"Defenders of occupational licensing typically argue that the rules help protect consumers and workers, and that’s undoubtedly true in some cases. I want the people filling my cavities to know what they’re doing. But it’s hard not to suspect that in many cases, these rules serve another purpose: to make it harder for new competitors to enter the marketplace."
While the article seems to criticize rent-seeking behavior only in businesses and professions that require lower levels of education, if
we combine this article's statements with the often repeated claim that the US pays roughly twice as much for health care per capita as other developed countries it seems reasonable to ask: Is there a rent seeking problem in the medical and dental fields too?
OTOH, why does the article's author want to deny the poor and less well educated segment of the small business community its fair share of the economic protection which occupational licensing offers?
The history of licensing of doctors and dentists is covered in the book "Competition And Monopoly In Medical Care" by Frech. Much of the motivation for licensing was reducing the number of doctors so they could raise prices. Licensing also enabled pervasive discrimination against Jewish, black, and female doctors (pg. 54).
"one benefit of licensure requires that it confer monopoly rents upon physicians." pg. 58
> Is there a rent seeking problem in the medical and dental fields too?
It certainly is. It's just that the crux of this article is that occupational licensing for low or medium skilled trades is inherently problematic rent-seeking, whereas the requirement for a license to practice medicine or dentistry isn't itself a problem, it's the artificial limiting of those who can get the license that presents a problem.
> why does the article's author want to deny the poor and less well educated segment of the small business community its fair share of the economic protection which occupational licensing offers?
Well, obviously, no one deserves a particular "fair share" of a business. That's basically saying that they own a certain number of people as customers, which is almost like micro-slavery. (And if there's enough businesses where someone owns the rights to you as a customer, it gets progressively more and more so.)
But beyond that, who would be the competition for the "poor and less well educated segment of the small business community" afforded protection? Surely a new entrant into the hair-braiding business is more likely to be poorer and less-well educated than someone who is already in the business and influential enough to be lobbying occupational licensing boards.
No mention of doctors, lawyers, civil engineers, architects, librarians, actuarians, dentists, pharmacists .. in that article.
These all professionalized in the late 19th/early 20th century, to great benefit of practitioners in these fields, in terms of remuneration or job security or even both. If those get to benefit from rent seeking, it is not surprising that others would seek the same advantage.
>While the article seems to criticize rent-seeking behavior only in businesses and professions that require lower levels of education, if we combine this article's statements with the often repeated claim that the US pays roughly twice as much for health care per capita as other developed countries it seems reasonable to ask: Is there a rent seeking problem in the medical and dental fields too?
Western countries with same or even stricter bars to become a doctor/dentist etc manage to have 1/3 to 1/10 the prices the US has.
So I don't think it's "rent seeking" that's responsible for this. I'd put the blame more on insurance companies and the bizarro US ideas about employment insurance and healthcare.
Nor I think "occupational licensing" for e.g. cabs which can be considered rent-seeking is the same as requiring higher levels of education from doctors, lawyers and such things.
One of the issues in the US vs other countries is that the licenses for a lot of these sort of things are per state and the requirements vary drastically. There was an article here a while ago about a nurse who moved state, but had to transfer her qualification too which took about six months. In the UK nurses must register with the governing body, but any qualification from the EU is equally valid [0].
> Is there a rent seeking problem in the medical and dental fields too? <p>
Take a look inside any Medical device company (or Pharma)
So much time is spent on FDA compliance most engineers spend 85% of their time killing trees.<p>
Now these companies charge extremely high prices for their goods, but no new company can afford to spend the THree to five years getting something to market.And Here I am talking simple devices, not drugs.<P>
While the industry complains about the FDA, It is just this problem that builds a moat around the industry.
> While the article seems to criticize rent-seeking behavior only in businesses and professions that require lower levels of education, if we combine this article's statements with the often repeated claim that the US pays roughly twice as much for health care per capita as other developed countries it seems reasonable to ask: Is there a rent seeking problem in the medical and dental fields too?
