Specialization, information, and regulation in American economic history

This dissertation concerns the role of specialization and asymmetric information in the rise of the regulatory state in late 19th and early 20th century America. It consists of three essays that attempt to demonstrate how the forces of specialization created problems of asymmetric information in the markets for many goods and services, and how these problems in turn generated a productive role for government regulation.; The first essay is about the origins of state pure food regulation. In this essay I argue that state governments began to regulate food products in the late 19th century because specialization and the growing complexity of foods made it costly for consumers to accurately determine food quality. The available qualitative and quantitative evidence is more consistent with this hypothesis than the main alternative hypothesis, which argues that pure food regulations were introduced to increase the market power of the producers of “traditional” food items.; The second essay concerns the enforcement of the 1906 Pure Food and Drug Act. Many histories of food and drug regulation claim that the fledgling Food and Drug Administration (FDA) was largely ineffective in its efforts to enforce the Pure Food and Drug Act. This essay argues that although this law was written in a way that made it difficult for the FDA to enforce through the courts, the FDA was able to secure substantial compliance because it could offer useful services to firms in the way of product quality certification and direct assistance in improving product quality. Through its enforcement work, the FDA thus played an important role in shaping the markets for many food items.; The final essay deals with the rise of “professionals” and the emergence of occupational licensing regulation. I find that professionals came to dominate many occupations because advances in specialized knowledge made it advantageous for individuals engaged in certain occupations to obtain a university education. I also find that occupational licensing laws were adopted as a partial solution to an asymmetric information problem that arose as specialization and the growing complexity of professional services made it difficult for consumers to judge service quality.