[75 CPA]

Anytime you see the phrase, “to protect the public interest,” a little red flag should go up! Rent seeking behavior is at play.

“In yet another huge announcement from the AICPA this morning, Roger CPA Review was told that panels are being formed in order to determine a new passing score for each section of the exam. This is in conjunction with the new CBT-e changes that are set to occur 01/01/2011.”

“Before you start freaking out and signing up for all your exams at once, worrying that the passing rate will be pushed up to 100 points and you will have to get each and every question right – consider that the reasoning behind this review process is to protect the public interest and make the CPA designation stay as prestigious as it is. The AICPA will ensure that the exam is still fair and completely passable.”

“Rent seeking is the term used by economists when referring to actions taken by individuals and groups seeking to use the political process to plunder the wealth of others (Rowley, Tollison, & Tullock).” Rent-seeking behavior is the idea that government licensure of professions is necessary to protect the public. Milton Friedman, 1976 Nobel prize winner in economics, wrote his PhD dissertation at Columbia in the 1940’s on rent-seeking behavior. He refuted the constantly repeated mantra of rent-seeking behavior. Milton Friedman’s works provide empirical evidence that licensure is nothing more than a mechanism used by members of a profession to raise the entry costs, and thus keep wages and profits artificially high. Rent-seeking behavior improves the welfare of someone at the expense of the welfare of someone else (Baker, Morris, Barnett).