Coyote Blog

A couple of weeks ago, I started losing hearing in one ear.  A bit later, it started to hurt.  Suspecting an infection, I called my ENT's office.  They said they couldn't see me for four weeks, and would not let me switch to see anyone else in their 10-person practice (against their practice rules, which raises the question of, from a customer point of view, why there is any benefit to a large practice at all -- the large pool of doctors provides the illusion of more customer service capability but in fact the sole logic of the practice is cost-sharing of overhead and support staff).  So eventually I just went to one of those walk-in urgent care clinics in a strip mall near me and had the GP there look at it.  I found that I did in fact have an infection and got an antibiotic scrip and some drops and was told if it did not get better in 7 days, go see a specialist.

So it has been a week and the pain is mostly gone but I still have lost most of my hearing in the ear.  So I tried to make an appointment at my ENT again -- 4 weeks.  I described my situation, and said something seemed wrong.  4 weeks.

So I talked to two friends who are both semi-retired ENT's.  They said to get my butt to a doctor ASAP because it could be nothing or it could be something really bad that needs immediate intervention.  But no ENT would see me for weeks.  So one of my friends said they would help me, but they needed audiology tests.  Turns out, those are being scheduled 3 weeks out.  I finally called in a favor with a friend of a friend and found someone to test me next Monday, just four days from now.  Four days seems a long wait for something that could be an emergency, but it beats the hell out of 4 weeks.

This is what we have done to the practice of medicine.  With a myriad of professional licensing requirements and regulatory burdens that raise the fixed cost of opening a practice, we have managed to simultaneously raise prices while limiting supply.

First, I am interviewed today at Reason on our Equal Marriage Arizona initiative.

One question that keeps coming up, both from libertarians as well as others, is why should government define marriage at all?  Can't anyone get married in any kind of private ceremony?

My response is that yes, in some sort of libertarian small-government world, the state would be irrelevant -- what I used to call separation of marriage and state.

But it turns out that the state is already deeply involved in marriage.  The explicit state licensing of marriage already exists, and our laws in Arizona for this licensing are unequal -- some couples get access to this state license, and some cannot.

What makes this important is that marriage is embedded in hundreds, even thousands, of laws.   I searched the Arizona Revised Statutes for mentions of the words "spouse" or "spouses".  These words are used 1133 times in 373 different statutes!  The Our America team told me they counted over a thousand references in Federal code.  In other words, our law codes give -- in thousands of instances -- specific rights, responsibilities, and privileges to married couples who have access to a state-granted marriage license.  Those left out of the current unequal definition of marriage face any number of challenges imposed on them by these specifics of spousal rights and privileges embedded in our law code.  I call this the non-marriage penalty.

There is no way to rip all these references to marriage out of the law and tax code.  The fairest solution -- the one that most respects individual freedoms -- is to accept that such government licensing of marriage exists and then make it as open and as equal and as fair and as accessible as we possibly can.  That is what we are trying to achieve with Equal Marriage Arizona.

Ever since Amazon managed to patent one-click ordering, I have been skeptical of software patents.  When I was in the Internet field, I saw companies patent some, uh, patently obvious stuff, roughly akin to patenting an on/off switch.  Or even worse, multiple companies would get patents for the equivalent of an on/off switch, with this company claiming it has the patent for on-off switches for lighting, and this one for appliances, and this one for all electrical devices, and then all three end up sitting in court for about 10 years arguing about who has the patent for turning on the bulb in your refrigerator.

Kevin Drum brings us an amazing horror story of a patent that apparently I owe licensing fees for -- and probably you do too.

Vicinanza soon got in touch with the attorney representing Project Paperless: Steven Hill, a partner at Hill, Kertscher & Wharton, an Atlanta law firm.

"[Hill] was very cordial and very nice," he told Ars. "He said, if you hook up a scanner and e-mail a PDF document—we have a patent that covers that as a process."

It didn’t seem credible that Hill was demanding money for just using basic office equipment exactly the way it was intended to be used. So Vicinanza clarified:

"So you're claiming anyone on a network with a scanner owes you a license?" asked Vicinanza. "He said, 'Yes, that's correct.' And at that point, I just lost it."

Drum has a good discussion, including some prior art with which he actually participated.

I don't know if its the distance from the Mainland or something about its history, but Hawaii often appears to be among the worst states for regulatory capture by local businesses.  This example was brought to me by a co-worker, who lives in AZ but wants to buy a condo in Hawaii.  They want the condo for their own use, but also hope to rent it out.  This kind of model is more appealing nowadays given the ease (and low cost) with which one can advertise rentals on various Internet sites.

But not so fast, not in Hawaii.  In legislation that reminds be of stuff from the 1990's when businesses tried to fight Internet-driven disintermediation, Hawaii is proposing to force non-Hawaiians to use a local broker to list their rental properties.  Apparently local residents can still list their properties on low-cost Internet sites, but folks on the mainland (also known as "the United States") must use a high-cost locally licensed broker, who typically charge 50% of rental fees as a commission.  These type of commission rates are farcical - they imply that fully half the value of a one-week condominium stay is due to the broker, not the condo itself, its location, etc.  The only way brokers can charge these fees is by maintaining a tight cartel enforced by government licensing laws.

