Free Markets, Free People

market

Challenging licensing laws

What do doctors and florists have in common in the state of Louisiana?  Both have to be licensed by the state.  That’s right – the person who preforms heart surgery on you and the person who arranges the flowers you get afterward both have to meet licensing requirements set by the state.

A 7-decades-old state law requires florists to pass a test and get a license to arrange and sell flowers, making Louisiana the only state in the USA with such a requirement. Supporters of the law say it ensures florists know what they’re doing and deliver quality products.

“Know what they’re doing and deliver quality products?” I thought the market, i.e. customers, usually rewarded or punished those in that profession who didn’t “know what they’re doing and [don't] deliver quality products”.

So is this licensing requirement a) rational b) necessary and even c) constitutional? What it certainly is, though, is a bar to entry into the market imposed by government.

The arguments about licensing in general fall on two sides. Some see no reason to license anything – the market will sort out the good from the bad. Those that approve of licensing argue than in many cases lives and health are at stake and, in such cases, it is the role of government to step in and ensure those who pursue those professions are competent enough to do so.

Arranging flowers certainly doesn’t seem to fit the category of a risk to either the life or health of their clients.

What it certainly does is limit those who can enter the market. First, it imposes a $2,000 licensing fee. That will obviously keep a certain percentage who might otherwise become florists from attempting it because they don’t have the money. Certainly that might be a small percentage and you can make the argument that anyone who can’t afford the fee probably can’t afford to be a florist, but is that your or the state’s call? Instead it is an artificial barrier to entry in the market arbitrarily imposed by the state.

And, usually, when such a bar to entry is evident, you’ll find businesses who’ve met the bar to be the most ardent of supporters. Why? Because it is an artificial means to limit competition. For instance, this case:

The test to obtain a Louisiana florist license consists of an 80-question written exam and a four-part hands-on section, where aspiring florists are scored on how well they put together funeral wreaths, table bouquets and other arrangements, said Mike Rome, vice president of the Louisiana State Florists’ Association, which supports the law.

On the written exam, candidates are asked questions about floral arranging and flowers in general, including how to prolong the life of flowers, wiring methods and plant identification.

In the design section, the aspiring florists have four hours to arrange four designs: a wedding arrangement, corsage, funeral wreath and table bouquet.

Judges then score the designs using guidelines such as “Has the design the proper focal point?,” “Is the correct gauge wire used on flowers?” and “Is a corsage pin attached to the corsage in a way that will not injure anyone?”

Candidates are judged by a panel of three licensed florists. The average score of the written and floral arrangement sections needs to be 70% or higher to pass. The arrangements are judged more on technical competence than creativity, Rome said.

“The florist license gives the consumer a little more assurance that you get a quality product,” Rome said. “Florists are artists; they’re very opinionated. But sometimes you have to follow industry standards.”

“Industry standards?” What “industry standards”. Louisiana is the only state in the union that licenses florists. So whatever standards are imposed by a rather biased group, who apparently brook very little deviation from whatever arbitrary standards they’ve dreamed up, have control over who or who doesn’t join them in that state’s florist market.

As John Stossel reminds us:

Established businesses have always used government to handcuff competition. Years ago, small grocers tried to ban supermarkets. A&P was going to “destroy Main Street,” the grocers cried. Minnesota legislators responded to their lobbying by passing a law that forbade supermarkets to hold sales. Consumers were hurt.

And that is the result of this legal travesty.

As it turns out, 4 would-be florists have taken the requirement to court:

A lawsuit filed in U.S. District Court here last week is challenging the law’s constitutionality, claiming it infringes on a resident’s right to earn a living. The suit, filed by the Institute of Justice, a libertarian non-profit law firm based in Washington, D.C., lists as plaintiffs four local florists who have either failed the test or refuse to take it.

“Who is the state to tell me I’m not an artist?” said Monique Chauvin, 42, a plaintiff in the lawsuit.

Chauvin, owner of Mitch’s Flowers in New Orleans, failed the test in 2000 and has not retaken it. “It’s time for this archaic law to be off the books,” she said.

Chauvin, who has apparently owned a successful florist business in New Orleans for 10 years is defacto proof that the requirement is unnecessary. She’s obviously been successful enough in the marketplace (i.e. her customers find her floral arrangements satisfactory enough to keep her in business – even in a recession) without licensing to stay open for 10 years.

