Larry Ribstein Comments on Lawyerly Competitive Advantage

There are a couple of academic business law blogs I read regularly – particularly The Conglomerate and Truth on the Market.  So I was flattered to see that Larry Ribstein, at Truth on the Market, put up a short comment on a short essay of mine that appeared last semester in my school’s short-form essay journal, Business Law Brief, “Do Lawyers and Law Professors Have Any Comparative Advantages in Opining on Financial Regulatory Reform?”  My essay is only 5000 words, and is a not much revised version of a brown bag lunch talk I gave to (dismayed and depressed) business law students last term at my school, a pep talk on what I think are lawyerly comparative advantages, despite everything.  It’s not a deep academic work, that is, and needs to be read that way.  But I have always liked it, and was glad to see it published in reasonably short and readable form.

Professor Ribstein is one of the leading scholars in business law, and in a couple of distinct-yet-related areas. They include the law of unincorporated business entities – his book The Rise of the Uncorporation is outstanding, one that I assigned to my private equity class this past term with good results.  But he is also a leading commentator on the business model of the law firm and Big Law – including (not insignificantly for my essay, aimed in part at law students trying to figure out the new realities of the law job market) the implications of the changes in the broader legal market for legal education.  And add to that a subject increasingly dear to my heart – the nature of fiduciary duty in a world in which the nature of business entities is shifting.

The Truth on the Market post is titled “Why Lawyers?”:

Anderson wonders whether “the skills of the lawyer and law professor are, at most, those of scribe seeking clearly to write down policy positions necessarily reached elsewhere?” He argues that there are two important things lawyers and law professors know.

First, as he says in the abstract, “a particular disciplinary appreciation in the law for the ‘thick’ relationships of agency, fiduciary, loyalty, and care that bind together institutions far more than the simplification of ‘nexus of contracts’ can capture.”

Second, and perhaps more importantly, Anderson says … “lawyers have a better appreciation than other disciplines of the ways in which financial instruments used in markets as though they were economic equivalents are not actually legal equivalents[.]”  The essay discusses the lawyer concept of repos as more than just the financial equivalent of a secured loan but, legally, a spot sale and contract to repurchase. Under ordinary circumstances the financial idea may be good enough. But under conditions of stress – that is, in a financial crisis – the lawyer’s concept comes to the fore. And then only lawyers can provide the critical information that helps the market put a value on the contingency.

But Professor Ribstein then turns to point out that figuring out this comparative advantage for lawyers, if such it genuinely is, requires some urgent thinking, by lawyers and by legal educators.  He would disagree with parts of the analysis in the essay – in part about the idea that the nexus of contracts improperly obscures rather than clarifies duties in the new business structures, and perhaps as well with the specific example I use concerning repos.  But as he says, if legal education does not figure out its intellectual competitive advantages, and not just those of guild-privileged access of being lawyers with a license, then law as a field will discover that it has been overtaken by others.  “Why lawyers?” in other words, as Professor Ribstein concludes, is a way of asking the classic question of legal education, what does it mean to “think like a lawyer?”

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