Free exchange

Interior decorating? What in god's name do they need a license for?

The La-Z-Boy Oath

"I hereby proclaim that I shall place neither polka-dotted couch nor plaid wallpaper..."

When there's a big state-wide election approaching here in IL, it always seems that the calls for less regulation all have to do with the lessening of environmental standards. No one running for office who claims to be pro-business has ever mentioned that the process to get a new business tax ID is so spectacularly complicated that you can't do it without hiring a lawyer.

When one of these state-licensed professionals screws up, does the state compensate the customer for sunk cost? for consequential damage??

Having been in commercial real estate, I've dealt first hand with the many regulations that businesses deal with. They do complain about "burden" but when you ask them what the problem is the issues divide in three real categories:

1. Rules that open them to liability they didn't knowingly assume. These are partly state and local environmental regulations but the really big part is imposed by the market, meaning that lenders impose huge restrictions based on their guesses about liabilities as those are developed in various lawsuits. For example, the liabilities imposed by various spills of chemicals, by the use of chemicals in a business - like a hair salon, cleaners, etc. - are real mostly because lenders won't pass a property unless it is clear. The lenders only care because someone has been sued and they run from that kind of liability risk. No clearance, no loan, no sale of the property or the business at a price you want. Remember that rules don't really prevent spills and the enforcement of them is haphazard at best - and sometimes bluntly bought off. The real power comes from market punishment, mostly through lenders and landlords demanding more indemnity, more cleanup. Business owners fear rule changes in part because they worry the market will then react to any changes to impose more "new" risk.

2. Mindless stuff. Most smaller businesses are annoyed but not materially impacted by all sorts of regulations. Like posting equal opportunity notices. They like to point at this because they see it as useless but these rules don't create a lot of cost. People like to complain. If they didn't have this, they'd complain about other things.

3. More state and local regulation, which you mentioned. But the rules are more about fire safety and local concerns like keeping waste water out of the over-burdened sewage treatment system than ways to keep out competition. In a very real sense, the failure to invest in infrastructure then imposes costs on business as part of the need to mitigate impact a better infrastructure could handle. Because of various tragedies and public outcry, the building codes are much stricter. Localities are much more concerned about their wetlands, etc. These are the rules businesses face every day.

This is strangely similar to the European guilds of the last millenium. Control production by licensing to increase wages for "masters" of a craft, limit competition by locality and set up a maddening set of regulations designed to protect the industry from foreign and domestic (often rural) competition. And, perhaps most importantly, lobby the local political officials for special consideration.

Given my last haircut, I'm not so sure 1,500 hours of training is enough.

It's about time that someone pointed out that Federal regulation often rescues businesses from a rat's nest of state and local meddling.

States' Rights ended with the Civil War. The Southern delusion that they still existed, as a justification for treating Blacks as less than human, led directly to the routine involvement of the Federal courts in local affairs. This was necessary only because Southern state courts could not be relied upon to do justice. Then pols learned that it was safer to leave problems unaddressed until finally the courts took them off their plates. So if you dislike "activist" Federal courts, blame those who forced them to act - segregationists and gutless pols.

I agree with the post, but few of these trades are hired en masse right? Most are contractors or sole proprietors. So no more licensing shampooists, but lets not say these are the regulations that stops General Electric from hiring.

There is one free market group that does focus on eliminating these absurd rules, it's called the "Institute of Justice." They work through the courts.

I agree with what you wrote, but would add that it's semi-intuitive as to why placing a price on carbon is fought more vigorously than shampoo engineer certifications & that's based upon how many people they directly affect and their collective resources.

Additionally, if GE needs to hire an interior designer, theoretically the only place where they could potentially be directly effected, they have the money to pay the premium anyway, so they don't care.

So basically, the regulations you discuss are freedom reducing piles of dung, but so long as voters don't care and those directly impacted amount to a very small percentage of the population without the resources necessary to lobby successfully against such regulations, it would appear there is no obvious end in sight.

Of course... see: Sorites Paradox

I don’t think deregulating those markets is a good idea. That’s an anti-inflationary, or disinflationary, method, and thus inappropriate to the present US economy.

This type of confusion comes from overlooking effects of microeconomic benefits – such as a discount in the exam fee for those wannabe cowboy shampooists in Texas – to macroeconomic benefits. This failure is typical of neoclassical economics in general.

What is actually happening to the US economy – or, more accurately, the US dollar economy – under the Bernanke Put is that the money to be held by transactions- and precautionary-motives is growing sluggishly while the money to be held by speculative-motives is growth rapidly. (I don’t think anybody would want to argue against the fact that there are only these two types of money in the open market).

