Introduction of Michigan Supreme Court Justice Brian Zahra at the Friedman lecture, given by former Chief Justice Clifford W. Taylor

We in Michigan have a Supreme Court that is the envy of knowledgeable conservatives across the United States. It is a court that has for the last 15 years, been engaged in resurrecting a proper notion of the judicial role in a republic such as ours. In practice what this has meant is that we have a court that decides cases in accord with what the constitution, statute, contract or even bill of lading before it actually says as opposed to what they would like it to say. This approach, called textualism or sometimes orginalism, is entirely consistent with the notion of allowing free men and women to govern themselves both in the agreements they enter and in allowing representative governments to flourish. The bedrock of this approach is that if the courts are respectful of citizens’ rights, one of which is to do as they wish until such time as they offend the governing law and to also make the communities policies through representative bodies such as legislatures, there really can be no other approach to adjudicating cases.

In the 19th century and actually well into the last century, all courts in the United States felt it to be incontrovertible that their role was in accord with this simple notion that the court doesn’t re-write the instruments that it is asked to adjudicate. They felt any other role would muscle the proper policy making body, that is the legislature or, in the case of contracts, the contracting parties themselves, out of the picture to be replaced by judges. The people then would have lost their freedom to the degree the courts encroached. Judges were aware of this peril and were, to an almost universal extent, accepting of the notion that they could not invade the power left to ordinary citizens to settle their affairs as they would wish.

This understanding has an interesting history. There were those at the time the Constitution was drafted and ratified who intently believed that no judiciary, no matter how high minded, could be counted on to not over-reach as that is the nature of having power as Lord Acton a century later famously suggested when he observed that absolute power, the kind judges have surely, corrupts absolutely.

Indeed it is interesting to consider that a leading anti-Federalist who opposed the ratification of the US Constitution, Robert Yates writing as Brutus, felt just that as he was of the view that the proposed Constitution had no check on judicial power and that judges would misuse that power simply because that is the nature of individuals granted any power. Hamilton wrote to the contrary and his assurances were such as to satisfy the ratifying conventions in the states, but the thought was in the air that untrammeled judicial power was a threat to the freedom the new constitution institutionalized and lawyers and judges were accordingly very disciplined that their powers not be abused under this new government.

In fact so prudential were they that no lawyer or judge of any prominence believed that slavery, as repulsive and reviled as it was in the North, could be abolished without a constitutional amendment. Similarly all agreed that for women to be extended the vote a constitutional amendment was necessary and even more remarkably to even outlaw whiskey and spirits required an amendment of the constitution. This was a profession then that understood that judges had the important, but limited, power to interpret in accord with the fair understanding of the document before them but they lost legitimacy once they strayed from this path.

Yet, things changed as time went by and the lessons of the founding era dimmed. The discipline which was so apparent in the first 150 years was largely abandoned as judges across the land sitting on high appellate courts forgot the wisdom of Yates and Hamilton. They, on the wings of concepts generated by the so called progressives, became emboldened to push aside constitutional prudence and restraint and they did.

This produced an aggressive, muscular judiciary that could and did revolutionize criminal law and procedure as well as taking sides in the cultural wars over marriage, pornography, abortion and religion in our public life to name just a few of the areas where there were major changes effected solely by judges.

This engendered a reaction among thoughtful conservatives such as Robert Bork, Antonin Scalia, Richard Epstein and Lino Graglia who began to argue of the perils and dangers of giving unaccountable judges these largely political powers. Some political leaders such as Presidents Reagan as well as both Bushes agreed and determined that this was a dangerous innovation without constitutional warrant and that it had to be reversed. They made appointments to the Federal judiciary to effect this change and at every juncture the American left, which is pleased to take policy victories however they can get them with little regard for damage done to the constitution, resisted these Presidents on their appointees who looked like they were going to be serious about not exceeding their constitutional authority. 

In the states, there was also activity to reset the judicial balance and here in Michigan Governors Engler and Snyder have steadfastly attempted to return our courts to their original and important tasks of reading and interpreting documents in harmony with their original understanding. They have succeeded up to this point but every election possess a challenge that all the good will be reversed and we can be thankful that lawyers such as Brian Zahra hold these positions today and are serious about not repeating or extending the errors of the past members of their bench.

