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neoclassical vision was free of unresolvable conflict. The very term "social system" is a measure of the success
of neoclassical economics, for the idea of a system, with its interacting components, its variables and parame-
ters and constraints, is the language of mid-nineteenth-century physics. This field of rational mechanics was the
model for the neoclassical framework. Agents were like atoms; utility was like energy; utility maximization
was like the minimization of potential energy, and so forth. In this way was the rhetoric of successful science
linked to the neoclassical theory, and in this way economics became linked to science itself. Whether this link-
age was planned by the early Marginalists, or rather was a feature of the public success of science itself, is less
important than the implications of that linkage. For once neoclassical economics was associated with scientific
economics, to challenge the neoclassical approach was to seem to challenge science and progress and moder-
nity.
The value of neoclassical economics can be assessed in the collection of truths to which we are led by its
light. The kinds of truths about incentives – about prices and information, about the interrelatedness of decisions
and the unintended consequences of choices – are all well developed in neoclassical theories, as is a self-
consciousness about the use of evidence. In planning for future electricity needs in my state, for example, the
Public Utilities Commission develops a (neoclassical) demand forecast, joins it to a (neoclassical) cost analysis
of generation facilities of various sizes and types (e.g. an 800-megawatt low-sulfur coal plant), and develops a
least-cost system growth plan and a (neoclassical) pricing strategy for implementing that plan. Those on all
sides of the issues, from industry to municipalities, from electric companies to environmental groups, all speak
the same language of demand elasticities and cost minimization, of marginal costs and rates of return. The rules
of theory development and assessment are clear in neoclassical economics, and that clarity is taken to be bene-
ficial to the community of economists. The scientificness of neoclassical economics, on this view, is not its
weakness but its strength.
OCCUPATIONAL LICENSING
By S. David Young
Most Americans know that practicing medicine without a license is against the law. They also know that
lawyers and dentists must have the state's approval before they can ply their trades. Few Americans, however,
would guess that in some states falconers, ferret breeders, and palm readers are also subject to government
regulation. Some regulations are relatively harmless, requiring little more of individuals than listing their names
on official rosters. Sometimes, however, individuals must qualify for a state license to engage in a given trade
or profession. At present, nearly five hundred occupations are licensed by at least one state. Indeed, it appears
that every organized occupational group in America has tried at one time or another to acquire state licensure
for its members. Today at least a fifth, and perhaps as much as a third, of the work force is directly affected by
licensing laws.
The argument in favor of licensing always has been that it protects the public from incompetents, charla-
tans, and quacks. The main effect, however, is simply to restrict entry and reduce competition in the licensed
occupation. Yet from the beginnings of the modern professional movement early in America's history until the
seventies, the growth of licensing proceeded with little opposition. The possibility that licensing might be used
to enhance professional income and power was considered incidental to serving the public interest.
A careful analysis of licensing's effects across a broad range of occupations reveals some striking, and
strikingly negative, similarities. Occupational regulation has limited consumer choice, raised consumer costs,
increased practitioner income, limited practitioner mobility, and deprived the poor of adequate services – all
without demonstrated improvements in the quality or safety of the licensed activities.
Why have states required licensing of so many occupations if the results are so counter to consumer inter-
ests? Participants in any regulatory process must have a reason for getting involved. Because the number of po-
tential political and legal battles is large, people tend to concentrate on those battles in which their personal
stake is high. Because their per capita stakes in the licensing controversy are so much greater than those of con-
sumers, it is professionals who usually determine the regulatory agenda in their domains. Crucial licensing de-
cisions that can affect vast numbers of people are often made with little or no input from the public. If such a
process serves the public interest, it is only by happenstance.
Licensing laws generally require candidates to meet four types of requirements: 1) formal schooling, 2) ex-
perience, 3) personal characteristics (such as citizenship and residence) and 4) successful completion of a li-
censing examination. The mechanism for enforcing these requirements and maintaining control over a licensed
occupation is the state licensing board. The state legislature, in effect, grants a charter to the board, and the
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