With deregulations in the markets – like that for those shampooing Texans – that the author cites, the former money will further contract due to increased supply of goods and services. This will only make the disinflationary pressure more powerful. We should interpret the trend of intensifying regulations as a natural reaction by the open market.

Both ‘mobility’ and ‘flexibility’ are fishy terms, because they have different meanings by context. This time they mean more supply in the labour market, thus more supply of labour, thus a harsher competition, thus lower prices and wages, and thus a more disinflationary pressure in the entire US economy.

Thus, higher mobility or higher flexibility in the labour market is absolutely inappropriate under the present conditions of the US economy, and means lower mobility of income. That is, mobility or flexibility in the labour market offsets income mobility. It is simply a matter of demand and supply in the labour market.

(I don’t deny that there may still be cases in which deregulations are really needed locally. But, a general deregulation, which is the theme of this entry, is out of question).

The costs the author cites are not an issue to worry about in macroeconomics. They go into either private businesses or authorities, by which they will become the money to be spent for either investment or consumption.

What the policymakers should instead do is to lead money from being invested into speculative activities to being invested into transactions and precautionary activities. By this method, a stronger inflationary pressure will occur in the market. Generally, deregulations in the markets of goods, services and labour should be imposed when the rate of inflation accelerates, in which The Fed will not have to raise interest rates as rapidly as otherwise.

The best way to lead money into transactions and precautionary activities is simple: Regulate the market – both domestic and international – in which the money to be held by speculative motives. By that method, there will be such a contractionary pressure in speculative activities that money (i.e. credit) will be pressed out to transactions and precautionary activities. Naturally, the method can be translated as regulating financial and property markets. A law that is similar to the Glass-Steagall Act, an income taxation reform like a reinforced progressive taxation, and an international capital-gains tax like the Tobin Tax must be right policies. By these policies, there will be a situation in which the markets of goods, services and labour can be deregulated in a safer manner and thus a more stable and FREEER ECONOMY will be accomplished.

Bars, restauarnts, etc., in my state are mandated to
be smoking free by state law.

One would think the state would auction licenses to allow a percentage of businesses - say 20%, based on pct of smokers in the state - to purchase to allow smoking.

Regards

The Federal Register publishes new federal regulations and averages 10,000 pages every year. State and local governments probably add twice that many new regulations. So how does anyone get the idea that we have a free market in the US?

Licensing makes even less sense now than it did in the past. Licenses can have some signaling value that the individual is at least basically competent in their job. The doctor or truck driver in question might not be very good, but at least they had training. Now we have the internet to share experiences (i.e. Yelp and other local ratings sites), easily make complaints, and do Google based background checks. In 2011, I don't need the state to tell me that my yoga teacher knows what she's doing. I can do a much better job figuring that out then relying on whatever ridiculous curriculum is developed by local government.

Let us not forget that at least one can leave a state or city. For example, states like California have noted that jobs are for losers, i.e. it wants none of them. New York City has insisted that only greedy crazy types hire other people.

You cannot escape the feds!

Jasiek w japonii wrote: Feb 8th 2011 12:47 GMT
"I don’t think deregulating those markets is a good idea. That’s an anti-inflationary, or disinflationary, method, and thus inappropriate to the present US economy."

Deregulating the labor market is only going to be anti-inflationary in the labor market, not the broader market. Given that there are some 14 million unemployed, lowering the cost of labor is likely to be a spur to new hiring, and therefore a desirable outcome.

The regulation of the labor market merely creates barriers to entry and additional opportunity costs. Ironically, it is often the industry itself that lobbies for these regulations, specifically as an attempt to create barriers to entry and discourage competition with existing businesses. The governments go along with it because licensing fees generate more income for them.

Some labor regulation I can understand -- doctors, lawyers, accountants, and the like. But professions like barbers and glaziers? I have yet to hear a rational explanation for requiring education and licensing for those.

In search of a theory as to why increased licensing would make sense, apart from the obvious explanation that it's just successful rent seeking on the part of incumbents, is that it's much easier now for an individual to avoid liability for faulty work, mostly by operating LLCs with no assets. If professions are becoming more frequently judgment proof, then the market is going to have trouble policing those professions. It's the best plausible explanation I can come up with. Aside from the reality that it's all local politics.

@LexHumana

When the credit creation is sluggish for the money to be held by transactions- and precautionary-motives against the money to be held by speculative-motives, lowering the cost of labour leads businesses to more attempts of lowering the prices of goods and services.

As for the reason why the credit creation is being sluggish for the former money within the US economy Richard Koo’s view on balance sheets sounds convincing.

"It would be nice if groups that claim to support economic freedom would devote more energy to fighting these kinds of restrictions and less to opposing, say, a price on carbon."

A better idea.

Oppose both.

.