Friday, October 21, 2011

Expose the popular unexamined propositions

When you close (politicize) markets, you have problems.  Cliff Winston, Robert Crandall and Vikram Maheshri recently published First Thing We Do, Let's Deregulate All the Lawyers.  One of the questions they ask is why firms that hire freshly minted lawyers have to spend so much time training them.  In fact, why do state bar exams seemingly require time and money spent on prep -- after the candidate has graduated from law school?

The WSJ recently ran "What's First-Year Lawyer Worth? Not Much, Say a Growing Number of Corporate Clients Who Refuse to Pay."

Credentialing and branding can/will occur if licensing and politics are taken out of the picture.  But this is a hard sell.  The professions will fight to keep their lock on supply when and where they have it.  Many others go along, presuming we would be lost without state sanctioned seals of approval.

Here is the bottom line from Morris Kleiner's "Licensing Occupations: Ensuring Quality by Restricting Competition?" Journal of Economic Perspectives, Autumn, 2000: "From the evidence I was able to gather, there is no overall quality benefit (measured in a number of different ways) of licensing to consumers.  Consequently, the cost of regulation to society is higher prices or longer waits for service.  An additional societal cost is the reallocation of income from consumers to practitioners of the licensed occupation as well as lost output."

Many economists want to make macro-economic forecasts (which are in demand) but are loathe to admit they cannot really pull it off.  They can teach valuable lessons about the popular unexamined propositions used to make band policies.


Here is Russ Roberts interviewing Valerie Ramey re quality of (and the prospects for improved) macro-economic forecasts.