Wait, are you suggesting that the regulatory barriers to private competition in medicine and dentistry are higher in the US than other developed countries?
It is logical to require you to have a license to fill a cavity for safety reasons. It is not logical to require a license to cut hair. Yes, it will boost earnings of barbers, who are generally lower-middle class, but it simply doesn't make logical sense.
Here's a tech sector example. If your startup wants to become an auDA registrar (i.e. of domains under .au) you must first spend six months as a reseller of an existing registrar.
You read that right. Planning on building anything innovative around a .au domain registration? Please, first funnel all your anchor customer registrations to a competitor. Oh, and build your stack and business processes around their platform, workflows, APIs &c.
He's missed another trend that's not as visible - the concentration of commercial real estate ownership. There are many towns and small cities where one or two organizations own most of the commercial property. They control rents and can decide which businesses get to operate.
I'm in the market for commercial property. I have a growing company, want a space customized for us, and we plan to stay long term. But buying is making almost no sense as you can't write down the costs against profit, whereas you can with rent.. so the only people buying such property are investors or people with money to burn in my experience. If they changed the tax code to let businesses get a deduction based on property they buy or build, ownership would be so much more diverse.
Not just commercial real estate: in most cities I've lived in (including SF), a handful of large conglomerates own a big fraction of rental real estate, too.
In my experience, these landlords are amongst the most scummy to deal with -- unresponsive, inflexible and unrelenting on rent increases. They'll take months to fix anything, but damned if they won't raise your rent by the maximum legal amount at every opportunity, and there's very little room for negotiation. Given a choice between losing a good tenant and maybe getting more rent, they'll choose the latter. It's like having Comcast control your living situation.
The corporatization of our residential real estate market is just one more step toward the future predicted by Terry Gilliam in Brazil.
This is a huge problem for residential real estate too. Among other things, a felony in a town where a real estate company controls nearly all of the cheap apartments is basically a condemnation to homelessness. While private landlords are often willing to consider the circumstances of the felony (being young and dumb, having been addicted to drugs or alcohol, etc.), corporate landlords won't. Credit scores are another problem -- a private landlord will often accept proof of income in lieu of a credit check, but if you have even one bad item on your credit report, you'll never get a place from a corporate landlord. And of course, they jack the rent prices all the way up thanks to a monopoly or near monopoly. If you're poor or you did something stupid when you were young, you're really fucked in these towns.
This is particularly bad in college towns where almost all development is being done by a small handful of companies, who lure in students and then raise the rents for new tenants year over year until inflated rental prices become the norm.
Every city needs an area of town which is commercial, owned by the city, and heavily subsidized to promote social welfare, art, and commerce. For the people that don't want to participate in society on the terms of Capitalists. In such an area you can sell wares, food, whatever. And office space and retail space is available cheaply to anyone running a bona fide business.
Unemployment is quite a bit more expensive to governments than subsidizing retail and commercial space. Buying land when it's very cheap and holding on to it forever, as part of the city's bylaws. And perhaps doing sponsorships deals with big business in the city, to generate additional revenue to support the properties.
Professionalization and accreditation could all be described as a closed shop in labor terms. It's classist to say unions are bad while the AMA is good, or vice versa. They're the same thing. Doctors may say they cannot form unions (AMA vs USA) but they have something even better: a closed shop. Closed shops are rarer than collective bargaining, and far more powerful.
On the other hand, you really want a professional association that can put a doctor out of business permanently if they persistently fuck up, and assure that new doctors have the requisite training. The AMA is an example of professional licencing that does in fact benefit consumers. A line industrial worker who is always drunk on the job is a much smaller problem than a doctor who is always drunk on the job.
That said, I'm all for unions, because they provide protection for workers from rent-seeking behavior by corporations. If it makes my prices a bit higher, so what.
Great example of laws that start out innocent enough, but then become a vector for anti-competitive behavior by the incumbents. The laws that prevent tesla dealers from selling directly to consumers is another example.
These types of misguided laws should come with very short expirations (if they come at all).
