> Why would they not show me what are the pros and cons of licensing besides just the cost.

Calculating only the cost is useful information. If you have something that produces a $5B benefit at a $4.5B cost, the proponents will tout a $500M gain without considering whether there is any alternative that can produce the same benefit at a much lower cost.

It points out that there is a very large cost which is an opportunity for optimization.

For example, if hairdressers are licensed due to questions of sanitation, perhaps the same benefit -- or more benefit -- could be achieved through periodic health inspections rather then licensing individual hairdressers.

Perhaps having licenses for electricians is net positive, but the existing licensing system is wasteful or corrupt and makes it artificially more difficult to obtain a license than is optimal.

Perhaps it is useful to license doctors and lawyers, but much of the work the law currently requires them to do is less sensitive and could reasonably be allowed to be done by nurses and paralegals instead.

> What I found interesting is that, those with licenses make more money?

This is the same kind of issue. If you make an extra $5000 but have to spend $5500 in time/money related to keeping your license, you're not making $5000 more, you're losing $500. But your customers are paying $5000 more. And someone who was qualified but couldn't navigate the Kafakaesque licensing system had to take a lower paying job doing something else.

> Calculating only the cost is useful information.

I mean, kind of, but it's not remotely the only relevant piece of information. I could make you a car for $2,000. Would you want to drive it at highway speeds in it? What do you think your chances of survival would be in an accident?

The article makes a point to call out the music therapy case to conjure the specter of seemingly unnecessary regulation leading to regulatory capture, but the vast majority of licensed occupations are licensed because bad shit happened when they weren't. Doctors were quacks. Bridges fell down. Buildings caught fire. Planes fell from the sky. Millions of dollars in damages and countless lives were lost over and over because some greedy sumbitch decided to cut corners or defraud his customers or just didn't think about the consequences of his design or service decisions. These regulations exist because people ruined it.

And I mean, is music therapy dangerous if it's misused? I don't know. I don't even know what music therapy is used to treat! What harm can unethical application music therapy cause? Physiotherapy can easily be unethical. So can psychotherapy and counseling. Why is music therapy harmless, especially if it's been shown to have measurable heath effects? And how can I tell the difference between an actual music therapist whose treatment is based on established practices, and some guy with a blindfold, some headphones, a nice couch, and an mp3 player? Rely on my for-profit insurance company to do that for me, when they have a conflict of interest as well?

Yes, it's difficult to gauge the effectiveness of regulation, especially because you can't tell if what you got for $5,000 in regulation might have been just as effective as if it had cost $500. But arguing that the choice of whether or not to regulate comes down entirely to cost is kind of absurd.

> But arguing that the choice of whether or not to regulate comes down entirely to cost is kind of absurd.

But this isn't what was argued. From the post you replied to

> For example, if hairdressers are licensed due to questions of sanitation, perhaps the same benefit -- or more benefit -- could be achieved through periodic health inspections rather then licensing individual hairdressers.

Regulation has many forms. Licensing is only one of them.

Most hairdressers are independent subcontractors. The license is the only handle the regulatory system has on them short of criminal proceedings.

Perhaps the 1400 hour instruction requirement could be cut down to 20 hours, and the licensing could remain to give health inspectors a registry of who to inspect?

Something like that would be the approach if the goal were to use regulations to maintain good hygiene without imposing undue costs on young people hoping to get into the industry. If the intention of the license is to keep others out of the field of work though, 1400 hours of instruction would be the approach taken.

> What harm can unethical application music therapy cause?

For that matter, what about retail clerks? They could defraud their customers or steal from their employers. We could license them too. Farmers workers could contaminate food. So could restaurant workers. Janitors who fail to clean properly could allow disease to spread. Groundskeepers operate dangerous equipment. News reporters could misreport the news. Priests could give bad advice -- or worse. To say nothing of legislators.

Just about anyone could screw up their job with severe consequences. So why do we license the people who cut your hair but not the people who make your food? It makes no sense. And before you conclude that the answer should be that we license people who make food, consider the consequences for people who would no longer be able to afford food. (Or a medical care, or legal services, or to have a working toilet.)

