Keeping Business Honest – John Stossel
May 23, 2012 6 Comments
Here is John Stossel with the truth about licensing and some more truths about capitalism. I probably don’t have to tell you how much I agree with him.
Instinctively, we look for people’s motives. We need to know whom we can trust and whom we can’t. We’re especially skeptical of business because we know business wants our money.
It took me too long to understand that business’s desire for profit is a good thing. To get our money, businesses — if they can’t look to the government for favors — need to give us what we want. Then they must make continuous improvements and do it better than the competition does.
That competition is enough to protect consumers. But that’s not intuitive. It’s intuitive to assume that competition isn’t really consumer protection and that experts at the FDA, FTC, DEA, FCC, CPSC, OSHA and so on must protect us. These experts consult “responsible” businessmen for advice on creating rules to make sure businesses meets minimum “standards.”
Unfortunately, this standardization stops innovation.
We are imprinted to be wary of newcomers, strangers. Newcomers by definition are less experienced. Maybe they’ll do something unsafe or dishonest! We don’t want government to stop them from doing business — we just want consumers protected! Governments claim to do that by licensing businesses.
People like the idea of licensing. We license drivers. We license dogs. It seems prudent. People naively think this government seal of approval makes us safer.
This naivete is used to justify all sorts of rules that kill competition.
Las Vegas regulators require anyone who wants to start a limousine business to prove his new business is needed and, worse, will not “adversely affect other carriers.” But every new business intends to beat its competitors. That’s the point. Competition is good for us. Las Vegas’ anticompetitive licensing rules mean limo customers pay more.
Let’s take down to a particular. Here in Nebraska we license electricians, most states do. An apprentice card cost only money, a journeyman card costs money and four years experience + passing a code test, and the top of the heap an electrical contractor license costs money, 5 years + passing a somewhat tougher test, and buying insurance. This is fairly standard requirements for states having licenses. What’s the catch here? Everyone of the applications have to be signed by an electrical contractor. If you are an average electrician with an electrical contractor license and have a super journeyman, how likely are you to sign the application for an electrical contractor license which will allow your journeyman to compete with you? Yeah, that’s what I think. too.
In other words it’s a racket but, it’s more. It’s really a medieval guild. if you want to be an electrical contractor in Nebraska you have to convince your prospective competitor that he should sign off on you. Good luck, unless he’s your daddy.
I’m sure you’re wondering what’s on those tests, right? Basically one thing, the Nebraska Electrical Code (it’s almost the same as the National Electric Code, with a few differences). That’s fine, as far as it goes, that is the standard we work to. But there is nothing to guarantee that an electrician is honest, nothing to guarantee that he knows anything about business, not even anything that he knows how to fix anything electrical. It mandates that he knows the code, that’s it.
Incidentally, would you be interested in what an apprentice does for four years? Almost always he spends the first two years doing the garbage details, digging trenches, running conduit, crawling around in people’s crawl spaces. I’m pretty much OK with that, it has to be done, and you might as well find out if he really wants to be an electrician sooner, rather than later.
Unfortunately, often the last two years are often the same, instead of learning leadership on the crew level and learning how electricity works, there is lots of theory and math involved in this field, even when you are in the field. So when you get that coveted J-ticket you may, or may not, know a damn thing about running a crew, or planning your work, or even how anything works.
In other word, state licensing is a scam, it provides no protection to the homeowner but, lots of protection to contractors, it’s almost a license to print money.
Does it need to be this way? NO. Unless it’s changed, Indiana has no license for electricians, as long as the work is done to code the state is OK with it. Want to bet that you’ll pay less for electrical work in Indiana? Yes, on average you will, you can also do your own, if you do it right. Here you can wire your own ‘primary domicile’ but if you’re lucky enough to have a lake cottage, or a hunting lodge, or God forbid, a commercial property, you must have a contractor, or you risk, literally, going to jail.
It’s not about safety, it’s about crony capitalism.
- John Stossel on Creating a Risk-Free World (reason.com)
- “No They Can’t” by Stossel Is a Fascinating Book (constantreader.typepad.com)
- John Stossel on the Food Police (reason.com)
- John Stossel on Vulture Capitalism (reason.com)