The economic effects of licensing and certification regimes have been the subject of a couple of recent posts by Angelica, and of extensive discussion in the comments: “Call Me Street Food Libertarian“ and “The Rats of El Toro.”

One frequent effect of licensing regimes is that they stand in the way of transforming one’s skill into a source of income, and raise the cost of doing so. The result is that they raise the overhead cost of daily living by several orders of magnitude for the average person, so that (as Paul Goodman put it) decent poverty becomes impossible. The minumum amount of labor required for comfortable subsistence is inflated unnecessarily–and guess  who collects the difference? You guessed it: the controllers of the various licensing cartels, the owners of “intellectual property,” and the wage employers who profit from the artificial restriction of self-employment alternatives.

For example:

“Washington had no schooling until he was 11, no classroom confinement, no blackboards,” notes John Taylor Gatto in the first chapter of “The Underground History of American Education.”….

He immediately took up geometry, trigonometry and surveying. Before he turned 18, Washington had been hired as the official surveyor for Culpepper County. “For the next three years, Washington earned the equivalent  of about $100,000 a year in today’s purchasing power,” Mr. Gatto, the former New York state Teacher of the Year, reports.

How much government-run schooling would a youth of today be told he needs before he could contemplate making $100,000 a year as a surveyor — a job which has not changed except to get substantially easier, what  with hand-held computers, GPS scanners and laser range-finders? Sixteen years, at least — 18, more likely.

George Washington attended school for two years.” –Vin Suprynowicz

Another example, mentioned by Ivan Illich in Tools for Conviviality, is self-built housing. As late as the 1940s, some one-third of housing in Massachusetts was still self-built. In the sixty years since, we’ve seen quantum increases in the user-friendliness of modular housing technology, and alternative techniques like earthships, cob houses, papercrete, and the like. The population surely has more average years of schooling (albeit  probably a lower literacy rate) than the people who constructed their own homes sixty years ago. And yet the legal barriers to self-built housing are far greater now than then. The main function of the building codes is not  to enforce objective safety requirements, but to define “safety” in such a way that the standard can only be met by licensed contractors. The main practical effect is to add another contributing factor to the inflation of  housing costs. The average worker who might have owned his house free and clear in less than ten years, back in the 1940s (and therefore have been not utterly at his boss’s mercy for keeping a roof over his head), will be  mortgaged for most of his life today. Housing costs, which were maybe 20% of the average monthly budget back then, are pushing half these days.

The Democratic Freedom Caucus (a vaguely Georgist-tinged libertarian group within the Democratic Party) includes in its platform one promising suggestion that might serve as a consensus position for scaling back  licensing regimes: “license fees should be no higher than administrative costs, and there should be no arbitrary quotas on the number of licenses issued.” In other words, eliminate the power of licensing bodies to restrict  the number of practitioners based on some estimate of what the market will bear, or to enable the monopoly profits of current license holders by inflating the costs of market entry. To take just one small example of the  effect of such a reform, imagine what it would do to the taxicab “medallion” system that exists in so many large American cities, with a license to operate a cab costing into the hundreds of thousands of dollars. The effect of the medallion system is to criminalize the countless operators of gypsy cab services. For the unemployed person or unskilled laborer, driving carless retirees around on their errands for an hourly fee seems like an  ideal way to transform one’s labor directly into a source of income without doing obesiance to the functionaries of some corporate Human Resources department.

The primary purpose of the medallion system is not to ensure safety. That could be accomplished just as easily by mandating an annual vehicle safety inspection and a criminal background check (probably all the licensed  taxi firms do anyway, and with questionable results based on my casual observation of both vehicles and drivers). And it would probably cost closer to fifty bucks than three hundred thousand. No, the primary purpose of  the medallion system is to allow the owners of licenses to screw both the consumer and the driver.

This entry was posted on Wednesday, March 12th, 2008 at 11:17 am