Why Better Bar Exams are Not the Answer

In a thoughtful response to my recent post on the bar exam, prominent criminal lawyer Nathaniel Burney agrees with my view that the current bar exam system is flawed, but argues that the best solution is to adopt a new and better exam:

We are not fans of the bar exam, either, but we think the solution is not to abolish the exam, but more and better bar exams…. Nobody in their right mind believes that the bar exam is a reliable indicator of who is going to make a good lawyer. It doesn’t test judgment, reasoning or understanding. More importantly, it doesn’t test actual skills that lawyers need to know….

Instead, the bar exam should be replaced with a series of exams for something along the lines of board certification in medicine. You want to practice criminal law? Someone’s life and liberty is going to be on the line. You’d better prove you know what you’re doing, and get bar-certified to stand up in a criminal courtroom. Or you say you want to be a transactional lawyer? People’s assets and livelihoods will be at stake. You’d better be able to prove you know how to put together a deal that does what the client needs, and get bar-certified.

Burney’s proposed exam system might well be better than the status quo. But I see no reason to believe that bar associations would ever adopt a system whose goal is to protect consumers rather than advance the interests of incumbent lawyers. Even if the bar exam were written by a more objective body, it would still be vulnerable to “capture” by lawyers, and still likely to be inferior to market mechanisms as a means of weeding out bad attorneys.

I. Why Bar Associations Can’t be Trusted to Run Mandatory Bar Exams.

As Burney points out, bar associations are not neutral experts on law. Rather, they are interest groups representing currently licensed lawyers who have a strong incentive to try to reduce competition by making entry into the profession difficult. This helps explain why the bar exam requires applicants to memorize thousands of rules that most lawyers will never use. This approach weeds out people who lack the time, patience, or talent for memorization needed to learn all that arcana. In Burney’s words “[t]he legal profession is a cartel … [W]e have absolute control over entry into our ranks, the rules by which we operate, and even the laws that would apply to us and their enforcement.” Like any other cartel, it’s no surprise that we lawyers use our monopoly power to try to reduce competition and increase our own incomes.

It’s possible that bar association leaders will suddenly decide to prioritize the public interest ahead of their members’ interests. But I wouldn’t bet on it. As Burney puts it, “We need to make sure that the members of our profession are up to the task. Weed out the incompetent. We’re not doing that now. We’ve never really done that.” [emphasis added]. If “we’ve never really done that” in the hundred year history of bar exams, it seems highly unlikely that we are going to start now.

II. The Independent Regulatory Agency Alternative.

One possible alternative to bar exams administered by bar associations are exams developed by independent regulatory agencies. In theory, they could be free of control by lawyers and thus more likely to focus on protecting consumers. But even an independent bar exam agency is likely to be “captured” by lawyers through lobbying. Because of collective action problems and rational political ignorance, the general public is unlikely to effectively monitor the bar exam agency. Lawyers, by contrast, are a well-organized interest group with a strong incentive to flex their lobbying muscle over this issue. Extensive research shows that it is common for independent occupational licensing agencies to be captured by the professions they seek to regulate. Morris Kleiner’s recent book has a good summary of the relevant evidence. Still, an independent bar exam agency would be at least somewhat better than just handing over control to lawyers. It might, for example, be marginally more open to influence by consumer groups.

Even if the independent regulatory agency could be completely insulated from lobbying by lawyers, its tests are still likely to have important shortcomings. One is that lawyer “competence” is not a binary variable in which either you’re competent or you’re not. Rather, there are different degrees of competence. Some low-quality lawyers lack the skill needed to handle complex cases and transactions, but are knowledgeable enough to handle very simple ones. Many such people could well end up failing even a well-designed bar exam. Yet keeping them out of the market would harm consumers by driving up the cost of the simple but important basic legal services they can provide. This is a crucial point, since one of the main flaws of the current system is the very high cost of simple legal services, which is especially damaging to the poor.

Second and related, consumers in many markets are willing to trade off quality for price. Only the individual consumer himself can really know how much he values the one relative to the other. A poor quality lawyer who flunks a well-designed bar exam may still be better than no lawyer at all; and some clients could reasonably prefer to hire him at a low price relative to hiring a better practitioner that costs more. No regulatory agency can really know how a variety of different consumers would make such tradeoffs, especially since there will be great variation in preferences. Inability to take account of varying consumer preferences is a standard flaw of paternalistic policies.

III. Market Competition and Voluntary Certification.

The main fear that many have about abolishing the bar exam is that consumers will have no way of assessing lawyer quality without becoming legal experts themselves. Most clients don’t know much about law, after all.

However, markets have numerous tools for dealing with this problem without resorting to government-mandated licensing. The most obvious is reputation. Clients can’t directly assess a lawyer’s competence. But they can learn about his reputation from other lawyers, previous clients, and others. Law firm brand names are also useful. If I hire Wachtel or Cravath, I may not know much about the individual lawyers who will work on my case. But I do know that the firm has a strong reputation overall, and that they have powerful incentives to hire lawyers who will uphold it. Less sophisticated clients can also piggyback on the knowledge of better-informed ones.

Voluntary certification is another useful tool for consumers. If state-mandated bar exams were abolished, both bar associations and other private groups would still be free to certify lawyers using either tests or other standards they deem appropriate. If lawyers certified by the bar association are generally more competent than others, sophisticated clients will soon realize that, and the knowledge will quickly trickle down to less sophisticated ones. Over time, lawyers certified by the bar association will command higher salaries and enjoy more prestige than those who are not.

Superficially, voluntary certification seems little different from the old bar exam system. After all, lawyers would still have incentives to meet standards established by some professional organization. However, there are three big differences. First, abolishing state-mandated exams allows different certification systems to compete against each other. This stimulates improvement in standards over time and also increases consumer choice. Second, since no certifying body will have a monopoly, these groups will have strong incentives to improve the quality of their certification systems. If the bar association’s certification system turn out to be inferior to that of the Better Business Bureau, for example, fewer consumers will pay attention to it, and fewer lawyers will pay to take the bar association’s test. For this reason, a bar association that didn’t have a legal monopoly on certification is likely to produce a better test than one that does.

Finally, with multiple certification systems, we would no longer have to have a “one size fits all” system that sets standards for all lawyers and all clients. It could well be that Certification A better meets the needs of some clients, while others have reason to prefer B, and still others need no certification system at all.

Market competition and voluntary certification might not be able to eliminate all need for regulation of lawyer quality. For example, there is the issue of what to do in situations where clients have no real choice, as in the case of court-appointed lawyers for indigent criminal defendants. However, it does obviate the need for crude licensing regimes such as the bar exam that completely block access to the profession to anyone who doesn’t pass.

UPDATE: Some commenters doubt that bar exams really keep out a significant number of would-be lawyers. However, the National Council of Bar Examiners reports that 32% of bar exam takers failed in 2009. And that doesn’t count people who chose not to attend law school or take the bar exam in the first place because they knew they lack the talent for memorization needed to pass and therefore don’t want to waste time and money trying.