A Question about the Cost of Movie Tickets (and Other Things)

Yesterday having been Christmas, my wife and I went to a movie (we skipped the Chinese food, however; it’s not the same without the kids). Because there is always a big crowd on Christmas Day in Evanston, we bought our tickets on line. In past years we would have used a service such as Fandango, but now tickets are available directly from the theater chain. But even in the absence of a commission to a third party, there was still a $1.50 service charge per ticket, which raises some interesting questions.

It obviously costs the theater chain (Cinemark, in case anyone is interested) less to sell tickets on line than the old fashioned way – no labor; no benefits; almost no overhead – so why does it cost more to buy them over the Internet? In other businesses – for example, airline tickets – you pay less for Internet purchases, or a surcharge if you insist on human interactions. How is it that theaters can charge more for something that saves them money?

The obvious answer, and probably the right one, is that people like me are simply willing to pay extra for the convenience of avoiding lines, and the theaters are happy to take our money. In other words, the price is set by demand, not by the cost of production (which in this case is zero, or perhaps even negative).

I wonder if this has implications for law school pricing. We often heard it said that high tuition rates have driven up legal costs, but the theater example suggests that pricing is more a function of demand – how much people are willing to pay – rather than the baseline costs of the provider. A generic lawyer will charge clinets as much as she can get, whether her tuition was free or exorbitant. Competition may put a cap on pricing, but that would still be independent of tuition bills.

But isn’t there a minimum rate, below which lawyers won’t work? And isn’t that a function of their investment in education?  And doesn’t that in turn affect the availability of legal services to the middle class? I am thinking that the answer is yes and no. Certainly a lawyer would tend to abandon law practice if she cannot earn sufficient income, but that would be a function of the available alternatives. Why practice law if you can make more money as an entrepreneur or managing a Starbucks? But the attractiveness of a more lucrative career is again independent of law school tuition. (Yes, I know that some people would prefer to practice law even for less money, but I am assuming that most people are rational maximizers regarding income.)

I suspect we saw some proof of this at the depths of the recent recession. Even though there were thousands of unemployed lawyers, they did not suddenly begin competing for middle-class legal work by offering lower prices. Why not? Because they were able to find other jobs that paid better. If they had been able to make more money doing middle class representation, they would have. But they didn’t – not because of tuition (which was a sunk cost), but because there was inadequate demand.

And what about public service and public interest jobs? We often hear it said that high tuition debt prevents students from taking those positions, but I am not aware of any public interest job that has ever gone unfilled for lack of applicants. In fact, there will always be a limited demand for public interest lawyers, and lowering tuition will not do anything to expand that market. (A change in tuition structure may affect who takes public interest jobs, but not how many such jobs exist.)

I am not arguing for higher tuition or greater law school debt, but only positing that legal pricing – like movie tickets – is probably more sensitive to demand than to cost.

I would be quite delighted to be proven wrong about this intuition.

Comments

[Sy Ablelman]

Us solos and neighborhood law offices have been representing the UNDERSERVED for decades. And oddly, even though my income is borderline Lower Middle Class, I enjoy the Practice and take great satisfaction that I can get somebody out of Jail on a Saturday after Central Bond Court. Many of us will appear in court for single appearance for as low as $100.00. The reason legal pricing has not gone "down," is because it is so low to begin with. It is a Walmart world for us Solos. Everyday low prices. And clients pull open the Yellow Pages and price shop among the hundreds of attorneys baring about free consultations and tremendous PI results. My colleagues and I sometimes chase retail thefts and possession cases for three bills. What I will not do is work for free. The Pro Se folks or the unrepresented (Middle Class and otherwise) you see at courthouses demand FREE legal services. Many suffer from conduct disorders, oppositional defiant disorder and are socially maladjusted. Some are adherents of the Sovereign Citizen Movement.

[Sy Ablelman]

That should read "barking" about free consultations. I hate auto correct features.

[Sy Ablelman]

Actually, there is not enough "Middle Class" work to go around in this grotesquely oversaturated attorney market. Look to the Professor Paul Campos data...the average Solo struggles at under 47K a year. They are being served and represented.

[Jojo]

Steve,

It happened in law starting about 20 years ago. Less than six weeks ago, a municipal court judge told me that a young lawyer represented someone in a full DWI trial for $350. That is rock bottom pricing. Even cutting corners and under preparing, you are looking at 5 to 10 billable hours minimum on a full DUI trial. It also means you have to clear the deck of any other work you might have done. that day. You cannot make a living trying DUI cases for $350. 15 years ago, you'd have gotten $1,200 to $1,800 for the same file. There is no money in non-biglaw, non-contingency law anymore.

For the most part, faculty are unaware (perhaps willfully ignorant) of what has happened. There is, however, a factual basis underlying the scam mantra. You are preciously (dangerously?) close to seeing the truth with your inquiry.

If you are really curious, please do the following. Post a fake law job on Craigslist offering a wage and experience requirement that you think is just untenable. Weep as you see how many qualified resumes come in.

