22 ms·

The Rent-Seeking Is Too Damn High

321 points by luu 11y ago

bobby_9x 11y ago
Of course this behavior is artificially inflating the market. The demand stays the same and the supply is reduced （due to the barrior to entry and hoops you need to jump through), which results in higher prices. The same principals can also be applied to most unions.
- api 11y ago
  It's a complicated problem though. Everyone wants to make as much as possible, but everyone also wants (economically speaking) everyone else to make as little as possible. A union job is great for me. But it's bad for me if my plumber has a union job because then it will cost more to fix my sink. In economics (and ecology, evolution, etc.) it's actually quite strange for something not to be a paradox. Straightforward linear behavior in complex living systems is weird, and if you think you have an example you're probably missing something.
  - chrisseaton 11y ago
    What's the paradox?
    - VLM 11y ago
      Under the "situation containing contradictory features" the second paragraph takes care of that. Under the "absurd statement turns out to be true upon research" consider how weirdly we distribute risk. So hire an unlicensed plumber he causes a leak that destroys the house, foreclose, bankruptcy, and all the risk lands on the govt guaranteed mortgage loan provider aka the taxpayer. So I can save $50 today with 99.9% odds and if something bad happens, all the risk falls on other people not solely on me. You'd be a fool to ever hire a union plumber, and the government would be a fool not to prosecute unlicensed plumbers because they pay every failed mortgage. Risk estimation is very interesting because much like accumulation of capital, it seems only a tiny minority of the population are any good at it. There's also the fake free market situation. If you can't have a meeting of the minds between you and your doctor or plumber, you can't have a free market transaction. Rather than sending the whole population thru med school and plumber school, it seems cheaper as an overall total societal cost to certify practitioners in both fields. That's the paradox of a regulated uneducated market being closer to a free market WRT identical decisions and outcomes than an unregulated uneducated market, how could adding regulation make something freer, well, clearly it doesn't, but it makes the outcome indistinguishable from an actual free market.
      - pdonis 11y ago
        > If you can't have a meeting of the minds between you and your doctor or plumber, you can't have a free market transaction. What do you mean by "a meeting of the minds"?
        zo1 11y ago
        It's a legal term. https://en.wikipedia.org/wiki/Meeting_of_the_minds https://en.wikipedia.org/wiki/Meeting_of_the_minds "[...]it refers to the situation where there is a common understanding in the formation of the contract."
        pdonis 11y ago
        I realize you're not the one who used the phrase, but I don't see why a customer of a doctor or plumber would need to be a doctor or plumber themselves in order to have a meeting of the minds in this sense. Nor do I see how having the government certify the doctor or plumber helps with this issue.
    - jackcosgrove 11y ago
      The fallacy of composition. If everyone made more money, everyone would be better off, right? Except in order for this to happen, everyone would need to charge more for their goods and services, so prices would rise and the raises everyone got would be sucked up by rising prices, leaving everyone in the same place as where they started, relatively. The sad truth is that every economy must pick winners and losers. If everyone wins, no one wins. Whether this selection process aligns with productivity determines the trajectory of nations. Productivity measures actual wealth creation, and hopefully politics does not lag too far behind it.
      - shin_lao 11y ago
        Economy isn't a zero-sum game because you create wealth.
        jackcosgrove 11y ago
        Having your basic needs met is not a zero sum game, but beyond that the economy is mostly about status. Whether you are working to attract a mate, impress your family, or build your nation, you are seeking status relative to your peers, and that's zero sum.
        iamcurious 11y ago
        I'm not convinced. First, there are plenty of things that people are interested in that do not improve their social status neither satisfy their basics needs. Like movies. Secondly, social status is fractal in nature, each subculture considers different things valuable and you can belong to many subcultures at the same time, so it isn't necessarily a zero sum game. You can be a lowly janitor at day, but the lead player of the company of the football team at night.
        jackcosgrove 11y ago
        Movies and other such pleasures are so cheap compared to the big line items in life. I don't think anyone studies to get into college and work a job for 40 years for the sake of watching movies. People do these arduous things mostly, I believe, for the sake of status. If you did not care about status, as many don't, you could rent a small one bedroom apartment in an inexpensive place and work an easy job to make ends meet, and still watch movies or play video games, what have you. Social status can be fractured, but eventually people come into conflict for people, places, and things. We don't live in independent streams. We fight over the best apartments, the best cars, the best mates, the best stocks, etc. Then status, money, and power come into play.
  - morgante 11y ago
    > A union job is great for me. Not necessarily. Unions tend to lower the pay of the top performers.
    - throwaway7767 11y ago
      > Not necessarily. Unions tend to lower the pay of the top performers. There are many kinds of union. Your viewpoint reflects a very US-centric view of things. I work in IT, and am part of a union. I negotiate my pay on my own, as do most of my coworkers, and we get paid considerably more than the union contracts stipulate. The contracts only set a floor on the compensation and benefits.
      - morgante 11y ago
        > There are many kinds of union. I'm well aware. I certainly didn't mean to imply that all unions necessarily lower top pay. Just that they generally do, which there is extensive research supporting.
HillaryBriss 11y ago
Here's a quotation from the article: "Defenders of occupational licensing typically argue that the rules help protect consumers and workers, and that’s undoubtedly true in some cases. I want the people filling my cavities to know what they’re doing. But it’s hard not to suspect that in many cases, these rules serve another purpose: to make it harder for new competitors to enter the marketplace." While the article seems to criticize rent-seeking behavior only in businesses and professions that require lower levels of education, if we combine this article's statements with the often repeated claim that the US pays roughly twice as much for health care per capita as other developed countries it seems reasonable to ask: Is there a rent seeking problem in the medical and dental fields too? OTOH, why does the article's author want to deny the poor and less well educated segment of the small business community its fair share of the economic protection which occupational licensing offers?
