Audio Clips

02 February 2011

Protectionism: Trade Group Style

I've been reading Timothy Sandefur's book The Right to Earn a Living and it is really good. I highly recommend it. On page 22 he is talking about the protectionism that trade groups enact to restrict competition and allow the existing members to have higher incomes than they otherwise would.

Trade groups...often colluded to make it difficult for newcomers to enter a profession. Restricting entry into a profession kept up the rates that practitioners could charge clients. These practitioners often devised burdensome apprenticeship rules that made it harder for the new and unskilled to practice a trade. At a time when the economy of England was organized on mercantilist principles, the guild system prevailed as a sort of early labor union, controlling particular industries and setting the terms on which newcomers could enter a given trade. These guilds used their licensing power to create artificial scarcity in the market, thereby increasing the prices that they could charge. Following their earlier rulings against limiting competition, courts often declared these "bylaws" illegal as well. In one case, Lord Coke struck down a guild rule that required extensive training for any person seeking to go into the upholstery trade. The upholsterers argued that the training was required to protect the public from incompetent practitioners, but Coke rejected this proposition: "no skill there is in this, for he may well learn this in seven hours." He concluded with a lucid explanation of the common law's balance between consumer protection and economic freedom:

[B]y the very common law, it was lawful for any man to use any trade thereby to maintain himself and his family; this was both lawful, and also very commendable, but yet by the common law, if a man will take upon him to use any trade in which he hath no skill; the law provides a punishment for such offenders, and such persons were to be punished in the court leet [i.e., by tort lawsuits].

Coke cited the example of a blacksmith who injured a horse because he was not skilled in his trade - proper legal redress, he explained, was already available in the form of a suit for damages. "Unskilfulness [sic] is a sufficient punishment for him." But the possibility that a practitioner might do a bad job was not a good excuse for restricting economic freedom, raising costs to consumers, and depriving entrepreneurs of economic opportunity. (italics added)
This reminds me of stories that John Stossel has shared about florist groups getting their legislatures to require florist testing and licensing. For crying out loud people! You're working with flowers, for the love of Pete. Why should someone have to get any kind of licensing? Easy answer, it keeps people from competing with the existing florists and thus keeps those florists earning a wage that they otherwise wouldn't earn. In other words, they're cowardly despots who, having found their way to earn a living, seek to make sure that no one else can have the same success. It's despicable and wherever that spirit of monopoly exists it should be shut down.

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