So, why is Chauvin bringing a lawsuit now? Enforcement:

Chauvin said her legal fight is about keeping her shop open through the economic recession. She now has two options: hire a licensed florist or take the test again. If not, she’ll be forced to close her shop.

The market, not a state panel, should be the final judge of her bouquets, she said.

“If a customer is not happy with what we do, he’s not going to come back to me,” Chauvin said. “That should be the quality control.”

Exactly. So in answer to the three questions above – a) it’s not rational.  It imposes arbitrary requirements as well as artificial bars to entry on a profession which threatens neither life or health. b) it’s not necessary. Consumers don’t need government “protection” from florists. and c) it’s most likely not constitutional since most would agree it interferes with a person’s fundamental right to earn an honest living in profession which doesn’t threaten life or health.

Of course, my use of the words “life or health” imply I find the licensing of those who work in professions that can have a detrimental effect on life or health, such as the medical field, to be ok.  Well, yes and no.  I think, for instance, a market solution is possible for those professions as well.  Think, for instance, if the American Medical Association, instead of being a shill for government health care reform, was a body that set minimal professional standards for the medical profession and anyone seeking membership had to demonstrate competence enough to meet those standards.   If you were seeking out a doctor, most likely your first question would be “is he (or she) a member of the AMA?”  And, in this day and time, you’d most likely be able to access an AMA data base to check doctor’s out before going to them.  And your insurance carrier would certainly require you use such a doctor, wouldn’t it? In fact,  you’d likely be leery of any doctor that wasn’t a member.  Same solution as now exists done on a voluntary basis without government intervention. And certainly there might be other associations that would form which would also lend credibility to a doctor’s abilities than just the one.

Would the AMA have a reason to assure its members met their standards and continued to meet them?  Of course it would.  It’s very existence would depend on it, as would the credibility of every one of it’s members.

Of course that’s all been rendered moot by government deciding it should be the final arbiter in that regard.  But it is food for thought, isn’t it?

~McQ

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Network news circling the drain?

The NYT, a member of another news venue with serious problems, carries an article today about the problems network news faces.  Network news is differentiated from cable news as news shows carried by the traditional big 3 networks (at a certain time) as opposed to cable/satellite TV networks (CNN, MSNBC, Fox News) that cover the news 24/7.

As James Joyner says: “So what?”  It’s not like “news” is going away.

There is certainly nothing sacrosanct about network news, and certainly while lamenting the passing of an semi-old tradition, there’s nothing really being lost here in terms of news delivery if they do close up shop.  Things change and evolve.  That’s what is happening with network news.

Look, I’m one of those guys who remember watching Chet Huntley and David Brinkley each night with my dad.  That’s how far back I go.  But you have to remember that those guys supplanted radio news as the primary source for Americans.  And Movietone newsreels shown at movie houses also went down the tubes because of them.  But today, the delivery of news has evolved from appointment TV (you have to be there when they’re ready to present the news) to 24/7 “the news is ready when your are” TV. 

Which do you suppose makes more sense to the viewer?  News when they want it or news when the network wants to present it?

In fact I’m rather surprised to see network news has survived as long as it has.  I can tune into CNN headline news and essentially get the same thing – a half hour round up of the top stories of the day – whenever I choose to do so.  And if I want in-depth coverage, I certainly don’t wait to watch network news or for the newspaper to show up – I google it.

For the networks, reality has finally reared its ugly head:

The economic problems facing ABC News and CBS News in many ways mirror those faced by newspapers, which have been similarly afflicted by a drop in advertising revenue. The reaction — severe cuts in personnel and other costs — also looks to be the same.

But can you shrink your way to prosperity? Andrew Heyward, the former president of CBS News who is now a news media consultant (NBC News is one client), said of the ABC cuts: “The real issue after this is what is going to drive growth? How do you generate more profit? And this doesn’t address that.”

The networks are mostly vehicles of entertainment. And in the past, when there were no alternatives, network news was a profit center. It no longer is a profit center. So what ABC and CBS (NBC has MSNBC and CNBC so they’re not quite in the same boat) have to decide is whether the “tradition” of their news services are worth preserving and paying for with profits from the entertainment side, or whether it is all about profit and non-profitable enterprises have to be dropped.

