OT: Degrees as barriers to entry [was Re: - E04 - Leadership! Google, Guido van Rossum, PSF]

[Steven D'Aprano]

On Tue, 03 Jan 2006 08:27:39 -0800, Alex Martelli wrote:

> Or some even more stringent qualification, such as the state's Bar exam
> for lawyers -- you may not be able to sit for that exam w/o the
> appropriate degree, but the degree by itself is not enough, you still
> have to pass the exam.  It is that way for Engineers in Italy (I passed
> my State Exam in the early '80s), although you only need the certificate
> for some specific professional undertakings (e.g. design a ship, or a
> large building, or technically supervise building operations beyond a
> certain size -- not to write software or to design chips).
> 
> Personally, I agree with the theory, first expressed by Adam Smith, that
> such barriers to entry are mostly useful to grant practitioners of a
> certain profession the "scarcity value" that lets them charge higher
> prices, although of course they're always presented as "good for
> society".  Note that in Europe in the Middle Ages you needed strict
> qualifications of that kind for just about anything -- you could not
> make hats unless you belonged to the Hatters' Guild, etc; most of those
> restrictions have since been lifted, but a few groups (doctors, lawyers,
> accountants, ...) have managed to keep them in place.

Let's not confuse the medieval guild system with today's system. Guilds
were more like clubs than professional bodies: it was who you knew, rather
than what you knew, that decided whether you got in. You were forbidden
from becoming (say) a hat maker unless the other hat makers allowed you to
join the guild. There was no independent, or even semi-independent, body
who decided what qualifications were needed to make hats. It was all about
who you knew -- if your uncle's best friend was a hat maker, you could be
apprenticed to a hat maker and join the guild, otherwise there was no exam
to sit that got you in, no matter how talented you were.

This system combined the worst of all outcomes: you got artificial
scarcity with the monopoly pricing that leads to, *plus* it failed to
enforce or even encourage minimum standards of skill and strategy.

By contrast, today's professional bodies like law, medicine etc. have
independent standards of skill that must be met. I don't wish to deny
that knowing the right people can help smooth the procedure of becoming
a doctor, lawyer, etc., but failing to have an uncle who is a lawyer is no
barrier to becoming a lawyer, provided you can pass the bar exam. That is
very different from the guild system.

In general, professional bodies like engineers, doctors, etc. do a
reasonable job of enforcing minimum standards of skill and quality.
Certainly there are a lot fewer building collapses in countries that
enforce building standards than countries that allow the free market to
decide.

Free market radicals like to sneer at "for the good of society" arguments,
but the problem with their reasoning is that they only consider the
monetary cost of hiring a professional, and not the other costs. Of course
anything that makes professionals scarce will increase the cost of hiring
that professional. But they fail to take into account the externalities
that come from increasing the numbers of under-qualified, shoddy
professionals.

The free market often works well for (say) enforcing minimum standards for
bread: anyone who can taste can recognise good bread from bad, and if you
buy bad bread from a baker today you simply will go to another baker
tomorrow. But dealing with accountants, lawyers, doctors etc. is very
different. Expert opinions are not like bread: only a fellow expert can
recognise good advice from bad advice. Most people buy bread at least once
a week, but might only get legal advice once or twice in their life. Under
these circumstances, Adam Smith's Invisible Hand is feeble indeed, and
shonky rip-off merchants and incompetents thrive, harming everyone.

That's not to say that skilled experts can't make a living -- in an
economy filled with snake-oil medical practitioners, good experts who
get a good reputation can charge a high premium. People who find a
good doctor or lawyer will recommend him to their friends. This squeezes
out the middle: new, but skilled, experts get lost in the sea of shonkies,
but the tiny minority that manage to get a reputation will attract
near-monopoly pricing. That leads to a two-tier system where only the rich
and powerful can afford good experts, be they doctors, lawyers, engineers
or accountants, and everyone else either goes without or are forced into a
lottery where the vast majority of experts they can afford are incompetent.

Another major difference between today's professional bodies and medieval
guilds is that the scarcity is not entirely (or even mostly) caused by
the professional body. It is the universities controlling prerequisite
degrees that gain more from the scarcity: within reason, the fewer places
they offer for (say) law degrees, the higher fees they can charge for
them. In my inexpert opinion, the cause of shortages of experts is more
the fault of the universities than of the professional bodies.


-- 
Steven.