[Sy Ablelman]

Professor,

Jojo is spot on. There are many veteran attorneys, including my buddies and I that are exactly in the same position as that kid who took a DUI for $350.00. It doesn't matter, NU, Marshall, Cooley, Kent, etc. I used to bring in 75K with a volume of these matters and some appointed work. I had a nice niche representing the UNDERSERVED. That was ten years ago. The work has not really dried up. It is now too thinly spread among thousands of struggling attorneys who need cash flow to pay IBR, not mention living expenses. Think Walmart, Kmart, Target and Meijer on every block in every town, city, hamlet, berg. In Illinois alone, there are 92,000 registered attorneys and 95,146 people employed by car dealers. Nearly every Illinois adult owns a car or two and will own several throughout their lifetimes. All will need to be serviced and maintained at some point. How many adults will need the services of an attorney and what period of time? If you are law abiding, not much. This is where pricing is....

[Deborah Merritt]

I've thought about this issue a lot, Steve, and I think a lot of factors play a role. There clearly is a limit on what people will pay for legal services, so the demand side matters.

On the other hand, we simply don't teach students what they need to know to start a practice catering to the middle class. The biggest unmet need is in domestic relations, but how many new law grads know the detailed rules of divorce, child custody, and other matters within their state? Equally important, how many know the unwritten customs that judges and other lawyers follow in this area? Or how to find clients and get them to pay their bills?

I think we vastly underestimate the time and expense it takes for new lawyers to gain this information. And who will share it with them? Not the lawyers they are competing against; even if they would like to "give back," most of those lawyers operate on very thin margins. They can't afford to spend a lot of time tutoring new lawyers.

Legal ed also fails to prepare students for the type of high-volume practice they need to undertake in these middle-class areas. It may be possible to make $40,000-50,000 per year in these areas, but only if you are very efficient. To do that, you have to know how to practice high-quality, high-volume law, and that's something law schools don't teach.

There are other factors as well, such as the status that students seek when entering law school and the ways in which the profession (including schools) diminishes the status of working for middle class clients. We have a peculiar profession in which it's noble to work for legal aid, but shabby to offer the same services (sometimes at less pay) to people just above the legal aid line.

[Steve L.]

I agree, Deborah. Law schools could do much more to prepare students. (As you may know, I have devoted most of my career to clinical and skills teaching.)

The point of this post is only that career choices tend to be influenced much more by the prospect of future income than they are by sunk tuition expenses, and that legal fees are determined by demand rather than the cost of education.

[[M][a][c][K]]

Steve:

The problem with saying that legal fees are determined by demand is that it fails to understand how demand actually works, especially in the legal context. Supply can influence price - but at the end of the day clients can only pay what they can actually afford, and much of the time what they can afford is not a lot. That is the real issue in unmet needs - clients who cannot afford to pay lawyers.

At the high end what clients are prepared to pay, is, though I have run into exceptions, a function of what is at stake and their sense of exposure to legal risk. Supply does influence price, but there is also a basic issue of skill in certain areas - the better lawyer can make a huge difference. That said, many marquee name large law firms are actually not that good at what they purport to do well.

So on some the supply of lawyers doing legal work has driven down prices, but it has also simply meant that many lawyers are catering to those who simply cannot pay adequate fees for the legal work they need.

[just another solo]

Hi Steve:

I'll give you an example about a rate negotiation for resulting in me passing on a criminal trial. This was a felony trial for which the client was exposed to up to ten years in prison. It was a burglary of an occupied house in the Northeast.

The case would have required, one week of preparation, one week of jury selection, and probably one week of trial. The client spoke Chinese and not English, and would have needed an interpreter for out of court conversations. I would have needed to pay the private interpreter out of the retainer, and they agreed to cap their bill at 1/3 of the retainer. Common accepted wisdom for low paying criminal work, get your money up front.

So figuring a minimum of 120 hours of work, and a drive of an hour to the courthouse, I offered to do the job for $12,000:00 of this amount I would have taken home $8,000:00 That's roughly $66:00 per hour. The client, who was cash poor, offered a flat $4,000:00 of which I would have taken home $2,667. That's $22 per hour. But wait, assuming $50 a day for travel expenses for three weeks of going to court, one could take another $750 off the top. So that's about $16:00 per hour for three weeks of work, assuming that there were no further scheduling surprises.

It was the travel expenses, and the length of commitment that led me to not want to discount my rates any further. Since I no longer have tuition debt, that was no factor in this decision.

One way to trim costs would have been to agree to a bench trial but that would have been a betrayal of the client's interests since this was a case in which a disagreement over facts could have resulted in a hung jury, which is usually considered a win for the defense. (The client would have accepted a much better deed, not the offer of 4 years, which was a horrible offer because they did not have a previous felony record, they were not on probation or parole, and the victim had not been injured or threatened by the person who had broken into the home.

