Lawyers Create Scarcity

November 18, 2009 · Posted in abundance, economics 

Almost all scarcity is either artificial or limited to a time or location. Let me make it clear that there are some valid uses for solutions in law. When law is used in the wrong situation it will always create scarcity. Monday I ran into a perfect example of how lawyers create artificial scarcity.

Sunday I got a flat tire. My tires were old and worn so it was time to replace them. Fortunately I had a complete set of tires in my garage. My friend had taken a car to the scrap yard but saved the nearly new tires. The tires were a different size from what his new car used so he didn’t have a use for the tires. It was junk to him but useful for me. I put them in my garage to safely save them for when I replaced the tires on my car.

Monday I loaded the tires into my car and went to Sam’s Club to have my used tires mounted. Sam’s Club offered this service free to members. I was so happy with this service that I frequently recommended membership just because of this service. To my surprise they don’t provide that service any more. Was it because of cost cutting? No. Lawyers stopped the service because of fear of liability.

Mounting tires for members didn’t cost Sam’s Club anything and in fact helped sales. They had staff there to install tires sold there but they weren’t always busy so performing this service for members was free. And since members had to wait for the tire to be mounted they would do extra shopping or get some food from the café. Now because of the lawyers they lost that valuable marketing advantage and I lost the free and convenient service.

Irritated, I went to Belle Tire and they said they would charge me $80 to mount the used tires. After waiting for 30 minutes the manager told me they could not mount the tires because of fear of liability because the tires were supposedly too old. Tires don’t spoil. The tires had been sitting in my garage since being removed from the other car so they were not worn or weathered, the tires were new in every way except for the date they were manufactured. The manager agreed it was stupid but he had to follow the policy created by lawyers.

So I had to drive all over town on the unsafe temporary tire wasting gas and time to find a business to take my money for a service that would have been free if the lawyers had not interfered. There wasn’t an option for me to sign a waiver. There wasn’t a test to determine if my tires were safe. The lawyers forced an arbitrary rule that caused artificial scarcity hurting everyone.

The lawyers created real waste and real scarcity to prevent a potential risk. Was this a rare case? No! I had to go to four different stores to find one that would mount my tires. And we all can point to examples of something being effectively outlawed to avoid lawsuit.

The legal system is a scarcity system. The legal system is a win-lose system. That does not create anything new. At best the legal system moves things around. In reality the legal system wastes time and materials at all levels. Time spent defending yourself and fees paid to lawyers are huge but not even the largest waste. The better cheaper options that are made illegal are the biggest waste.

Doctors perform unneeded test just to protect themselves from liability. That increases costs and wastes medical services that could be used for real illness. Threats of lawsuits or legislation prevent life saving drugs. That is the ultimate real harm from artificial scarcity.

Any system that does not create something causes scarcity.