Another problem with the over regulation of professions is that in many states those convicted of a crime cannot obtain a license. They can have totally served their time, both in jail and/or probation but still be prevented from holding a "professional license".
Worse many of the jobs that require these licensees don't pay that much which brought up a whole industry of schools which pass off the costs through student loans and such to get a career which long term isn't going earn a lot of money or even come with benefits
This mainly relates to non-scalable industries where everything depends on simply reproducible labor not requiring a lot of training - like yes, barbershops, or real estate. I think it's more of good than bad - it prevents flocking of people into these industries resulting in cutthroat competition, low quality, and desperation of everyone involved. People simply find some other better trades instead.
Sometimes i feel like something like that must be introduced into software development, too: too many random people here, trying to compete only in price. It doesn't work of course, savvy clients see the real picture, but it drops the shadow on the industry in general, like people don't want to learn now to code out of the fear of having to compete with $5 an hour Indians.
Low quality doesn't automatically follow from cutthroat competition, at least not nearly as automatically as it follows from a lack of competition. "Too much" competition might result in shipping too quickly to capture market share, but how bad the product that is shipped can be and still make profit is limited by what people will buy - they might as well decide to wait for a competitor's product instead, and typically the wait isn't very long. "Too little" competition, on the other hand, means you don't have a choice; it certainly gives vendors more time to perfect the product, and more money since they can ship later and charge more - but it also removes much of the incentive to improve the product since now it doesn't have to be better than a competitor's, it must only be better than nothing, which is not a very high bar.
Now it'd be nice if we could have an amount of competition that is "just right" - just enough to improve the product, not enough to ship half-baked stuff while desperately trying to conceal its problems. Unfortunately, I have no idea how to get there, and since all arrangements that I know of overshoot in one direction or the other, we have to pick one of the extremes, and I think "too much" is way better for the consumer than "too little."
Would society be better off if programmers managed to restrict entry into the profession as did lawyers and doctors? On general grounds, I rather doubt it as described above, but those programmers who're already in the profession would most certainly benefit from it!
I would love to know your justification for regulating barbers and stylist. A greenhouse manager requires certification for pesticides which can make sense, but a florist merely goes out of business if they are awful but require certifications. Regardless, from 2013 here is the list in my state. http://explorer.dol.state.ga.us/mis/Current/cerliccurrent.pd...
The document is a little odd as some jobs specifically call out licensing in the state while others mention national certifications (baking food anyone?). Interesting that Computer Engineer is in there, broad enough to catch a lot of people who might not expect it.
Am I the only one who thinks that "rent-seeking" is a wildly misleading name for this phenomenon? To normal people, "rent-seeking" means "looking to collect on a payment for leased property".
Same for "moral hazard". I'm not sure what phenomenon that phrase should be applied to, but it certainly shouldn't be applied to the phenomenon of people taking more risks because they won't have to deal with the fallout. That phenomenon should be called something like "risk asymmetry".
It's an established name from economics. The wikipedia definition is: "seeking to increase one's share of existing wealth without creating new wealth". You can think of it as a generalization of seeking rent for a property.
For better or worse, that is what you are doing when you lease a property. You want to be paid just for owning something, not for doing anything.
Analogously, if you provide service X, you can seek "rent" in addition to the value you provide.
One way to do this is by manipulating the market for X by reducing the supply of those who provide X, e.g. through an unnecessarily onerous licensing process. The additional amount you make with the licensing process in place falls under the category of economic "rent".
I agree that the names are confusing or misleading to modern readers. The strange choice of words in both cases seems to be due to the terms being used in a technical sense with a more specific meaning than in plain English. Plus, they are both based on terms coined long ago, and the connotations (or definitions) of English words do tend to change over the centuries.
From the Wikipedia page on moral hazard:
> [...] the term dates back to the 17th century [...] Dembe and Boden point out, however, that prominent mathematicians studying decision making in the 18th century used "moral" to mean "subjective", which may cloud the true ethical significance in the term.
