What makes City law firms cost as much as they do? As the heated debate generated by FT GC Tim Bratton's recent blog illustrates, it's a familiar topic. The usual suspects put forward include partner profits, hourly billing, associate salaries, the media and plain old greed – and there's something to all the aforementioned.

Still, much as they offend the Value Police, I'd argue that the influence of some of these villains is overstated, while some key factors go little noticed. So, for what it's worth, I'm jotting down what I'd argue are the strongest factors propping up law firm rates.

They keep bringing out new stuff

Since the 1980s, Western governments have hugely expanded the levels of new legislation and regulations. Recent research from Sweet & Maxwell found that 3,506 laws were introduced in the UK in 2010, a rise of 41% on the previous year and against an annual average of 1,724 during Margaret Thatcher's administration. The growth is even starker if you use the 1970s as a benchmark. This has unsurprisingly been very good for the legal business. And happily for international law firms, the tradition of hyperactive law-making and prescriptive regulation is rapidly spreading to emerging economies. It's the gift that keeps on giving.

Non-discretionary spending

There are plenty of uninspiring corporate lawyers. But, in general, the more successful ones usually bring a reasonable slab of charm, insight and gravitas to the table. The very best are often near-obsessive about their clients' interests and many clients come to value that rapport and support hugely. And yet no company has ever chosen to do a deal just to get their favoured M&A guy through the door, no matter how much they like working with them.

The point is this: law in the vast majority of cases is an entirely non-discretionary element of spending – you buy because you have to and the penalties of not getting good service in high-stakes scenarios can be huge. The discretionary bit is in which lawyer you instruct, but the basic fact you have to consume the service plays a huge role in underpinning the high cost of law.

Selling liability

An important element of what you buy from a lawyer or law firm is comfort – because part of what law firms are selling, quite rightly, is being on the hook. What else is the IBM factor (no one ever got fired for buying it) if it isn't about whether the client's rear is covered. There are clearly strong incentives for legal teams to buy a big brand in high-end matters. There's nothing wrong with that, but it does rather restrain the competitive forces that would normally bear down on costs. Or, to put it another way, the incentives for legal teams have often pushed more in the direction of comfort than cost.

Professionals instructing professionals

Buying commercial legal services largely revolves around lawyers buying legal services from other lawyers. There are many advantages, but it does hard-wire professional respect into the model – sometimes too much respect. If you look at sectors in which non-lawyers have taken either dominant or substantive roles instructing lawyers – say, property, insurance or private equity – the result is pretty clear: rates are either pushed downward or financial incentives are very strongly aligned between client and adviser.

Other people's money

Buying corporate legal services usually involves spending someone else's money. This explains why years ago many City law firms got out of high-end private client work – even if your clients are very, very wealthy, you generally get paid less when the client is spending his own money.

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But what about high partner profits, the topic Tim addressed in his blog? Critics argue law firms decide what PEP they want to generate and extrapolate from that to a charge-out rate. Similar criticisms are made of associate salaries. Plainly, there is something to this. High transparency around partner and associate remuneration and tightly banded pay structures easily transmit high costs through law firms – especially during periods of high demand and ensuring pay wars. This trend was exasperated over the last 15 years, when UK law firms had to start competing for talent with US rivals with deeper pockets.

However, its impact is exaggerated because it ignores the basic reality about how markets work. Whatever ratio of success or return on equity an industry uses, there will always be a huge incentive to push up on rates. You could abolish PEP and law firms would still try to get away with charging as much as the market will bear. To expect anything else is a strange reading of capitalism and human nature. The only force that can restrain that upward pressure is the clients themselves.

The failure to acknowledge this basic point is much of the problem with discussions regarding the role of billing models. Hourly billing can obviously incentivise inefficiency or straightforward padding. For many clients, other models will work better, especially for more standardised work. But what alternative billing can never do – but what some clients seem to want it to do – is police a client's interests. That requires a person.

With all respect to Tim – a consistently interesting and thoughtful writer on law – I fall into the camp of believing clients should spend less time focusing on what their service providers are earning and rather more on what they are paying. Some ask if partner profits or associate salaries are reasonable. I have no idea how to answer that question or what yardstick you would use. They are simply what the market currently delivers. When the market changes – and it will – then what lawyers earn will change too.