Saturday, July 16, 2016

Alternatives to government licensing

Why Should Anyone Need a License for Anything? | Foundation for Economic Education - Kevin Currie-Knight:

May 23, 2016 - "Recently, the state legislature in my home state of North Carolina approved draft legislation that would undo licensing requirements for 15 professions, including locksmithing, pastoral counseling, and acupuncture..... It is tempting to assume that the only way professional certification can be effective is if the state does it and if it is mandatory. Neither assumption is true....

"First, let’s ask ourselves when certification is and isn’t valuable. Certification reduces what economists call information costs: if I am shopping in a field where choosing a bad provider may be costly, searching for a certified provider may be an easy way to ensure that the provider meets a minimum standard....

"In Kansas and Wyoming, two states where licensure is not required to practice acupuncture, the number of acupuncturists who voluntarily have certification from the NCCAOM is 42 and 26, respectively. That may not seem like many, but consider that Kansas has 1 voluntarily certified acupuncturist for every 49,000 residents, while neighboring Missouri has 1 licensed-by-legal-requirement acupuncturist for every 51,300 residents. That’s pretty comparable....

"And what if the state decides not to serve as licenser? Will private organizations step in? The answer is an almost certain yes.... Becoming an 'athletic trainer' in North Carolina requires a state license, but becoming a 'personal trainer' does not. It turns out, however, that most employers seem to want only certified personal trainers.... So where do personal trainers get certified?.... private certifying bodies for personal trainers, such as the National Personal Training Institute and the International Fitness Association. Why do employers tend to hire trainers who are certified? Presumably, it’s not because of any government demands, but because they find those trainers to be better for business.

"Locksmithing is another profession for which the North Carolina bill would dissolve licensure requirements. To help us predict the outcome for the state’s consumers, we can look to Great Britain, where the government imposes no licensing requirement on locksmiths. British locksmiths can, however, pursue certification with the nonprofit Master Locksmith Association and other similar organizations, which allow locksmiths to advertise as certified. And, true to form, a good many locksmiths voluntarily acquire this certification....

"Kosher food regulation is a well-studied example; kosher meats used to be certified by state governments, but over time, it was found that private organizations like Organized Kashrut Laboratories and the Union of Orthodox Congregation did a better job.... In his essay 'Kosher Certification as a Model of Private Regulation,' law professor Timothy Lytton suggests several reasons. Demand for kosher products, he says, 'gives food manufacturers incentive to pay for reliable, independent' certification. Additionally, 'brand competition among certifiers based on reliability has led to increasing expertise and accountability.'

"When customers demand a superior product or service, and they believe certification to be a good indicator of quality, businesses will generally realize the benefit of pursuing certification, even if the certifying bodies are private and licensure isn’t mandatory.

"Consumers will decide what the value of certification is by deciding what premium they will pay to go with a certified service provider. This outcome would offer the best of both worlds, because nothing would be imposed on anyone. Whether to obtain certification, and whether to use certified providers, will be voluntary. And voluntary is good."

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