The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne

Exercise 12

The Washington State Utilities and Transportation Commission periodically launches a crackdown on unlicensed movers of household goods.
(a) The commission's enforcement chief said the crackdowns occur because of consumer complaints about damaged goods and price manipulation and because authorized carriers are complaining about growing competition from unlicensed movers. Which set of complaints do you suppose put the most pressure on the commission? How many consumers do you think know about the existence of the State's Utilities and Transportation Commission? How many licensed movers probably know about the commission?
(b) State officials have said that the legislature set strict requirements for entry into the moving industry in the 1930s because legislators were concerned that "unregulated, cutthroat competition would lead to a deterioration in service, safety problems, overly intensive competition in urban areas, and a lack of service in rural areas." Do you agree that these problems are likely to arise in the absence of regulation? Does competition usually lead to a deterioration in service? When is competition "cutthroat" and "overly intensive?" If you ask this last question of people already in the moving industry, how are they likely to respond?
(c) There is a "stringent public convenience and necessity test" for any new firm seeking a mover's permit, which places on the applicant firm the burden of proving that its services are needed. Can that be proved?
(d) The transportation director for the state commission is on record as believing that there are currently "more licensed movers than is necessary-as far as service rather than rates are concerned." What is the relationship between high rates and sufficient service?
(e) What does the fact that there are dozens of unlicensed movers operating
in the state indicate about the transportation director's claim?