- seibelj 11y ago
  It is logical to require you to have a license to fill a cavity for safety reasons. It is not logical to require a license to cut hair. Yes, it will boost earnings of barbers, who are generally lower-middle class, but it simply doesn't make logical sense.
  - nedwin 11y ago
    I'm also not so sure that occupational licensing is the primary driver of the cost of healthcare in the US.
    - maxerickson 11y ago
      Is there a primary driver? It seems to me that it's the effect of many forces, each of which is probably worth addressing. When I get medical bills, I have a lot of difficulty trying to figure out why the service I consumed could possibly cost as much as I am being charged. But I apparently agreed to pay whatever as a condition of obtaining the service.
  - pdonis 11y ago
    > It is logical to require you to have a license to fill a cavity for safety reasons. It is not logical to require a license to cut hair. You mean there are no "safety reasons" involved in cutting hair? A person with sharp implements around your head and neck poses no safety risk? Also, even if the "safety reasons" are more compelling for dentists than for barbers, that's still not a reason to have the government doing the safety checks by means of licensing. Private organizations could do the same safety checks--plus, they would have an incentive to do only the checks that actually added value, whereas government has an incentive to impose any requirements that have enough of a political constituency, whether or not they add value.
EGreg 11y ago
I think Milton Friedman had some great (albeit biased) lectures in which he analyzed these issues from a consequentialist libertarian point of view: http://m.youtube.com/watch?v=8q71hrwUcu0 http://m.youtube.com/watch?v=8q71hrwUcu0
gozur88 11y ago
https://news.ycombinator.com/item?id=11041340 https://news.ycombinator.com/item?id=11041340
deleted 11y ago
[deleted]
Animats 11y ago
He's missed another trend that's not as visible - the concentration of commercial real estate ownership. There are many towns and small cities where one or two organizations own most of the commercial property. They control rents and can decide which businesses get to operate.
- timr 11y ago
  Not just commercial real estate: in most cities I've lived in (including SF), a handful of large conglomerates own a big fraction of rental real estate, too. In my experience, these landlords are amongst the most scummy to deal with -- unresponsive, inflexible and unrelenting on rent increases. They'll take months to fix anything, but damned if they won't raise your rent by the maximum legal amount at every opportunity, and there's very little room for negotiation. Given a choice between losing a good tenant and maybe getting more rent, they'll choose the latter. It's like having Comcast control your living situation. The corporatization of our residential real estate market is just one more step toward the future predicted by Terry Gilliam in Brazil.
  - prostoalex 11y ago
    Multi-family residential real estate has been securitized for quite a while with fairly major REITs (AVB, ESS, APTS, etc.) There is some institutional money chasing single-family market as well (AMH, ARPI, soon to be merged into a single entity, and a few others), we'll see how well that model scales to single family residences.
  - mooreds 11y ago
    > It's like having Comcast control your living situation. That sounds like a nightmare! PS what do you mean maximum legal rent increase. I am in Colorado and as far as I know, the only limit on a rent increase is the market. Does SF have laws around this?
    - nommm-nommm 11y ago
      https://en.wikipedia.org/wiki/Rent_control_in_the_United_States https://en.wikipedia.org/wiki/Rent_control_in_the_United_Sta...
Shivetya 11y ago
Another problem with the over regulation of professions is that in many states those convicted of a crime cannot obtain a license. They can have totally served their time, both in jail and/or probation but still be prevented from holding a "professional license". Worse many of the jobs that require these licensees don't pay that much which brought up a whole industry of schools which pass off the costs through student loans and such to get a career which long term isn't going earn a lot of money or even come with benefits
mschuster91 11y ago
The problem is that sometimes it is vital for cities to be able to control which (and how many) businesses open up in an area. Just look at what has hit HN today - an article about Walmart closing down and leaving entire regions without a less-than-3-hours drive to the next grocery store. It is vital for a city to be able to prevent big chains from entering a market, destroying the competition by price dumping (made possible by sheer scale) and then packing up - leaving a stripped down town in the process. Oh the other side, it's unfortunate that these laws and regulations more often than not get abused for clientel politics.
- jimbokun 11y ago
  What does that have to do with requiring two years of training to get a barber's license?
  - mschuster91 11y ago
    I don't have a problem with that. Anything with healthcare or safety (electricians, plumbers, gas installers, builders, car mechanics) must be regulated in order to protect the public. 90% of the skill required in many jobs can be learned in a week or a month. It's the 10% you only learn over the course of education that are safety critical, though. Not to mention practicing in a safe environment instead on your customers or their homes. Let's take your barber as an example, and only the stuff that comes to my non-professional mind: - highly aggressive chemicals that will ruin your health if you're not taking proper safety precautions - the fact that you're meddling with a deadly sharp knife at the necks of your customers - health hazards for the customers: lice, other transmittable diseases, improperly disinfected equipment - health hazards for yourself that can be carried by your customers and you can pick them up (e.g. you cut the customer by accident, he's HIV+ and you have an open wound on one of your fingers while not wearing gloves - something I rarely see barbers do) The fact that the IT industry largely consists of self-educated people might be pretty cool but on the other side, how many security incidents could have been avoided by proper education? Even for BASIC security like not doing echo $_GET["name"]? Take a look at https://blog.setec.io/articles/2016/01/07/software-kill.html https://blog.setec.io/articles/2016/01/07/software-kill.html or literally hundreds of similar articles.
deleted 11y ago
[deleted]
hwstar 11y ago
