Lawyers and economic development, or why we stumble oftentimes

CROSSROADS (Toward Philippine Economic and Social Progress) By Gerardo

P. Sicat (The Philippine Star) | Updated March 27, 2013 - 12:00am

The announcement of the list of new lawyers law students who took the bar
examinations and passed is one of the most awaited events concerning the
profession. Newspapers in the country give this event prominent coverage and use it
to twit the competition between the countrys top law schools.

Although not as heavily discussed, the percentage of failures of such exams is high.
This years passing rate is 17 percent, which means 83 percent of those who took the
bar did not pass. The average passing rate has been around 25 percent, so that from
year to year, 75 percent of those who want to become lawyers actually fail in their
ambition.

Lawyers, litigations, lobbyists, legal processes. Even as the law is a very select
profession and lawyers are needed wherever laws and regulations are written, a
relevant question that can be asked is, Do we have too many lawyers in this country?

Another important question is, do we train them sufficiently so that they acquire the
learning tools to understand societys problems and the nature of economic markets?

Lawyers are needed to enable society to adopt the appropriate legal frameworks, the
rules and the proper interpretation of the spirit of the laws so that the nation achieves
forward motion progress, reform, and fulfillment for its citizens. A growing
economy is needed to solve the nations social and economic ills. That includes
an understanding of markets and how they function.

Lawyers are needed by enterprises, companies, and individuals to preserve or

enhance the benefits derived from the provisions of laws and regulations.
Governments hire lawyers to help advance societys laws and to enable their proper
administration.

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When economic reforms are proposed, those who could lose from the change protect
their gains vehemently. Groups that benefit most from declining institutions or
arrangements will expend resources to resist change. This explains why economic
reforms are often very difficult to pursue.

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It goes without saying that lawyers will do their utmost to defend and advance the
interests of those who hire them. Threatened interest groups will do so as long as the
benefits exceed the costs of the actions. Lobbying, and predatory tactics, sometimes
even of corruption, could result from such efforts.

In addition to the legal framework and the courts, lawyers are crucial to the resolution
of legal disputes. Lawyers are the active agents for interpreting the law for their
clients. Dispute resolutions often involve the ownership of property rights (assets
such as land, capital, permits, patents, goodwill, brands, and so on).

The resolution of such disputes invariably implies the transfer of questioned property
rights. To the winners come the rewards, and often, the rewards are significant for the
lawyers. This is one reason for their high supply.

Disputes are inevitable in society, but too many disputes often hinder progress,
economic and otherwise. Hence, less disputes encourages more development.

When restrictions or special access are made the rule in favor of tolerance or
openness for all participants; when regulated activities are preferred to market based
resolutions of disputes; when monopolies or solutions favoring a few are
preferred to institutions supporting greater competition among economic participants,
then the economic system is prone to the presence of more legal disputes and raises
the cost of doing business.

A litigious society that raises economic costs for all. Some time ago, I wrote a
paper entitled, Legal and constitutional disputes and the Philippine economy. This
paper was later published in the Philippine Law Journal (vol. 87, December, 2007). It
described the litigious character of Philippine society that has affected seriously the
manner in which the countrys economic affairs are guided. The original sin in this
setup was the introduction of the restrictive economic provisions in the Philippine
Constitution in 1935 and reaffirmed as well as expanded in 1987.

The litigious character in society has created stalemates, setbacks and mis-directions
of the Philippine economy, both in large as well as in small business affairs that affect
everyone.

It is possible to settle small cases when property rights and contracts are followed.
Yet, small cases do not get settled at the neighborhood (barangay) level. Often such
cases get elevated to the metropolitan courts where they essentially get unresolved.

Standards of contract fulfillment give way to a surfeit of tactics to delay and further
delay the movements.

Of course, there are much bigger affairs in which constitutionality issues reach the
Supreme Court. There have been many such cases that have hindered the countrys
forward motion in industrial and commercial development. Decisions of the Supreme
Court, when they become final resolutions of existing issues, could determine the
extent to which the nation is allowed to move forward or to step backward. In many
cases in the past, the country had stepped backward.

The optimum number of lawyers: an issue for all nations? An interesting paper to
ponder about is that of Stephen Magee (The optimum number of lawyers,
Department of Economics, University of Texas, November 2010).

The author is steeped in the field of public choice economics. His studies include big
questions on the reform of the legal profession in the context of economic growth
and, in particular, the US economy. Using a data base of around 40 countries, this
study tried to find answers to the relationship of number of lawyers to the nations
economic growth.

His international data shows a negative linear relationship between lawyers as a

presence in the lower houses of parliament. Though this finding is not statistically
strong, he speculates on the basis of nuanced analysis of the problems of rentseeking that is prevalent in many countries. His data set does not include the
Philippines, but includes many Asian economic neighbors, like Japan, Korea,
Malaysia, Singapore, Hong Kong, China and so on.

In his data, the US has four times as many lawyers as the average for the countries in
his data set. The relative number of lawyers (lawyers per thousand population;
lawyers as percent of parliament members; lawyers ratio-to-physicians) in the
Philippines is likely to be closer to that of the US than in any of the countries
enumerated above.A