5th January 2018
A reputational platform: a market-based alternative to occupational licensing
Occupational licensing (OL) is one of the worst ways to deal with alleged problems of information asymmetry (essentially problems about trustworthiness including trustworthy delivery of a product of agreed quality and in a timely manner). There is a good amount of literature on this issue.
However, we need to explore whether market based solutions exist, to alleviate this problem.
I am thinking of a voluntary reputational platform that will deal with information asymmetry issues and ultimately eliminate the need for occupational licensing. [See my FB post here.]
To be durable and credible, the government should build such a generic platform covering all licensed occupations. The government would need to ensure that only genuine consumers are able to provide feedback on individual professionals (say, doctors or builders). The professionals being rated would be in a position to read the names of the reviewers while the public would only see the review, not the reviewer’s name. The professionals being rated would also have the right to provide their own view on any adverse situation reported by a customer. It is important that the professionals relinquish any recourse to defamation laws against consumers who provide honest feedback, as part of entering this platform.
Such a platform being voluntary would ensure that only good professionals step forward to be rated. Customers will, of course, not provide custom to anyone who is not willing to get himself/herself fated. Those who agree to be rated would also have an incentive to provide excellent quality of service to ensure continued high ratings. This would improve the quality of services provided by the professionals. The last period problem would remain but it is likely to be relatively small, and other mechanisms could be designed to deal with it.
Such a platform can initially run in parallel with existing schemes and over time, after it is evaluated, it could allow the scrapping of such schemes.
We can call this platform Citizens’ Eye.
In 2011, Poland decided to liberalise access to 250 of the 380 currently regulated professions. Need to find out more about this bold experiment.
Overall, I think it is high time to think of a new models that support the market instead of requiring major government involvement – which merely increases inefficiency and makes things worse.
Have you thought in detail about any such reputational platform? Happy to receive any inputs.
Here’s a generic framework to look at this issue:
My FB post here.
Why do we need to license GPs? They are harmless creatures. The worst they can do is to misdiagnose – in which case one has to go to the specialist in any case.
Even most specialists can do no serious harm. So only those with the most potential for harm (mainly surgeons) need to be under the scrutiny of government. Even that can be minimised through a voluntary reputational platform.