Someone has actually proposed a constitutional amendment to control rent-seeking: http://ordinary-gentlemen.com/2013/11/08/the-anti-rent-seeking-amendment-part-i-definitions/ http://ordinary-gentlemen.com/2013/11/08/the-anti-rent-seeki... http://ordinary-gentlemen.com/2013/11/11/the-anti-rent-seeking-amendment-part-ii-the-amendment/ http://ordinary-gentlemen.com/2013/11/11/the-anti-rent-seeki...
matt_wulfeck 11y ago
Great example of laws that start out innocent enough, but then become a vector for anti-competitive behavior by the incumbents. The laws that prevent tesla dealers from selling directly to consumers is another example. These types of misguided laws should come with very short expirations (if they come at all).
- thirdsun 11y ago
  The Tesla laws don't sound innocent at all however - I guess most people would agree that it seems pretty ridiculous right from the start.
  - rezistik 11y ago
    Originally the dealership model allowed car companies to rapidly expand their market without the costs of the infrastructure to sell to consumers, when they had enough money to do so they could easily strangle these businesses.
  - AjithAntony 11y ago
    > right from the start Why would thousands of entrepreneurs open GM, Ford, and Chrysler dealerships when the manufacturers could just open a store and undercut them? These laws were a promise to protect that business model. That doesn't mean that such laws are a great fit for our current economy, but it started out innocent enough.
    - thirdsun 11y ago
      Yes, you're actually right - thinking about it, the issue is that these laws a) don't have any place in this day and age and b) were really abused in the case of Tesla, which never used the traditional dealership model to sell cars as far as I understand it (european here). On a sidenote: One could argue whether these laws made any sense, even back then - just image how ridiculous it would be if every industry enjoyed the same "protections".
gaur 11y ago
Am I the only one who thinks that "rent-seeking" is a wildly misleading name for this phenomenon? To normal people, "rent-seeking" means "looking to collect on a payment for leased property". Same for "moral hazard". I'm not sure what phenomenon that phrase should be applied to, but it certainly shouldn't be applied to the phenomenon of people taking more risks because they won't have to deal with the fallout. That phenomenon should be called something like "risk asymmetry".
- chubot 11y ago
  It's an established name from economics. The wikipedia definition is: "seeking to increase one's share of existing wealth without creating new wealth". You can think of it as a generalization of seeking rent for a property. For better or worse, that is what you are doing when you lease a property. You want to be paid just for owning something, not for doing anything. Analogously, if you provide service X, you can seek "rent" in addition to the value you provide. One way to do this is by manipulating the market for X by reducing the supply of those who provide X, e.g. through an unnecessarily onerous licensing process. The additional amount you make with the licensing process in place falls under the category of economic "rent". https://en.wikipedia.org/wiki/Rent-seeking https://en.wikipedia.org/wiki/Rent-seeking
  - mcguire 11y ago
    While you're at it, look up 'usury'.
  - gaur 11y ago
    > The wikipedia definition is: "seeking to increase one's share of existing wealth without creating new wealth". I think I figured it out. "Rent seeking" means "trying to get something for nothing" economically. This would be a lot less confusing if people would just use straightforward terminology ("getting something for nothing") rather than an opaque phrase that sounds like something else ("rent seeking").
    - Kalium 11y ago
coldtea 11y ago
>Defenders of occupational licensing typically argue that the rules help protect consumers and workers, and that’s undoubtedly true in some cases. I want the people filling my cavities to know what they’re doing. But it’s hard not to suspect that in many cases, these rules serve another purpose: to make it harder for new competitors to enter the marketplace. In Nevada, according to Politico, barbers need more than two years of training to qualify for a license; that’s a high bar to anyone looking to break into the business. So, it's the all powerful Nevada barber cartel that influences legislation in order to keep new people from entering the trade? Well, I, for one, seriously doubt that. And I wouldn't call the requirement to have "two years of training" before taking razors to people's necks and scissors to people's hair "a high bar" either. While there is indeed TONS of rent-seeking going on, I'd look for it in serious industries, with big companies and multinationals involved -- from telcos and ISPs to construction and the health industry for example.
- hibikir 11y ago
  A cartel doesn't have to be very powerful at all to influence public policy. For something like this to happen, we need very few factors: 1)A small set of people that have much to gain from a policy change, while it'd be a small visible cost for everyone else. The moment another easily identifiable groups can lose, this weakens considerably 2)Enough political will to lobby. This can be due to single issue voting, or a setup where only the people that contribute economically to a cause will really benefit from it. This is the reason unions are very weak in "right to work" states, as the legislation makes paying dues a suboptimal outcome. As long as you have that, it's pretty easy to get laws passed that will help you and hurt the public in hard to measure ways. It's easy to sell occupational licensing to people that aren't paying much attention, because the costs of it to the public are not easy to see, but very real to people who know get protected from other people joining their profession. In Spain, for instance, you'll see a bunch of computer science professional organization that try to recruit people by saying that they will "protect your degree", mainly by lobbying for legislation that would separate someone with a computer science degree from "intruders" (people with decrees in engineering physics and such that can code). And two years of training before becoming a barber is plenty of barrier: There are other professions that have similar difficulty and pay, but lack the two years of training requirement. So less people become barbers, as losing two years of pay for training is worse than getting a job right away! This leads to decreased competition, and eventually high prices. Two years is A LOT of time to end up getting paid that little.
silveira 11y ago
Now just imagine if that to be a programmer, you needed a diploma from an credentialed university and passing an exam from some organization.
- collyw 11y ago
  Instead we get stupid coding tests every bloody interview we go to.
silveira 11y ago
Now just imagine if that to be a programmer, you needed a diploma from an credentialed university and passing an exam from some organization.
jackcosgrove 11y ago
