The Cost of Regulation
My previous post reported on my experience buying prescription eyeglasses online and raised the puzzle of why they cost five or ten times as much from a store. One commenter provided enough information so that I was able to locate the relevant California regulations.(specifically paragraphs 2559.1 and 2559.2 on pages 163-4). In order to dispense eyeglasses you must employ a registered spectacle lens dispenser and in order to be a registered spectacle lens dispenser you must pass an exam provided by the American Board of Opticianry (I'm leaving out some detailed exceptions and qualifications).
That means that the profession of eyeglass sellers is in a position, like other licensed professions, to control entry, to make it hard for people to join the profession in order to hold up the income of those already in. I have no data on how restrictive they actually are; perhaps someone else does.
But I do have some data on the outcome. Prescription eyeglasses, in my experience, cost from about $100 to $300 in stores in California. Online they cost about $20. If we take the bottom of the range for comparison, on the theory that the higher prices may represent either higher quality or additional services, and if we assume that the cost of selling online is only half the cost of selling in a store, that suggests that the effect of the regulatory restrictions is to make the cost of eyeglasses about two and a half times what it would otherwise be.
A little googling turns up a figure of 15.8 billion for optical retail sales in 2001. 1.9 billion of that was contact lenses. Combining this information, it looks as though restrictions on competition in the eyeglass industry cost consumers about ten billion dollars a year.
This is, of course, only a very rough estimate, but still an interesting figure. There is apparently an old literature that looked in more detail at the consequences of particular restrictions, and found large effects.