The more important something is, the more important it is that we don't price people out of being able to afford it.

>>but the vast majority of licensed occupations are licensed because bad shit happened when they weren't. Doctors were quacks. Bridges fell down. Buildings caught fire. Planes fell from the sky.

You repeat this as an article of faith. Do you have any evidence that licensing increased safety?

If yes, do you have any evidence that the increase in friction for those wanting to enter a field of work incurred less social costs than the risks alleviated from the occupational licensing?

If you're going to massively intervene to restrict economic interactions between consenting adults, at the very least you need a comprehensive, well-sourced argument for the net utility of such restrictions. I've personally never seen such a case made for the centralization approach.

It's all just repeating a narrative as if it's self-evident it's true, which is not giving things as complex and impactful as economics and the laws that govern us the respect they deserve.

> Calculating only the cost is useful information.

> It points out that there is a very large cost which is an opportunity for optimization.

Two things, one: why does everything need to be perfectly optimized? And two: You're assuming that intangible benefits aren't useful. Is money all that matters?

> Andrew Wimer works to make the case for economic liberty, free speech, private property rights and school choice in the court of public opinion.

This is also a politically charged study and this guy has an axe to grind. Sure, tear down everything that protects people from quacks and charlatans - that's the American Dream, after all.

> If you make an extra $5000 but have to spend $5500 in time/money related to keeping your license, you're not making $5000 more, you're losing $500.

I don't see why there's this concern about $500 of inefficiency, this isn't an optimization problem. The benefits to licensing are intangible.

>>Two things, one: why does everything need to be perfectly optimized?

Any sub-optimization is wages, quality-of-life, scientific funding, etc that is being foregone.

>>Sure, tear down everything that protects people from quacks and charlatans - that's the American Dream, after all.

Reputation markets are extremely effective at protecting people from quacks. In any case, to some extent, people have to take responsibility for their own consumer choices. They shouldn't have market choices taken away from them for their own good, by a paternalistic government/voting-base. That's not how a healthy/free society is governed.

The reason why paternalistic centralization isn't functional is that those very same quacks can exploit the public through licensing. They can make false appeals to safety and claims of benefits to argue for highly restrictive licensing rules that cost society far more than they provide in the way of safety, just so that they can enjoy wages inflated from suppressing competition.

Then fighting quacks becomes a political process requiring an election win, and that is all-or-nothing (either you get the quack's representative voted out, or you don't), and doesn't allow the incremental, parallel improvement possible through a decentralized market consisting of millions of consumers making independent consumer choices not subordinate to a single regulatory agency wielding monopoly power.

"Reputation markets are extremely effective at protecting people from quacks."

You mean like vote totals on Reddit, or StackOverflow points?

I believe, based on the contexts I've seen the term used in, that a reputation market just means the competition created between market providers to gain a better reputation than each other, due to the competitive advantage that having a superior reputation provides. There doesn't have to be explicit quantification of reputation, like Reddit/StackOverFlow points, to qualify as a reputation market.

Reputation obviously has a huge impact on market success, and this effect leads to high quality providers dominating the market overtime.

Probably the best example of this dynamic is eBay. The vast majority of trades are not fraudulent, because consumers rely on the seller ratings as indicators of reliability. Most top sellers have something like 99% positive ratings. The market is pretty much totally unregulated, yet very reliable.

That works for ebay because it is very simple to determine if you got the result you wanted.

Case A: You get the correct product, it is working. Case B: Didn't get product, doesn't work, etc...

A gets +1, B gets -1. Simple to judge for 99% of people.

More complex things, like medicine or law or even wiring electrics in a house, the consumer is completely incapable of determining if the service they got is good, because they don't understand it well enough to judge.

This is why reputation systems won't work for anything more complex than ebay. Studies already show doctors get judged mostly by how nice they are. Sure, a reputation system might help you find the nicest doctor, but that isn't whats important right?

This is a common argument for having government take over, but it's unsubstantiated in my opinion.