In this effort to remake the legal culture here in Michigan, Brian Zahra, our keynote speaker this evening, has been instrumental. He has served on the trial bench as well as the Court of Appeals and has been a Justice on the Michigan Supreme Court since January of 2009 and has courageously remained true to his oath of office.

In each of these positions, he has shown that he understands what powers a judge has and those they do not. This is no small accomplishment because his principled decisions are with irritating regularity characterized by the left not as thoughtful reflections on the nature of judicial power in a constitutional republic but as the product of some affinity with commercial interests or hostility to the class that wishes the constitution to be twisted into a document that says what it clearly doesn’t say. I believe Justice Zahra is steadfast in this undertaking because of his profound understanding of the law and of American freedom and liberty. In short, he is, to use an old fashioned word, a man animated by patriotism.

It is because of his mettle that I suggested that he would be an excellent speaker for the Milton Friedman anniversary lecture this evening because Dr. Friedman was a proponent of freedom who came to the rescue of economics from the authoritarians just as legal conservatives such as Justice Zahra have done in the law.

The roughly parallel movement of these freedom based intellectual movements to resurrect in economics and the law a proper understanding of these disciplines is an important development in our state and nation and Justice Zahra is an articulate advocate for a legal culture that is principled and a worthy person to reflect on Dr. Freidman’s contributions.

We at the Mackinac Center are pleased he accepted our invitation given his difficult schedule and work load and are looking forward to his remarks. 

Please help me welcome Justice Brian Zahra.

Justice Zahra's Comments

Thank you and thanks to the Mackinac Center for Public Policy for finding me worthy to commemorate Milton Friedman’s legacy. I am here tonight not because of my knowledge of economic theory — if that was the standard there would be countless people more qualified than me to be here. I am here because I serve you as a member of the Michigan Supreme Court. Friedman recognized the importance of the rule of law in a 2002 interview when he said that the laws “written down on paper [are] not what matters. What matters is what happens in practice.” He lamented over the fact that the rule of law does not exist in post-Soviet Russia and said that an enforced rule of law “is probably more basic than privatization” for ensuring individual freedom.

And that is what you have in Michigan — a Supreme Court that is recognized across the nation for its dedication and commitment to enforcing the rule of law. It has not always been this way. The rule of law legacy of the Court has been in place for just over 14 years. This legacy was founded by Chief Justice Clifford Taylor. I am a beneficiary of Chief Justice Taylor’s hard work. I have had the benefit of serving on the Court after Chief Justice Taylor laid its foundation. My job on the Court is substantially easier because of all that was done by Chief Justice Taylor to establish the commitment to enforcing the rule of law. Thank you Chief Justice Taylor. It is an honor to share the stage with him tonight.

President Truman famously professed to be searching for a one handed economist, so fed up was he with the trope of economists to consider endless alternative approaches. Tonight we honor the memory of the guy Truman never found, but should have, “old one hand Freidman.” Milton Friedman preached one gospel and that was freedom — freedom through the application of the rule of law to human affairs and capitalism, freedom in the economic system, freedom for the production of wealth and widespread prosperity. He never faltered in this advocacy. Indeed it made him the most important economist of the 20th century, rivaled only by Maynard Keynes. His most important early work, at least as far as influencing public policy, “Capitalism and Freedom,” was published 51 years ago. It was this book that, in combination with Hayek’s “The Road to Serfdom,” began the demise of the almost unchallenged lock on economic thinking that Keynesian economic theory had enjoyed in this country and indeed in the Western World. While “The Road to Serfdom” was more theoretical, “Capitalism and Freedom” was remarkably practical and laid the foundation for specific reforms that changed the scope and direction of American government action — from monetary policy, to military conscription, to school choice. The little book had so many fine and bold ideas and expressed them so compellingly that even the ones that haven’t been accepted as economic gospel are worth reading and re-reading. Chapter 9, titled simply “Occupational Licensure,” falls into this category, and Chapter 9 is what I want to talk about this evening.