Any reasonable person will look at this law and immediately know it is about crony protection of local real estate brokers.  Of course, that is not what the law says.  It is all about "consumer protection"

The legislature also finds that requiring nonresident owners to employ a licensed professional such as a real estate broker or salesperson or a condominium hotel operator is an important consumer protection measure. Consumers who use real estate companies, real estate brokers, real estate salespersons, or condominium hotel operators for their transient accommodation rental needs can do so with the knowledge that all money generated will flow through a client trust account, the appropriate federal tax form 990s will be generated, and accurate transient accommodations taxes and general excise taxes will be paid. Real estate companies, real estate brokers, real estate salespersons, and condominium hotel operators must comply with specific licensing and bonding requirements, thus offering additional protections for consumers.

So consumer protection is defined as making sure taxes get paid and the government forms get filled out.  Because God knows my entire vacation would be ruined if Federal tax form 990 was not filled out properly.

This is total BS, and Milton Friedman called it years ago when he wrote on licensing:

The justification offered is always the same: to protect the consumer. However, the reason is demonstrated by observing who lobbies at the state legislature for the imposition or strengthening of licensure. The lobbyists are invariably representatives of the occupation in question rather than of the customers. True enough, plumbers presumably know better than anyone else what their customers need to be protected against. However, it is hard to regard altruistic concern for their customers as the primary motive behind their determined efforts to get legal power to decide who may be a plumber.

This is also a great example of voters agreeing to add costs on everyone but themselves.  If the almost inevitable Constitutional concerns with this law forced in-state and out-of-state condo owners to be treated equally, local owners would immediately push back, hard, against the costs this law would impose.  Only  by structuring this law to apply to those annoying out-of-staters could it ever be passed.

I have been considering taking advantage of low prices in Hawaii to buy a condo, but I may rethink that plan given this pending legislation.

These two articles were back to back in my feed reader this morning.  First, Joe Biden argues that medical procedures should be free if you feel you need one

“Everyone knows, everyone in this room knows that President Obama has increased the benefits available to people on Medicare by the action he took,” Biden said. “You are now able to go get a wellness exam, and guys, if you conclude you need a colonoscopy because of the feeling you had or you need a breast health examination, you don’t have to pay a co-pay for that.”

And then I got this from China

As part of its 8 day Golden Week celebration, China's central planners decided to do a good thing for the people and remove all tolls from expressways. That was the populist explanation. The fundamental one was that this act would somehow spur the economy. Alas, while the same people may have saved some transit money in the process, what they did not save was on transit times. As South China Morning Post reports, millions were promptly stuck in traffic jams as a result of the politburo's generosity. From SCMP: "A bid by authorities tostimulate the economy by suspending road tolls for the "golden week" holiday brought huge tailbacks across the mainland yesterday as almost 86 million travelers took to the roads. That's 13.3 per cent more than on the first day of the National Day holiday last year." And then the fun began.

"One traveller blogged that he could only move 200 metres in an hour on the Zhengzhou to Shijiazhuang expressway in Henan province. Others said the queue of cars on the Guangzhou to Shenzhen expressway was 40 kilometres long. All roads leading out of Guangdong were jammed, with cars moving at about a kilometre an hour in front of some toll gates. Provincial traffic-management authorities estimated traffic on expressways would increase by 40 to 80 per cent compared with the same period last year, the Shenzhen Special Zone Daily reported. The People's Daily reported dozens of accidents on 24 highways across the mainland, further aggravating the congestion."

Since the government still keeps hammering down doctor supply, through enforcement of tough licensing procedures and through price caps (that keep getting cut) on doctor visits, we should soon be seeing the equivalent of this highway traffic jam in medicine.  Which is why every socialized medicine country in the world has queues and why their citizens keep flying to the US for treatment.

My son is in Freshman econ 101, and so I have been posting him some supply and demand curve examples.  Here is one for health care.  The question at hand:  Does government regulation including Obamacare increase access to health care?  Certainly it increases access to health care insurance, but does it increase access to actual doctors?   We will look at three major interventions.

The first and oldest is the imposition of strong, time-consuming, and costly professional licensing requirements for doctors.  At this point we are not arguing whether this is a good or bad thing, just portraying its inevitable effects on the supply and demand for doctors.

I don't think this requires much discussion. For any given price for doctor services, the quantity of doctor hours available is certainly going to increase as the barriers to entry to the profession are raised.

The second intervention is actually a set of interventions, the range of interventions that have encouraged single-payer low-deductible health insurance and have provided subsidies for this insurance.  These interventions include historic tax preferences for employer-paid employee health insurance, Medicare, Medicaid, the subsidies in Obamacare as well as the rules in Obamacare that discourage high-deductible policies and require that everyone buy insurance rather than pay as they go.  The result is a shift in the demand curve to the right, along with a shift to a more vertical demand curve (meaning people are more price-insensitive, since a third-party is paying).

