Licensing Occupations: Ensuring Quality or Restricting Competition?

Synopsis

Dentists, Doctors, Lawyers, Fortune Tellers and Frog Farmers are nowlicensed occupations in either all or some U.S. states. The reasons given for the growth andbenefits of this form of regulation usually states that existence of licenses may minimizeconsumer uncertainty over the quality of the licensed service and increase the overall demand forthe service. Regulations that require a practitioner to be trained at a minimum levelrecognize a form of regulation which may produce positive social payoffs. Consumers often value the reduction in downside risk more than they valuethe benefits of a positive outcome. This preference by consumers of the statusquo or reducing risk of a highly negative outcome has been called "lossaversion".