For example, an automobile is an extremely complex product where the outcome of a purchase takes years to materialize, and yet we have highly developed market-based mechanisms for ascertaining the quality of automobiles.

Bottom-up decentralized processes disseminate correct information very efficiently. Wikipedia would be a good example of that. Anyone can quickly find a reasonably good answer on almost any issue, of any level of complexity, using a Google search to return the top Wikipedia page on it.

>>Studies already show doctors get judged mostly by how nice they are.

That doesn't tell us much. The quality of doctors may already be assured by the overly stringent licensing process, and price is made a non-factor by insurance/government coverage, so consumers look for signs of empathy, as its the only other relevant variable and the only one that they control.

While there's no indication that reputation markets don't work, there's plenty of evidence that government take-over of industries turns out just as classical economic theory would predict: disastrously.

One major case is healthcare: in every developed country over the last 50 years, government regulation and control of healthcare has massively increased, and this as corresponded with substantial increases in healthcare expenditure as a percentage of GDP.

In the US for example, the number of hospital administrators increased 3,200% between 1975 and 2010, compared to a 150% increase in physicians, and this increasing inefficiency is due to an increasing number of regulations:

https://www.athenahealth.com/insight/expert-forum-rise-and-r...

> Two things, one: why does everything need to be perfectly optimized? And two: You're assuming that intangible benefits aren't useful. Is money all that matters?

Intangible benefits are difficult to quantify, but that's no excuse for assigning their value as infinity and assuming they justify any cost. Or for wasting resources unnecessarily.

You could try to estimate the intangible value in QALYs or some other made up thing, but it's usually best to just estimate it in monetary terms, because money is fungible and well-understood. If you lose $5000, that's $5000 you don't have to spend on fighting climate change or education or cancer research or whatever other productive use it could have been put towards if you hadn't wasted it.

And if you get $5000 in intangible value by spending $4500, you're still wasting $4000 if the same intangible value could have been produced by spending $500.

> perhaps the same benefit -- or more benefit -- could be achieved through periodic health inspections rather then licensing individual hairdressers

Inspections with out a license would be unenforceable. If they fail an inspection, you revoke their license, requiring them to shut down. If there is no license to revoke, there is nothing stopping them from continuing to operate.

I think the difference is between a license that requires you to drive down to the statehouse with $50 and a valid state ID vs. a license that requires you to pass the tests at the end of an 8 week course held once every other year that costs $40k.

Calculating the costs without analyzing all of the pros and cons means not actually calculating the costs. It is borderline dishonest.

If you wanted to do the study fairly, you'd make also some attempt to quantify the benefits from fewer accidents, lower insurance premiums, lower remediation costs and faster work etc associated with licensed professionals carrying it out. In a number of fields, you might well get an indication that there's a net financial benefit to doing so (even before you start trying to quantify intangible stuff like peace of mind). If you wanted to represent the scope of the study honestly, you wouldn't claim the gross difference in earnings between licensed and unlicensed professionals as the "cost"

You'd probably want something more granular than SOC code and age to identify the difference between the premium licensed professionals earn for having their document and the premium they earn for also being on average more experienced and capable professionals performing more specialised and difficult work than unlicensed ones in their field.

But then the study is far more about headlines than anything else. Disappointed they weren't bold enough to note that the coefficient on "married" was similar in size to the coefficient on "licensed" and use the same dataset to argue that "U.S. Consumers and the Economy Loses Billions to Professionals Being Married"!

> If you wanted to do the study fairly, you'd make also some attempt to quantify the benefits from fewer accidents, lower insurance premiums, lower remediation costs and faster work etc associated with licensed professionals carrying it out.

I disagree. The report is eplicitly about the costs of licensing. It's not trying to be an all encompassing and comprehensive study of all possible pros and cons. Let those benefits be the focus of another study.

"Hey $accountant, I need you to write up a report of all business expenditures."

"Sorry boss, that wouldn't be fair. All I'll tell you is that we made a net profit of X million. I don't want to tell only one side of the story"

Except that the report claims to be a "conservative" estimate of "deadweight loss", implying no possible benefit to the licensing whatsoever.