The result is a substantial rise in prices, as we have seen over the last 30 years as health care prices have risen far faster than inflation

As the government pays more and more of the health care bills, this price rise leads to unsustainably high spending levels, so the government institutes price controls.  Medicare has price controls (the famous "doc fix" is related to these) and Obamacare promises many more.  This leads to huge doctor shortages, queues, waiting lists, etc.  Exactly what we see in other state-run health care systems,  The graph below posits a price cap that forces prices back to the free market rate.

So, is this better access to health care?

I know that Obamacare proponents claim that top-down government operation is going to reap all kinds of savings, thus shifting the supply curve to the right.  Since this has pretty much never happened in the whole history of government operations, I discount the claim.  When pressed for specifics, the ideas typically boil down to price or demand controls.  Price controls we discussed.  Demand controls are of the sort like "you can't get a transplant if you are over 70" or "we won't approve cancer treatments that only promise a year more life."

Most of these do not affect the chart above, since it is for doctor services and most of these cost control ideas are usually doctor intensive - more doctor time to have fewer tests, operations, drugs.  But even if we expanded the viewpoint to be for all health care, it is yet to be demonstrated that the American public will even accept these restrictions.  The very first one out of the box, a proposal to have fewer mamographies for women under a certain age, was abandoned in a firestorm of opposition from women's groups.  In all likelihood, there will be some mish-mash of demand restrictions, determined less by science and by who (users and providers) have the best lobbying organizations.

My longer series of three Forbes articles on this and other economic issues with Obamacare begin here:  Part 1 Information, Part 2 Incentives, Part 3 Rent-Seeking

Update:  Pondering on this, it may be that professional licensing also makes the supply curve steeper.  It depends on how doctors think about sunk cost.

Several sites have reposted this Craigslist ad, gasping in shock at it as evidence of massive foreclosure fraud

We are a collection agency/debt buyer. What we are looking for is a part time attorney to work for us as our corporate counsel, on our payroll, about 5 to 6 hours a week. This is a short term employment arrangement, no longer than 90 to 120 days.

Your job will be to sign pleadings, praecipe for entry of appearances, praecipe for writ of execution, and garnishment orders. Our paralegal will prepare all paperwork for your signature. This is very standard stuff for us.

If you are an attorney looking for challenging legal work, this is not for you. WE DO NOT NEED F LEE BAILEY- we are fee shopping. If you passed your boards with a D+, and you can sign your name, you possess all the credentials required for this job. If this opportunity interests you, please feel free to reply to this email with a brief description of who you are, when you got your law license, and what you will be needing from us in the way of compensation.

I would instead offer it as a lesson in the stupidity of state-enforced professional licensing arrangements.  Let me rewrite it:

We have all the legal knowlege we need.  We know exactly what the forms look like and mean.  We have written all the documents and tested them over time during our long presence in this business and we know them to meet our legal needs.   We have no need, in other words, for legal help.

However, attorneys have gotten together and created an attorneys guild, and, what's more, have convinced the government to pass laws that require membership in the guild to perform certain gate-keeping functions.  In our case, we need a member of the guild to sign some forms to make them legal, both because the guild has strong influence and because certain folks have convinced everyone that all mortgage pain in this country came from having a machine perform this signature function rather than a flesh and blood hand.  So we need a flesh and blood hand rather than a machine to sign foreclosure documents.  Unfortunately, that hand has to be attached to a brain that has passed the bar exam, and because the guild is pretty good at limiting its membership, we expect to have to pay an absurd amount of money for this trivial function that could be duplicated by a six-year-old (and used to be performed by a simple $100 machine).

Don't get us wrong -- if we were on trial for our lives or facing a nasty, complicated lawsuit or wanted to draft a custom contract to protect our interests, we would be very happy to consider the opinion of third party licensing groups as to the merit of a particular attorney.  Ironically, though, even then current licensing would be absurd, for in this case it would not greatly exceed our quality requirements (as it does for signing our foreclosure paperwork) but it would vastly undershoot our need due diligence needs.   Perhaps there is some legal function for which attending an ABA-accredited school and passing the bar exam is the perfect level of quality assurance, but we have not found it yet.

The whole topic of licensing as anti-consumer efforts to restrict competition is a long-running one here.   Since I am sort-of-kind-of not-blogging right now, I won't excerpt or comment on it a lot, but this is a very interesting piecelooking at internal documents of the American Dietetic Association discussing their efforts to pass laws in various states that essentially ban anyone but their members from giving diet and nutrition advice.  It is one such law in North Carolina which required that Steve Cooksey take down all his blog posts about his dieting experiences (since he is not licensed by the state, it is illegal for him to speak on the topic).

The funniest part for me in the ADA materials is that they constantly seem to be put out that their efforts to  ban competition from anyone outside of their organization are described by critics as creating a monopoly.  Who, us? Monopoly?  We are just trying to help customers.  Missing in all this, of course, is any evidence of a grass roots effort by nutrition customers.  I will remind everyone of this great Milton Friedman quote:

The justification offered is always the same: to protect the consumer. However, the reason is demonstrated by observing who lobbies at the state legislature for the imposition or strengthening of licensure. The lobbyists are invariably representatives of the occupation in question rather than of the customers. True enough, plumbers presumably know better than anyone else what their customers need to be protected against. However, it is hard to regard altruistic concern for their customers as the primary motive behind their determined efforts to get legal power to decide who may be a plumber.

