Yglesias on Occupational Licensing

by on August 18, 2010 at 12:26 pm in Economics, Education, Law | Permalink

I am outsourcing this post entirely to Matt Yglesias because it's awesome and it made me very happy to see how public choice has moved out in the world:

A number of people, including many commenters here and even alleged
conservative James Joyner think you should need a professional license to become
a barber because you might hurt
someone with a straight razor
. Uh huh. At best this would be an argument for
regulating people who do shaves with a straight razor, which would be
considerably narrower than current comprehensive regulation of hair
stylists.

Meanwhile, though “torts and the free market will take care of it” isn’t the
answer to everything, it’s surely the answer to some things. Getting
some kind of training before you shave a dude with a straight razor is obviously
desirable in terms of strict self-interest. If you screw it up in a serious way,
you’ll face serious personal consequences and the only way to make money doing
it–and we’re talking about a very modest sum of money–is to do it properly.
People also ought to try to think twice about whether their views are being
driven by pure status quo bias. Barbers are totally unregulated in
the United Kingdom
, is there some social crisis resulting
from this? Barber regulations differ from state to state, are the stricter
states experiencing some kind of important public health gains?

Last you really do need to look at how these things play out in practice. If
you just assume optimal implementation of regulation, then regulation always
looks good. But as I noted
in the initial post
the way this works in practice is the boards are
dominated by incumbent practitioners looking to limit supply. One result is that
in Michigan (and perhaps elsewhere) it’s hard for
ex-convicts to get barber licenses
which harms the public interest not only
by raising the cost of haircuts, but by preventing people from making a
legitimate living. States generally don’t grant reciprocity to other states’
licensing boards, which limits supply even though no rational person worries
about state-to-state variance in barber licensing when they move to a New Place.
In New Jersey, you need to take the
straight razor shaving test to cut women’s hair
because they’re thinking up
arbitrary ways to incrementally raise the barrier to entry.

In principle, you could deal with all these problems piecemeal. But
realistically this sort of problem is inevitably going to arise when you pit the
concentrated interest of incumbent haircutters against the diffuse interest of
consumers. It’s hard enough to make sure that really important regulatory
functions related to environmental protection, public safety, and financial
stability are done properly.

deregulate August 18, 2010 at 1:08 pm

How about home health aids and nurses aides?

JD August 18, 2010 at 1:21 pm

I’m curious on your thoughts about Professional Engineer (PE) and Structural Engineer (SE) licenses. The requirements for obtaining a PE license are somewhat uniform, and most states have comity provisions. However, the requirements for obtaining an SE license vary regionally (think seismic).

A big hurdle for obtaining a license is the exam, the purpose of which is to demonstrate minimum competence. Typically, the exams have first-time pass rates of around 30-60%, with stunningly-low pass rates for repeat examinees.

As a (self-interested) PE, can I legitimately credit the rigorous licensing requirements for the rarity* of structural and mechanical failure in the developed world**?

Thanks,

* I said rarity, not absence, of failure.
** Most, if not all, developed countries require some form of license or certification to practice engineering.

linus August 18, 2010 at 1:36 pm

Nanny state protecting its denizens from Sweeny Todd lurking among us.

Here is an interesting observation (re: barbers in India), you never go to a barber without someone having told you about how good he is. There is an incredible network of “market-based information” about a barber’s abilities. Then, you are not deciding on which barber to give your custom to, based on his record of nicking barbee’s jugular veins. You are testing them for a much higher order skill, how well they “style” hair, for which non-nicking is a mere prerequisite ability.

Huh! Huh! why am I telling all this? Is the licensing board listening?

Colin August 18, 2010 at 2:09 pm

It’s a sad commentary on the left that we are rejoicing Yglesias is figuring out something so obvious — this is setting the bar pretty low.

Mae August 18, 2010 at 2:36 pm

No one mentioned health issues, or practices in the interest of cleanliness. If both barber/beauty shops and practitioners have licensing requirements — including training in recognition of contagious conditions — would that help prevent the spread of lice? Fungal diseases? Just word-of-mouth about a shop or stylist/barber isn’t enough in even a small city, especially as people who were infected might be ashamed to discuss it. I always assumed this was as much the issue as knowing how to use a scissors/razor/clippers — though I wouldn’t want to take any risks with this aspect either.

bgreen August 18, 2010 at 2:51 pm

did Yglesias get this topic idea from “A Splendid Exchange: How Trade Shaped the World” ?

in the book there is an interesting discussion about barbers in mexico initiating regulation to prevent chinese barbers from creating competition.

the book also reveals the real reasons for the boston tea party, anger by local merchants against the opening up of their market to competition. a great read.

dearieme August 18, 2010 at 3:35 pm

“Once Yglesias gets married…” he’ll be a sensible chap and have his wife cut his hair.

Stephan August 18, 2010 at 4:11 pm

Check out the comments at Yglesias’s blog. Amazing, but people actually like occupational licencing. And if you argue against, you must have sold out to the Cato Institute.

mark August 18, 2010 at 5:06 pm

I posted this link, to a recent Greek newspaper editorial on the adverse effect of licensing and other trade restrictions on their economy, as a comment to Matt Y’s post and reproduce it here for anyone who might be interested:

http://www.ekathimerini.com/4dcgi/_w_articles_columns_100008_16/08/2010_119061

matt d August 18, 2010 at 5:32 pm

How are all these unlicensed potential barbers and consumers to organize for the repeal of license requirements when Barbers today have such an intense interest in seeing it is not?

Its not about optimization, its about sticky policy. Politicians have no interest in dealing with issues that have such little political payoffs.

