Argentinian Decline and Texas Licensing

Welcome to the research round-up, our new weekly summary of the studies, briefings, and policy work that Mercatus scholars have produced over the past week.

The Rise and Fall of Argentina

At the turn of the 19th century, Argentina was the envy of South America and one of the most prosperous countries in the world. Literacy in Buenos Aires led its Latin American neighbors; infrastructure projects boomed; Europeans immigrated to the country at unprecedented rates. By 1913, Argentina’s per-capita income was one of the ten highest in the world.

Things have changed. On the eve of World War I, Argentinian incomes measured in at 72 percent of their American counterparts. In 2010, that number had fallen to barely one third. What happened?

Rok Spruk, a post-doctoral research fellow at the Faculty of Economics, University of Ljubljana - Laibach presents a compelling answer. Populist takeovers of resources and government repeatedly weakened the key institutions in Argentine society. As a result of redistribution and government favoritism, property rights diminished, lowering productivity and future economic growth. Simultaneously, rent-seeking flourished and exacerbated class conflict, which in turn led to polarization and the disappearance of stable governing norms. All of these actions compounded economic losses, resulting in severe reductions to the potential of the Argentine economy.

To read the entirety of Spruk’s working paper, click here. To read his summary policy briefing, click here.

Texas Needs More Freedom (When It Comes to Occupational Licensing)

Last Tuesday, Mercatus scholar Matt Mitchell testified before the Texas Senate Business and Commerce Committee on the effects of occupational licensure.

Despite the state’s tradition of individualism and liberty, Dr. Mitchell explained, many Texans still struggle to enter their desired professions. That’s partially because Texas requires licensure in order to enter many professions, including 37 low- to medium- income occupations. The average Texan seeking one of these 37 licenses would have to spend 341 days in training and pay $253. That doesn’t count the formidable cost associated with training for a license rather than working. That puts Texas a little above the national median; the Institute for Justice deems the state’s laws to be the 21st most burdensome in the country.

Dr. Mitchell demonstrated that these licenses aren’t proportional to the risks of the chosen occupation, either. Texan emergency medical technicians (EMTs) must complete 35 days of training under current law. But Texan shampooers are confronted with twice that, and barbers must train for ten times the EMT requirement. If you want to make a living as a security alarm installer, you will need twenty times that training; an aspiring athletic training will spend 1,460 days in training—forty times EMT training.

The economic literature tells us that these regulations raise prices, but that they do little—if anything—to increase safety. Instead, they act as barriers that special interests use to artificially inflate their prices and keep competition out of the business.

Thankfully, there are many promising ways to review licensure requirements and weed out anti-competitive and unnecessary rules. Dr. Mitchell outlined three ways that legislatures could accomplish this: create an independent review board, assign their own committees review responsibilities, or elevate the level of scrutiny that courts must give to occupational licensure laws.

To read the whole testimony, click here.