My guess is they’ll finally decide on the latter. Not because they’re necessarily cheap or don’t want to preserve tradition. No, instead they’re going to realize that even if they do preserve their news operation it won’t bring in any more viewers than it does now. The habit of “appointment TV” is forever broken and people are no longer going to arrange their lives around the time CBS or ABC chooses to present the news when they have so many other more appealing choices available.

Time to pull the plug, boys.

~McQ

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Green Jobs, Distorted Markets And “Comprehensive” Energy Policy

This is what it takes to create “Green Jobs“?

President Obama’s announcement earlier today of an additional $2.3 billion in federal tax credits for creating approximately 17,000 subsidized temporary jobs in the green energy industry is drawing a less than enthusiastic response from Thomas J. Pyle, president of the Institute for Energy Research:

“Show me one other industry that requests and receives a nearly 30 percent taxpayer subsidy. That’s what the wind and solar industries require – at a minimum – to exist. All the president did today is throw more money at an unproven technology that is not economically viable in the marketplace. Unfortunately, the only winners in this latest taxpayer giveaway will be Wall Street money managers and corporate interests in the wind and solar industry.

Of course, dividing the subsidy by the number of jobs shows us that each job costs the taxpayers $135,295 each. The usual inefficient and wasteful spending for which the government is famous.

But there’s another bit of truth in Pyle’s statement that the right likes to mostly ignore – corporate interests, not just in the wind and solar industry, are deeply intertwined with political interests in this country and those corporate interests use their ability to influence in ways that give them an advantage (even to the point of helping to write legislation). However, that’s a post for another day.

Today, we’re looking at a perfect example of a governmental distortion of a market. Without the subsidy, the wind and solar industries most likely wouldn’t survive. But since it is a politically favored industry, it gets a hand out to keep it afloat. Meanwhile, it finds only a limited market share because the alternatives – coal, natural gas, oil, etc. – are much cheaper, more reliable and more readily available. Says Pyle:

“If the president really wants to create an environment that will foster economic growth and job creation, he need not look any further than the domestic oil, gas and coal industries. These three industries and energy sources built this nation. For the administration to continue to ignore this fact and to keep the vast resources that taxpayers own under lock and key at the Department of Interior is irresponsible and a disservice to the American people.

“The Outer Continental Shelf (OCS), if opened for business, would create over 1 million high-wage jobs. It would reduce our dangerous dependence on hostile nations for their energy resources and spur economic growth across all 50 states. Development of these energy resources will create sustainable employment, not taxpayer dependent make-work jobs.”

Instead, as I pointed out in a post last week, this administration is doing the opposite. New rules from Secretary of the Interior Ken Salazar make such exploration and exploitation of these known reserves much more difficult to do. It is step 2 in the government’s distortion of the energy market.

And it’s distortion of markets does have an effect – mostly unintended and, frankly, negative. Take the biofuel mandates Congress passed into law a year or so back.

It sounded like a good idea: Provide a little government money to convert wood shavings and plant waste into renewable energy.

But as laudable as that goal sounds, it could end up causing more economic damage than good — driving up the price of raw timber, undermining an industry that has long used sawdust and wood shavings to make affordable cabinetry, and highlighting the many challenges involved in decreasing the nation’s dependence on oil by using organic materials to create biofuels.

In a matter of months, the Biomass Crop Assistance Program — a small provision tucked into the 2008 farm bill — has mushroomed into a half-a-billion dollar subsidy that is funneling taxpayer dollars to sawmills and lumber wholesalers, encouraging them to sell their waste to be converted into high-tech biofuels. In doing so, it is shutting off the supply of cheap timber byproducts to the nation’s composite wood manufacturers, who make panels for home entertainment centers and kitchen cabinets.

The subsidy has distorted the market that has historically seen timber byproducts go to composite wood manufacturers and, since the subsidy pays more, seen those byproducts go to the production of biofuels. Result? Higher timber prices, an important market segment in trouble and an industry which couldn’t survive in the market without the subsidy continues to function.

In fact, the tail is wagging the dog as the government uses its power and purse to attempt to meet the arbitrary mandates that Congress passed into law:

The federal government is actively working to support the growth of as many of these biomass crops as possible, in part to meet requirements under the 2007 energy bill: The country must produce 5.5 billion gallons of advanced biofuels annually in five years, and 21 billion gallons by 2022. Right now, almost no U.S. land is devoted to raising biomass crops; according to congressional estimates, by 2022 the country will need between 22.2 and 55.5 million acres for this purpose

Did you get that? In 13 years it is estimated that between 22 and 55 million acres will be devoted to growing crap “crops” – like switch grass – instead of food – just to feed this contention that biofuels are better for us than fossil fuels. Those, I suppose, will be “green jobs” as well.