In awarding Prof. Friedman the Nobel Prize in Economics in 1976, the Swedish Academy said, “Perhaps Friedman's most characteristic feature is his unique propensity and ability to effectively influence and disturb current notions and previously established knowledge.” In tribute to him, I’d like to approach Friedman’s notions of licensure, in particular attorney licensure, in that spirit.

But before I delve into the topic, I should disclose that I am a Milton Friedman fan. I am a licensed lawyer. I have served as a member of the Michigan Board of Law Examiners, the board that oversees the licensing of lawyers. And the Michigan Supreme Court is the body that nominates and oversees the members of the Board of Law Examiners. Thus I am quite invested in this topic.

SMU business law professor Dwight Lee said in a tribute to Friedman last year that the licensing chapter of “Capitalism and Freedom” failed to change public policy not because of any deficiency in its argument but because, unlike the Vietnam draft, there has been no event to focus public attention on problems with occupational licensure. I find myself in partial agreement. But before those of us who are Friedman enthusiasts storm this particular unbreached barricade, it’s important to critically examine what Friedman actually said about professional licensing back in 1962.

Chapter 9 may not be the most successful chapter of “Capitalism and Freedom,” but it is trademark Friedman. It writes on the biggest possible canvas. He observes in the first sentence of the chapter that: “The overthrow of the medieval guild system was an indispensable early step in the rise of freedom in the Western world.” It has wit. After complaining that licensees pursue their own self-interest at the expense of those they are supposed to be serving, Friedman observes, "Of course, they are more aware than others of how much they exploit the customer and so perhaps they can lay claim to expert knowledge.” And it has audacity. It would be too easy for Friedman simply to mock the licensure of pedicurists and piano tuners  — “there is not much to be learned by knocking down straw men,” he says. So instead, he takes on doctors:

“I am myself persuaded,” he writes, “that licensure has reduced both the quantity and quality of medical practice; that it has reduced the opportunities available to people who would like to be physicians, forcing them to pursue occupations they regard as less attractive; that it has forced the public to pay more for less satisfactory medical service, and that it has retarded technological development both in medicine itself and in the organization of medical practice.”

Not one to pull his punches, he concludes that licensure should be “eliminated as a requirement for the practice of medicine.”

What to make of these conclusions?  It is possible, perhaps probable, that Friedman is right that licensure has increased the cost of medical care. But his conclusion that it has resulted in less satisfactory medical service is an assertion for which he offers no evidence, and, it is an assertion that many people, including many Friedman fans, find counter-intuitive.

Clearly he is right that licensing has reduced the opportunities available to some people who would like to be doctors, but is that really a problem? It is, in fact, the key question: must we deny some people the opportunity to test their purported medical skills on the open market in order to reduce the chances of harm that some of them would inflict?

In fact, Friedman himself deftly lays out the strongest case for medical licensure, which he labels “neighborhood effects.” 

“The simplest and most obvious example,” he writes, “is the ‘incompetent’ physician who produces an epidemic. Insofar as he harms only his patient, that is simply a question of voluntary contract and exchange between the patient and his physician. On this score, there is no ground for intervention. However, it can be argued that if the physician treats his patient badly, he may unleash an epidemic that will cause harm to third parties who are not involved in the immediate transaction. In such a case, it is conceivable that everybody, including even the potential patient and physician, would be willing to submit to the restriction of the practice of medicine to "competent" people in order to prevent such epidemics from occurring.”

Having laid out the neighborhood effects rationale for regulation so neatly, he never really knocks it down, proceeding instead to the social costs of regulation.

Where Friedman does get specific is in his vision of how the world might be better if doctors weren’t licensed, and here things get pretty interesting, given a half century of experience in our rear view mirror. 

Without medical licensing, Friedman writes, here’s what would have developed. More group practice in conjunction with hospitals. Medical partnerships, corporations, and teams providing central diagnostic and treatment facilities. A wide variety of payment and insurance options. Concierge medical services. And practices made up of medical people with varying degrees of skills and training using technicians with limited training for tasks for which they are suited and reserving highly skilled and competent specialists for the tasks they alone can perform. 

