Barriers to entry created by government. There are many barriers to entry in the market, but the main tools used to create barriers to entry in the market are as follows
Each of these regulations was created for various public purposes, but all have the potential to act as barriers to entry. Barriers to entry can be used in a way help the masses or it could be used to add the burden on general public. Like all tools, licenses are also a tool which can be used positively or negatively. It is the person or government who uses the tool who can decide the nature of use. If it’s in the right hands, it could do a good job. But if this goes in the wrong hands, the general public could face the consequences.
Licenses: The licensing of physicians and other professionals is usually justified on the basis of maintaining quality of the individuals in this profession. However because the licensure of physicians also restricts their numbers, it acts as a barrier to entry and can generate higher profits for those in the profession. Physicians have raised the quality argument in disputes over the range of medical services that other medical professionals such as physician assistants and nurses aides can perform. Critics have charged that physicians are simply trying to maintain their incomes in the face of increased competition among the medical service providers. The debate also surfaced b/w the physicians and psychologists. For more than a decade now, this debate has been in discussion. Psychologists believe that the physicians are taking unfair advantage of this act. The only benefit of the licenses is to the physicians, and not for the general public. It has been pondered upon that a change in regulation could actually benefit the general public.
The idea is to protect the mass population. Often monopolies are formed who make profits on expense of the public. Hence governments are expected to safeguard to rights of the population. Licenses are barriers to entry of new entrants. This could be used to safeguard the rights of monopolies as well. This is a common practice in the 3rd world countries. Often the basic necessities of life such as electricity and telephone are owned by the government itself. So to protect their corruption or mishandling the government often puts up licenses and other acts to stop entry of new competition. People are forced to use the product or service owned by the government.
Monopoly is often a threat to the general consumer. Governments make rules to curtail the Monopoly. There are under the table activities often in the 3rd world countries, in which the monopolies bribe the governments in some way or shape to get legislation in their favor.