So actually much closer to using the compensation figures from your accountant to argue "this is how much our business is losing from having a sales team"

"Deadweight loss" is a term in economics that refers specifically to loss of producer and consumer surplus due to distortions in the prices or quantities that are supplied or demanded. This is different from the colloquial definition of "dead weight" - the latter would imply that licensing produces no benefit, while the former does not.

https://en.wikipedia.org/wiki/Deadweight_loss

If the licensing actually provides benefit to the consumer, the loss in consumer surplus is smaller than that calculated by simply counting the wage differential as the study authors have done. Deadweight loss in economics implies an efficiency loss (hence why Pigouvian taxes, for example, are not considered to produce a deadweight loss even though they actually do reduce producer and consumer surpluses) and thus very much does imply no benefit to licensing when estimated in the manner the study authors have done. The whole field of welfare economics is based around the assumption that a distortion to the price and quantity supplied on an unregulated market might lead to a welfare gain, and thus does not necessarily result in deadweight loss.

You're understanding of dead weight loss is not how economists use the term. Dead weight loss is simply when a market is not at equilibrium and there is some allocative inefficiency. There is absolutely no moral or subjective judgement there: it is literally just a description of a feature of a supply and demand graph. Dead weight loss is often presented negatively, because we don't want inneficiency, but it's not defined by some moral badness.

Your example about sin taxes is wrong. The whole point of a sin tax is to shift the supply curve to the left and let the market come back to equilibrium so as to reduce equilibrium quantity. Sin taxes wouldn't work if they didn't move the market to an equilibrium.

You may think that, in this case, the cost of distortions in the market caused by licensing is morally good and a net positive for society. That is an entirely reasonable position to take. But you cant then pretend like those inneficiencies don't exist by playing word games.

I'm an economics major, fully familiar with the use of the term deadweight loss, and what you're arguing against is welfare economics 101. All forms of tax, subsidy and quota including licensing shift supply and/or demand curves to new equilibria which are different from the unregulated market equilibrium; the purpose of the Pigouvian tax example was that the unregulated market equilibrium is not necessarily the "correct" reference point for calculating deadweight loss in the presence of externalities and information asymmetries. Similarly, comparing wages between licensed and unlicensed professionals across different licensing regimes is useful as a method for estimating deadweight loss from the licensing regime only in the event that there is no benefit from the licensing (i.e. it assumes no externalities related to licensing exist and licensed and unlicensed professionals are undifferentiated in average quality and in an efficient market ought to earn the same amount)

It's not a terribly useful study to me as a result. Granted, the parent piece from a libertarian think tank, so this type of report - an advocacy document - is what to expect. That's fine. But you can also find advocacy from the other side, too... for instance, an advocacy piece concerning the costs (via shoddy work) of using unlicensed contractors for construction, courtesy of Angie's List. (https://www.angieslist.com/articles/how-unlicensed-contracto...)

What we don't have is the proper detail to allow me to make up my mind which cases licensing makes sense, and in which cases licensing doesn't. Sure, licensing has costs. That doesn't tell me anything, because licensing may protect me from bad work quality, which also can cost money, or even possibly be a safety hazard (eg the shoddy electrician that didn't ground a light and nearly electrocuted another worker as a result in the Angie's List piece).

I am fine with the position that occupational licenses aren't necessary for careers where licensing doesn't add any value. But my hunch is that in many careers, licensing adds value overall. The posted piece did nothing to change my position on this.

I'm not sure I follow you. I think the situation you describe, where we have factual (but perhaps motivated) studies on both sides of the issue is exactly what we want. We have the costs and benefits laid out to us, and we can make up our own mind about whether it is 'worth it'. I don't think it is the job of a study like this to make that kind of subjective judgement.

> Would you not want someone to be able to verify that they have the skills to do what they say they offer.

The state of Georgia (and likely many others) requires chiropractors to have a license.

Please explain how the State is uniquely qualified to determine the competence of a practitioner of junk science?