Professionalization and accreditation could all be described as a closed shop in labor terms. It's classist to say unions are bad while the AMA is good, or vice versa. They're the same thing. Doctors may say they cannot form unions (AMA vs USA) but they have something even better: a closed shop. Closed shops are rarer than collective bargaining, and far more powerful.
- deleted 11y ago
  [deleted]
- onetwotree 11y ago
  On the other hand, you really want a professional association that can put a doctor out of business permanently if they persistently fuck up, and assure that new doctors have the requisite training. The AMA is an example of professional licencing that does in fact benefit consumers. A line industrial worker who is always drunk on the job is a much smaller problem than a doctor who is always drunk on the job. That said, I'm all for unions, because they provide protection for workers from rent-seeking behavior by corporations. If it makes my prices a bit higher, so what.
  - jackcosgrove 11y ago
    The artificial limiting of supply of physicians is terrible for consumers - it drives up costs and results in foregoing of care because people cannot afford treatment. I understand that physicians sacrifice a LOT during training, and so can expect high wages in return. I also understand that many physicians give away tens of thousands of dollars of free care every year. But I think the answer is to amateurize the medical profession. "Amateurize" means to use algorithms and tools to reduce complicated activities into bite-sized pieces that are easier to learn. Henry Ford amateurized automobile manufacturing. This would enable doctors to begin their careers faster and with less debt, and would enable more people to become doctors because the skills and aptitudes required to become a doctor would be reduced. Doctors now are still in the craftsman mindset, much like a carriage maker in 1910. I believe most doctors could be reduced to technicians much like CRNAs or PAs without affecting health outcomes. There would still need to be a core of highly trained physicians as there are now, to do research and bridge the knowledge gaps between the technicians, and perhaps this core could be the same size as the current yearly crop of MDs. But does a family practice doctor need 8 years of post-high school education and 3 years of residency to do routine diagnoses when the most likely course of action is, "Eat less and exercise more"? I don't think so.
inopinatus 11y ago
Here's a tech sector example. If your startup wants to become an auDA registrar (i.e. of domains under .au) you must first spend six months as a reseller of an existing registrar. You read that right. Planning on building anything innovative around a .au domain registration? Please, first funnel all your anchor customer registrations to a competitor. Oh, and build your stack and business processes around their platform, workflows, APIs &c.
- feider 11y ago
  "Planning on building anything innovative around a .au domain registration" Can anyone give an example involving innovation around specific domain registration?
  - J-dawg 11y ago
    I'm only guessing here, but I assume that any SaaS that offers a "white-label" service would need to be a domain registrar. Survey Monkey, for example, does this on the platinum pricing plan.
- shostack 11y ago
  What are the requirements to be a reseller? Can you just sign up as a regular affiliate, focus on getting your other stuff in order while driving zero sales, and then become a registrar?
- bkovacev 11y ago
  You can't be serious.
anovikov 11y ago
This mainly relates to non-scalable industries where everything depends on simply reproducible labor not requiring a lot of training - like yes, barbershops, or real estate. I think it's more of good than bad - it prevents flocking of people into these industries resulting in cutthroat competition, low quality, and desperation of everyone involved. People simply find some other better trades instead. Sometimes i feel like something like that must be introduced into software development, too: too many random people here, trying to compete only in price. It doesn't work of course, savvy clients see the real picture, but it drops the shadow on the industry in general, like people don't want to learn now to code out of the fear of having to compete with $5 an hour Indians.
- _yosefk 11y ago
  Low quality doesn't automatically follow from cutthroat competition, at least not nearly as automatically as it follows from a lack of competition. "Too much" competition might result in shipping too quickly to capture market share, but how bad the product that is shipped can be and still make profit is limited by what people will buy - they might as well decide to wait for a competitor's product instead, and typically the wait isn't very long. "Too little" competition, on the other hand, means you don't have a choice; it certainly gives vendors more time to perfect the product, and more money since they can ship later and charge more - but it also removes much of the incentive to improve the product since now it doesn't have to be better than a competitor's, it must only be better than nothing, which is not a very high bar. Now it'd be nice if we could have an amount of competition that is "just right" - just enough to improve the product, not enough to ship half-baked stuff while desperately trying to conceal its problems. Unfortunately, I have no idea how to get there, and since all arrangements that I know of overshoot in one direction or the other, we have to pick one of the extremes, and I think "too much" is way better for the consumer than "too little." Would society be better off if programmers managed to restrict entry into the profession as did lawyers and doctors? On general grounds, I rather doubt it as described above, but those programmers who're already in the profession would most certainly benefit from it!
- nommm-nommm 11y ago
  What is a "non-scalable industry?"
osoti 11y ago
Cutest Exotic Animals you can Legally have as Pets http://goo.gl/tlx5LD http://goo.gl/tlx5LD
osoti 11y ago
Cutest Exotic Animals you can Legally have as Pets http://goo.gl/tlx5LD http://goo.gl/tlx5LD
pluma 11y ago
ITT: HN arguing whether capitalism is better than democracy.
anon4 11y ago
You have a gun, why not just kill him? Getting away with murder isn't that hard.
- dang 11y ago
  We've asked you before to stop posting uncivil and unsubstantive comments to Hacker News. If you can't or won't stop, the next step is to ban your account. So please do stop. We detached this comment from https://news.ycombinator.com/item?id=11057312 https://news.ycombinator.com/item?id=11057312 and marked it off-topic.
onetwotree 11y ago
The comments in this discussion seem to be focusing on the fact that rent seeking is problematic in highly skilled professional fields as well as lower skilled fields. While we clearly need to ensure that bad doctors stop practicing medicine, that crooked accountants can't take advantage of people, and...that loud librarians can't be librarians anymore (or something ;)), perhaps this is a better role for the government than a private professional association that is motivated to engage in rent-seeking?

