The New Ideas Blog

A couple years ago I wrote an ebook called “99 Lies,” which covered common lies we are told or common beliefs that are not true. I explained the reason for each lie (sometimes speculative on my part), the truth, and why it matters. Many of the entries were what I sometimes refer to as “public lies.”

Another description could be “participatory lies,” since they require not only a desire to deceive, but a desire on the part of others to be deceived. Politicians and businesses cater to this desire. These lies can be right out there for all to see and believe or not. Here is an example from the book.

The Business Licensing Lie

This is actually a small bundle of lies. First, it isn’t necessarily true that licensing protects us as is commonly believed, or that most businesses need to be regulated in this way. The bigger lie though, is that “consumer protection” is the intention from which such regulations originate. Finally, another huge non-truth is the belief that businesses don’t want this kind of regulation.

People, businesses and governments lie for all sorts of reasons. For example, lies are told to gain power, profit, votes and simple solutions. The fraud of business licensing accomplishes all of these for the various parties involved.

The Truth

Business owners almost always want more regulation, not less. Business owners fight regulations that harm them, but at the same time push for those that harm their competitors. Of course they want regulations that help them.

In particular, existing players in an industry almost always push for licensing once the industrty develops to a certain point. Why? To exclude competition or make it harder for them to compete, in order to increase profits.  Politicians get votes for picking up the cause, claiming that licensing is for the public good.

But is it for our good? Look at something like hair-cutting. Is licensing necessary? Is it really that dangerous a profession? Was there a rash of accidental hair cutting deaths? Is it a great crime if your unlicensed neighbor cuts your hair? Does getting a license make someone a good beautician? Would it actually matter if the hair-cutters out there were without a license? Or could we just ask about their experience and training before we sat down in that chair?

What is the real reason this profession is licensed then? It begins with the businesses themselves. Many people believe the lie that businesses don’t want regulation, but the truth is that they are always the first to call for it because it helps their bottom line profits by excluding competition and making it harder for others to compete. When you limit access to a profession or industry, prices - and profits - can be maintained at a higher level.

This isn’t about any concern for the consumer, although that is where the politicians come in. Politicians love to perpetuate the lie that licensing is necessary, because they can look good when they introduce the necessary legislation. Certainly some also believe they’re doing good, convince by the “experts.”

The “experts” include those who benefit from designing, promoting and implementing the regulations that ensue. Certainly this include the bureaucracy which needs to be created. As an aside, it is very human to want to believe one is doing the right thing, so once a man or woman benefits from and participates in a certain belief or viewpoint - and gains power from this - it is not likely that he or she will easily see any validity in opposing beliefs.

The public, meanwhile, never thought about the issue previously, and so has to be “sold.”  Think about it for a moment. Have you ever lobbied for licensing of your dog-walker or local fast food workers? Have you ever worried that a person doesn’t have to get a license to sell flowers? Well, don’t be surprized if someday it is “common knowledge” that all of these jobs require government involvement through licensing.

The pricier flower shops, for example, might unite and prepare and then wait for a rash of allergic reactions to flowers to call for licensing of flower sellers. That will push some of the cheaper places out of business and so support higher profit margins. By the time they are done getting the “horro” stories out there ion the news, it will all seem necessary and prudent.

It does seem to make sense to license people. Never mind that a man can have 1% of the experience of an unlicensed builder and get a contractor’s license by studying for few days. We think licensing is really about standards and safety, so it is easy to agree. In addition, many people are inherently (even unconsciously) suspicious and resentful of business people, and want them to be “controlled” or even punished by government.

Let’s look at another example, where licensing isn’t yet common. A carpet cleaner told me about “cutthroats” that clean too cheap. They don’t have the expensive training and equipment this guy has, so they can charge less. He doesn’t like that, so what is his solution to this problem of free competition? “Carpet cleaning should be regulated and carpet cleaners should be licensed.” That would force the cutthroats to upgrade equipment and training. “Better for the consumer,” he assured me.

Of course the “cutthroats” would either quit the business, or spend the money to comply with the new regulations, and so have to charge more. This, of course, means that the bigger players could compete more easily without all those “little guys” undercutting their prices. That is the real point of such regulation.

Years ago I used one of the “cutthroat carpet cleaners.” Did he clean my carpet as well as the more expensive companies? Absolutely not. But it was good enough, and cost half the price. Now I have more income and would choose a better cleaner, but I like having the choice. Still, if they ever regulate the carpet cleaning industry it will be in the name of the consumer, and the cleaners will be the ones pushing for the regulations.

Again, such regulations are rarely meant for our good. “Public good,” is a concept lawmakers use to hide the fact that they are creating regulations for the benefit of specific businesses and industries that have lobbied them. Politicians get votes from this lie, businesses get profits, bureaucrats get power, and the public gets simple solutions to imagined problems.

Consider this: The rich can already pay for what they want, including better hair-cuts and better carpet cleaning. So they don’t need any regulations that are supposed to raise standards. The safety and quality wanted is there for any who can pay for it.

What about if you don’t have much money? Unfortunately licensing can’t force the existence of higher quality service at lower prices. All such regulations can do is take away the cheaper options, making life more difficult for those with less money (I just wouldn’t have had my carpet cleaned). So who do these regulations really benefit? Businesses, politicians, and bureaucrats.

Why It Matters

What do we get from accepting the lie that businesses don’t want regulation but we need it? For some, it is the pleasure of “punishing” businesses owners with regulations (who ultimately want them anyhow). For the rest of us, it is fewer, more expensive options. By what logic could we expect higher quality or safety without higher cost?

The consumer, then, is the one that loses most from this lie - but rarely understands what is happening. As Warren Buffet says, “If after twenty minutes at the poker table you can’t tell who the patsy is, it’s you.”

Morality

I have to include one last issue not covered in my book “99 Lies.” Law is implemented from the barrel of a gun. That is meant metaphorically in part, but you probably get the point. It is the threat of force that ultimately makes us comply with laws we don’t agree with.

Now consider the true story of a woman who was running a small beauty parlor out of her home many years ago (as a child I knew her daughter). Not one neighbor complained about the ocassional extra car in the driveway, but as soon as local “licensed” hair cutting places heard, they demanded that she be shut down. Her customers knew that she was unlicensed, so there was no fraud here. They liked the job she did - and her prices. Getting a license was perhaps possible, but she was on a tight budget and couldn’t pay for six months of training that she didn’t need, let alone lose her income for that time.

I don’t know how the case was resolved, but I have some questions that I think are important. Would it have actually been “the right thing to do” to take away her livelihood and put her in jail if she refused to shut down her little business? Was she truly doing something wrong? Who would actually have been the criminals if the police came to drag her away? Do police and other government officials have no blame for the wrong done to people if they can claim to be “just doing their jobs?”

Okay, we are getting into other areas here. But it does suggest another issue in these matters that are so often seen as only economic or political. It also alludes to some other common “public lies” that people participate in (like the idea that the law can think for us or that we can do no wrong if we are “just doing our jobs”).

My ebooks:

Note: Read the truth about 98 more lies in the e-book “99 Lies,” a bonus you get with “You Aren’t Supposed To Know -  A Book Of Secrets.”

Tags: business, public lies, regulation

This entry was posted on Wednesday, March 18th, 2009 at 8:05 am and is filed under Political Ideas. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.