Gordon's post inspired me to share the reaction of my Law, Literature and Business class to Ron Gilson's classic article. "Value Creation by Business Lawyers" might seem an odd syllabus pick, even though Gilson opens with a telling quote from Kurt Vonnegut (see after the jump if you want a reminder). But Gilson's transaction cost engineer is the reigning academic account of what business lawyers actually do, so I figured it was part of the literature of business law.

The students found Gilson's central claim to be pretty self-serving. Business lawyers in his view don't just negotiate in a zero-sum game, but rather create value by reducing transaction costs and enable more deals to be done, at lower cost. My students accepted the transaction-cost-reduction portion of Gilson's argument pretty readily, but remained unconvinced that lawyers are specially suited to play the transaction-cost-engineer role. The grim job market and perennial stories about outsourcing legal services help explain their skepticism, I suspect.

One thing that struck me anew was Gilson's struggle for a language to describe and justify business lawyer's role and fees. "Transaction cost engineer" doesn't exactly roll off the tongue, nor does it do what a metaphor is supposed to do, vividly illustrate a point.

Picture it:

Irate client: $50,000 for negotiating the reps and warranties? Are you serious? For this much I could hire 10 Indian software engineers!
Lawyer (explaining): Well, I'm really a transaction-cost engineer.
Client: Huh.

Gilson himself ends with the classic pie image: we do more than just divide up the pie, he says, we reduce uncertainty, and that makes more pies, and larger pies. Anyone have a better metaphor for what business lawyers do?

In every big transaction [the professor said], there is a magic moment during which a man has surrendered a treasure, and during which the man who is due to receive it has not yet done so. An alert lawyer will make that moment his own, possessing the treasure for a magic microsecond, taking a little of it, passing it on. If the man who is to receive the treasure is unused to wealth, has an inferiority complex and shapeless feelings of guilt, as most people do, the lawyer can often take as much as half the bundle, and still receive the recipient's blubbering thanks.

K. Vonnegut, God Bless You, Mr. Rosewater 17-18 (1965).

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