July 18, 2007

Labor + Capital = Law Firm Associates?

by PG

In Slate, Daniel Gross attacks Simpson Thacher's program to donate $45 to a public interest group each time a summer associate spends $15 or less on her lunch. Gross sees this as emblematic of modern upper class culture, and he may be right from a sociological perspective. His economics, however, seem a little skewed:

4. It's Good To Be the King. In this economy, management and owners of capital always win. The partners of law firms have been among the most fortunate owners in this economy. They don't face competition from China. They mark up the labor of junior associates and then pass on the costs associated with that labor -- copying, car services, long-distance phone calls -- to their deep-pocketed clients. Summer associates are already a great deal for law firms -- their hours are billed out to clients at hourly rates of between $200 and $300, but the firms don't have to pay any benefits.
First Gross says the owners of capital are winners; then that partners are among the most fortunate owners (compared to whom? surely not their college classmates who went into finance instead); and that their work involves management of labor, not capital. What is this capital that partners own, the Swingline staplers? The massive value Americans are seeing from capital nowadays is not its direct use in the old fashioned Econ 101 sense of a factory, but its investment in various funds, arbitrage among currencies, etc. Law firm partners don't do any of that as part of their job. They write the contracts and devise ways to minimize taxes and litigate when it all goes wrong, but they are prominent as neither owners nor managers of capital.

July 18, 2007 07:46 PM | TrackBack
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