I am encouraged to see this from the Left.  Kevin Drum writes, in response to a proposal for California state licensing of dog groomers:

What's unfortunate, I guess, is that this would all be unobjectionable if it were a voluntary certification program. If you want to pay more to take Fido to a certified groomer, go right ahead. If you want to save money, then don't. But critics are almost certainly right that a voluntary license would become a required license in pretty short order. After all, Vargas's proposal may be for a voluntary license right now, but that's only because he's failed to get support for a required license in the past.

What's more, if the program were voluntary I'm not sure why you'd need the state involved in the first place. If there's really a demand for this kind of certification, it seems likely that a trade association of some kind would set something up. And if there isn't, then why bother?

Right on!  I wish Drum would carry this same thinking further into other economic spheres (why are consumers powerful enough to handle dog grooming choices suddenly infantile when it comes to health care decisions) but I am encouraged none-the-less.  There is room, I think, for a left-right coalition against corporate cronyism (of which licensing is among the worst forms, helping to protect incumbent businesses against upstart competitors).  Unfortunately, such cronyism is so deeply ingrained in both Romney and Obama that it is certainly not going to happen in this election.

Seriously, it takes over $1000, 1460 hours of special education, and the passing of two tests to be a floor sanding contractor in Nevada.  This is an amazing roundup of state licensure requirements, via Reason.  Note the profession at the top of the list of requirements, which by implication is the most dangerous possible activity to customers if it is done poorly.

A reminder from Milton Friedman on professional licensing:

The justification offered is always the same: to protect the consumer. However, the reason is demonstrated by observing who lobbies at the state legislature for the imposition or strengthening of licensure. The lobbyists are invariably representatives of the occupation in question rather than of the customers. True enough, plumbers presumably know better than anyone else what their customers need to be protected against. However, it is hard to regard altruistic concern for their customers as the primary motive behind their determined efforts to get legal power to decide who may be a plumber.

I already had this column at Forbes in the works, but I could not resist switching the protagonist from myself to Obama's Julia.  Every tax, license, and story here are real ones I have experienced in my business.  Here is just a small sample:

So twelve registration numbers and 12 monthly/quarterly/yearly reports later, surely Julia has fulfilled all her obligations to the government.  Unfortunately, no, because she has not even begun to address licensing issues.  To begin, the County will require that she get an occupancy permit for her campground, which must be renewed annually.  This seemed surprisingly easy, until someone from the County noticed she had removed an old rotting wooden deck from the back of her store that had been a safety issue and an eyesore.   It turns out she was in violation of County law because she did not get a removal permit first.  She was required to get a permit retroactively, which eventually required payments to seven different County agencies and at one point required, for a reason she never understood, the collection and testing of a soil sample.

Because she will be selling packaged foods in her store (e.g. chips and pop-tarts), she also has to get a health department license and inspection.  She had originally intended to keep some fresh-brewed coffee for customers in the store, but it turned out that required a higher-level health license and eight hours training in food handling.  She might have been willing to pursue it, but the inspector told her that to make coffee, she would need to install a three-basin stainless steel wash-up sink plus a separate mop sink in her store, and she decided that coffee would have to wait.

Once through the general health licensing process, she then needed to obtain licenses for individual products.  She wanted to sell aspirin, so she had to get a state over-the counter drug sale license.  She knew that customers would want cigarettes, so she had to obtain a tobacco sales license.  One day as she was setting up, a state inspector noticed she had a carton of eggs in her cooler, and notified her she needed  a state license to sell eggs  (as Dave Barry would say, I am not making this up).  And then there was the problem of beer.

I have written a lot about government-provided health care as a Trojan Horse for government micro-management of individual behaviors.  The logic is that once the government is paying for your health care, your decisions that once only affected yourself now affect public costs.  Here is a great example:

Touting new recommendations from an Institute of Medicine panel on obesity on Tuesday's NBC Nightly News, science correspondent Robert Bazell proclaimed to viewers: "...a sea change in how we perceive obesity. No longer a question of individual responsibility, but a need to change what's called an 'obesity-promoting environment.' Calling on corporations, government and individuals to act."...

Bazell further pushed the findings: "With the cost of treating obesity-related illnesses approaching $200 billion a year, many on the panel say the nation is ready to act."

I wonder how many feminists who were pretended to be libertarian rather than just pro-abortion by arguing "keep government policy out of my body" are all-in on this type of food consumption regulation?  I would bet a lot.

Update:  Here is an idea -- let's deal with the perceived issue of people eating poorly by ... licensing nutritionists to make their advice scarcer and more expensive.  And here too.

