The taxi thing seems totally like a pretext, but cosmetologists engage in a lot of quasi-medical stuff that seems reasonable to regulate. Perhaps I'm mostly thinking of spas and their ilk, and honestly I'm probably mostly just thinking about the rise in community-acquired MRSA (which, to be fair, has not been shown to be driven by cosmetological practices at this point).
Is it really necessary for the government to regulates?
Why not have voluntary associations that people can join but have rules on business? If the organization have honest inspectors, their reputation will show. Businesses will pay for that kind of exclusive brands. Risk-averse customers will flock to it.
If you have an organization that everyone must join by law to practice certain field, then it could be a breeding ground for corruptions. The government is now intertwined with a professional organization, and then create an illusion of safety which none shouldn't exists.
Associations that has been around for years will have more trusts than new associations that pop up. The new associations will then prove that they're not kooks that been rejected by incumbent associations.
Why not have voluntary associations that people can join [..] their reputation will show
This is an illusion. Are you going to check with what association your taxi driver is registered and have you done the necessary research upfront to judge the credentials of the association? If a taxi stops and it's from the 'wrong' association, but you know it's relatively cheap, are you going to send it away and wait for the next one?
Especially services that an individual uses only very infrequently, such as a taxi, can get away with very poor performance. The businessman will tell everyone that the taxis in StateCapital suck, but a few months later, when he's there again for a one-off trip, he will have forgotten the name of the taxi service that rendered him such a bad service last time. However, commerce in StateCapital is harmed by all the gossipy remarks concerning one of their taxi services (which are remembered as concerning all taxi services in the city). Requiring taxi drivers to be licensed and checked on by the government could very well be a net advantage for all commerce in StateCapital.
Do you check to see if electrical appliances are UL listed?
UL is private company that sets safety standards and tests products that manufacturers voluntarily submit for (and pay for) testing.
Does a small mid-west town have the resources and and expertise to inspect the traveling carnival rides to insure they are set-up properly? Or does the carnival's insurance carrier handle that responsibility?
There are private replacements for coercive regulation that are not theoretical but are actually working.
UL is private company that sets safety standards and tests products that
manufacturers voluntarily submit for (and pay for) testing.
Why do these manufacturers do that? Perhaps just as a lawsuit hedge: they can always claim to have been 'certified by the de facto testing standard', in which case it's the reasonable expectations laid down by the law that drive the interest in this 'independent' testing. I.e.: the government.
Another explanation is that large brand A initially wanted to distinguish itself as 'the safest' and brand B just followed the lead so it didn't seem less safe. When they control a substantial part of the market, others will soon follow. After that, the actual contents behind the logo don't matter anymore. It's a perception-driven protection racket, the actual value of which cannot be determined by consumers. But it doesn't even matter how it comes about: after most of a market sports a certain logo or association, what's to stop that organisation from growing lax and pleasing their clients? There is hardly any room for competition in that market: who's going to start a UL competitor and why on earth would a brand be interested?
Or, the more fundamental question: who tests the testers? How do you know the UL is not theoretical and actually working? Even the government suffers from corruption; I doubt such companies are any better.
> Are you going to check with what association your taxi driver is registered and have you done the necessary research upfront to judge the credentials of the association?
This is a valid point, because people don't always have the time to do detailed research when they make buying decisions. However, with the internet, and with (soon) most people carrying smartphones, this may change. One could easily imagine a registration including a computer-readable logo, that when one points one's phone at it, produces reviews of whether that registration is good or bad.
> The businessman will tell everyone that the taxis in StateCapital suck, but a few months later, when he's there again for a one-off trip, he will have forgotten the name of the taxi service that rendered him such a bad service last time. However, commerce in StateCapital is harmed by all the gossipy remarks concerning one of their taxi services (which are remembered as concerning all taxi services in the city).
Then why not have the city government issue a voluntary registration? Then, if people value it and feel it provides real benefits against being ripped off, they will value that registration.
But compulsory government licenses are if anything more likely to lead to customers being ripped off than protecting those costomers. Consider New York, where a taxi medallion costs $600,000 (source: http://www.reuters.com/article/idUSN3040666220070530 ). Who pays the $600k? Eventually the customers do.
So compulsory government licensing is more likely to lead to me being ripped off than no licensing.
