License Please

Here’s an amusing backfire.

Exchange standards serve two audiences: buyers and sellers.  Well, maybe they serve three audiences; the buyers, sellers, and the middlemen.  Oh wait, maybe they serve four audiences; the buyers, the sellers, the middlemen, and the tool/technology vendors.  No wait, what about the agents?  I could go on, but the point is that as we negotiate and evolve the standards each group advocates.  Successful advocacy for a given class requires solving a coordination problem.

The smaller classes can coordinate more easily.  The middlemen, the agents, the tool vendors are well positioned in this game.  Real estate agents, or condo management companies, or manufactures of tools that conform to the metric system have an inherent advantage when it comes time to set the rules for their respective industries.  It’s not just he middlemen of course, any industry were either the buyers or the sellers are concentrated will end up with standards that benefit who ever is more concentrated.  But I have a particular interest in the folks that gather around the actual point of exchange; i.e. the middlemen and the agents.

Ok, so there’s that.

As market scale up private ordering is reified into commercial and civil law.  This is entirely natural, any large scale market will require regulatory devices at the scale of the law and government.

So unsurprisingly the agents, middlemen, etc. work to assure that the regulatory frameworks are aligned with their preferences.  And this is one reason why their professional societies often transition.  This is one of the drivers of professional licensing.

None of the above requires any appeal to ethics and while it might be standardized fun to we need not say anything snarky about the player’s motivations.  I don’t want to deny people their fun.  There are lots of other fun to be had.

Licensing systems breakdown in pretty regular ways.  There are always some percentage of practitioners who’s licenses have lapsed.  There are always some, and often a lot, of failure of discipline; e.g. practitioners who should have lost their licenses.  There are always tenure issues, that give rise to license holders who’s skills are woefully out of date.

This morning’s news includes the discover that a vast percentage of the real estate agents in Massachusetts are practicing without a license.  Often their licenses lapsed years and year ago.  The commissioned paid to such agents were illegal and so sellers, who generally paid those fees, should be able to get their money back.

What fascinates me about these stories is how the scale of the varies groups plays out.  The individual sellers will have trouble coordinating their response; but on the other had the amounts are sufficient to motivate them to act, even if they have to act individually.  Individual brokers are small entities as well, which makes them hard to track down and means they lack deep pockets.  But, then most of the brokers worked for larger brokerages; some are very large.  One the one hand these provide a deep pocket to go after, but on the other hand these guys have the ability to mount a coordinated response to the threat.

All in all it looks like if you sold a house in the last decade you might want to investigate if the agents involved in the transaction had their paperwork in order.

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