Comment by notahacker | Hacker News Reader

Comment by notahacker | Hacker News Reader

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If you wanted to do the study fairly, you'd make also some attempt to quantify the benefits from fewer accidents, lower insurance premiums, lower remediation costs and faster work etc associated with licensed professionals carrying it out. In a number of fields, you might well get an indication that there's a net financial benefit to doing so (even before you start trying to quantify intangible stuff like peace of mind). If you wanted to represent the scope of the study honestly, you wouldn't claim the gross difference in earnings between licensed and unlicensed professionals as the "cost"

You'd probably want something more granular than SOC code and age to identify the difference between the premium licensed professionals earn for having their document and the premium they earn for also being on average more experienced and capable professionals performing more specialised and difficult work than unlicensed ones in their field.

But then the study is far more about headlines than anything else. Disappointed they weren't bold enough to note that the coefficient on "married" was similar in size to the coefficient on "licensed" and use the same dataset to argue that "U.S. Consumers and the Economy Loses Billions to Professionals Being Married"!

> If you wanted to do the study fairly, you'd make also some attempt to quantify the benefits from fewer accidents, lower insurance premiums, lower remediation costs and faster work etc associated with licensed professionals carrying it out.

I disagree. The report is eplicitly about the costs of licensing. It's not trying to be an all encompassing and comprehensive study of all possible pros and cons. Let those benefits be the focus of another study.

"Hey $accountant, I need you to write up a report of all business expenditures."

"Sorry boss, that wouldn't be fair. All I'll tell you is that we made a net profit of X million. I don't want to tell only one side of the story"

Except that the report claims to be a "conservative" estimate of "deadweight loss", implying no possible benefit to the licensing whatsoever.

So actually much closer to using the compensation figures from your accountant to argue "this is how much our business is losing from having a sales team"

"Deadweight loss" is a term in economics that refers specifically to loss of producer and consumer surplus due to distortions in the prices or quantities that are supplied or demanded. This is different from the colloquial definition of "dead weight" - the latter would imply that licensing produces no benefit, while the former does not.

https://en.wikipedia.org/wiki/Deadweight_loss

If the licensing actually provides benefit to the consumer, the loss in consumer surplus is smaller than that calculated by simply counting the wage differential as the study authors have done. Deadweight loss in economics implies an efficiency loss (hence why Pigouvian taxes, for example, are not considered to produce a deadweight loss even though they actually do reduce producer and consumer surpluses) and thus very much does imply no benefit to licensing when estimated in the manner the study authors have done. The whole field of welfare economics is based around the assumption that a distortion to the price and quantity supplied on an unregulated market might lead to a welfare gain, and thus does not necessarily result in deadweight loss.

You're understanding of dead weight loss is not how economists use the term. Dead weight loss is simply when a market is not at equilibrium and there is some allocative inefficiency. There is absolutely no moral or subjective judgement there: it is literally just a description of a feature of a supply and demand graph. Dead weight loss is often presented negatively, because we don't want inneficiency, but it's not defined by some moral badness.

Your example about sin taxes is wrong. The whole point of a sin tax is to shift the supply curve to the left and let the market come back to equilibrium so as to reduce equilibrium quantity. Sin taxes wouldn't work if they didn't move the market to an equilibrium.

You may think that, in this case, the cost of distortions in the market caused by licensing is morally good and a net positive for society. That is an entirely reasonable position to take. But you cant then pretend like those inneficiencies don't exist by playing word games.

I'm an economics major, fully familiar with the use of the term deadweight loss, and what you're arguing against is welfare economics 101. All forms of tax, subsidy and quota including licensing shift supply and/or demand curves to new equilibria which are different from the unregulated market equilibrium; the purpose of the Pigouvian tax example was that the unregulated market equilibrium is not necessarily the "correct" reference point for calculating deadweight loss in the presence of externalities and information asymmetries. Similarly, comparing wages between licensed and unlicensed professionals across different licensing regimes is useful as a method for estimating deadweight loss from the licensing regime only in the event that there is no benefit from the licensing (i.e. it assumes no externalities related to licensing exist and licensed and unlicensed professionals are undifferentiated in average quality and in an efficient market ought to earn the same amount)

It's not a terribly useful study to me as a result. Granted, the parent piece from a libertarian think tank, so this type of report - an advocacy document - is what to expect. That's fine. But you can also find advocacy from the other side, too... for instance, an advocacy piece concerning the costs (via shoddy work) of using unlicensed contractors for construction, courtesy of Angie's List. (https://www.angieslist.com/articles/how-unlicensed-contracto...)

What we don't have is the proper detail to allow me to make up my mind which cases licensing makes sense, and in which cases licensing doesn't. Sure, licensing has costs. That doesn't tell me anything, because licensing may protect me from bad work quality, which also can cost money, or even possibly be a safety hazard (eg the shoddy electrician that didn't ground a light and nearly electrocuted another worker as a result in the Angie's List piece).

I am fine with the position that occupational licenses aren't necessary for careers where licensing doesn't add any value. But my hunch is that in many careers, licensing adds value overall. The posted piece did nothing to change my position on this.

I'm not sure I follow you. I think the situation you describe, where we have factual (but perhaps motivated) studies on both sides of the issue is exactly what we want. We have the costs and benefits laid out to us, and we can make up our own mind about whether it is 'worth it'. I don't think it is the job of a study like this to make that kind of subjective judgement.

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