Via Zero Hedge

today, in a unanimous vote, "The U.S. futures regulator approved on Monday a rule that puts tighter limits on how brokerage firms can use customer funds, a measure that the now-bankrupt MF Global had encouraged the agency to delay." In other words, while before commingling client accounts was assumed to be a clear violation of every logical fiduciary imperative, now it is set in stone. For real. The CFTC means it.

In the past, I believed that a lot of financial regulations were honest (though often misguided) attempts to create transparent and trustworthy markets.  I am increasingly being pushed to the cynical conclusion that financial regulations, like, say, licensing of funeral homes, are mainly aimed at making it impossible for small competitors to survive, while larger competitors either have the scale to pay for compliance departments, or in the case of MF Global, have the political muscle to get themselves exempted (by Administrations of both parties, I should be clear, though the current one certainly gets a hypocrisy award for standing beside OWS while handing out finance and health care law exceptions to the powerful).

MF Global is far worse in my mind than, say, Enron.  In Enron's case, the management was at least mostly pursuing the activities and investments that they were supposed to be pursuing.  They were making bets of the type shareholders expected, though they were likely masking the cost and risk of these bets by aggressive pushes at the margins of accounting rules.

MF Global was doing exactly what everyone supposedly knew to be an absolute no-no, ie using client funds to make leveraged bets for their own account.  If Joe Schmoe in Florida did the same thing, he would already be incarcerated.  In the case of MF Global, no one even seems to be interviewing Corzine and so far the bankruptcy committee has put a higher priority on repaying JP Morgan and Goldman for Corzine's bad bets than on getting investors' money back.

I want bother to except this, you really need to see the post in its entirety.  Popehat looks at 98 pages of Colorado state regulations on day care centers.  The breadth and depth of the regulations, down to exactly how many of what type blocks kids should have to play with, is just amazing.

This is job security for life for a bunch of bureaucrats.  If we require all this stuff, we need regular reporting don't we, on compliance.  And inspections. And a detailed licensing and application process.  And ten years from now, when all the day care centers are closed or cost too much, we will need extensive government programs to provide subsidized day care.

There are certain regulatory agencies where it is clear from the outset that most of the agency's activity is merely aimed at protecting their own jobs and power.

The one such agency I run up against are Alcoholic Beverage Commissions in various states, from whom one must obtain a liquor license.  In the type of small store we run, there are really only two things the state should care about, and even the second is a bit weak

• That we don't sell alcohol to underage kids
• That we don't allow alcohol consumption on the premises

But the liquor licensing process can be interminable.  In Arizona, for example, I have had my applications kicked back to me, which resulted in 2-month delays in the process, because I wrote an address as 1313 48th Pl.  rather than 1313 48th Place.  They spend incredible man-hours looking for nit-picky mistakes like this, and then kick it back so that the whole review process must begin again.  Many states and counties have a second layer of review, to make sure that your new competition is "needed" - after all, we wouldn't want to upset the position of incumbent businesses who are entitled to their market share and who make nice campaign contributions.

Each application has to have a drawing of the store layout and where one plans to put the beer.  If you want to move the beer at a later date, you have to get the state's approval.  (Bizarrely, the drawing in most states has to be by hand -- they will kick back an application with a CAD drawing or architect's drawing).  And don't get me started on the fact I have to be finger-printed by the FBI (so they can be sure I am not Al Capone) before a store I own can sell beer.

All this being said -- and I didn't mean to run on so long but liquor licensing just drives me nuts -- it is nothing to I won't repeat it all, but take this example:

a drug manufacturer must get approval for how much of a drug it plans to produce, as well as the timeframe. If a shortage develops (because, say, the FDA shuts down a competitor’s plant), a drug manufacturer cannot increase its output of that drug without another round of approvals. Nor can it alter its timetable production (producing a shortage drug earlier than planned) without FDA approval.

They have to get their production schedules approved?  What possible justification can there be for this?  But even more outlandish is the apparent drive to regulate drugs that have been on the market for over 70 years and have to date been relatively unregulated because they were on the market before the FDA got its current powers.   Why should a bureaucrat lose her job when there are still unregulated items out there?  Besides, some uneducated American might use these examples of safe, unregulated drugs to question the who regulatory mission!

Several drug shortages (e.g., concentrated morphine sulfate solution, levothyroxine injection) have been precipitated by actual or anticipated action by the FDA as part of the Unapproved Drugs Initiative, which is designed to increase enforcement against drugs that lack FDA approval to be marketed in the United States. (These drugs are commonly called pre-1938 drugs, referring to their availability prior to passage of the Food, Drug, and Cosmetic Act of that year.) Some participants noted that the cost and complexity of completing a New Drug Application (NDA) for those unapproved drugs is a disincentive for entering or maintaining a market presence.

I have heard several medical people joke that it would be tough to get aspirin through the FDA today if it were a new drug and not grandfathered.  Don't know if that is true, but it feels believable.

Yeah, I know, this is volume one hundred and something in a series, but it is such a crystal clear example of government licensing working primarily to protect incumbent competitors in an industry I have to share it.

Suppose you’re the owner of a taxicab company in a largish metropolitan area. One day you notice some taxis tooling around town—and they’re not yours. They belong to an upstart competitor. His cars are newer, his drivers are nicer, and his fares are lower. Pretty soon your profits start shrinking. What are you going to do about it?

