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A blog with tips and insights
into the practice of law

The Tragedy of the Commons – what the Legal Profession Needs to learn from the GFC

Since its publication in Science in December 1968, “The Tragedy of the Commons” has been anthologized in at least 111 books, making it one of the most-reprinted articles ever to appear in any scientific journal – and an apparently appropriate go to for my significant other over dinner, what with MAFS spoiled and sport cancelled.

The article considers an economic problem in which every individual has an incentive to consume a resource at the expense of every other individual with no way to exclude anyone from consuming. It results in overconsumption, under investment, and ultimately depletion of the resource.

It got me thinking about the legal services market, where the skill and experience of the person delivering the service are arguably the most valuable resource. Skilled and experienced lawyers do not grow on trees, but are the product of significant investment of time money and effort on the part of firms over a substantial period of time. Because it is practically impossible for one firm to provide training and experience for all the lawyers it may need in the future, an ecosystem exists where the whole industry invests in developing a common resource (i.e. trained and experienced lawyers).

The tragedy of the commons occurs when individuals neglect the well-being of society in the pursuit of personal gain. In the context of the legal profession, this means that whenever there is a significant reduction in opportunities for graduate lawyers as the result of law firms cutting costs during economic downturns, there is a knock on effect which impacts the entire industry over a significant period of time.
When the GFC really hit Australia towards the end of 2008 the graduates who were due to commence the following January were
basically told they couldn’t start. Some firms paid the lawyers half their wages to take a 6-12 month gap year, the unlucky ones just didn’t complete the graduate cycle. Graduate recruitment only really picked up steam 2-3 years later and by that stage we had lost a substantial segment of lawyers.

Over the course of the following 4-6 years, every client I would see would lament at the dearth of quality 2-5 year PQE lawyers across every Practise area. The reason was of course that neither the client I was sitting in front of nor any other firm trained lawyers ( certainly not in any substantial volume) between 2009 and 2012. Many of the 2008 grads were made redundant and lost to the profession in the process as well leaving a 4-5 year gap where no one was doing any training.

There are few areas of endeavour that don’t require a lengthy unbroken chain of experience consisting of hours upon hours of practicing the craft under supervision to get good at it, and the practice of law is certainly not one of those endeavour.
So fast-forward to the landscape that is 2020 and three weeks into Covid-19 what are we seeing… exactly the same thing we saw 12 years ago. Law firms starting to shed grads, paralegals, juniors….

Juniors are expensive and they appear inherently dispensable when work dries up, but they are absolutely critically necessary when the market swings the other way. If we start shedding grads and juniors now and then continue the pattern of 2009-2012 the industry will have the same structural issues, we’ve faced the last decade and these gaping pqe holes can’t be fixed with a stimulus package. It’s not any one firm’s fault or responsibility, but the profession needs to work out how to keep training graduates and providing PLT opportunities in good times and bad.. please let’s learn from the mistakes of the past.