Regulation and “Rent-Seeking”: Understanding Attorney Certification

• DOI: 10.1177/0160323X0103300104
• Published date: 01 April 2001
• Author: Grant W. Neeley,Irwin L. Morris
• Date: 01 April 2001
• Subject Matter: General Interest

42 State and Local Government Review

State an d Local Government Review

Vol. 33, No. 1 (Winter 2001): 42–51

THE PUBLIC POLICY-MAKING literature

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-

sumer

—

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-