You have a couple of choices. Option A: Invest a lot of money in new vehicles, customer-service training for your drivers, GPS systems to map faster routes and so on. A lot of expense. A lot of effort.

So you go for Option B: Invest a little money in a few politicians, who adopt a medallion law: Only licensed operators with city-issued taxi medallions may operate cabs. The oldest cab companies get first dibs on the medallions, at the lowest rates. Only a few medallions are left over for the new guy, and he can’t afford them anyway. Bingo—your competition problem is solved. The customers might not like it, but what are they going to do—walk?

Apparently this is exactly what is happening in DC

Now it’s the District of Columbia’s turn. Four members of the D.C. City Council have introduced a bill that would create a medallion system for the nation’s capital. Medallion prices would start at $250 for the most established taxi companies and, for the newer entrants, run as high as $10,000. At least initially. As time wore on, it’s likely that the price of a medallion would go up for everyone. That’s what has happened in places such as New York, where a government permission slip to drive a cab costs about $600,000. In Boston, which initially capped medallions at 1,525 in the 1930s—and more than a half-century later had added only 250 more—a medallion will cost you $400,000.

At present the District has more than 10,000 licensed taxi drivers; the proposed legislation would establish only 4,000 medallions. Needless to say, such artificially imposed scarcity also drives up prices. A study by Natwar Gandhi, the District’s chief financial officer, found that fares in cities with medallion systems are 25 percent higher than in cities with open taxi markets.

By the way, for extra points, here is a lawsuit right out of Atlas Shrugged

That story has played out in many cities across the United States, with sometimes amusing variations. A decade or so ago, Minneapolis (population 300,000-plus) allowed a grand total of 343 taxis to operate until Luis Paucar, an immigrant, filed suit. The city council decided to allow another 45 cabs. Then the existing cab companies sued, using the creative legal theory that they had a constitutional right not to face competition. (They lost.)

Via Carpe Diem, yet another group of market incumbents using licensing and regulation to limit competition and, in particular, ban business models different than those of the incumbents.

From the Institute for Justice: "Until 2010, sedan and independent limo services were an affordable alternative to taxicabs in the Music City. A trip to the airport only cost $25. But in June 2010, the Metropolitan County Council passed a series of anti-competitive regulations requested by the Tennessee Livery Association - a trade group formed by expensive limousine companies. These regulations force sedan and independent limo companies to increase their fares to $45 minimum.

The regulations also prohibit limo and sedan companies from using leased vehicles, require them to dispatch only from their place of business, require them to wait a minimum of 15 minutes before picking up a customer and forbid them from parking or waiting for customers at hotels or bars. And, in January 2012, companies will have to take all vehicles off the road if they are more than 7 years old for a sedan or SUV or more than 10 years old for a limousine.

Dish Network is going to buy Blockbuster out of bankruptcy for $320 million.  I am frankly floored there is that much value.  I have found that one can make a surprising amount of money riding an obsolete business down over the years if it is managed correctly -- but this is generally for product businesses.  Retail businesses are really hard to ride down because you need to be closing stores every year and that is hard to do cost-effectively given typical lease terms.  Never-the-less, I expected the winning bid to be from a liquidation company, someone like the folks who took wound down Circuit City.

But the purchase by Dish Network implies that the buyer wants to continue operating Blockbuster in some form, and the identity of the buyer implies some sort of on-demand or streaming service.  But what does Blockbuster offer?  Is the brand valuable in this context, or a liability?   Does it have customer loyalty with a segment (old people?) who have so far shied away from Netflix / Hulu?  Does Blockbuster have favorable royalty / licensing contracts with studios that are transferable to other video delivery models?

If I had to guess, I would bet on the latter.  There have been examples of whole businesses built from legacy contracts.   One of the best examples is a little noticed contract Carl Icahn had with TWA, which spawned a huge new travel agency and later really helped to build Priceline.com.  Here was the story:

When TWA got a loan from Carl Icahn, an almost unnoticed part of the deal was that a certain travel agency owned by Icahn, small at the time, would be guaranteed TWA tickets at a healthy discount off the lowest published fares.  This agency, with this boondoggle, grew to enormous size as Lowestfare.com.  TWA, beyond the reasons listed above, therefore had a second reason for not wanting to publish their lowest possible fare.  Normal limitations that most airlines could set on how many seats would be available at their lowest fare could not be enforced by TWA.  If they offered a new $100 fare, Lowestfare.com could blow out an unlimited number of tickets at $80 or less and TWA would have to accept it.  Therefore, by offering discounts unpublished via Priceline, TWA prevented the travel agency from getting inventory even cheaper.  And so, a huge portion of the early Priceline inventory was TWA.  (ironically, after the American Airlines acquisition of TWA killed the deal, the Lowestfare.com URL was bought by … Priceline.

I wonder if Blockbuster has something of similar value in their royalty / licensing agreements?

