How much should professional markets be regulated? an introduction.

• Author: Domin, Jean-Paul
• Position: Special issue on: "The comparative economics of regulated professions"

The regulation of professional markets is "extensive and growing"(Kleiner, 2011) and even "growing faster" than any other "major labor institution" (Kleiner, 2006, p. 17; see also Kleiner and Krueger, 2011). Accordingly, the economic literature that analyzes regulatory practices is also growing and it provides us with a more precise understanding of their virtues and flaws. However, whether the virtues (and advantages) of professional regulation are greater or not than the limitations (and costs) remains unclear. Indeed, no clearcut, straightforward definitive arguments that would legitimate or de-legitimate these practices has been proposed. But this is small surprise, and should not be taken as a proof that economic analyses of the phenomenon are useless. What the literature tells us is that the genuine alternative is not between to regulate or not to regulate professions. There does not seem much doubt that at least some regulation is useful and even necessary. The really important question that has to be raised is rather how much regulation has to be used to control the functioning of professions? That is, should professional regulation be strong or light? This is the question to which the papers gathered in this special issue aim at answering. These papers compare two forms of professional regulation: on the one hand, a strong form of regulation (licensure, or licensing, that is also sometimes called "mandatory licensure") that implies that no one can enter the market and exert the profession without having the license and, on the other hand, a lighter form of regulation (certification, also called voluntary licensing) in which no one is prevented to practice a profession--certification establishes no entry and not being certified does not prevent the exercise of the profession. To be more precise, the comparisons are made profession by profession: auctioneers (Elisabetta Lazzaro and Nathalie Moureau), lawyers and legal markets (Camille Chaserant and Sophie Harnay; Mario Pagliero and Ed Timons), health professions (nurses, physicians and pharmacists) (Ivy Bourgeault and Michel Grignon; Mark Law and Cindy Marks; Niels Philipsen).

Fundamentally, the opposition between licensure and certification, between strong and light professional regulation, amounts to opposing public interest and private interest arguments. The former refers to the "obvious ... need" (Slaughter, 1986, p. 241) to protect the "uninformed public against incompetence and dishonesty" (Gellhorn, 1976, p. 11). Without a strong, mandatory regulation imposed on markets, one may expect that workers or practitioners would be less competent and they therefore would supply services of a poor quality and that would be detrimental to consumers. By contrast, licensure means more skilled and competent workers and therefore also means an improved quality of the services they provide to consumers. Economically, this is justified by market-failures type of arguments. The main point here is that there are asymmetries of information between professionals and consumers (see Arrow, for instance, 1962; 1963) generate adverse selection (Akerlof, 1970) or moral hazard. Also, although less frequently put forward, are the market failures that result from positive (resp. negative) externalities effects that are created by high (resp. low) skilled workers. All in all, the problem is the failure...