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  • rmacculloch

Lets' even the tables - did Brash, du Plessis-Allan & right-wing media folks unfairly put a race slant on the true reason behind the real estate Māori values course?

This Blog doesn't aim to be a partisan vehicle that relentlessly defends one side of the political spectrum. Its' more an economics blog than a political one. As we've been giving leftist journalists a hard-time lately, lets even the tables and now give rightist ones a run for their money. On that note, why are there so many restrictions, regulations & requirements to work in so many different professions? You can't start-up as a pharmacist, a builder, a real estate agent, a financial adviser, and many more in NZ, even if you're very knowledgeable & skilled at doing those occupations. Why? Because you need to get "licensed" - you need to jump through a whole bunch of hoops. One reason could be to ensure there is a higher quality of service and stop cowboys & cowgirls operating in these kinds of industries.

However, another reason is slightly sinister: many professions want to limit the number of people working in their industry to ensure that the insiders get paid a premium. This behavior was called "rent seeking" by US economist George Stigler in 1971. He argued that industries seek to "capture" their regulator and the true reason behind many rules is that they are wanted by incumbent players to limit new entrants from starting up. Such behavior is anti-competitive and puts up the cost of living (ring any bells?). Its worthwhile to make this observation in the context of Realtor Janet Dickson who was facing a five-year ban for refusing a compulsory Māori values course set by the Real Estate Authority. Stigler's work suggests the Authority in Wellington may not give a fig about supporting Māori values - the bureaucrats there may only care about themselves & the real estate agents and firms who they regulate and who are making truck loads of money from exorbitant commissions. Anything to restrict entry to the profession by making it harder to become an agent would likely be received with open arms by the industry, which may have captured its regulator. Given the number of millionaire real estate agents there is probably a lot of truth in it.

If this rent-seeking explanation is true, then no-one comes out of the debate well. The Real Estate Authority was insincere about the true reason for introducing this course and the likes of Brash & du Plessis-Allan got fooled. The losers are .. you & me, who have to pay higher fees when we sell houses - as well as those who suffer when racial division is stirred up. The winners are our incumbent agents who may have been thrilled to see Dickson get kicked out. The profession tried to appear as if it was acting in the social good, when instead its motive may have been to make more profit & increase the cost-of-living. Next time the industry huddle with the Authority to design more courses, let me suggest they have a 40 hour compulsory course on gardening to help take out a few more prospective agents.



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