Nominal and inflation-adjusted billing rates and legal spend

General counsel need to be conversant with one of the terms – and key concepts – of economics. Nominal concepts apply to the company as well as to the law department. Nominal figures for outside counsel rate increases, for example, or for increases in the legal department’s budget, do not adjust for inflation.

It can be misleading when inflation is not accounted for in the department’s spending figures because the amount spend will appear higher than it actually is. The same concept applies to return on investment. If you have a 10 percent ROI and inflation for the year has been 3 percent, your real rate of return is 7 percent, not the nominal 10 percent.

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