You can argue all day about the virtues of the free market. However, political disincentives and collective action problems usually drive outcomes rather than a predetermined “nanny state.”

kebko August 18, 2010 at 8:40 pm

It’s evidence that regulation doesn’t work. Right? What else could it mean?

Also, the existence of underground shops is a failure, not a success.

db August 18, 2010 at 9:46 pm

You think hair stylist professional licensing is bad, how about tour guide professional licensing. In DC to operate as a tour guide within the district you have to be licensed. And the licensing requirements include a minimum competency test on history. Which should raise some serious first amendment issues, in my opinion.

kebko August 18, 2010 at 11:31 pm

It’s like if we threw a virgin in the volcano every year so that the crops would come in well. If you convince everyone to stop martyring virgins, then the first year the crops are bad, they say “See what good your advice did?”, they tar & feather you & they go back to sacrificing virgins.
These conversations feel the same way. I want to say “Stop sacrificing virgins.” And people with the regulatory mindset respond, “Get a hold of this guy. He thinks the crops will be overflowing every year, all by themselves, with no help from the volcano.”
Markets do police themselves (that’s kind of what a market is!), and every once in a while they don’t, in some way. But, the volcano that is government is not really that relevant to the solution.
Some people might really believe government is the solution. They really want it to be. If only the government would work the way they want it to, it would be. But, some people really believe that volcano is ruining the crops, too.
per Arnold Kling:
Markets fail.
Use markets.

Eric H August 19, 2010 at 7:22 am

“Except for being a teacher, there is no other way to exist as an engineer except through licensure.”

Nope. I’ve worked in engineering for 23 years, never had a license, never worked for anyone who did, only in the past few years have we had a part time PE on staff (and I know a non-degreed engineer who is better with the FCC compliance stuff than he is). The same is true of probably 98% of the engineers I know. State law says that you cannot advertise, “John Smith, Engineer”, and large civil engineering projects are going to require some PE to bless the thing. Other than that, I don’t believe there are any restrictions on actually doing engineering *work*.

The link between licensing and the relative lack of disasters is tenuous at best. Could it possibly be that people who commission large projects have some kind of vetting process other than license inspection to make sure the builder is competent? Like, say, looking at previous experience?

JD August 19, 2010 at 9:26 am

Eric,

You’re correct. I wasn’t totally clear. When I said Engineering Work, I was referring to the traditional structural, infrastructure, and plant engineering work. There is a great deal of technical work that does not require licensing (software and some electrical).

Thanks

Andrew August 19, 2010 at 10:16 am

“Barbers are totally unregulated in the United Kingdom, is there some social crisis resulting from this?”

Have you seen their hair? It’s a catastrophe!

I think people don’t want to think about these things, so they outsource the responsiblity to government, the antipathy makes them ripe for special interest public choice stuff, and finally why debates with people on the subject are so short: “We need licensing, and that’s all I want to say about it!” Go read some of the comments on Matt’s page. Every other one says effectively “we’ve already told Matt why we need regulations for people pouring acid on peoples’ heads.”

So, my hypothesis is that there will be more specific/activist/intrusive/arbitrary/ridiculous regulations the more mundane something is.

Jay August 19, 2010 at 11:52 am

Here’s a puzzle: If occupational licensing is mostly about people in the field building barriers to entry, why do so many professions also now require continuing professional education? CPE raises costs for those ALREADY in the profession but is supported by many within a given profession.

Does this alter how much we should think OL laws are just about benefiting those in the field?

An example is CPE for professional engineers. NSPE and ASCE both support extending mandatory CPE to all states.

You can read some more about CPE for engineers here:

http://papers.ssrn.com
/sol3/papers.cfm?abstract_id=1569851

Jay August 19, 2010 at 1:48 pm

Working in two different civil engineering firms, I found that it was expected one would get their PE license. Those who didn’t had great difficulty in moving up.

In civil so much of the work requires a PE seal and if you want to ever become a project manager you need the PE. So I think the need to get a PE license is very strong for many civil engineers but not for most other fields.

Eric H August 19, 2010 at 8:04 pm

“NCEES, the folks who develop the PE exams, are working on an exam for software engineering. Maybe it will be ready in 2012 sometime.”

They shouldn’t bother.

Civil Engineer: “I must pass this exam, so I will study and practice and work on getting the details right. Those things matter and you only get one chance.”

Software Engineer: “I should pass this exam, but I will just take it without studying. I can always send out a patch or a v2.0.”

Benny Lava August 19, 2010 at 9:30 pm

“do they really think that state licensing boards do a better job — are more effective and more motivated to protect the interests of consumers (rather than the livelihood of the practitioners) — than independent organizations along the lines of Consumer Reports?”

Do you REALLY think that independent organizations does a better job of protecting the interests of consumers than state licensing boards or other regulatory regimes? Why so?

So many assumptions and petty tribal group affiliations in this post, and not a whole lot of critical thinking. Typical for libertarians I suppose.

Bill Jones August 20, 2010 at 9:35 pm

The one that always amused me was that in Texas (of all places) one needs a license to be an Interior Decorator. The public desperately needs to be protected from brash Fuchsia curtains instead of the tasteful, State approved Lavender or Peach.

Tom P , I used to get the full service Shave at Trumper’s just off Berkeley Square. It was conveniently located close to the Lansdowne Club where you could get a game of squash, cool down in the most under used pool in London and, for those of Prussian tendencies whip out the rapier in the Salle D’Armes. Food sucked though.

Also in the area was the headquarters of one the Spook organizations, all sorts of Shady types (and Bankers too) were to be found.

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