Regulation and “Rent-Seeking”: Understanding Attorney Certification

Published date01 April 2001
AuthorGrant W. Neeley,Irwin L. Morris
Date01 April 2001
Subject MatterGeneral Interest
42 State and Local Government Review
State an d Local Government Review
Vol. 33, No. 1 (Winter 2001): 42–51
provides two basic explanations for
the regulation of industries or pro-
fessions: consumer benefit and supplier ad-
vantage (Meier 1985; 1988). Both rationales
are based on an understanding of the dy-
namics of competitive markets. Consumers
benefit from regulation when it pr ovid es us e-
ful but previously unavailable information.
Governments can use regulations to limit in-
formational asymmetries (i.e., informational
advantages, usually enjoyed by producers)
and the exploitation of those asymmetries by
whole industries or professions. By the same
token, the industry or profession may be ad-
vant age d by r egul ati on th at effectively restricts
“market” entry, thereby providing “rents”1
to those firms already in the “marketplace.”
When regulatory regimes limit the movement
of new fir ms into an industry, firms may limit
“supply” in order to reap “profits” based on
“prices” that are significantly higher than the
prices generated by a competitive market.
In some important situations, however,
regulation may reasonably benefit both con-
sumers and suppliers. For example, regula-
tions that reduce certain types of transaction
costs may be mutually beneficial. When in-
dustries or professions “sell” services that
vary in subtle but signific ant ways, making
Regulation and “Rent-Seeking”:
Understanding Attorney Certification
Irwin L. Morris and Grant W. Neeley
the connection between “buyer” and “seller”
may be a costly and time-consuming process.
If a regulatory regime is able to reduce the
transaction costs associated w ith efficiently
and effectively connecting buyers and sellers,
one would expect to see pres sure for regula-
tion from both the industry and consumers.
One example of a regulatory opportunity of
this type is attorney certification. It not only
provides valuable information to the con-
in some cases, at little or no public
cost (that is, through mere recognition of pri-
vate cert ification)
but also benefits attorneys
by giving them the opportunity to segment
the market for legal services and to increase
“advertising” efficiency and effectiveness.
From b oth attorney s’ and consumers’ per-
spectives, the benefits assoc iated with certifi-
cation are public, and all of the conventional
“public goods” problems attend the legisla-
tive recognition of private certification or the
legislative establishment of a public certifica-
tion system.2 Thus, without preexisting orga-
nizational capacity, it is unlikely that either
attorneys or consumers will expend the re-
sources to coordinate their activities and lobby
for public certification programs or public
author ization an d recognition of private cer-
tification programs. However, in those states
where citizens and/or lawyers have preexist-

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