The WSJ has yet more examples of crazy job licensing, example:  (ht Alex Tabarrok)

But economists—and workers shut out of fields by educational requirements or difficult exams—say licensing mostly serves as a form of protectionism, allowing veterans of the trade to box out competitors who might undercut them on price or offer new services.

"Occupations prefer to be licensed because they can restrict competition and obtain higher wages," said Morris Kleiner, a labor professor at the University of Minnesota. "If you go to any statehouse, you'll see a line of occupations out the door wanting to be licensed."...

Texas, for instance, requires hair-salon "shampoo specialists" to take 150 hours of classes, 100 of them on the "theory and practice" of shampooing, before they can sit for a licensing exam. That consists of a written test and a 45-minute demonstration of skills such as draping the client with a clean cape and evenly distributing conditioner. Glass installers, or glaziers, in Connecticut—the only state that requires such workers to be licensed—take two exams, at $52 apiece, pay $300 in initial fees and $150 annually thereafter.

California requires barbers to study full-time for nearly a year, a curriculum that costs $12,000 at Arthur Borner's Barber College in Los Angeles. Mr. Borner says his graduates earn more than enough to recoup their tuition, though he questions the need for such a lengthy program. "Barbering is not rocket science," he said. "I don't think it takes 1,500 hours to learn. But that's what the state says."

Many, many other examples -- it takes 750 hours of training to be a manicurist in Alabama.  Somehow my daughter learned to paint her own nails during the course of a single sleepover.

Via the Washington Post and Hit and Run

The National Park Service says it has no permit filed for zombie activity at the Lincoln Memorial Tuesday morning by AMC, a posse of zombies, or anyone else.

Wow, that was easy to stop.  And here I thought government permitting and licensing requirements were counter-productive.  Chalk one up for the statists.

Private companies often come running to the government to protect themselves from competition.  Sometimes they are successful, and get government licensing and certification requirements that help create barriers to entry that protect incumbents  (if incumbents are lucky, they will actually get to control the licensing and certification board and testing process).

But whether or note private companies have the political muscle to get this kind of protection, the government almost always protects itself whenever it embarks on any sort of quasi-commercial enterprise.  The ban on first class mail delivery competition is one example (as an aside, when email began making an end run around this ban, the USPS actually made a [fortunately failed] play to be the monopoly email provider).  In Denver, there was a story a while back that after they built a new toll road, they added traffic lights and lowered the speed limit on a parallel free road to drive more people to the toll road.

Carpe Diem brings another example:

"When the old arena for the Orlando Magic opened 21 years ago, it was common for Parramore neighborhood residents who lived nearby to charge Magic fans and concert-goers to park on their property. But five weeks ago, the Orlando City Council approved standards that will likely keep most Parramore homeowners from profiting on parking near the Orlando Magic's new $480 million Amway Center (pictured above).

Among other things, property owners must pay a $275 application fee and provide a business tax receipt. Lots must have an attendant, signs, proper lighting and a paved, gravel or grass surface free of potholes or ruts. City officials also recommend hiring security. Even when all those requirements are met, temporary parking lots are allowed only during an event expected to draw at least 5,000 attendees. So far, five applications have been approved, but all are for large properties such as churches, not homeowners.

The city, meanwhile, has doubled its event-parking rate to $20 at the two garages closest to the Amway Center; elsewhere, event parking at city garages and lots is $10."

The last sentence explains the first two. They are trying to charge an above market price for parking, so must constrain supply to avoid being undercut.

The government terminology that tends to tick me off the most is calling commerce a "privilege" that can only be granted to the state and therefor must be licensed with appropriate tribute paid to the state for the "privilege."  Here in Arizona our sales tax is called a "transaction privilege tax."  Here is a story about licensing bloggers in Philly:

Between her blog and infrequent contributions to ehow.com, over the last few years she says she's made about $50. To [Marilyn] Bess, her website is a hobby. To the city of Philadelphia, it's a potential moneymaker, and the city wants its cut.

In May, the city sent Bess a letter demanding that she pay $300, the price of a business privilege license.

Selling one's labor, and conducting commerce to the mutual interest of two parties are fundamental rights rather than artificial constructs granted by the state.

OK, so after the monks and coffins, here is the future licensing act ripe for abuse by industry incumbents to protect their position.

New state licenses required for anyone handling a mortgage application could help prevent a repeat of the bad loans that contributed to Phoenix's housing crash....

The law, passed in 2008, creates state oversight for people who take loan applications, gives consumers an avenue for reporting misconduct and establishes a fund to help repay borrowers who lose money because of unethical or illegal acts by their loan officers.

The law faces hurdles, as cash-strapped Arizona struggles to process thousands of new applications.

Still, advocates call it a success. Many of the risky - and sometimes illegal - home loans that helped lead to record foreclosures in Arizona might not have been made if the more than 10,000 unlicensed loan officers working then had been subject to more oversight.

