The Purpose of Licensing

The Purpose of Licensing

Only the correlation between the median year of licensing and the percentage of an occupation belonging to its association supports the profit hypothesis. This could, of course, be the result of licensing, since licensing may increase the power of the association and hence make membership more desirable or more necessary. However, the order of licensing and which occupations are licensed may depend on the elasticities of supply and demand and on the rate of growth of the occupation. No really satisfactory measure of the rate of growth can be devised, since, under this hypothesis, the period of licensing would presumably be the period of most rapid growth and the rate of growth at this period might easily be the same for occupations licensed late as for those regulated at an earlier period. Experimenting with different measures never revealed a correlation.

Thomas G. Moore

The Journal of Law and Economics

October 1961

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