Archive for the ‘economics’ tag
Occupational licensing: common sense or common cents?
Last week, the Michigan Department of Human Services ordered a West Michigan mother to stop babysitting her neighbor’s two children each morning before they board the school bus. Lisa Snyder said she watches the children for less than an hour and receives no compensation. Around the same time as Snyder’s run-in with the nanny state, UK officials confronted two working mothers who cared for each other’s children on a reciprocal basis. The women, both police officers with Thames Valley Police, are said to have violated the 2006 Childcare Act, which requires non-relatives to pay a $164 annual fee, attend training sessions, and conduct risk assessments in order to be registered as childminders.
Although Britons are growing used to the Orwellian way of life, few Americans would expect that a mother could be threatened with fines and imprisonment for watching a friend’s children without a commercial license from the state. Thanks to occupational licensing laws, the state can protect us from good neighbors like Ms. Snyder. She suspects that a close acquaintance reported her “illegal daycare” to the authorities. She alludes to a personal vendetta, but it just as likely might have been a jilted day care provider who lost a customer thanks to Ms. Snyder’s generosity, or an industry shill who wanted to send a message to unlicensed providers.
Of course it is within reason to regulate and license some professions, particularly those where liability or human welfare is a concern, such as medicine, debt collection, and indeed, child care. But a quick look at Michigan’s Licensing Services portal confirms that regulation is not limited to these critical professions. The State of Michigan licenses 116 occupations, making it one of the most heavily regulated states in the country – ranked 6th overall, according to a Reason Foundation policy study. It is unlikely that all of these occupations are regulated out of necessity, especially when one considers that occupational licensing is often nothing more than a form of industry protectionism. Often enacted at the behest of industry lobby groups, these laws restrict competition by creating procedural and financial barriers that shut out people without the means to acquire a license.
Those who dare to ignore the laws face substantial fines and in some cases, incarceration. This may seem unfair, but without such harsh penalties, how will be be spared the ineptness of unlicensed interior designers, auctioneers, and hair braiders? How will we punish the college dorm resident who gives $2 haircuts? We might as well prohibit any activity which causes powerful lobbying organizations and their protected constituents to lose profits. The Louisiana State Florists’ Association succeeded in this task when the Bayou State became the first nationwide to require a florist license. Aspiring florists must pass a test with a failure rate that exceeds that of the state bar exam and is written by the florist’s association itself. It is true that public safety is sometimes a motive for regulation, but greed is the perennial factor.
UPDATE: By a unanimous vote in each chamber, the Michigan House and Senate passed legislation which exempts free babysitting from the license requirement. (12 Nov. 2009)
Popularity: 47% [?]
Verkeersbordvrij: free of traffic signs
A traffic experiment in the small Dutch city of Drachten is being hailed as a success after observers noted that casualties at one junction dropped from 36 over the previous four years to only two in the two years following the experiment. The experiment? Eliminate traffic lights and signs.
The idea is based on an urban design philosophy known as “shared space.” When drivers, pedestrians and bicyclists are forced to develop their own natural ways of interacting with each other, goes the thinking, they work out better social behaviors than the rule-driven behaviors dictated by professional traffic engineers.
On a 2006 trip to Jamaica, I observed a similar attitude toward driving among cab drivers, who blitz past grazing goats and children on bikes. They honk first and hit the brakes later. A friend of mine who spent a summer in Mexico City made similar observations about big city motorists.
Related links:
Popularity: 1% [?]
Fed asks approval to pay interest on reserves
WSJ:
The Federal Reserve is formally asking Congress for authority — starting this year — to pay interest on commercial-bank reserves, in an effort to gain better control over interest rates and more leverage to battle the credit crunch.
Popularity: 1% [?]
Economics lessons from pop songs
From ABBA to Zeppelin examines the lyrics of pop songs and often finds them grappling with economic questions. For example, Queen’s Freddie Mercury is aware of the difficulty in evaluating opportunity costs and time preferences:
I’m a man with a one track mind
So much to do in one lifetime (people do you hear me)
Not a man for compromise and where’s and why’s and living lies
So I’m living it all, yes I’m living it all
And I’m giving it all, and I’m giving it all
[…]
I want it all, I want it all, I want it all and I want it now
An essay question follows:
The lyrics above remind us that there is a lot to do in one short lifetime. Freddie Mercury, Queen’s lead singer, asserts that he wants it all and he wants it now. Do you prefer to consume goods in the present or future? With reference to these lyrics, explain why individuals charge interest for deferring consumption.
Audio samples and full lyrics are available for each entry.
Popularity: 1% [?]