In other words, Friedman was able to envision in remarkable detail the way in which the business of medicine actually did develop. While I have no doubt that the licensure requirements delayed these developments, given sufficient time market forces precipitated many changes in medical services even within the existing licensing system.

I think that the same pattern of prescient vision obstructed by ideology also holds for his arguments when applied to lawyer licensing, perhaps even more so. The conventional wisdom, which Friedman shared, is that the case for licensing lawyers is weaker than the case for licensing doctors. But that is a proposition that can be challenged based on one of Friedman’s own tenets. The pre-eminent 20th century champion of minimal government, Friedman believed that government has only three primary functions. Of the three, two are squarely in the wheelhouse of the legal profession. Government, he said, should:

  • Provide for the military defense of the nation.
  • Enforce contracts between individuals.
  • And protect citizens from crimes against themselves or their property.

Period.

Our judicial system is the mechanism that we have developed, over the course of centuries, to enforce contracts between individuals. And our judiciary is the backstop for the protection of citizens from crimes against individuals or their property.

Courts, in effect, are the emergency room, the examining room, and the operating room of the rule of law. Our rule of law. The people’s rule of law. 

Let me make the simple case for restricting operating privileges in our courts to people who have qualified to be officers of the court. As an essential governmental function, courts must work well. The legal principles and the rules of civil and criminal procedure in which lawyers are trained are designed, by historical evolution and now by expert and democratic intention, to help them work well — to make the process for enforcing private contracts and public laws both fair and efficient. 

Anyone who believes that the procedural rules are nothing more than arbitrary impediments to the efficient resolution of disputes consistent with due process has not been in a courtroom in which people are attempting to represent themselves. I’ve been there. It’s not a pretty sight. It’s bad enough when poorly trained lawyers and judges are running the show. Representing another person in a court of justice is not just about providing a commercial service to a paying customer, it’s also about serving the owners of the courthouse — the people. A legal licensing system is about demonstrating the requisite knowledge and skills to operate competently within our court system. It is also be about practicing within a well-established code of professional ethics.

So, based on painful first-hand observation of the way in which the law can be abused in the hands of people who are not trained and are not accountable, I’m not ready to sign on to the idea of scrapping our lawyer licensing system in favor of an open market free-for-all. I have no doubt from my personal experience with the Board of Law Examiners that lawyer licensing and regulation can and does keep some people out of the courtroom whose attempts to practice law would not just harm clients, but would also damage the system at taxpayer expense. In other words, lawyer licensing corresponds to the “neighborhood effect” Friedman describes in relation to incompetent doctors and epidemics. 

As a result, I would not do away with the system of lawyer licensure, as Friedman would have preferred. But I am on board with thinking long and hard about whether our current process for qualifying as a lawyer and our current rules of professional conduct make sense in the light of dramatic changes underway in the legal marketplace, driven largely by technology, the rise of the information age, globalization, and specialization. And Friedman is very instructive on how to think about proceeding with reforms of the lawyer licensing system.   

“Capitalism and Freedom” described licensed occupations as cartels conspiring to hold down the number of licensees in order to maximize profits for their members. Licensing, Friedman wrote in 1962, “almost inevitably becomes a tool in the hands of a special producer group to obtain a monopoly position at the expense of the rest of the public.“ There was then and there continues to be today both intuitive force and some corroborating evidence behind this view. But if the conscious or unconscious goal of the legal profession has been to depress the number of lawyers, it has failed miserably. In fact, the ranks of licensed lawyers rose steeply from 1962 through 2008. In 1962, there was one attorney for every 640 people in the United States. By 2008, there was one attorney for every 262 people — more than double the number of attorneys even when factoring in the changes in population. The rise in the number of lawyers has begun to plateau, but the strongest evidence is that this plateau is wholly market-driven, not licensing-induced. 