Please explain how snide, dismissive statements contribute to a healthy discussion? There are chiropractic techniques which I do not agree are junk science and produce good outcomes for patients. For example:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3081245/

How does it compare against a placebo in a double blind trial? This is simply a single case report with no comparison.

Chiropractic remedies have a long history of being questionable.

Wikipedia provides many sources:

> Systematic reviews of this research have not found evidence that chiropractic manipulation is effective, with the possible exception of treatment for back pain.[4] A critical evaluation found that collectively, spinal manipulation was ineffective at treating any condition

> It is frequently associated with mild to moderate adverse effects, with serious or fatal complications in rare cases.

https://en.wikipedia.org/wiki/Chiropractic

I don’t think anyone thinks patients can’t have good outcomes after having chiropractic techniques applied - it’s more a question of causality. A single case where spinal manipulation was used to successfully treat tinnitus is probably not a good argument in that case.

A lot of people have the luxury of raging against licensing and regulation because they don't remember the world before these existed.

It's just assumed that most people are honest about their work and the who aren't will be swiftly punished. But in most cases, it's the opposite: the honest people get driven out because scammers can promise the world for a penny because they know they will never deliver.

People were fed up with being swindled left and right, so they decided to get the government to step in. Obviously, they've been highly successful because Libertarians can't even imagine the world as it was 100 years ago.

The world is also very different than it was 100 years ago. Today we can review a barbershop on Yelp and complain they aren't cleaning their tools. Today we can share digital medical records and delegate decisions to nurse practitioners while having the option to fall back to a doctor if necessary.

There may have been good reasons for certain licensing laws 100 years ago but that doesn't mean those reasons are still valid today.

I remember an unregulated internet. It was better.

The internet has literally never been unregulated.

I'd say it's fairly unregulated. Where else could the silk road, 4chan, or furnitureporn.com exist??

I can put a kilo of cocaine in my trunk and drive on the highway, that does't mean the roads are unregulated.

Very slowly through the postal system.

Didn't regulation create the Internet?

Although if your point is "some regulations are better than others" I definitely agree with you.

Software generally and the internet specifically are relative "wild wests" compared to most industries. Literally anyone can write software or create a website. You don't need any fancy degrees, you don't need a license/certification, and generally speaking you don't really need permission. There's very few things which are "difficult" to do, categories of content which will be difficult to get hosted.

This is slowly getting chipped away though. There's more and more national internet filters, even in relatively free places like UK. There's GDPR, DMCA, SESTA/FOSTA, etc.

Pics or it didn't happen.

> What I found interesting is that, those with licenses make more money?

Some (most? all?) US states require not only a degree but "ongoing education" every other year that can amount to a not insignificant chunk of wages. It's pretty awful from those I know in the field.

In the case of dietitians, ONLY a dietitian can be licensed in those states that require it, and only the dietetics board of all dietitians get to decide who can be license. In Florida there are 22 million people, but because of the license monopoly, only 4,000 dietitians.

There is a cottage industry around passing around the material for those courses.

My wife worked in the pharmacy field and had those requirements. The courses were mostly made by the drug companies and were thinly disguised marketing material.

Market forces working through reputation generally do take care of verification fairly well in many countries - even more so in this era of free access to information. I find it ironic that in "socialist" (India, China) countries, these things primarily seem to run via free market forces with little or no licensing restrictions of who can practice a trade while in "free market" countries, there's endless red tape of who is allowed to carry out what trade.

Ultimately these systems are not about quality, they're about restricting free market in the labor pool to keep prices in a trade high.

Weird that you mention China.

https://en.m.wikipedia.org/wiki/2007_pet_food_recalls?wprov=...

https://en.m.wikipedia.org/wiki/2008_Chinese_milk_scandal?wp...

https://qz.com/1323471/ten-years-after-chinas-melamine-laced...

https://en.m.wikipedia.org/wiki/Chinese_drywall?wprov=sfla1

Product safety is certainly an area where strong regulation is valuable, however this article is focused on occupational licensing.