One of the biggest protection scams in the business world is the requirement for government issued licenses to participate in a specific market. This was a very big things back in the days for taxicabs where the city would only issue a specified number of taxi licenses and thus restrict the size of the market. Taxicab owners loved it because it ensures they had little competition and as demand for taxi drivers crew competition became less and less relevant. Of course taxicabs are a great example but a bit boring but thankfully Salem, Massachusetts provides us with a far more entertaining example of this:
In 2007, the city lifted a cap on the number of psychics allowed to operate and now some believe the ‘Witch City’ is getting overrun.
That’s right Salem required a government issued license to perform “psychic” services within the city. This requirement was recently lifted though and some of the older “psychics” are a bit perturbed:
Barbara Szafranski is a long-time psychic license holder who conducts readings at her downtown shop Angelica of the Angels. She needed no crystal ball to tell her business would take a hit when more fortunetellers hit the scene.
“It affected me 75%. I lost business because many stores opened up that were not in this field. They just opened up because they wanted to get the money from the readings,” said Szafranski.
“It just becomes a bunch of gypsies. Maybe I shouldn’t say that word because they might be upset by it but those people are not necessarily always qualified.”
That 75% loss of business is due to the fact actual competition has moved into a market where government interference ensured little existed. Basically the market is telling Mrs. Szafranski that her price for
stupid magically bullshit psychic services is too high and that her clients have found a cheaper provider elsewhere. I would also like to know what qualifications a psychic needs as apparently gypsies lack these qualifications (I’m betting it’s bloodline, you need to be a pure decedent of some promised people).
The reason business owners are in favor of these licensing requirements is because it protects their business and also ensures a high barrier for entry for new potential competitors. Most cities that impost licensing scams like this set a fixed number of available licenses and thus a prospective business owner needs to obtain a licenses from somebody currently in the business. As these licenses are quite rare (the limit is always set artificially low) the prices for a license skyrockets. Needless to say when a license cap such as this is lifted those who put the investment into getting their license want to see the cap returned as Mrs. Szafranski does:
“I’m in favor of putting the cap on because there are so many psychics in the city now. When I first opened up my business 25 years ago I was just about the only one in this area and, of course, as you’re seeing since then it’s grown and grown and grown,” said Szafranski.
Which translates into “I want the cap returned so I can charge my artificially high prices again.” Either way this is a great example of government licensing requirements being nothing more than protection scams.
One thought on “Why Business Owners Love Government Required Licenses”
Perhaps their government should require businesses to provide actual scientifically proven services. Kind of interesting that her local government was in a sense creating an anti-competitive market.
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