Speaking of green jobs – the government doesn’t even have a definition of what that means:

Even the Bureau of Labor Statistics, which has been cogitating on the problem since last spring, hasn’t made up its mind on how to count green jobs.

“There’s alternative ways for doing that and we haven’t yet finalized our methodology,” says John Galvin, associate commissioner for employment statistics at the BLS.

So you, and they, can call just about whatever you want a “green job” – and I have little doubt that the spinmeisters in government will do exactly that for the foreseeable future (especially when inventing statistics for “created and saved” jobs).

In reality I have no problem with “green jobs” or alternate and renewable fuels. I only have one demand – that they carry their own weight in the marketplace. Subsidizing each doesn’t meet that demand. Instead it unleashes the law of unintended consequences in all its negative fury and distorts exiting markets in ways that cost jobs and productivity that this economy badly needs. As Thomas Pyle points out, we have existing resources and existing technology that could create more available energy while creating thousands of good paying jobs not requiring a single dollar in subsidies that we’re ignoring to push an industry (or industries) which aren’t economically viable and, with existing technology, won’t be for years if not decades.

It is a short-sighted, politically driven policy which will hurt us in the long run. While this administration talks about a “comprehensive” energy policy, it is clear it has settled on one which is focused on an nonviable but politically correct industry to the detriment of the viable but carbon based existing industry. That is not a comprehensive policy regardless of how many times the politicians claim it is or put it in the title of their bills. A comprehensive strategy would recognize the reality with which we’re faced, exploit the traditional carbon based fuels while putting together a rational timetable for switching over to alternative (nuclear) and renewable fuels as the technology proved viable and cost effective.

Instead we get subsidized distortion of the markets, eschewing of readily available carbon based fuels and a push for jobs no one has yet to be able to define.

It’s madness. And, unfortunately, it is a madness which is going to cost us dearly in the not too distant future.

~McQ

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Health Care Spending – The Government Is NOT The Answer, It’s The Problem

Morgen Richmond of Big Government points out a story that received very little coverage this week in the media.  It had to do with a report released by the Centers for Medicare and Medicaid Services and its findings.  Apparently, per CMMS, 2008 health care spending (the latest figures available) “slowed” when compared to 2007.  In fact that slowed from 6% growth to 4.4% growth in 2008.

That, one would think, especially as health care reform is the hot topic, is newsworthy.  But one has to believe that the reason it wasn’t found newsworthy has to do with the details of the report.  The reason is that the details don’t support the premise that our health care spending problems lie in the private sector:

Because in a year where the growth rate in overall healthcare spending dropped by an unprecedented amount, federal spending on Medicare and Medicaid actually increased dramatically from the prior year.

Medicare by 8.6% in 2008 compared to 7.1% in 2007, and Medicaid by 8.4% compared to 6.1% in 2007. And Federal spending on the Children’s Health Insurance Program (SCHIP) increased by an even greater amount (13.4%).

In other words, the reduced growth rate in healthcare spending for 2008 was entirely due to reduced spending in the private sector. Which upon reflection really comes as no surprise since the private sector by its very nature must respond and adapt to market dynamics. As long as it has the flexibility to do so, unimpeded by government regulation.

Exactly.

Look again at those numbers. Think about the reduction in private health care spending necessary to offset those increases in federal health care spending to bring the overall number down to 4.4%. Private care and/or insurance are not the problem and giving more power to government is not the solution to lowering health care costs.

Another report that has been mostly ignored points to factors which will most likely see private sector spending continue to decline over the coming years. It is most likely being ignored because the solutions put forward are primarily market based solutions.

Given these facts, you are left to ponder the following question articulated by Richmond:

So a federal government which has never in history demonstrated one iota of ability to reign in spending can permanently add another 40+ million people to federal entitlement programs [and] [t]his is the silver bullet necessary to reduce costs?

Nope. No bullets at all, silver or otherwise. The government is shooting blanks, and a system that is ranked number 1 out of 191 in the world for “responsiveness to the needs and choices of the individual patient” (uh, isn’t that what good medicine is all about?) is about to be downgraded dramatically based on a collection of myths, half-truths and outright lies.

Comforting, isn’t it?

~McQ

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