[just another solo]

Sorry "the client would have accepted a much better deal"

[Sy Ablelman]

Professor,

I post under a handle from the movie, A Serious Man. I can post honestly. The Scam Bloggers are going to hate me. The cost of my legal education does not really factor into client pricing. I have almost 200K in debt. I accept the CBR (cash bond refunds) of $90.00 for a simple plea as a Bar Attorney. I do Administrative Hearings for my town at $100 for a couple of hours. I am on IBR and I have received all manner of deferments, hardships, and forebearances over the years. I play the system like I do for my criminal clients at 26th Street, I delay and deny. Delay and Deny. If I can't make a payment, I just talk to the nice people at the Servicer and I can slide for a month or two. I will take the cost of legal education (student loans) with me to my grave. I look at my practice as payback and the fact that I am the face of Justice, Captain Solo Justice (I read that somewhere). The gub'mint gets a bargain in the deal....there would be no legal system were it not for folks like me and all of my colleagues bringing it to all comers. Instead of a road or a school, the gub'mint bought a lawyer, an awesome investment.

[Sy Ablelman]

Just Another Solo cites to an example (Chinese/English) burglary client in a Northeast Jurisdiction. In Cook County, that would be small potatoes. Here is how it would go down here for my colleagues and I. We would grab the $2500 cash and go through the normal pre trail dates. At 26th Street or Markham, if this kind of "BS" is set for a Jury (read, waste of time) the prosecutor would get really tired of schlepping the file around for two years on a property case. She would likely look at a reducer to a Misdemeanor to "get rid of it." The beauty of Delay and Deny. I would then twist my client's arm into taking the plea or it will cost him another 5K to take it to a jury and then roll the dice.... I would then threaten to withdraw because of a "professional conflict." If he takes the deal, it only cost him $2500 for two years worth of court appearances spaced six to eight weeks apart.

[Steve L.]

If we ever meet, Sy, I will tell you of the time I declined a judge's offer of a CBR.

[not so sly]

A relative of mine was supposed to have been an extra in A Serious Man before an accident prevented that from taking place.

[Jojo]

Deborah,

You get it! My law school class on family law had about zero practical information. If a law student fails to obtain biglaw, midlaw, or a DA position right out of school, they are in a tight spot.

Small law will be reluctant to take them because they don't know anything and want too much money. When they do work in small law, it is at low pay. Further, unless you make 3 or 4 years apprenticing under someone else, you don't know enough law or enough business to practice alone.

As constituted, law schools assume their students graduate, clerk for a federal judge, then join biglaw or a prosecutor's office. A large percentage of law students (like 90 percent) lack that path. It is cruel to saturate the market and to keep sending underprepared new entrants of lower aptitude than ever before out into that glutted market to advise an unsuspecting public who can't readily differentiate quality in services. That is the current state of legal Ed. Sorry I rocked the boat.

[terry malloy]

funny story about 'a serous man.'

I watched that movie in a midtown west theatre with about 15 other people. one of those people was Sentator Al Franken, who apparently grew up in the same minniapolis suburb as the cohen brother.

he laughed at a few Jokes that no one else did, regarding the town.

life is strange. good movie.

[just another solo]

Hi Sy:

I did not mention in my original post, that the prospective client already had a lawyer who had tried to settle this case which is approaching two years old. It will be going to trial.

[Sy Ablelman]

Greetings Just another solo:

Hopefully your guy has no background. Maybe the judge won't bang him to hard if the jury doesn't see it his way.

JoJo is spot on. Most of us older solos came up through the PD's office or the equivalent. It took years of "seasoning" to know the culture and how to work the system. A kid with a "10" AVVO rating and a slick website does not a good attorney make. That "10" AVVO rating is manipulated and fake. All one has to do is answer a fine on line questions and have other computer or APP literate newbies shill for them...The APP-Millenial generation has figured it out to the detriment of the legal profession. Electronic literacy has supplaneted old fashioned shoe leather, skills and experience. It takes years of hard work, hard knocks and a few upset judges (justified or not) to obtain the necessary skills to really represent a client well. A few electronic key strokes is not it.

[Sy Ablelman]

Professor Steve,

Before this post closes out, let me add one final thought on pricing. When I price everything from an Overweight Truck to an Aggravated Battery, I think about what the client can reasonably pay. If I tell them to bring 3 bills to court and they give me two bills, it's ok. Sometimes I price things because it is "better than starring at the walls" all day. The cost of my legal education and loans does not figure in to pricing. Its what the client can pay or is willing to pay. Second, having a big student loan nut and living in a "parent's basement when you are 32" is half baked. I have never been denied credit, a mortgage or a car note because of my 197K loan. They key is to never DEFAULT. I may have to submit additional paper work explaining IBR, but that's easy with the Interwebs. Frankly, nearly every car dealer has ignored my big loan nut and one told me it was "bullshit cause everybody has 'em." The banks were more interested in whether I made my car payments... Have a Healthy New Year!