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Good reason to be a lawyer

13 Jan 2014

The Australian

By Max Baker

Max Baker authored an opinion piece published in the Australian responding to Adam Creighton's article Too many laws, too many lawyers.

Adam Creighton's article ("Too many laws, too many lawyers") in The Australian laments lawyers' world domination. They have used their growing numbers and positions of power to spew out needless new laws. Creighton's grudge is an old one as Dickens once wrote "if there were no bad people, there would be no good lawyers". In Creighton's world, rather than study law and contribute to the growing insanity, students should become economists and uphold the virtues of simplicity and rationality.

But what is an economist and what do they do? Creighton is shy in terms of details here. Perhaps outside of Canberra they don't do much to facilitate everyday business besides produce the occasional economic forecast. My experience of working at a large Australian bank was that economists were an endangered lot compared to the armies of accountants. Even if you managed to find two economists to rub together you couldn't get them to agree.

Creighton's argument, like much economic theory, is idealistic. Economists believe in a tale of perfect markets functioning with minimal intervention producing prosperity and freedom for all. Lawyers and politicians spoil this perfect world, imposing what economists perceive as costly red tape that makes it all just too damn complex. Creighton's anti-regulation view was made popular by Milton Freidman in the late 1970s and subsequently politically championed by conservative disciples like Margaret Thatcher. But if we have learnt anything from the recent global financial crisis, it is that this view is a dangerous one.

In 2008, in the absence of regulation, financial market participants were neither rational nor ethical. A more developed legal apparatus surrounding complex financial instruments may have saved us enormous pain.

Our experience of the financial crisis has indeed tarnished the simple ideas of classical economic theory. Now we begin to understand the business world for what it is: aggressive and complex not rational and simple. New laws offer a way to define our rights and create proper procedures within this world. In essence, these laws make this world liveable.

For instance, the growing financial pressures on managers to perform have led to greater risk taking. These competitive pressures create a greater need to refine and extend laws and impose boundaries on managers. The products and structures of corporations are also growing in complexity. Technologically advanced products contain a myriad of complex intellectual property arrangements. Corporate ownership structures involve a tangled web, with joint ventures, alliances and networks muddying the picture. The apparently simple notion of what it is to own something is no longer clear. These new laws are not just the play things of corporate lawyers; they define the rights of customers, staff and other contracting parties.

The development of new laws is an essential part of the functioning of our complicated world. Perhaps Creighton would prefer we close our eyes and trust that 'rationality' will protect us! Personally, I would rather live with the minor nuisance of regulation than suffer the consequences of the recent foray into financial non-regulation. Massive inequality, corroding workplace rights and crippling levels of debt are not a legacy of which we should be proud.

We need more lawyers, not fewer. Studying law is notoriously boring and difficult. However, it is a degree that is both practical and theoretical, the topics of which extend from the legal implications of mundane business transactions to discussing ethics and human rights. Rather than modelling behaviour like economists, lawyers are taught to engage with real problems. They have to digest and analyse enormous amounts of information and moderate ambiguity not resort to simplicity and certainty. Perhaps it is a result of this comprehensive training that lawyers dominate our corporate boardrooms and are some of our most revered leaders. Abraham Lincoln, Ghandi and Nelson Mandela were all lawyers.

Dr Max Baker is a lecturer at the University of Sydney Business School

First published in The Australian

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