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Economy, Monopoly, and Professional Licensing

This article Was originally Published by Data Driven Investor


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Occupational licensing is a way the government regulates a profession for compensation. Often only market access as a self-employed is limited to licensed professionals.


Occupations that can have an enormous negative impact on individuals, like physicians, public accountants, and lawyers, require occupational licenses in most nations. Many jurisdictions also compel licenses for professions without that prospect, like plumbers, taxi drivers, and electricians. Licensing creates a regulatory impediment to entry into licensed careers, resulting in higher income for those with licenses and usually higher costs for prospects.

Licensing’s proponents claim that it ensures the public interest by keeping away incompetent and unethical individuals working with the community. However, according to some scholars, there is little proof that it affects the offered overall quality of services to clientele by associates of the particular regulated profession.




The concept of licensing and certification, in general, is against what a free market stands for. It donates a tool for administration agents to alter a specific profession’s growth course and service within a market or region. Thus, it is practical to suggest that the economic essence of a tempered supply of amenities and things is all but a free call, as it would be fated to help those at the end of the monopoly chain of order.

” Our system is sustaining overwhelming supremacy of a unique culture that enforces confines to the physician’s scope of practice riddled with the jotted down biased protocols.”

For instance, in 2017, the foundation for economic education published an article highlighting the American Medical Association (AMA) controls (Both, directly and indirectly) the licensing of physicians, the accreditation of medical schools, admittance into medical schools, and the payment policies of insurance companies. One of the main reasons for licensing is to troll the supply against the demand. For instance, Lawyers have to be approved by the state wherein furthermost cases, lawyers licensed in one form or country cannot practice law in another region. Hence, there are a limited number of lawyers that a client can select. On the other hand, those whose jobs require no licensure do not have the aforementioned added security. Thus, they find themselves exposed to competitive forces and have to lower their wages to attract or retain clients. From an economic point of view, the latter is a monopoly wherein a few sellers control the cost, supply, and demand in the market.

” Knowledge and skills are dominant traits of every citizen, thus having control over them is defined into decreeing and harnessing the sovereignty of the scientific disciples, against the honor of the populace.”

Licensing grants domination power to a particular group of individuals. In most countries, chartered accounts make their own governing and regulatory formations. Thus, they work with virtually no supervision. That makes the monopoly powers all-purpose where they can raise the price of their services or restrict entry for others. On the extreme end, the social order even reserves the right to disbar other affiliates. In other cases, the number of available licenses is rendered restricted. And furthermore, even those that are available may also be transferable. As a consequence, meanwhile, limited licenses are being issued, the existing permits become more valuable. Frequently holders of those licenses don’t need to work to earn an income. All they have to do is simply rent out their “license” and continue to make passive earnings.


” Anyone who has dwelled through a less than an authentic Laissez-faire free-market must be aware of the intuition of kickback practices, monopoly, and favoritism, particularly of those underwritten by the administrations.”

Licensing ultimately raises Costs for two reasons. The new candidates require to be qualified by already licensed professionals. Since those licensed professionals tend to be more expensive, and considering their time and services are needed, the newcomers have to pay a higher cost. That raises the prices. For Students, medical school or law school fees are a lifetime investment, something they have to struggle to gain a return on investment. They will, too, have to recover it from the consumers at a later point in time, or otherwise, pursuing such an endeavor would be senseless from an economic point of view.

The Courses that allow students licenses are frequently full-time curricula. Hence, the worker has to sacrifice their existing proceeds. That also appends to the cost of obtaining the permit. Once again, these costs are later recovered by overburdening the patrons.

In particular, in the United States, it is a notorious circumstance that many young physicians are under enormous medical school debt. Hence, they need to raise their charges to break even. This is “one of the reasons” why medical costs in America are soaring through the roof. Similarly, private school fees in the U.S. are snowballing exponentially, the roots of which can be traced to the high costs of a teacher’s license.

Licensing is every so often justified by bringing public safety into inquiry, arguing that if just about anybody is allowed to provide selected services, then the standard of delivery will drop and place public health and safety at potential risk. And furthermore, licensing bodies are required to keep a check on whether the standards are being maintained. Nonetheless, in reality, licensing bodies only cause more corruption since bodies with vested interests hold authority over individuals.

Take-home Message

Today in almost every industry, trade unions representing established players push for legislation and regulation to protect their members’ interests by eliminating competition. They do so habitually under the pretense of favoring public safety. It is utterly rhetorical to place the seal of approval from a qualified body of experts on some as the vetting procedure, to let consumers know that individual members of a profession are safe for the society, but isn’t fair enough to give the ultimate decision to the consumers and not to the bureaucrats?


“For governments to retain the power over scholars, they have refined an efficient scheme to leash its prodigy through accreditation and to license by the hands of the denomination of individuals bound by way of political alliances.”

Some may argue; consumers are not expert enough to discern the lousy professional from the good. Nonetheless, that would only be true if we take the school diplomas and certification out of the equation and fully agree that the experts are perfect and the average consumer is powerless. Additionally, we must all recognize that licensed professionals can never be erroneous to the same breadth, and all non-licensed genii are incapable. Indeed, neither the government nor a trade group should be in the business of dictating what individuals can discuss. Such efforts represent a threat to a free market as well as our freedom of speech.



” Utter sophistication of the licensing scheme is an invitation to futile bureaucracy, often deeming to dictate overkill fault, hence costly to an individual’s worthiness.”

#Economy #Licensing #Certification #Monopoly #Profession


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