Rent Seeking is a relatively recent idea and identification in the field of economics.
‘Rent seeking’ is one of the most important insights in the last fifty years of economics and, unfortunately, one of the most inappropriately labeled. Gordon Tullock originated the idea in 1967, and Anne Krueger introduced the label in 1974. The idea is simple but powerful. People are said to seek rents when they try to obtain benefits for themselves through the political arena. They typically do so by getting a subsidy for a good they produce or for being in a particular class of people, by getting a tariff on a good they produce, or by getting a special regulation that hampers their competitors. Elderly people, for example, often seek higher Social Security payments; steel producers often seek restrictions on imports of steel; and licensed electricians and doctors often lobby to keep regulations in place that restrict competition from unlicensed electricians or doctors.
Unfortunately, most people tend to think of this problem—even if not aware of the technical term; i.e., on an intuitive level—as something that pertains to “The Corporations!” Of course, it does, but consider that the problem is lesser in scale that that posed by the rent seeking behavior of small professions and trades, such as being a hairdresser, manicurist, makeup artist, yoga instructor, used-car salesman, private investigator, blogger in the city of Philadelphia, Monk in Louisiana, tour guide in D.C., raw milk producer, pumpkin or Christmas tree vendor in Minnesota, an interior designer, or someone who wants to close their business in Milwaukee, WI…and the list goes on and on.
Licensing has been among the fastest growing labor market institutions in the United States. The figure shows the growth of occupational licensing relative to the decline of union membership since the 1950s.
By 2008 occupational licensing in the U.S. had grown to 29 percent of the workforce, up from below five per cent in the 1950s. In contrast, unions represented as much as 33 percent of the U.S. workforce in the 1950s, but declined to less than 12 percent of the U.S. workforce by 2008.
So, whereas private-sector unions used to be seen as the way to artificially keep wages somewhat higher than for non-unionized counterparts, much has given way to levels of red tape, bureaucracy, training, licensing, and certification requirements as a means of accomplishing the same thing on a far more pernicious level, because of the way it impacts poor people and would-be entrepreneurs.
But Arizona’s Goldwater Institute published a much-discussed report last year pointing out that occupational licensing has been a losing proposition for consumers and entrepreneurs alike.
“States that license more than 50 percent of the low-income occupations had an average entrepreneurship rate that was 11 percent lower than the average for all states,” the report noted. Unsurprisingly, people with limited resources get whacked the hardest. “[T]he higher the rate of licensure of low-income occupations, the lower the rate of low-income entrepreneurship.”
At the same time, “those who hold licenses within licensed professions have 15 percent higher wages than those in unlicensed professions” because of reduced competition. That’s a cost that has to be picked up by those hiring the services of licensed professionals designing their yards, teaching them yoga, or providing any of a host of services in fields with limited competition.
That’s a problem in a country where the percentage of the workforce covered by licensing laws rose from less than 5 percent during the 1950s to 20 percent by 2000 and 29 percent in 2006, according to research by Morris M. Kleiner and Alan B. Krueger. A lot of fields have been effectively closed to new entrants with limited resources. And Americans are paying higher bills than necessary as a result.
But what about The Public Safety!? LOL Morons.
Objectives: Based on 1984 data developed from reviews of medical records of patients treated in New York hospitals, the Institute of Medicine estimated that up to 98,000 Americans die each year from medical errors. The basis of this estimate is nearly 3 decades old; herein, an updated estimate is developed from modern studies published from 2008 to 2011.
Methods: A literature review identified 4 limited studies that used primarily the Global Trigger Tool to flag specific evidence in medical records, such as medication stop orders or abnormal laboratory results, which point to an adverse event that may have harmed a patient. Ultimately, a physician must concur on the findings of an adverse event and then classify the severity of patient harm.
Results: Using a weighted average of the 4 studies, a lower limit of 210,000 deaths per year was associated with preventable harm in hospitals. Given limitations in the search capability of the Global Trigger Tool and the incompleteness of medical records on which the Tool depends, the true number of premature deaths associated with preventable harm to patients was estimated at more than 400,000 per year. Serious harm seems to be 10- to 20-fold more common than lethal harm.
Conclusions: The epidemic of patient harm in hospitals must be taken more seriously if it is to be curtailed. Fully engaging patients and their advocates during hospital care, systematically seeking the patients’ voice in identifying harms, transparent accountability for harm, and intentional correction of root causes of harm will be necessary to accomplish this goal.
It’s much like gun laws or the TSA. They serve to make moron sheeple believe the flock is safe. I’d wager that you could toss out all medical licensing and standards and with only Yelp to turn to, lives would be saved.
In conclusion, the story of Melony Armstrong, who just wanted to braid hair.
There are numerous forms of crony capitalism, but one of the most subtle and damaging to the economically vulnerable are occupational licensing laws. For millions of Americans, occupational licensing continues to serve as a barrier to work and self-sufficiency. Take, for example, Melony Armstrong.
When Armstrong began her hair braiding business, she was required to have a cosmetology license, which required 1,500 hours of training and $10,000 in tuition. What makes this state occupational licensing requirement so unreasonable? None of the training had anything to do with braiding hair.
I suggest that the next time you hear about big corporations ripping off the public and getting special favors from the state to do so, keep in mind that at least tens of millions of Americans can still get good and decent jobs from these corporations, often with good benefits.
The larger body of barriers to entry exist in the realm of the small fish. Thousands of regulations, designed to motivate people to look elsewhere…even burden themselves with student loans, rather than try their hand at starting a business at 18, 19, or 20 years of age.
And those who do neither? Well, they end up in a low-skill job and then lobby for minimum wage hikes, and the circle is complete. Political balance is restored.