Question

Explain the basic tradeoff a state makes when it tightens regulations on licenses for physicians, pharmacists, or any other professionals. What are the costs and benefits?

Answer 1

Firstly, let us clear ourselves regarding the true meaning of the phrase, tradeoff. In the field of economics, tradeoff usually refers to what we give up in order to gain something. In other words, it is the opportunity cost of choosing one action over the other.

When the State decides to tighten its regulations on licenses for physicians, pharmacists or any other professionals, there are negative as well as positive sides to it. Discussing these shall help us understand the tradeoff problem that the State is faced with in reaching such a decision.

• When regulations are tightened, professionals, have to undergo rigorous verification and quality checks, noting their authenticity before they get their license to legally work as a professional. In the case of pharmacists and physicians, it is very likely that such a strategy on part of the State will lead to a fall in the absolute number of physicians and pharmacists. This is primarily because getting a license now depends on a lot more attributes than it used to (eg. getting a license for a physician might now depend on some speficied desirable student traits). Now this poses a serious threat to the overall society as far as physicians and pharmacists are concerned since medicine and medical care shall now get costlier as the number of service providers decline. In case of other professions, it leads to a similar problem by reducing the number of service providers. This segment therefore explains the costs of undertaking such a decision
• Now, coming to the benefits when the State tightens regulations of licenses, society is more likely to benefit even though the absolute number of service providers have declined. This is because now, owing to tighter regulations, there is introduced some sort of quality checks before a license is handed out. Therefore the overall quality of services in the economy improves significantly.

Given the costs and benefits of the decision taken by the State, it shall weigh out whether or not the benefits and worth the cost. Rather, whether or not the benefits outweigh the cost. It is only in this situation that the State shall decide to proceed with its plan of action.

Note that the question of whether or not the benefits outweigh the costs from such policies are relative to each societal formation. For example, in a more populous underdeveloped country where a majority of the population lives in poverty, making sure that healthcare at reasonable prices being available is of utmost importance rather than focusing just on the quality of services provided.

Hope this clears out your doubt regarding this situation.