Order, Disorder, and License Requirements
By Arnold Kling
A reader sent this question:
Your post on Prof. Wagner’s piece on market order, especially the institutional nature of the order (differences between taxed orders and illegal orders), made me think about the nature of organization within legally established licensed fields, namely, law and medicine. My own limited exposure to these fields would seem to suggest that there is more hierarchy, rents earned by “prestige”, not market merit, etc. than compared to other non-licensed fields. How would you character the organization of legally established licensed markets?
In law and medicine, the rationale for licensure is that the consumer needs to be protected from people who misrepresent themselves as qualified to perform certain services. Because the price of the service does not convey all of the information that a consumer needs in order to make a decision, the simple elegance of an orderly market seems impossible.
Nonetheless, there are many solutions to the consumer information problem. A professional can list the degrees that he or she has obtained, courses taken, past experience, and so forth. This information could be compiled, audited and evaluated by independent agencies, either government or private. Consumers could make decisions based on the information available.
Government licensing is an imperfect solution, and it does produce some disorderly behavior–optometrists lobbying against opthalmologists in state government, physical therapists limiting supply by getting regulators to require doctoral degrees of new practitioners, and so on. But the alternative solutions will have some disorder as well. Whenever there is a system for rating people or businesses, resources will be spent trying to game that system.