How?  If people were selling illegal home loans before, they were already breaking the law and the state obviously was unable to enforce the law.  How is adding a piece of paper that must be applied for each year going to help?  My company has all kinds of silly licenses - liquor licenses, guiding licenses, health licenses, tobacco sales licenses, over-the-counter drug sales licenses, even egg licenses - and in not a single case does the issuer of these licenses exercise any sort of oversight of our operations.  If they get their extensive paperwork (so workers have an excuse to retain their jobs - after all someone has to process the paperwork) and their check, that is generally the sum of interactions with these organizations.

Now, some of these licenses were hard to get in the first place, but not for any reason of my character or ethics or business model.  They were hard to get because their issuance has been co-opted by incumbent businesses in the state who use the process to limit competition.  Liquor licenses are a great example - in places like Shasta County CA and Lake Havasu City AZ, we had a real problem getting the liquor license over opposition from existing businesses.

This is almost mindless naivete:

"Loan-officer licensing is long overdue in Arizona," said Felecia Rotellini, who for five years served as superintendent of the Department of Financial Institutions, the state agency regulating the mortgage industry. She is running for Arizona attorney general.

"A lot of bad loans wouldn't have been made if we had it before," Rotellini said. "It gives me peace of mind for consumers to know we have licensing now."

The author of the article just throws the following statement out there without any source, as if it was an axiom with which we all would agree

In Arizona, the housing boom and crash were partly fueled by loan officers, how they operated and how they were paid.

In fact, the author's incredible confidence in licensing is undermined in this adjacent statement:

Mortgage brokers, who run firms that connect borrowers with the best loans, have long been regulated by the Department of Financial Institutions.

Brokers employ loan officers, who work directly with borrowers, collecting their Social Security numbers and financial information to determine whether they qualify for a loan. Loan officers usually recommend types of mortgages and lenders.

These officers, sometimes called originators, weren't subject to state scrutiny. They worked under the licenses of their brokers, much the way an apprentice would work for a licensed contractor. Previously, that oversight was considered sufficient.

So the firms these guys worked for were licensed, but the individual employees were not. But if that licensing of firms, which after all is the level where loan practices and compensation policy are set which supposedly are at fault, how does licensing individual employees help? This is a typical political step that a) gets some state organization more money and power, b) generates one sound bite in a news cycle for some politician to tell voters that they care and c) does zero for consumers.

At the end of the day, the real cause of the housing boom was easy credit, and yes loan officers participated in this given that their commission-based incentives caused them to want to make every loan possible.  But this incentive outcome would not have been some kind of insight to the people and system that employed the loan officers.  In fact, everyone from the loan officer to the Congress wanted easy credit, and to blame one link in the chain of delivering this credit to consumers is madness.  Going forward, there is absolutely no evidence that the government is going to reduce its history of promoting easy credit, as evidenced by any number of federal loan modification and lending programs over the last 2 years.  So the likelihood that a government regulatory agency could have somehow headed off the bubble and its bursting is just silly.  The government was a party to it.

In the long run this mechanism will almost certainly be co-opted by current loan issuers as a way to limit competition, much as real estate agents and lawyers and funeral home directors already do.  As a minimum, this is a way for mortgage brokers to outsource some of the cost of running background checks and such on their employment candidates onto taxpayers.  In fact, I wonder who was behind this law in the first place?

Backed by mortgage brokers and real-estate regulators, the law quietly went into affect on July 1

This week's episode -- Monk's making simple caskets to support themselves must desist because Louisiana has detailed licensing laws to protect current funeral homes from just this type of low-cost competition. This is what the monks would have to do to sell what is basically a nice wooden box

Louisiana law purports to require that anyone who is going to sell a casket has to jump through all same regulatory hoops as a full-fledged mortuary operation that embalms bodies. See, selling "funeral merchandise" (including caskets) means you are a "funeral director." And to be a "funeral director," you must be approved for "good moral character and temperate habits" by a funeral-related government entity [of course, that's in Louisiana, but still], complete 30 semester hours at college, apprentice with a funeral director for a year, pay an application fee, and pass an exam. But that's not all. If you want your facility to sell caskets, it's got to qualify as a facility for funeral directing, including a showroom and "embalming facilities for the sanitation, disinfection, and preparation of a human body."

The monks are being represented by the IJ (what the ACLU should have been if it weren't for its Stalinist founders) which hopes to get to the Supreme Court.  If I were one of the monks (wildly unlikely as that is) I might be tempted to sell them as "human-sized wood boxes" rather than coffins and see where that got me.

I have written a lot about state licensing typically being more about protecting incumbents from competition than consumer protection.  This is a story in a similar vein, where plumbers worked to stop the approval of waterless urinals because they required, well, fewer plumbers to install.  In the end, there was a compromise -- the plumbers would support waterless urinals in the code, BUT the code would also say that water still had to be piped to the urinals that don't need water.  I kid you not.

This reminds me of when railroads were switching from steam locomotives to diesel.  The switch basically obsoleted the job of the fireman, who shoveled coal and kept the fire optimized in the boiler.  Faced with extinction, the fireman's union followed a gutsy strategy -- they demanded that diesel locomotives have two firemen instead of one!  You see where this is going.  Eventually, they compromised at one, so for years, decades even, useless firemen were paid to ride around on locomotives.