improvements in social welfare, even if certain market incentives are dulled and agency and administrative costs are all but guaranteed, when we face any of a raft of possible market failures or have specific distributional preferences.

Accordingly, policymakers require something more than these imprecise all-or-nothing rules ("any" benefit or "unnecessarily" costly) to make optimal allocation decisions. Welfare economics suggests a possible, albeit controversial, approach: calculate the net benefits of a government-funded legal services program and compare those benefits to the net benefits that would be generated by other public programs or by leaving the resources in private hands. (7) If the legal services program produces more net benefits than other options, it should be expanded. If not, the program's funding should be cut or, potentially, eliminated. (8)

In this invited essay, I explore how policymakers and other public-interested actors have empirically calculated the benefits of providing low-income access to legal services in the past, and how they might improve upon existing methods going forward. Specifically, I review, criticize, and try to build on two major civil justice needs studies, one published by the Legal Services Corporation in 2005 (reissued in 2007) and the other by the American Bar Association in 1994. (9) Because I do not intend these criticisms of the LSC and ABA studies to suggest that legal services programs ought to be reduced in size (in fact, an improved study could provide strong and reliable evidence favoring greater funding of such services), I also briefly criticize assertions that the public provision of services is necessarily counterproductive.

Welfare economics and, in particular, cost-benefit analysis provide the framework for my discussion, although many find these approaches unsatisfactory on both ethical and methodological grounds. (10) Even granting the seriousness of these objections for purposes of argument, it would be difficult for critics to gainsay the relevance of cost-benefit analysis to many policymakers considering increasing, reducing, or eliminating the funding for legal services programs. More importantly, while justice or some other fundamental value may, in the views of many, require expanding legal aid to satisfy indigent needs whatever the "costs" and "benefits," assessing how much we are willing to sacrifice to satisfy this moral imperative can only deepen our understanding of the importance of this value.

This paper proceeds in five parts. First, I briefly explain the optimal approach to allocating public funds from a welfare economics perspective. Second, I introduce the challenges of valuing "benefits" in the context of the public provision of legal services. Third, I summarize and critique existing attempts to quantify the benefits of and need for legal services funding. (11) Fourth, I briefly, but critically, assess the arguments on the other side of the legal services debate, where commentators regularly rely on anecdotes and empirically unverified assumptions to argue for reducing the public provision of legal services. (12) Finally, I describe the basic methods that cost-benefit analysis employs to crack the difficult nut of measuring the value of publicly provided services generally, and I sketch a few ideas for how a researcher might design and conduct a study using these ideas to measure (at least some of) the benefits of providing access to legal services to low-income individuals.

1. "OPTIMAL" ALLOCATION OF PUBLIC RESOURCES

   In a perfect world, according to welfare economists, policymakers would make funding allocation decisions by employing a cost-benefit approach that fully captured all relevant costs and benefits of funding all possible public enterprises. (13) For a given pot of money, these calculations would yield an allocation that maximized society's total net benefit by arranging funding so that the marginal net benefit for each enterprise was the same. If this marginal-net-benefit-generated-per-dollar-spent (i.e., the return on public investment) was significantly higher than private lending markets demanded for private investments, one could argue that, under certain conditions, government should increase its investments by raising additional tax revenue. (14)

   It makes practical sense to speak of net benefits in monetary rather than utility terms. This is very unfortunate in a way, because if costs and benefits were denominated in utility terms, distributional issues would become significantly less important: under normal conditions, an allocation that equalized the marginal utility of government spending across individuals would be optimal, so more money and programs would, as a general matter, be directed toward those with less. Unfortunately, a utility metric is unworkable in practice because marginal utility is tough to measure in anything other than monetary terms.

   Maximizing wealth (i.e., conducting cost-benefit analysis in monetary terms), on the other hand, can exacerbate distributional concerns. For example, if a program serving the rich generated more net benefits (in dollar terms) than a program serving the poor, cost-benefit analysis would support funding the rich program as the more efficient option because it maximizes overall wealth, even if the wealth generated by the program were to wind up entirely in rich hands. (15)

   A corollary of making a wealth maximizing choice, however, is that there must always be enough new wealth for the beneficiary group to (at least) fully compensate any group that suffers from the decision. (16) In other words, in the context of an allocation decision, efficient decisions are those that can, with redistribution occurring elsewhere, make everyone better off.

   This means we may be able to ignore distributional concerns when focusing on a particular reform or public project regardless of the metric we use to measure benefits, as long as allocation decisions are complemented by a separate policy or policies designed to "undo" any distributional losses. (17)

   If we knew what the final wealth-maximizing allocation looked like in the perfect world described above, we could be precise: legal services would be underfunded if they received less public support than the perfect-world allocation would dictate. But we do not live in such a world--and getting there would cost too much and require too much guesswork. So, as a practical matter, we have to come up with a more tractable approach to making allocation decisions.

   A simplistic substitute approach would analyze each project separately and ask only whether additional funding would generate "any" benefits. The advantage of this type of rule, as noted in the introduction, is that it is easy to apply. We can be fairly unconcerned about details. We can generally ignore minor benefits and costs and mismeasure important ones because these mistakes very rarely matter. On the other hand, mistakes do not matter only because the "any benefit" criterion will almost always indicate that more money is merited. More funding will rarely hurt intended beneficiaries or any third parties who happen to be affected. This is not always true--too many cooks can spoil the broth--but, for all intents and purposes, the rule is just about useless as an...