State rents and society of distrust
The issue of regulated professions has recently surfaced in the political debate. But it was poorly posed, pointing out the existence of modest advantages instead of analyzing the formidable state hypertrophy which is the cause. The case of Parisian taxis, for example, attracted attention. There are fewer of them today than in 1925. There were 25,000 then, there are now only 15,000. However, since 1945 France’s GDP has multiplied, excluding inflation, by more than six, and transport grow at a rate that is double that of GDP. We can therefore estimate that the number of taxis should have increased by well over six times during this same period. The reason is that Parisian taxis are subject to installation authorization from the prefecture. This rule is of course absurd in itself. One could imagine an obligation to declare to the police for the purposes of transparency and traceability. But it is not up to an emanation of the government to issue an authorization to exercise a private economic activity, especially when it is not of a particularly sensitive nature with regard to health or public order requirements.
Administrative slowness has resulted in a chronic shortage of licenses in relation to changing needs. The scarcity of licenses gives an advantage to those first installed, but becomes a barrier for new entrants. Licensees have all the more to lose from an increase in the number of licenses as they have paid dearly for theirs. As a result of this scarcity, taxi licenses are sold at a high price: between 150,000 and 300,000 euros. This situational rent ended up being legalized at the expense of all consumers. In return, the administrative bureaucracy is established as an essential regulator to protect rent. She finds her interest in this system which implies the perpetuation of her existence. The case of taxis is not isolated. Cafés, pharmacists, notaries, veterinarians… everyone, except the excluded, can believe that they have an annuity that protects them. Cafe owners benefit from a quasi-numerus clausus, inherited from a time when the fight against alcoholism was a priority, even though 95% of alcohol purchases no longer pass through them. Veterinarians cannot have more than two assistants. Hairdressers must have a professional certificate when they work in town, but a CAP only when they work at home, which is curious… it is still a relatively simple profession, so what does the job get involved with? ‘State?
The case of France is certainly particularly laughable. But it is not exceptional. In the most corrupt countries, the regulator creates scarcity to give licenses a greater value than it can monetize. In Western countries, the creation of artificial scarcity leads to an objective alliance between the state bureaucracy and professions which therefore find themselves protected, without overshadowing the power of which they become the objective ally. Governments are increasing “access to the profession”, with the official aim of raising the level of management of these professions, but in reality slowing down professional mobility, on-the-job training and social promotion. If a recent debate has focused attention on taxis and other professions considered relatively modest, what can we say about the protected or semi-protected judicial professions whose financial demands paralyze the execution of judgments and access to justice, fees of notaries legally fixed outside of any competition and including unjustified state taxes?
You don’t need to be a great economist to know that the scarcity of supply increases the price of the service. This is especially true since the person who purchased this “load” will have to make it profitable. Regulatory barriers to entry into markets for goods and services have a direct cost in terms of reduced quality and quantities, and increased prices. But they have an even more insidious indirect cost, due to the potential increase in corruption that they induce, the blocking of social mobility, the reduction in the feeling of belonging to a whole, and the development of the feeling of partiality of “public” power. The formation of speculative phenomena and the development of social egoism are the consequence of the existence of an incapable and invasive bureaucracy. State bureaucracy divides society, harms the quality and quantity of services, and fuels inflation.