321 points by luu 11y ago

Of course this behavior is artificially inflating the market. The demand stays the same and the supply is reduced （due to the barrior to entry and hoops you need to jump through), which results in higher prices. The same principals can also be applied to most unions.

api 11y ago
It's a complicated problem though. Everyone wants to make as much as possible, but everyone also wants (economically speaking) everyone else to make as little as possible. A union job is great for me. But it's bad for me if my plumber has a union job because then it will cost more to fix my sink. In economics (and ecology, evolution, etc.) it's actually quite strange for something not to be a paradox. Straightforward linear behavior in complex living systems is weird, and if you think you have an example you're probably missing something.
- chrisseaton 11y ago
  What's the paradox?
  - VLM 11y ago
    Under the "situation containing contradictory features" the second paragraph takes care of that. Under the "absurd statement turns out to be true upon research" consider how weirdly we distribute risk. So hire an unlicensed plumber he causes a leak that destroys the house, foreclose, bankruptcy, and all the risk lands on the govt guaranteed mortgage loan provider aka the taxpayer. So I can save $50 today with 99.9% odds and if something bad happens, all the risk falls on other people not solely on me. You'd be a fool to ever hire a union plumber, and the government would be a fool not to prosecute unlicensed plumbers because they pay every failed mortgage. Risk estimation is very interesting because much like accumulation of capital, it seems only a tiny minority of the population are any good at it. There's also the fake free market situation. If you can't have a meeting of the minds between you and your doctor or plumber, you can't have a free market transaction. Rather than sending the whole population thru med school and plumber school, it seems cheaper as an overall total societal cost to certify practitioners in both fields. That's the paradox of a regulated uneducated market being closer to a free market WRT identical decisions and outcomes than an unregulated uneducated market, how could adding regulation make something freer, well, clearly it doesn't, but it makes the outcome indistinguishable from an actual free market.
    - pdonis 11y ago
      > If you can't have a meeting of the minds between you and your doctor or plumber, you can't have a free market transaction. What do you mean by "a meeting of the minds"?
      - zo1 11y ago
        It's a legal term. https://en.wikipedia.org/wiki/Meeting_of_the_minds https://en.wikipedia.org/wiki/Meeting_of_the_minds "[...]it refers to the situation where there is a common understanding in the formation of the contract."
        pdonis 11y ago
        I realize you're not the one who used the phrase, but I don't see why a customer of a doctor or plumber would need to be a doctor or plumber themselves in order to have a meeting of the minds in this sense. Nor do I see how having the government certify the doctor or plumber helps with this issue.
  - jackcosgrove 11y ago
    The fallacy of composition. If everyone made more money, everyone would be better off, right? Except in order for this to happen, everyone would need to charge more for their goods and services, so prices would rise and the raises everyone got would be sucked up by rising prices, leaving everyone in the same place as where they started, relatively. The sad truth is that every economy must pick winners and losers. If everyone wins, no one wins. Whether this selection process aligns with productivity determines the trajectory of nations. Productivity measures actual wealth creation, and hopefully politics does not lag too far behind it.
    - shin_lao 11y ago
      Economy isn't a zero-sum game because you create wealth.
      - jackcosgrove 11y ago
        Having your basic needs met is not a zero sum game, but beyond that the economy is mostly about status. Whether you are working to attract a mate, impress your family, or build your nation, you are seeking status relative to your peers, and that's zero sum.
        iamcurious 11y ago
        I'm not convinced. First, there are plenty of things that people are interested in that do not improve their social status neither satisfy their basics needs. Like movies. Secondly, social status is fractal in nature, each subculture considers different things valuable and you can belong to many subcultures at the same time, so it isn't necessarily a zero sum game. You can be a lowly janitor at day, but the lead player of the company of the football team at night.
        jackcosgrove 11y ago
        Movies and other such pleasures are so cheap compared to the big line items in life. I don't think anyone studies to get into college and work a job for 40 years for the sake of watching movies. People do these arduous things mostly, I believe, for the sake of status. If you did not care about status, as many don't, you could rent a small one bedroom apartment in an inexpensive place and work an easy job to make ends meet, and still watch movies or play video games, what have you. Social status can be fractured, but eventually people come into conflict for people, places, and things. We don't live in independent streams. We fight over the best apartments, the best cars, the best mates, the best stocks, etc. Then status, money, and power come into play.
- morgante 11y ago
  > A union job is great for me. Not necessarily. Unions tend to lower the pay of the top performers.
  - throwaway7767 11y ago
    > Not necessarily. Unions tend to lower the pay of the top performers. There are many kinds of union. Your viewpoint reflects a very US-centric view of things. I work in IT, and am part of a union. I negotiate my pay on my own, as do most of my coworkers, and we get paid considerably more than the union contracts stipulate. The contracts only set a floor on the compensation and benefits.
    - morgante 11y ago
      > There are many kinds of union. I'm well aware. I certainly didn't mean to imply that all unions necessarily lower top pay. Just that they generally do, which there is extensive research supporting.

