The Real Cost of Licensing Is Innovation, Not Just Freedom
People usually focus on the principled opposition of ‘having to ask permission for everything’ or the monetary consequences of licensing but few realise the real damage is an insidious, chronic wound.
The UK has become a laughing stock for its TV license and the goons it has spawned, but that is far from the kind of licensing that stings the most in the long run. Most countries in the developed world have signed on to having a hand in every aspect of life.
Sure, they might not control exactly what you should, or should not, say to each other in private company (yet), but perhaps that’s not due to their kindheartedness and more due to the cumbersome nature of such regulation, as proven by such regulation in spaces they can easily monitor and control (such as online).
Social media is the biggest boon to any tyrant in-charge in the history. There is no longer need for people to spy on each other like Mao’s China or Stalin’s USSR when they voluntarily share their opinions online.
By design, these take-downs and arrests send a message to any persons holding said ‘harmful opinions’, to remain quiet and, over time, only the most hardcore believers will end up sharing their opinions. The most principled, the most ardent believers. As such, from the eyes of the State, it is even more necessary to apprehend the people willing to stick to their guns in the face of adversity, as they are the ones most likely to oppose, and reject, the State agenda and enlighten the masses to form a strong opposition. Sure, a few tokens lunatics are left alone only so they can point and laugh, discrediting everything.
Anyway, we are getting too far off topic from the title of this article, I just couldn’t hold back from mentioning that.
Getting back to our subject.
Besides being an impediment to personal freedom, and prohibitively expensive in some cases (which has the delightful side effect of increasing inequality by having the cost of entry raised), licensing usually comes with an exam. A demonstration of you knowing the right things and the scope within which, therefore, you must operate in.
People usually look at something like barbers to point to how such licensing is necessary as they could literally chop your ears off. And just like with driving licenses, is a mere demonstration not proof enough that they can do what they are setting out to do? Certainly, if you can seemingly cut hair and people are paying you for it, you must be doing something right?
And it’s not as if licensed barbers don’t have any accidents! The same goes for driving licenses. If they were such an amazing demonstration of the capabilities of someone driving, we would live in a world where no vehicle collided with another, ever.
In the free market, if a barber does not do the job the clients wanted from him (and more, usually), such barber would have no customers and would go out of business fast. The market will put him in check for being such an incompetent person entering the wrong profession automatically. This would stand truer today than ever with businesses that can be rated and reviewed online for everyone to see. Anyone could make a more informed decision than was ever possible.
Of course, the real costs are hidden, as is always the case. The effect of these ‘exams’ and certification programs is that it limits the scope of what can and cannot be done, the more regulatory these licenses are. It limits the amount of new things that can be done and makes everyone limit the working environment to a narrow definition allowed in such licenses or regulations. I am not just talking about the barbers’ case, perhaps there it hasn’t come to the point where it’s prohibitive but in any case, the mere existence of such ‘thinking barriers’ is a limitation in and of itself.
The mere limitation of what tools one ought to use, how to use them and where, may look innocent and common sense on the surface, but it fundamentally limits anything new that can be done with said tools once such thing is legislated.
If it was regulated that scissors only be ought to cut certain stuff to perfection when scissors were invented, hypothetically speaking, there would be no barbers and no Koreans cutting food with them.
I am using really simplistic examples for demonstrative purposes but it should not be hard to see that as time passes, more and more things are becoming regulated (pre-licensed), even things that haven’t fully materialised like drone deliveries have been regulated before any market adoption.
Who benefits from such regulation as the one with drone deliveries that are applied even before the market has developed? The first movers in such a market. In fact, it is by the feedback of Amazon itself that this regulation was materialised in the first place.
That, itself, makes sure that no emerging competitors deviate too much from what has been envisioned by Amazon itself. And of course, when you limit the scope of what can be done, it only becomes a question of who has the more money. That would be the case regardless with such licensed monopolies established with the help of the State itself but regulations or licensing like this just makes sure that your competitors get a little piece of the action but never come close to toppling your position by outmanoeuvring you in the intellectual side of things.
Even if you can, theoretically, bring change to the regulation to better suit your new innovation, it is sure to be a long (and expensive) political process, and there is little in the way of the pre-established parties (the Amazons, Googles who help institute such regulation for private gains) not knowing what you’re trying to change to then develop systems to out-compete you before you even get your start.
By now, you can start seeing the multifaceted ways in which these regulations, licensing and permits have an effect of pinching the natural pipeline of innovation and safeguarding special interests from competition as a side treat. It makes sure that even if your idea is great, it’s the incumbents who get to apply it before you ever do. There is no market reaction in such a space to each other’s advancements but more so who gets to hear what happens within the four walls of a politician’s office first.
Perhaps, there is a reason why there has been a slow rate of innovation in tangibles but a surge of it in intangibles (such as web technologies, software, etc.) I’m not saying it’s the entire cause, but one significant factor among many ‘non-inherent to market’ reasons.
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