From the Wikipedia page on rent seeking:
> The word "rent" does not refer here to payment on a lease but stems instead from Adam Smith's division of incomes into profit, wage, and rent. The origin of the term refers to gaining control of land or other natural resources.
"If you behave badly because you know you'll get away with it, that's being "bad."
A Moral Hazard is different. If you behave "worse" than you would have otherwise, solely because you know that you won't have to bear the consequences, then you have a Moral Hazard.
I'll emphasize: the key is that your behavior is in itself not necessarily "bad." It is simply worse than your behavior otherwise would have been, because you know there won't be consequences.
Here's why it's called a Moral Hazard: if there are no external consequences, the only thing that would prevent you from behaving worse is an internal set of rules.
The comments in this discussion seem to be focusing on the fact that rent seeking is problematic in highly skilled professional fields as well as lower skilled fields.
While we clearly need to ensure that bad doctors stop practicing medicine, that crooked accountants can't take advantage of people, and...that loud librarians can't be librarians anymore (or something ;)), perhaps this is a better role for the government than a private professional association that is motivated to engage in rent-seeking?
It's a complicated problem though. Everyone wants to make as much as possible, but everyone also wants (economically speaking) everyone else to make as little as possible.
A union job is great for me. But it's bad for me if my plumber has a union job because then it will cost more to fix my sink.
In economics (and ecology, evolution, etc.) it's actually quite strange for something not to be a paradox. Straightforward linear behavior in complex living systems is weird, and if you think you have an example you're probably missing something.
We've asked you before to stop posting uncivil and unsubstantive comments to Hacker News. If you can't or won't stop, the next step is to ban your account. So please do stop.
[+] [-] HillaryBriss|10 years ago|reply
"Defenders of occupational licensing typically argue that the rules help protect consumers and workers, and that’s undoubtedly true in some cases. I want the people filling my cavities to know what they’re doing. But it’s hard not to suspect that in many cases, these rules serve another purpose: to make it harder for new competitors to enter the marketplace."
While the article seems to criticize rent-seeking behavior only in businesses and professions that require lower levels of education, if we combine this article's statements with the often repeated claim that the US pays roughly twice as much for health care per capita as other developed countries it seems reasonable to ask: Is there a rent seeking problem in the medical and dental fields too?
OTOH, why does the article's author want to deny the poor and less well educated segment of the small business community its fair share of the economic protection which occupational licensing offers?
[+] [-] WalterBright|10 years ago|reply
"one benefit of licensure requires that it confer monopoly rents upon physicians." pg. 58
There's a lot more in the book.
[+] [-] the_watcher|10 years ago|reply
It certainly is. It's just that the crux of this article is that occupational licensing for low or medium skilled trades is inherently problematic rent-seeking, whereas the requirement for a license to practice medicine or dentistry isn't itself a problem, it's the artificial limiting of those who can get the license that presents a problem.
[+] [-] fennecfoxen|10 years ago|reply
Well, obviously, no one deserves a particular "fair share" of a business. That's basically saying that they own a certain number of people as customers, which is almost like micro-slavery. (And if there's enough businesses where someone owns the rights to you as a customer, it gets progressively more and more so.)
But beyond that, who would be the competition for the "poor and less well educated segment of the small business community" afforded protection? Surely a new entrant into the hair-braiding business is more likely to be poorer and less-well educated than someone who is already in the business and influential enough to be lobbying occupational licensing boards.
[+] [-] trgn|10 years ago|reply
No mention of doctors, lawyers, civil engineers, architects, librarians, actuarians, dentists, pharmacists .. in that article.
These all professionalized in the late 19th/early 20th century, to great benefit of practitioners in these fields, in terms of remuneration or job security or even both. If those get to benefit from rent seeking, it is not surprising that others would seek the same advantage.
[+] [-] coldtea|10 years ago|reply
Western countries with same or even stricter bars to become a doctor/dentist etc manage to have 1/3 to 1/10 the prices the US has.