HillaryBriss 11y ago

Here's a quotation from the article: "Defenders of occupational licensing typically argue that the rules help protect consumers and workers, and that’s undoubtedly true in some cases. I want the people filling my cavities to know what they’re doing. But it’s hard not to suspect that in many cases, these rules serve another purpose: to make it harder for new competitors to enter the marketplace." While the article seems to criticize rent-seeking behavior only in businesses and professions that require lower levels of education, if we combine this article's statements with the often repeated claim that the US pays roughly twice as much for health care per capita as other developed countries it seems reasonable to ask: Is there a rent seeking problem in the medical and dental fields too? OTOH, why does the article's author want to deny the poor and less well educated segment of the small business community its fair share of the economic protection which occupational licensing offers?

seibelj 11y ago
It is logical to require you to have a license to fill a cavity for safety reasons. It is not logical to require a license to cut hair. Yes, it will boost earnings of barbers, who are generally lower-middle class, but it simply doesn't make logical sense.
- nedwin 11y ago
  I'm also not so sure that occupational licensing is the primary driver of the cost of healthcare in the US.
  - maxerickson 11y ago
    Is there a primary driver? It seems to me that it's the effect of many forces, each of which is probably worth addressing. When I get medical bills, I have a lot of difficulty trying to figure out why the service I consumed could possibly cost as much as I am being charged. But I apparently agreed to pay whatever as a condition of obtaining the service.
- pdonis 11y ago
  > It is logical to require you to have a license to fill a cavity for safety reasons. It is not logical to require a license to cut hair. You mean there are no "safety reasons" involved in cutting hair? A person with sharp implements around your head and neck poses no safety risk? Also, even if the "safety reasons" are more compelling for dentists than for barbers, that's still not a reason to have the government doing the safety checks by means of licensing. Private organizations could do the same safety checks--plus, they would have an incentive to do only the checks that actually added value, whereas government has an incentive to impose any requirements that have enough of a political constituency, whether or not they add value.

EGreg 11y ago

I think Milton Friedman had some great (albeit biased) lectures in which he analyzed these issues from a consequentialist libertarian point of view: http://m.youtube.com/watch?v=8q71hrwUcu0 http://m.youtube.com/watch?v=8q71hrwUcu0

gozur88 11y ago

https://news.ycombinator.com/item?id=11041340 https://news.ycombinator.com/item?id=11041340

deleted 11y ago

[deleted]

Animats 11y ago

He's missed another trend that's not as visible - the concentration of commercial real estate ownership. There are many towns and small cities where one or two organizations own most of the commercial property. They control rents and can decide which businesses get to operate.

timr 11y ago
Not just commercial real estate: in most cities I've lived in (including SF), a handful of large conglomerates own a big fraction of rental real estate, too. In my experience, these landlords are amongst the most scummy to deal with -- unresponsive, inflexible and unrelenting on rent increases. They'll take months to fix anything, but damned if they won't raise your rent by the maximum legal amount at every opportunity, and there's very little room for negotiation. Given a choice between losing a good tenant and maybe getting more rent, they'll choose the latter. It's like having Comcast control your living situation. The corporatization of our residential real estate market is just one more step toward the future predicted by Terry Gilliam in Brazil.
- prostoalex 11y ago
  Multi-family residential real estate has been securitized for quite a while with fairly major REITs (AVB, ESS, APTS, etc.) There is some institutional money chasing single-family market as well (AMH, ARPI, soon to be merged into a single entity, and a few others), we'll see how well that model scales to single family residences.
- mooreds 11y ago
  > It's like having Comcast control your living situation. That sounds like a nightmare! PS what do you mean maximum legal rent increase. I am in Colorado and as far as I know, the only limit on a rent increase is the market. Does SF have laws around this?
  - nommm-nommm 11y ago
    https://en.wikipedia.org/wiki/Rent_control_in_the_United_States https://en.wikipedia.org/wiki/Rent_control_in_the_United_Sta...

Shivetya 11y ago

Another problem with the over regulation of professions is that in many states those convicted of a crime cannot obtain a license. They can have totally served their time, both in jail and/or probation but still be prevented from holding a "professional license". Worse many of the jobs that require these licensees don't pay that much which brought up a whole industry of schools which pass off the costs through student loans and such to get a career which long term isn't going earn a lot of money or even come with benefits

mschuster91 11y ago

The problem is that sometimes it is vital for cities to be able to control which (and how many) businesses open up in an area. Just look at what has hit HN today - an article about Walmart closing down and leaving entire regions without a less-than-3-hours drive to the next grocery store. It is vital for a city to be able to prevent big chains from entering a market, destroying the competition by price dumping (made possible by sheer scale) and then packing up - leaving a stripped down town in the process. Oh the other side, it's unfortunate that these laws and regulations more often than not get abused for clientel politics.

jimbokun 11y ago
What does that have to do with requiring two years of training to get a barber's license?
- mschuster91 11y ago
  I don't have a problem with that. Anything with healthcare or safety (electricians, plumbers, gas installers, builders, car mechanics) must be regulated in order to protect the public. 90% of the skill required in many jobs can be learned in a week or a month. It's the 10% you only learn over the course of education that are safety critical, though. Not to mention practicing in a safe environment instead on your customers or their homes. Let's take your barber as an example, and only the stuff that comes to my non-professional mind: - highly aggressive chemicals that will ruin your health if you're not taking proper safety precautions - the fact that you're meddling with a deadly sharp knife at the necks of your customers - health hazards for the customers: lice, other transmittable diseases, improperly disinfected equipment - health hazards for yourself that can be carried by your customers and you can pick them up (e.g. you cut the customer by accident, he's HIV+ and you have an open wound on one of your fingers while not wearing gloves - something I rarely see barbers do) The fact that the IT industry largely consists of self-educated people might be pretty cool but on the other side, how many security incidents could have been avoided by proper education? Even for BASIC security like not doing echo $_GET["name"]? Take a look at https://blog.setec.io/articles/2016/01/07/software-kill.html https://blog.setec.io/articles/2016/01/07/software-kill.html or literally hundreds of similar articles.

