Category: Economics

The economic argument for state certification of certain professions rests on asymmetric information. The idea is that consumers might not know enough about medicine, for instance, to tell the difference between a good doctor and a quack. If we let consumers choose their doctors without constraint, so the reasoning goes, we would be overrun with quacks.

This is a decent argument for certification, but it’s not a good argument for mandatory state certification. If mandatory state certification were necessary to combat asymmetric information problems, the world would be overrun with bad piano teachers. Most parents are not pianists; how are they expected to know the difference between good and bad piano teachers? The answer is that they don’t have to know. If they want to know that their kid’s piano teacher is qualified, they just need to hire a teacher that a respected institution like the Royal Conservatory of Music has certified. Parents may not know what makes a good piano teacher, but this only means there is a market opportunity in delivering that information.

Private certification has many advantages over mandatory state certification. The first is that consumers who care less about quality, such as the parent who only wants a piano lesson as a substitute for babysitting and doesn’t intend his child to become a virtuoso pianist, can still choose to hire the cheaper, uncertified service.

The second is that competition regulates private certifying boards’ behaviour. Piano teachers are willing to pay to take Royal Conservatory examinations because of the premium paid to certified piano teachers over uncertified ones. The Royal Conservatory could attempt to sell certification to unqualified people, but it doesn’t do so because once people become aware of the dubious nature of the certification process, the price premium on certified piano teachers will shrink. The Royal Conservatory could also use its position as the premier certification body to excessively restrict the issue of certificates, but two factors mitigate its ability to do so: First, piano teachers and consumers could turn to other certification bodies or other means of signalling teachers’ skill. Second, more parents could risk hiring potentially less-skilled piano teachers.

The force of law eliminates these mitigating factors. Thus, state certification boards can get away with excessively restricting entry into the professions they certify, with police cracking down on anyone who attempts to offer a competing service. They can restrict consumer choice to only high-cost, high-quality services, while many consumers might prefer a low-cost alternative.

I can speculate with confidence that, if the state both certified piano teachers and strictly enforced the prohibition on uncertified piano teaching, piano teaching would be too expensive for many poorer families. This would probably be used as justification for the government to offer socialized piano teaching to all children (beyond that already offered in public school band programs). The irony is obvious from our perspective; we know that piano instruction is affordable when people are free to hire the piano teacher of their choice. We live in that world. But who, besides free market economists, would recognize the connection between mandatory state certification of piano teachers and the high costs of piano instruction? If public attitudes toward the mandatory certification of accountants, lawyers, doctors, and nurses are any indication, few would question a similar law applying to piano instructors.

The post How Private Certification Regulates the Market for Piano Teachers appeared first on The Economics Detective.

The economic argument for state certification of certain professions rests on asymmetric information. The idea is that consumers might not know enough about medicine, for instance, to tell the difference between a good doctor and a quack. If we let consumers choose their doctors without constraint, so the reasoning goes, we would be overrun with quacks.

This is a decent argument for certification, but it’s not a good argument for mandatory state certification. If mandatory state certification were necessary to combat asymmetric information problems, the world would be overrun with bad piano teachers. Most parents are not pianists; how are they expected to know the difference between good and bad piano teachers? The answer is that they don’t have to know. If they want to know that their kid’s piano teacher is qualified, they just need to hire a teacher that a respected institution like the Royal Conservatory of Music has certified. Parents may not know what makes a good piano teacher, but this only means there is a market opportunity in delivering that information.

Private certification has many advantages over mandatory state certification. The first is that consumers who care less about quality, such as the parent who only wants a piano lesson as a substitute for babysitting and doesn’t intend his child to become a virtuoso pianist, can still choose to hire the cheaper, uncertified service. (more…)

The post How Private Certification Regulates the Market for Piano Teachers appeared first on The Economics Detective.