And the market is suggesting other game-changing developments in the legal profession. Here are some snapshots of what’s happening:

  • Law school admissions this year reached a 30-year low.
  • Law firms have shed about 50,000 positions from their pre-recession peak.
  • Since 2009, the median starting salary for law school grads entering private practice has fallen 35 percent.
  • You can’t fill law school classes when students will face debts of over $100,000 after the schooling is completed and the market does not provide enough legal jobs with the salaries needed to pay off that debt.
  • Elsewhere in the world, the legal guild tradition is being shaken to its roots. In 2007, an Australian law firm became the world’s first publicly traded law firm, while in England the Legal Services Act, allowed non-lawyer ownership of law firms. Both of these developments move lawyer self-regulation away from the English law societies and begin to treat legal services as a consumer product, subject to consumer protection law. Interestingly, the law societies opposed the changes, but, notably, the changes themselves were designed and promoted by prominent lawyers.
  • The Co-Op, the English equivalent of Wal-Mart, has announced plans to offer cheap legal services in their stores throughout the country.
  • The number of people who are attempting to represent themselves in court has grown so dramatically that many states, including Michigan, have formed task forces to address how best to handle the phenomenon.
  • A RAND study says that computerized document review techniques such as predictive coding can identify at least as many documents of interest as traditional review by law firm associates, with about the same level of consistency. These techniques can reduce the hours lawyers spend on discovery by about 75 percent.
  • The online legal document store Legal Zoom took in $156M in 2011, a nearly 30% increase from 2010. In 2011, more than 20% of California’s limited liability companies were formed using Legal Zoom.
  • The Washington Supreme Court has adopted a “limited license legal technician” rule to address the growing crisis in meeting the legal needs of those unable or unwilling to pay for very basic legal services. These licensed technicians, in some ways the equivalent of nurse practitioners, will not represent clients in court proceedings or negotiations, but can provide other limited legal assistance to pro se clients, independent of any relationship with or supervision by a lawyer.

Notwithstanding the profession’s attempt to regulate itself, the free market forces are imposing change in the legal profession. So here are some obvious questions that need to be addressed as these changes in the legal marketplace occur:

  • Can we train lawyers in a shorter time and more cost-effectively?
  • Does it make sense to require very broad but relatively shallow legal training in many legal areas when legal services are increasingly specialized?
  • Different legal services and practices require different skills and levels of expertise, and have vastly different earnings potential. Should the training, and the expense of training, be the same for everyone? Should we have some form of limited license technicians, like Washington, or should we set high standards for a limited set of legal practices, and leave the provision of all other services within the legal marketplace unlicensed and unregulated?
  • Lawyers are licensed state by state based on a single comprehensive test with variations state by state. No state requires regular testing. Given that the law is not static, what assurances of continued competence does a state’s law license reliably convey?
  • Michigan, like most states, requires a demonstration of knowledge of a sampling of its state law, in addition to the big test, the multi-state bar exam, that tests general legal knowledge. But, also like most states, we allow experienced lawyers in other states to be admitted in our state without requiring any demonstration that they know anything about our state’s laws. How do we justify this?
  • Legal practice is increasingly global. How do our rules accommodate this change?
  • Why shouldn’t nonlawyers be able to invest in law firms, as long as the code of professional conduct for lawyers makes sense and is enforced?

I can’t help but think that Milton Friedman would have loved what’s happening in the legal marketplace today. He would embrace these questions, and have a couple dozen more. It’s our challenge to figure out what those couple dozen more would be.

In the preface to the 1982 edition of “Capitalism and Freedom” he wrote:

“Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”

It seems to me that the thinking and innovation about lawyer licensing has been frozen here as in many parts of the country, but the market is forcing a thaw.

Perhaps the Mackinac Center, our state’s most prolific incubator of ideas to promote freedom, would be interested in leading this movement. You, with your status as America’s leading state public policy think tank, would not be ignored if you called upon State Bar of Michigan to innovatively re-think the scope and breath of licensure for the provision of legal services in Michigan. If, however, you take up this important charge, don’t forget that the first thing to do is to have all participants read, as I have affectionately, but irreverently, described him, ‘one hand Friedman’ on this topic. As in all things he addressed, he has said it all with his characteristic wit, audacity, and love of freedom.

Thank you for your kindness in inviting me to this important event. It is always a pleasure to be with thoughtful people and to share a podium with my good friend Chief Justice Cliff Taylor. 

 

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