Value perceptions and keeping up with price changes

Reflecting on the much-discussed gap between fees paid law firms and value delivered by them, I recalled my wife’s common statement: “Rees, you haven’t kept up with the costs of things.” Every time I gripe about something being expensive — a dinner out, movie, haircut, or pair of shoes — she points out that I don’t buy things very much and am not in touch with the expected price increases. The same psychological lag time might happen to lawyers who periodically review outside counsel invoices for services performed only from time to time.

Firms keep up to date on what to charge but a lawyer who hires them might not appreciate that increases are usual and everywhere. The cost of legal living goes up, not down. We remember the old days when the firm of Lake, Woebegon & Keillor billed us fees that were always lower than average.

Another quirk of value, ironically, is that high prices influence our opinion of value favorably (See my post of Jan. 2, 2009: higher prices push us to sense higher value.). If it’s expensive, it must be good.