deleted 11y ago

[deleted]

hwstar 11y ago

Someone has actually proposed a constitutional amendment to control rent-seeking: http://ordinary-gentlemen.com/2013/11/08/the-anti-rent-seeking-amendment-part-i-definitions/ http://ordinary-gentlemen.com/2013/11/08/the-anti-rent-seeki... http://ordinary-gentlemen.com/2013/11/11/the-anti-rent-seeking-amendment-part-ii-the-amendment/ http://ordinary-gentlemen.com/2013/11/11/the-anti-rent-seeki...

matt_wulfeck 11y ago

Great example of laws that start out innocent enough, but then become a vector for anti-competitive behavior by the incumbents. The laws that prevent tesla dealers from selling directly to consumers is another example. These types of misguided laws should come with very short expirations (if they come at all).

thirdsun 11y ago
The Tesla laws don't sound innocent at all however - I guess most people would agree that it seems pretty ridiculous right from the start.
- rezistik 11y ago
  Originally the dealership model allowed car companies to rapidly expand their market without the costs of the infrastructure to sell to consumers, when they had enough money to do so they could easily strangle these businesses.
- AjithAntony 11y ago
  > right from the start Why would thousands of entrepreneurs open GM, Ford, and Chrysler dealerships when the manufacturers could just open a store and undercut them? These laws were a promise to protect that business model. That doesn't mean that such laws are a great fit for our current economy, but it started out innocent enough.
  - thirdsun 11y ago
    Yes, you're actually right - thinking about it, the issue is that these laws a) don't have any place in this day and age and b) were really abused in the case of Tesla, which never used the traditional dealership model to sell cars as far as I understand it (european here). On a sidenote: One could argue whether these laws made any sense, even back then - just image how ridiculous it would be if every industry enjoyed the same "protections".

gaur 11y ago

Am I the only one who thinks that "rent-seeking" is a wildly misleading name for this phenomenon? To normal people, "rent-seeking" means "looking to collect on a payment for leased property". Same for "moral hazard". I'm not sure what phenomenon that phrase should be applied to, but it certainly shouldn't be applied to the phenomenon of people taking more risks because they won't have to deal with the fallout. That phenomenon should be called something like "risk asymmetry".

chubot 11y ago
It's an established name from economics. The wikipedia definition is: "seeking to increase one's share of existing wealth without creating new wealth". You can think of it as a generalization of seeking rent for a property. For better or worse, that is what you are doing when you lease a property. You want to be paid just for owning something, not for doing anything. Analogously, if you provide service X, you can seek "rent" in addition to the value you provide. One way to do this is by manipulating the market for X by reducing the supply of those who provide X, e.g. through an unnecessarily onerous licensing process. The additional amount you make with the licensing process in place falls under the category of economic "rent". https://en.wikipedia.org/wiki/Rent-seeking https://en.wikipedia.org/wiki/Rent-seeking
- mcguire 11y ago
  While you're at it, look up 'usury'.
- gaur 11y ago
  > The wikipedia definition is: "seeking to increase one's share of existing wealth without creating new wealth". I think I figured it out. "Rent seeking" means "trying to get something for nothing" economically. This would be a lot less confusing if people would just use straightforward terminology ("getting something for nothing") rather than an opaque phrase that sounds like something else ("rent seeking").
  - Kalium 11y ago

coldtea 11y ago

>Defenders of occupational licensing typically argue that the rules help protect consumers and workers, and that’s undoubtedly true in some cases. I want the people filling my cavities to know what they’re doing. But it’s hard not to suspect that in many cases, these rules serve another purpose: to make it harder for new competitors to enter the marketplace. In Nevada, according to Politico, barbers need more than two years of training to qualify for a license; that’s a high bar to anyone looking to break into the business. So, it's the all powerful Nevada barber cartel that influences legislation in order to keep new people from entering the trade? Well, I, for one, seriously doubt that. And I wouldn't call the requirement to have "two years of training" before taking razors to people's necks and scissors to people's hair "a high bar" either. While there is indeed TONS of rent-seeking going on, I'd look for it in serious industries, with big companies and multinationals involved -- from telcos and ISPs to construction and the health industry for example.

hibikir 11y ago
A cartel doesn't have to be very powerful at all to influence public policy. For something like this to happen, we need very few factors: 1)A small set of people that have much to gain from a policy change, while it'd be a small visible cost for everyone else. The moment another easily identifiable groups can lose, this weakens considerably 2)Enough political will to lobby. This can be due to single issue voting, or a setup where only the people that contribute economically to a cause will really benefit from it. This is the reason unions are very weak in "right to work" states, as the legislation makes paying dues a suboptimal outcome. As long as you have that, it's pretty easy to get laws passed that will help you and hurt the public in hard to measure ways. It's easy to sell occupational licensing to people that aren't paying much attention, because the costs of it to the public are not easy to see, but very real to people who know get protected from other people joining their profession. In Spain, for instance, you'll see a bunch of computer science professional organization that try to recruit people by saying that they will "protect your degree", mainly by lobbying for legislation that would separate someone with a computer science degree from "intruders" (people with decrees in engineering physics and such that can code). And two years of training before becoming a barber is plenty of barrier: There are other professions that have similar difficulty and pay, but lack the two years of training requirement. So less people become barbers, as losing two years of pay for training is worse than getting a job right away! This leads to decreased competition, and eventually high prices. Two years is A LOT of time to end up getting paid that little.

silveira 11y ago

Now just imagine if that to be a programmer, you needed a diploma from an credentialed university and passing an exam from some organization.

collyw 11y ago
Instead we get stupid coding tests every bloody interview we go to.

