The classical economics view is that that regulation pursues public interest when it corrects for market failures. Information asymmetry is the main market failure that applies to professional legal markets. Specifically, for most clients or consumers, professional legal services are credence goods. The explanation is typically the following: a standard consumer is less informed about the nature and quality of the service and must rely on the expertise of the professional lawyer in order to assess (the so-called agency function) and implement the adequate strategy (known as the service function). Under these conditions, the market for professional legal services will fail to produce the socially optimal quantity and quality of legal services. Some protection for the standard consumer of professional legal services is necessary to guarantee quality and mitigate inefficiencies. This protection of legal consumers frequently takes the form of regulation of the legal profession, that is, the supply side of the professional legal services market.

However, asymmetry of information between the demand and supply sides is not the only market failure that economists see in the market for professional legal services. The overall quality of the legal system is positively related to the quality of lawyers. The consequences of poor representation, for example, go beyond the direct client and generate serious negative externalities to the public. A poorly drafted will, for example, will likely have to be litigated, consuming judicial resources. Regulation is justified because the regulatory body will have more information and expertise at judging quality, thereby reducing the negative externality caused by bad lawyering. The converse is also true—regulation can create positive externalities by improving the quality of the justice system via the lawyers that staff and represent that system.

The nature and regulation of legal services limit competition in the market for professional legal services. Alongside asymmetry of information and negative externality, there is another source of potential deadweight loss—lack of perfect competition. In particular, lack of perfect competition is a market failure that is either intrinsic to the market for legal services or a regulation failure, a loss imposed by regulation. This is generally referred to as government failure in the public choice literature.