One could easily imagine a registration including a
computer-readable logo, that when one points one's phone at
it, produces reviews of whether that registration is good
or bad.
Which just opens the door to abuse from anyone with an incentive to game the system. This is a complex problem (in the sense of Menken's rule) and probably a fabulous business opportunity if you can find a good way to solve it.
You might have better luck than me. Every month or so I try to solve it and so far each solution runs into one or more of: privacy, chicken-or-egg, incentives-to-use, internet-dickwad, or some kind of abuse from the various players.
> Which just opens the door to abuse from anyone with an incentive to game the system.
Pretending you've got a registration when you haven't is equally possible whether the registration is compulsory or not, so making registrations optional would not cause that problem.
Gaming the system by trying to get people to believe your product/service/company is better than it actually is, is as old as commerce, and societies have developed ways of coping with this which while not perfect, do work well enough that the vast majority of economic actors see it as not in their interest to rip people off.
You'll never get a perfect solution, but what is achievable is one that works reasonably well.
> Gaming the system by trying to get people to believe your product/service/company is better than it actually is, is as old as commerce, and societies have developed ways of coping with this which while not perfect, do work well enough that the vast majority of economic actors see it as not in their interest to rip people off.
I'm not sure that this is true any more. I remember that it used to be possible to find bad—or even just informative—reviews of products; but now it seems to me that there's a ‘conspiracy’ (in an informal sense, not an actual plotting-together sense) between
• providers who have no scruples about packing reviews with spurious praise,
and
• review-collectors who are either
•• less powerful than the providers (in which case they will winnow the reviews to just the good ones to curry favour) or
•• more powerful than the providers (in which case, because power corrupts, they will informally censor reviews for the providers who provide them bribes).
(Trying to find reviews of apartments, as I was doing recently, really drives this point home. Almost no-one reviews his or her apartment unless he or she is really unhappy, and, since it's so easy to do and there's effectively no penalty for it, it's more or less a given that the top reviews for each complex will be posted by staff of that complex.)
Government often regulates when an industry doesn't regulate themselves. Sometimes you need the government to step in because the social cost isn't being borne by the industry.
Not always. Often government regulates on behalf of existing business in order to create barriers around said industry. This way the existing businesses continues to operate while newcomers are deterred. Look at cable tv, cosmology, etc.
> Is there a cosmologist's guild I don't know about?
Yes. Almost every "trade" has one.
Every regulated one does. More to the point, every newly regulated trade had one that helped write the rules that they pushed through the relevant govt body.
> So what are the regulatory rules that apply to cosmologists?
No idea. However, we're discussing whether regulated trades have trade associations and whether those associations are involved in the regulations. No one implied that every trade was regulated, or even that every trade with a trade association was regulated.
Well, the customers should be the ones who regulate industry. In some markets (medicine, food, financial advice, etc), it's very hard for customers to make informed decisions. In other markets, negative externalities are an issue.
I think I can spot if a hotel room is clean or not. I doubt I could tell if the bedsheets had been properly sterilized, or if the shower was cleaned with bleach, but I can carry a sleeping bag and a pair of rubber slippers.
Neighbors will complain about tourists partying till 3am every night, but that could be handled by the cops. They could raise some revenue by fining noise polluters, just like they fine people who break the speed limit.
You raise a valid point. I suspect that professional associations are neither superior nor inferior to government regulation. Perhaps it's best when both exist to the most useful extent necessary, and no more. (I guess that's a trivially true statement; sorry.)
Government is susceptible to lobbying by interested parties (thinking about hoteliers vs Airbnb). Professional organizations are susceptible to antitrust (thinking about Wilk vs AMA) and perhaps to perpetuating the problem they are designed to solve.
Sometimes it might be better to wait and see if a problem arises rather than preemptively legislating it in a way that might do far more harm than the anticipated problem.
Indeed. And not only is it good to wait until problems occur, but it is also good even after a problem occurs to wait to see how businesses and their customers adjust, rather than assume that every new problem needs a regulatory solution.
Once a problem occurs, and gets enough media coverage to drive regulation, it has also achieved enough awareness to become a point of marketing/competition/consumer-activism. That might be enough to control the risk, even without official state inspectors/licensors/bureaucrats. Especially in the modern era of costless sharing/archiving/finding of customer reviews and discussion.
