Consumer surplus, another term for “value” from law firms

“Consumer surplus is the aggregate net benefit that consumers receive from using goods or services after subtracting the price they paid.” This definition of an economist’s term, from MIT Sloan Mgt. Rev., Vol. 51, Fall 2009 at 95, hearkens back to what I have written about the effort to measure and generate more value from law firms (See my post of Aug. 21, 2009: value compared to fees paid with 22 references.). Consumer surplus, in other words, is what general counsel who authorize payments to law firms want to maximize.

Law firm partners, too, should be as much interested in pinning down value (aka consumer surplus) as are general counsel. They would like to keep the consumer surplus from going too high as the cost of legal information and some services sink toward zero on the Internet. The cost will also drop, and consumer surplus rise, due to offshore competition, new models of law firms, pricing pressure, and disruptive technologies – but the shift in consumer surplus will be gradual and each change has precedents.