Free Law - Clemson University

Free Law - Clemson University

901 Notes Department of Economics

Clemson University

Free Law

Here is my best shot at the “Free Law” question on the Spring ’97 comp.

In the comparison of 200 hrs pro bono work to a 10% work tax, assume that 200 hrs is 10% of

the current work load and assume that lawyers supply curves are positively sloping. In this case

the 200 hrs requirement will generate more time.

This can be seen clearly in the following graph. For the sake of drama, assume that the hour

requirement is tt and that the hours tax rate is 50%. This means that tt is one-half of the amount of

time lawyers currently work. Let a be the current average time worked by lawyers. A work tax of

50% is the equivalent of a 50% tax on wages. This causes the work tax budget constraint to go

through point b. If the supply curve for labor is positively sloping, then the average labor-leisure

choice of lawyers given a work tax will lie to the right of b along the line bT. Half of this will be

less than tt.

The figure also helps us answer the question of a money tax fund used to provide free legal aid.

Assume that there are two kinds of lawyers. One group works a lot shown by point d. The other

works less shown by point c. The average is a. Let there be a fifty percent wage tax levied on

lawyers with incomes greater than a. This kinks the budget constraint, dropping it from a to b.

Assume that the hard working crowd does not find an equilbrium at a (where they would avoid

the tax), but rather ends up at e. The money ab can be used to hire legal services on an hourly

basis. I think that it is reasonable to assume that this legal fund can be used by the public service

agency in a way that perfectly price discriminates against lawyers. This will maximize the amount

901 Notes Department of Economics

Clemson University

of legal services that can be purchased with the money. Hence, the public service agency can hire

lawyer by paying them increasingly higher wages to get them to work more. Essentially, the

agency can move along the indifference curve of lawyers. In this way the money ab could

purchase legal work from the lazy lawyers from point c to point f. By construction, this exactly

exhausts the amount ab and leaves these lawyers indifferent. However, this process does not gain

as much legal aid as the requirement that lawyers work tt hours. 1

1 There is a slight problem in this conclusion using the 50% tax rate. This problem goes away with a 10% tax and

the 50% tax makes the graph easier to draw. So, if you figure out the problem, ignore it.


More magazines by this user
Similar magazines