Occupational Licenses and Rent Seeking

Many jobs that require an occupational license do so because they have high consequences if the job is done poorly. I want to know that my doctor, accountant, or surgeon has completed appropriate training before trusting them to take care of my health, manage my money, or operate on my body. It would be too costly to investigate each doctor's background and competitively compare them. A medical license ensures that a person has certain knowledge of what they are doing because the job has high consequences. In cases where the consequence of a job is serious, an occupational license not only serves as a barrier to entry for that industry, but also as an appropriate screening mechanism in the interest of the general public.

There are, however, many jobs that require occupational licenses where the stakes aren't so high -- such as a barber, librarian, or interior designer. In order to get a license to be a barber in Nevada, it takes over two and a half years for the appropriate training. If you want to become an interior designer in NV, LA, FL, or DC it will cost you $400 and six years to get a license. While there is a clear argument for why a license is required to practice law or medicine, the same can not be said for more inconsequential professions such as interior decorators and barbers. The license requirements for these jobs are a result of rent seeking behavior. Existing merchants divert funds from their business in order to pay lobbyists to influence legislation. The funds directed toward influencing legislation are inefficiently used because they don't create anything "new" in the economy while hurting competition. Although this form of rent seeking is a huge inefficiency, Tullock brilliantly points out that the biggest inefficiency of all might come from merchants who were unsuccessful in their lobbying efforts. Perhaps its not the 2.5 years of training to become a barber that is most inefficient, but what this license requirement represents. The notion that the government is willing to promote an anticompetitive market for barbers in NV. And if it can be done in NV, why should other companies not try the same thing in their industry?