Construction law knowhow by David Lewis

Solicitors: the last Marxists?

30/05/2010 18:07

The late Frank Johnson once simplified Karl Marx’s theory of surplus value thus: “a good’s value derives from the amount of work which went into making it."

As I think we all now know, Marx was dead wrong and a good’s value is the amount of money which people are willing to pay for it.  (It still amazes me, by the way, that free-market economists like Milton Friedman, and politicians like Margaret Thatcher and Sir Keith Joseph, actually had to persuade people of this basic and obvious fact during the 1970s and 1980s, but those were the times we lived in.)

Clearly the hourly rate for professional services – especially when it’s the same for any kind of work, regardless of its value or importance to the client – produces a total fee which derives from the amount of work done by the professional.

Of course, the market prevails in the end.  Solicitors who quote hourly rates are obliged to give estimates, are frequently stuck with the estimates they’ve given, and (I strongly suspect) sometimes “forget” to record some of their time in order to convince themselves or their superiors that they aren’t “making a loss” on the job.

Ultimately, if clients aren’t willing to pay fees which cover the cost of the fee-earners’ time then hourly rates won’t work.  In those circumstances, even where hourly rates are used they are likely to be something of a fiction.

I don’t say it’s easy to find alternatives to the hourly rate.  I haven’t found it too difficult for “project” work, where you more or less know beforehand what it will entail.  But I’m still working on the much harder problem of finding the best way to quote fixed fees for general retainer work.

Meanwhile I think I’ll leave the Marxist theory of surplus value to those few people who still believe in it: chiefly the governments of North Korea and Cuba, and (though they may not realise it) the English legal profession.

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