Just as in finance, it's a positional externality thing - firms and
clients do better if they win than if they lose, so they constantly
want to hire better people than the opposition. It's not always clear
who's better, though, so firms need to hire lots of good people to
find one superstar. It's pretty close to a zero sum game, though -
each case has winners and losers - so salaries go up, attracting more
talented people. You end up in a "keeping up with the Joneses"
situation where lots of good people become lawyers and firms keep
paying them lots of money.
You can't regulate it easily, though, short of some very scary
communist impositions on industries.
The solutions, however, differ for law and finance. The main
difference with law and finance is that you can simplify the legal
code to make it less important to have a great lawyer... that will
make great lawyers less important and reduce the number of "best
minds" that go into law. The world is complicated and there will
always be situations that require great lawyers, but if there are less
of these situations, there's less lawyers.
Finance, that can kind of work (make M+A less intensive and crazy by
changing tax laws and such, discourage fast trading with taxes, etc).
At a certain point, equity and debt capital is necessary for growth,
and the day stocks and bonds stop being an attractive place for smart
people is the day that the US economy has started collapsing... so
there's not a whole lot you can do to keep them out. To an extent,
there's societal value in funding good enterprises and having people
who can discern good from bad enterprises, so you don't want your
financiers to be incompetent, but I understand that effect is only
important up to a point, and we're probably beyond that point.
Still, I fully acknowledge that there's progress that can be made with
some simple regulations on banks (compensation controls are
scary-communist, but certainly risk controls and elements that make
the market fairer for long-term investors instead of short term
speculative traders... basically, reduce the profits of being a middle
man with no societal value as opposed to a provider of capital with