Completely Unjustified Occupational Licensing

I have been doing a series on blog posts on completely unjustified government policies. It started here. This post is about another disaster: unjustified forms of occupational licensing.

Occupational licensing is a disputed policy. Some people criticize it for reducing competition and for raising the cost of services. Others defend it on the ground that it protects the public from unqualified practitioners. People can certainly think of examples to support both sides.

My own opinion is that occupational licensing is dangerous and we should almost always rely upon certification. The government could certify persons for an occupation, and those persons could display and advertise that certification. Persons who were not certified could still practice the occupation but could not say they were certified. A more intrusive regulation might require uncertified persons to list in their place of business and in advertising that they are uncertified.

While I believe such certification is the best government policy, I don’t believe opposition to it falls into the category of completely unjustified policies. There are some reasonable arguments for such opposition.

What is completely unjustified is the situation that exists in the United States where each state has occupational licensing and requires someone to become re-licensed when they move from state to state. This is an outrage with no defense. It merely serves to protect from competition people serving in occupations within the state.

The obvious solution is to have a form of reciprocity—if someone gets a license in one state, then they are entitled to practice in other states under that license. It is sometimes argued that some states have deficient licensing regimes that do not sufficiently protect the public and therefore such reciprocity should be extended to those states.

It is not clear that most of these “deficient” regimes are actually problematic, but let’s imagine that some are. One could accommodate this concern about deficient regimes by allowing states not to accept reciprocity from states that have substantially different licensing regimes than they have. But that justification could not be used for similar licensing regimes.

Unfortunately, that claim is often used. Take just one example. I know someone who is a dentist and had passed the passed the Northeast Regional boards, but when they moved to California, they had to take the California boards again. Absurd. But what is worse is that the test questions for the California boards were taken from the Northeast Regional boards.

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on February 15, 2019 at 11:11:39 am

Milton Friedman, at an address at the Mayo Clinic essentially outlined the argument why ALL state licensing/certification schemes are unnecessary restraints of trade by attacking the one most commonly cited as being needed - the state licensing of physicians.

If the state licensing of physicians can be shown to be wholly unnecessary, then what other occupations are there that can be shown that must have state licensing/certifications of its practitioners?


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OH Anarcho-Capitalist
on February 15, 2019 at 11:29:36 am

Well said.

A tragedy several years ago led to the revelation that in Texas a cosmetologist must take - at great expense - more and longer training than a balloon pilot flying passengers.

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on February 15, 2019 at 12:48:48 pm

I recall when a classmate of mine was sentenced on a charge related to a woeker's comp fraud. He discussed it with a self taught "inmate lawyer" (everybody has a hobby)) who looked at the paper and immediately saw that the sentence was under the wrong statute. These guys are permitted under law to do research and will advise other inmates. They are a pain in the ass to the Administration, but are really too busy too busy to plan burning down the facility.

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Earl Haehl
on February 15, 2019 at 18:12:39 pm

Guess who favored licensure? Adam Smith!

There are … easy and effectual remedies … by whose … operation the state might, without violence, correct whatever was unsocial or disagreeably rigorous [fundamentalist] in the morals of all the little sects into which the country was divided.

[One] is the study of science and philosophy, which the state might render almost universal among all people of middling or more than middling rank and fortune; not by giving salaries to teachers in order to make then negligent and idle [a topic Smith had just addressed], but by instituting some sort of probation [test?], even in the higher and more difficult sciences, to be undergone by every person before he was permitted to exercise any liberal profession, or before he could be received as a candidate for any honorable office, of trust or profit. If the state imposed upon this order of men the necessity of learning, it would have no occasion to give itself any trouble about providing them with proper teachers. They would soon find better teachers for themselves, than any whom the state could provide for them. Science is the great antidote to the poison of enthusiasm and superstition; and where all the superior ranks of people were secured from it, the inferior ranks could not be much exposed to it.

Adam Smith, Wealth of Nations (1776), Book V, Chap. I, Part Third, Art. III "On the Expense of the Institutions for the Instruction of People of All Ages"

In short, Smith seems to embrace the idea that some amount of education is necessary for social cohesion (against the antisocial effects of fundamentalist religions). But simply putting teachers on the public payroll leads to negligence and idleness. Instead, we should make people pass a test to demonstrate that they have achieved some minimal level of education before than can "exercise any liberal profession" or hold any office.

This is kinda like the idea of telling highschoolers that they can't get a high school diploma without passing some state-mandated test--and then leaving it to the students (and their families) to determine how best to prepare for the test.

In short, the market-oriented Smith favored licensure as a substitute for other kinds of state interventions to ensure a socially-optimal level of education.

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