silveira 11y ago

Now just imagine if that to be a programmer, you needed a diploma from an credentialed university and passing an exam from some organization.

jackcosgrove 11y ago

Professionalization and accreditation could all be described as a closed shop in labor terms. It's classist to say unions are bad while the AMA is good, or vice versa. They're the same thing. Doctors may say they cannot form unions (AMA vs USA) but they have something even better: a closed shop. Closed shops are rarer than collective bargaining, and far more powerful.

deleted 11y ago
[deleted]
onetwotree 11y ago
On the other hand, you really want a professional association that can put a doctor out of business permanently if they persistently fuck up, and assure that new doctors have the requisite training. The AMA is an example of professional licencing that does in fact benefit consumers. A line industrial worker who is always drunk on the job is a much smaller problem than a doctor who is always drunk on the job. That said, I'm all for unions, because they provide protection for workers from rent-seeking behavior by corporations. If it makes my prices a bit higher, so what.
- jackcosgrove 11y ago
  The artificial limiting of supply of physicians is terrible for consumers - it drives up costs and results in foregoing of care because people cannot afford treatment. I understand that physicians sacrifice a LOT during training, and so can expect high wages in return. I also understand that many physicians give away tens of thousands of dollars of free care every year. But I think the answer is to amateurize the medical profession. "Amateurize" means to use algorithms and tools to reduce complicated activities into bite-sized pieces that are easier to learn. Henry Ford amateurized automobile manufacturing. This would enable doctors to begin their careers faster and with less debt, and would enable more people to become doctors because the skills and aptitudes required to become a doctor would be reduced. Doctors now are still in the craftsman mindset, much like a carriage maker in 1910. I believe most doctors could be reduced to technicians much like CRNAs or PAs without affecting health outcomes. There would still need to be a core of highly trained physicians as there are now, to do research and bridge the knowledge gaps between the technicians, and perhaps this core could be the same size as the current yearly crop of MDs. But does a family practice doctor need 8 years of post-high school education and 3 years of residency to do routine diagnoses when the most likely course of action is, "Eat less and exercise more"? I don't think so.

inopinatus 11y ago

Here's a tech sector example. If your startup wants to become an auDA registrar (i.e. of domains under .au) you must first spend six months as a reseller of an existing registrar. You read that right. Planning on building anything innovative around a .au domain registration? Please, first funnel all your anchor customer registrations to a competitor. Oh, and build your stack and business processes around their platform, workflows, APIs &c.

feider 11y ago
"Planning on building anything innovative around a .au domain registration" Can anyone give an example involving innovation around specific domain registration?
- J-dawg 11y ago
  I'm only guessing here, but I assume that any SaaS that offers a "white-label" service would need to be a domain registrar. Survey Monkey, for example, does this on the platinum pricing plan.
shostack 11y ago
What are the requirements to be a reseller? Can you just sign up as a regular affiliate, focus on getting your other stuff in order while driving zero sales, and then become a registrar?
bkovacev 11y ago
You can't be serious.

anovikov 11y ago

This mainly relates to non-scalable industries where everything depends on simply reproducible labor not requiring a lot of training - like yes, barbershops, or real estate. I think it's more of good than bad - it prevents flocking of people into these industries resulting in cutthroat competition, low quality, and desperation of everyone involved. People simply find some other better trades instead. Sometimes i feel like something like that must be introduced into software development, too: too many random people here, trying to compete only in price. It doesn't work of course, savvy clients see the real picture, but it drops the shadow on the industry in general, like people don't want to learn now to code out of the fear of having to compete with $5 an hour Indians.

_yosefk 11y ago
Low quality doesn't automatically follow from cutthroat competition, at least not nearly as automatically as it follows from a lack of competition. "Too much" competition might result in shipping too quickly to capture market share, but how bad the product that is shipped can be and still make profit is limited by what people will buy - they might as well decide to wait for a competitor's product instead, and typically the wait isn't very long. "Too little" competition, on the other hand, means you don't have a choice; it certainly gives vendors more time to perfect the product, and more money since they can ship later and charge more - but it also removes much of the incentive to improve the product since now it doesn't have to be better than a competitor's, it must only be better than nothing, which is not a very high bar. Now it'd be nice if we could have an amount of competition that is "just right" - just enough to improve the product, not enough to ship half-baked stuff while desperately trying to conceal its problems. Unfortunately, I have no idea how to get there, and since all arrangements that I know of overshoot in one direction or the other, we have to pick one of the extremes, and I think "too much" is way better for the consumer than "too little." Would society be better off if programmers managed to restrict entry into the profession as did lawyers and doctors? On general grounds, I rather doubt it as described above, but those programmers who're already in the profession would most certainly benefit from it!
nommm-nommm 11y ago
What is a "non-scalable industry?"

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pluma 11y ago

ITT: HN arguing whether capitalism is better than democracy.

anon4 11y ago

You have a gun, why not just kill him? Getting away with murder isn't that hard.

dang 11y ago
We've asked you before to stop posting uncivil and unsubstantive comments to Hacker News. If you can't or won't stop, the next step is to ban your account. So please do stop. We detached this comment from https://news.ycombinator.com/item?id=11057312 https://news.ycombinator.com/item?id=11057312 and marked it off-topic.

onetwotree 11y ago

The comments in this discussion seem to be focusing on the fact that rent seeking is problematic in highly skilled professional fields as well as lower skilled fields. While we clearly need to ensure that bad doctors stop practicing medicine, that crooked accountants can't take advantage of people, and...that loud librarians can't be librarians anymore (or something ;)), perhaps this is a better role for the government than a private professional association that is motivated to engage in rent-seeking?