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A Sighting of David Ricardo in Palo Alto

I’m genuinely delighted to learn that students at Stanford’s School of Law are learning the meaning and benefits of the principle of comparative advantage.  This fine op-ed in today’s Washington Post by Josh Sheptow, a Stanford law student, explains why the widespread practice of high-priced corporate attorneys devoting some of their time to do pro bono work for poor people is “staggeringly inefficient.”

Here’s the core of Mr. Sheptow’s argument:

My argument is straightforward. First, note that there are nonprofits such as the Legal Aid Society that do nothing but provide free legal services to low-income clients. Their offices are not fancy and their attorneys command much lower salaries than their counterparts at large, prestigious law firms. As a result, it costs these organizations (or, more accurately, their donors) less than $100 for each hour of legal services they provide to low-income clients.

Now consider a lawyer who charges paying clients $500 an hour (roughly the going rate for an upper-level associate at a large corporate law firm). If she donated 10 hours of fees to Legal Aid, she could fund roughly 50 hours of legal service to low-income clients. That’s five times the amount of service she could provide if she spent those 10 hours doing pro bono work herself. Thus it is much more efficient for her, and for high-priced lawyers generally, to donate their fees rather than their time.

Well done, Mr. Sheptow!