Demise of the billable hour again?

Did everyone else notice that, yet again, the NYT is positing the demise of the billable hour (here) and that it was for a time the most e-mailed story on the NYT this weekend?  I wonder about the fixation with the billable hour as a measure of lawyer's value.  While it has its obvious drawbacks, all billing methods are susceptible to the extraction of rents given the imperfections in the market for legal services.  Moreover, lawyers moved to the billable hour for good reasons (more efficient allocation of risk) as well as more dubious ones (accounting firm indications that this would correct the lag in lawyers' earnings).  Why isn't there more critical discussion of this?

Comments

[Andrew Perlman]

Alice,

That's funny. I noticed that it was one of the most emailed stories as well. The law business must be unusually slow if lawyers are spending that much time sending New York Times articles to each other!

For what it's worth, I think Jeff Lipshaw had a good take on that story and reached conclusions similar to yours: http://lawprofessors.typepad.com/legal_profession/2009/01/rumors-of-the-d.html

Andy

[Lance Godard]

Alice -- the billable hour debate rages on. I agree completely with you, and made similar points in a recent post on my blog: http://writingthisdown.blogspot.com/2009/01/who-are-we-fooling.html

Also, if you haven't seen it, Patrick Lamb just posted a nice piece on alternative fees:
http://www.patrickjlamb.com/archives/commentary-the-harmony-of-alternative-fees.html

Lance

[Christopher Marston, Esq.]

Interesting, but if you look at the history of the billable hour you will realize that people moved to the billable hour by accident (it was a cost accounting method) and not for any good reason at all. In fact, never in the history of the professions (over centuries) declined in respect so fast as the legal professions that in the last 50 years of operating under a model that economists all acknowledge is an inferior economic theory that bears no relationship to the value to the customer. The Vereage Institute (www.verasage.com) and Exemplar Law Partners get that there is not a single customer that wants to buy an increment of our time. Increments are excrement. HOwever, I love that you point out all of the talk about it! For God's Sake - if you want to kill the billable hour, just kill it and stop talking about it, right? :-)

Cheers!

[Alice Woolley]

I think the history of the shift is contested (as history always is). I have always found compelling the argument that the shift arose with the growing complexity of corporate transactions and litigation, and the desire for clients to bear the risk of cost unpredictability rather than pay the higher fees which would be required for lawyers to be willing to bear those risks ex ante. Also, while economists may dispute the merits of time as an economic measure, it is not obvious what measure works given the inherent non-homogeneity of the 'product' lawyers sell. If I go to lawyer A for task B, and to lawyer B, for task C, what meaningful measure do I have to compare the 'price' charged by two different lawyers - whose skills may vary widely - for two different tasks - the inherent 'value' of which may vary widely (Jeff Lipshaw makes this point well in his post). Further, if you use measures such as 'value' or 'task' payment, you still have the problem of information asymmetry, the credence good problem and the issue that, even ex post, it is not always clear whether the value received by a client arose from the skill of the lawyer or other factors - getting a good judge, having a case which even an incompetent fool couldn't lose (or conversely, having a terrible judge).

I am no fan of the billable hour - or at least of its abuse (my first academic publication on leaving practice was on abuse of the billable hour by Canadian lawyers) - but it is not obvious to me that its alternatives are much better.