Why things are so expensive? part 1

I have tried to stick to writing about parenting and sound finances, however once in a while I feel driven to write about economics. In order to explain why things are the way they are. This is because people all around me have questions about why things are as expensive as they are and why the economy is stagnant. Here are a number of things that contribute to it:


You might ask, why hair dressers are licensed? Does the license protect you from getting your ear cut? Does a licensed florist prevent crime or make nicer floral arrangements? Does licensing marriage some how make you more faithful or a better spouse? Does a licensed undertaker stop the flow of drugs? Yes the list can go on for hundreds and hundreds of different kind of things, because these are all mandated. Do they improve quality and is the quality followed up on? For many of these things, no.

 Okay, many of you would say that licensing is a good thing. “John, you are against licensing? Shame on you. Don’t you want the best quality and high standards?” Yes, yes I do. However the licensing should not be mandated and should be private. There can be private accrediting agencies that one could go to get certified. This would b ea seal of approval. However you should not be mandated to do it. It should be up to the individual to choose whether they want to buy a product that is certified or not certified.

 Furthermore not mandating licensing, would help bring about competition with new licensing and better quality being brought about.

 AMA and lawyers:

 This licensing leads us into the next part. The AMA and the lawyer boards. Doctors have firmly entrenched themselves by establishing the AMA. The AMA is backed by the Federal Government as the only doctor licensing agency out there. So for you to practice medicine you have to go through their boards and education. This means that you cannot practice medicine if you don’t go through their schools. It also means that they only produce a limited amount of doctors each year, this essentially creates a whole monopoly on doctors and does not allow the market to react to how many are needed.

 Right now the US is starting to age so there need to be even more doctors to help with this. Also the Affordable Care Act adds millions of new people into the insurance world and will need to have a doctor. With no market forces pressing on the AMA to make new doctors there will be fewer doctors to go around. The upside is that doctors can charge more money for their services, which is what we are seeing with raised insurance premiums and copays.

 Lawyers are somewhat in the same position, while their services are maybe not as greatly needed as medical doctors they still have a board and a quota system. This system is also backed by the government, meaning that if I want to be a lawyer I have to abide by the board and their system. I cannot establish my own lawyer board to provide some kind of quality control but have to go through theirs. Doctors and Lawyers have essentially created their own monopoly on their services with little to no competition.

 (Monday there will be part 2)

 Read more:


Reasons to shrink doctors pay: http://www.forbes.com/sites/theapothecary/2011/11/28/why-the-american-medical-association-had-72-million-reasons-to-help-shrink-doctors-pay/

On the AMA monopoly: http://www.economist.com/blogs/freeexchange/2007/09/a_spoonful_of_monopoly_helps_t

Breaking the AMA monopoly: http://reason.org/blog/show/breaking-the-ama-monopoly

Discussion on AMA: http://mises.org/daily/5066


WIKIs entry on licensing: http://en.wikipedia.org/wiki/Professional_licensure_in_the_United_States

Googles list of state licensing: https://www.google.com/#q=List+of+state+licensing

 NY times on how many licenses are out there: http://www.nytimes.com/2006/03/02/business/yourmoney/02scene.html?_r=0




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