So I don't think it's "rent seeking" that's responsible for this. I'd put the blame more on insurance companies and the bizarro US ideas about employment insurance and healthcare.
Nor I think "occupational licensing" for e.g. cabs which can be considered rent-seeking is the same as requiring higher levels of education from doctors, lawyers and such things.
[+] [-] lucaspiller|10 years ago|reply
[0] https://www.healthcareers.nhs.uk/i-am/outside-uk/information...
[+] [-] zafka|10 years ago|reply
[+] [-] dragonwriter|10 years ago|reply
Wait, are you suggesting that the regulatory barriers to private competition in medicine and dentistry are higher in the US than other developed countries?
[+] [-] seibelj|10 years ago|reply
[+] [-] Spooky23|10 years ago|reply
Since nurses actually deliver your care and have the training to actually help you, it is a cost saving measure of dubious value.
Of course, insurers and hospital cartels aren't rent seeking!
[+] [-] inopinatus|10 years ago|reply
You read that right. Planning on building anything innovative around a .au domain registration? Please, first funnel all your anchor customer registrations to a competitor. Oh, and build your stack and business processes around their platform, workflows, APIs &c.
[+] [-] Animats|10 years ago|reply
[+] [-] petercooper|10 years ago|reply
[+] [-] timr|10 years ago|reply
In my experience, these landlords are amongst the most scummy to deal with -- unresponsive, inflexible and unrelenting on rent increases. They'll take months to fix anything, but damned if they won't raise your rent by the maximum legal amount at every opportunity, and there's very little room for negotiation. Given a choice between losing a good tenant and maybe getting more rent, they'll choose the latter. It's like having Comcast control your living situation.
The corporatization of our residential real estate market is just one more step toward the future predicted by Terry Gilliam in Brazil.
[+] [-] onetwotree|10 years ago|reply
[+] [-] crdoconnor|10 years ago|reply
It seems to be a rehash of this: http://www.aei.org/publication/the-terrible-economic-burden-...
[+] [-] jonesb6|10 years ago|reply
[+] [-] gnarbarian|10 years ago|reply
[+] [-] x5n1|10 years ago|reply
Unemployment is quite a bit more expensive to governments than subsidizing retail and commercial space. Buying land when it's very cheap and holding on to it forever, as part of the city's bylaws. And perhaps doing sponsorships deals with big business in the city, to generate additional revenue to support the properties.
[+] [-] jackcosgrove|10 years ago|reply
[+] [-] onetwotree|10 years ago|reply
That said, I'm all for unions, because they provide protection for workers from rent-seeking behavior by corporations. If it makes my prices a bit higher, so what.
[+] [-] unknown|10 years ago|reply
[deleted]
[+] [-] hwstar|10 years ago|reply
http://ordinary-gentlemen.com/2013/11/08/the-anti-rent-seeki...
http://ordinary-gentlemen.com/2013/11/11/the-anti-rent-seeki...
[+] [-] matt_wulfeck|10 years ago|reply
These types of misguided laws should come with very short expirations (if they come at all).
[+] [-] thirdsun|10 years ago|reply
[+] [-] Shivetya|10 years ago|reply
Worse many of the jobs that require these licensees don't pay that much which brought up a whole industry of schools which pass off the costs through student loans and such to get a career which long term isn't going earn a lot of money or even come with benefits
[+] [-] gozur88|10 years ago|reply
[+] [-] EGreg|10 years ago|reply
http://m.youtube.com/watch?v=8q71hrwUcu0
[+] [-] anovikov|10 years ago|reply
Sometimes i feel like something like that must be introduced into software development, too: too many random people here, trying to compete only in price. It doesn't work of course, savvy clients see the real picture, but it drops the shadow on the industry in general, like people don't want to learn now to code out of the fear of having to compete with $5 an hour Indians.
[+] [-] _yosefk|10 years ago|reply
Now it'd be nice if we could have an amount of competition that is "just right" - just enough to improve the product, not enough to ship half-baked stuff while desperately trying to conceal its problems. Unfortunately, I have no idea how to get there, and since all arrangements that I know of overshoot in one direction or the other, we have to pick one of the extremes, and I think "too much" is way better for the consumer than "too little."
Would society be better off if programmers managed to restrict entry into the profession as did lawyers and doctors? On general grounds, I rather doubt it as described above, but those programmers who're already in the profession would most certainly benefit from it!
[+] [-] Shivetya|10 years ago|reply
The document is a little odd as some jobs specifically call out licensing in the state while others mention national certifications (baking food anyone?). Interesting that Computer Engineer is in there, broad enough to catch a lot of people who might not expect it.
[+] [-] nommm-nommm|10 years ago|reply
[+] [-] gaur|10 years ago|reply
Same for "moral hazard". I'm not sure what phenomenon that phrase should be applied to, but it certainly shouldn't be applied to the phenomenon of people taking more risks because they won't have to deal with the fallout. That phenomenon should be called something like "risk asymmetry".
[+] [-] chubot|10 years ago|reply
For better or worse, that is what you are doing when you lease a property. You want to be paid just for owning something, not for doing anything.
Analogously, if you provide service X, you can seek "rent" in addition to the value you provide.
One way to do this is by manipulating the market for X by reducing the supply of those who provide X, e.g. through an unnecessarily onerous licensing process. The additional amount you make with the licensing process in place falls under the category of economic "rent".
https://en.wikipedia.org/wiki/Rent-seeking
[+] [-] holmak|10 years ago|reply
From the Wikipedia page on moral hazard:
> [...] the term dates back to the 17th century [...] Dembe and Boden point out, however, that prominent mathematicians studying decision making in the 18th century used "moral" to mean "subjective", which may cloud the true ethical significance in the term.
From the Wikipedia page on rent seeking:
> The word "rent" does not refer here to payment on a lease but stems instead from Adam Smith's division of incomes into profit, wage, and rent. The origin of the term refers to gaining control of land or other natural resources.
[+] [-] dota_fanatic|10 years ago|reply
"If you behave badly because you know you'll get away with it, that's being "bad."
A Moral Hazard is different. If you behave "worse" than you would have otherwise, solely because you know that you won't have to bear the consequences, then you have a Moral Hazard.
I'll emphasize: the key is that your behavior is in itself not necessarily "bad." It is simply worse than your behavior otherwise would have been, because you know there won't be consequences.
Here's why it's called a Moral Hazard: if there are no external consequences, the only thing that would prevent you from behaving worse is an internal set of rules.
Where do these internal rules come from?"
[+] [-] lawpoop|10 years ago|reply
[+] [-] onetwotree|10 years ago|reply
While we clearly need to ensure that bad doctors stop practicing medicine, that crooked accountants can't take advantage of people, and...that loud librarians can't be librarians anymore (or something ;)), perhaps this is a better role for the government than a private professional association that is motivated to engage in rent-seeking?
[+] [-] silveira|10 years ago|reply
[+] [-] collyw|10 years ago|reply
[+] [-] pluma|10 years ago|reply
[+] [-] bobby_9x|10 years ago|reply
The demand stays the same and the supply is reduced （due to the barrior to entry and hoops you need to jump through), which results in higher prices.
The same principals can also be applied to most unions.
[+] [-] api|10 years ago|reply
A union job is great for me. But it's bad for me if my plumber has a union job because then it will cost more to fix my sink.
In economics (and ecology, evolution, etc.) it's actually quite strange for something not to be a paradox. Straightforward linear behavior in complex living systems is weird, and if you think you have an example you're probably missing something.
[+] [-] anon4|10 years ago|reply
[deleted]
[+] [-] dang|10 years ago|reply
We detached this comment from https://news.ycombinator.com/item?id=11057312 and marked it off-topic.
[+] [-] silveira|10 years ago|reply
[deleted]
[+] [-] osoti|10 years ago|reply
[deleted]
[+] [-] osoti|10 years ago|reply
[deleted]
[+] [-] unknown|10 years ago|reply
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