“Just because somebody packs up that moving van in Chicago, Illinois, they don’t lose their skills on the way to the state of Arizona. Why should somebody have to suffer the burden of thousands of dollars or weeks or months of recertification in a skill that they already have?”
So said Doug Ducey, the Republican governor of Arizona, in making his case recently for relaxing Arizona’s licensing laws. What Ducey and Republicans in the Arizona legislature propose is a small step in the right direction. Some economists who have studied the issue, including the late Milton Friedman and George Mason University’s Daniel Klein, argue for getting rid of all occupational licensing. This may sound radical. It is radical. But there’s a strong case for it that is rooted in basic economic reasoning and lots of evidence. What might seem to be powerful arguments for keeping occupational licensing are actually quite weak.
These are the opening two paragraphs of my latest Defining Ideas article, “Occupational Licensing Is a Bad Idea,” April 2, 2019. HT2 Alexis Garcia for making me aware of the proposed legislation in Arizona.
Another excerpt:
The third reason for doubting the consumer protection rationale is that if that were the driving force, one would expect, at least occasionally, that consumers were the ones who pushed for licensing. Yet, even though over 800 occupations are currently licensed in at least one state in the union, I know of no example where consumers were the driving force. Were consumers really that concerned about unlicensed fortune tellers in Annapolis, Maryland (Question: how would you judge their quality?), unlicensed manure applicators in Iowa, or interior designers in many states in the union? In every case I know of, the people who initiated the licensing were practitioners of the licensed occupation, not the consumers. Of course, the practitioners stood to gain from restricting competition.
A paragraph about medical licensure:
In his 1962 classic, Capitalism and Freedom, Milton Friedman even made a case for ending licensing of doctors. He pointed out that licensing made doctors’ fees higher than otherwise, causing some people to get less medical care than otherwise. An alternative he proposed, which many economists favor for many currently licensed occupations, is certification. In a discussion I had with the earlier mentioned Alan Krueger on NPR, Krueger said that some reduction of licensing would be good, but he “wouldn’t want an unlicensed doctor to touch” him. I would, if a trustworthy certifier had given thumbs up. Indeed, many of us wouldn’t want even licensed doctors to treat us on particularly serious ailments if they were not certified for that ailment. If we had certification rather than licensing, I predict that we would quickly have at least 10 percent more doctors, as foreign doctors resident in the United States came out of the woodwork and more of them moved here.
And finally my pitch for the Institute for Justice, a remarkable organization:
One reason I donate to the Institute for Justice is that it is on the forefront of protecting people’s right to make a living, which means going after burdensome licensing requirements. The case for no licensing requirements is strong.
READER COMMENTS
BC
Apr 3 2019 at 1:18pm
“I know of no example where consumers were the driving force [behind licensing].”
That’s because, even without licensing rules, consumers can already refuse to buy from providers whose reputations those consumers don’t trust, whether due to lack of certification or other reasons.
Licensing restrictions are constraints on consumers, not on service providers. The restrictions prevent consumers from buying from unlicensed providers, regardless of the consumers’ preferences. Pro-choicers on abortion usually recognize that a law that nominally prevents doctors from performing abortions is really primarily a law that restricts womens’ abortion choices. Strangely, many of those same people don’t view licensing restrictions imposed nominally on providers as really primarily restrictions on consumer choices.
David Henderson
Apr 3 2019 at 3:18pm
You wrote:
Exactly.
You wrote:
They certainly are constraints on consumers, but they’re also constraints on providers. As I thought I made clear in the piece, many potential providers are constrained to the point of not being able to practice.
James Hanley
Apr 3 2019 at 2:30pm
Amen.
One of my political economy students last term talked about a woman in his city who worked as an orthodontist out of her basement, making braces for kids. This was a poor minority neighborhood, where few could afford the thousands of dollars forbraces. The lady had worked as an orthodontic assistant for years, and knew what she was doing at least well enough to make her $300 braces a satisfactory deal to her clients.
The real-world alternative available to these folks was not “someone who really knows what they’re doing,” but not getting braces at all.
David Henderson
Apr 3 2019 at 3:18pm
Great story, James. I hope she hasn’t been shut down.
Duncan E
Apr 4 2019 at 1:16am
I’m not sure how certification wouldn’t end up the same as licensing? E.g. in order to get certified for hair braiding you need to take a 2000+ hour course to get the certification?
robc
Apr 4 2019 at 8:56am
Two ways it would be different:
There would be competing certificates.
There would be no government requirement to have a certificate, the certificate is for the consumer to use as a guideline.
Matthias Goergens
Apr 4 2019 at 9:36am
Very similar to certain certificates already work today.
Eg even for medical doctors. In most jurisdictions once you are an MD you can legally do anything any other MD can. But hospitals and patients still insist on extra training for eg brain surgeons.
(I am not sure about exact details. Would be useful for someone to fill in.)
Merlyn
Apr 6 2019 at 12:38am
The suggestion of certification seemed to also be as a lawful requirement.
robc
Apr 8 2019 at 12:11pm
I think you are misinterpreting it.
Certification as a lawful requirement would be licensing.
Certification is for the consumer or employer to use, as they see fit, instead of a mandatory license.
Vivian Darkbloom
Apr 4 2019 at 3:55am
With respect to most things, I’m not a proponent of large central government. But, here’s a case where federal rules rather than 50 state schemes might make sense. If the licensing or certification were issued at the federal level, it wouldn’t be necessary to obtain a new license or certification when moving from Illinois to Arizona.
Not long ago, John Cochrane bemoaned on his blog the long wait he encountered in getting a new driver’s license after having moved from Illinois to California. I made the same observation—why does each state need to issue driver’s licenses in the first place? Is driving so much different in Illinois than in California? If driver’s licenses were issued at the federal level, there would be no need to wait at all when moving from state to state! I’ve gotten driver’s licenses in four different countries and the US is the only one I know of where it is issued by sub-national governments. (And, yes, I’m aware that driver’s licenses are also used as ID’s).
Ducey’s proposal for greater reciprocity is a step in the right direction; however, a federal standard for occupations in which licensing or certification may make sense would be a more efficient solution than the status quo.
Alan Goldhammer
Apr 4 2019 at 8:15am
Vivian beat me to the punch! My late father was a civil engineer, a profession that required state licensure. Though most of his practice was with the architecture firm that he co-founded in California, the firm did a certain amount of out of state design business that required he and his partner to be licensed in those states. Arguably, there are some professions that require a level of competency that is assessed by the licensing process. A minimal federal standard is far better than a myriad of different state ones.
BC wrote, “That’s because, even without licensing rules, consumers can already refuse to buy from providers whose reputations those consumers don’t trust, whether due to lack of certification or other reasons.” In some cases this is true but a lot of times it’s not. One current example is this Stem Cell company in Florida that is subject of FDA litigation right now. Consumers are getting stem cell treatments that in most cases are not effective and have serious side effects. Do you think that consumers are able to judge this benefit/risk themselves?
robc
Apr 4 2019 at 8:57am
Yes.
Matthias Goergens
Apr 4 2019 at 9:40am
For civil engineers, it looks like what you are looking for would be someone posting a huge bond to absorb civil liability in case that building they signed off on comes down.
That sounds like a job for an insurance company to me. And the insurance company would be free to demand that the engineer signing off has various certifications or job experience. (And can make it a sliding scale with lower premiums for more experience or a simpler design instead of a binary decision, too.)
robc
Apr 4 2019 at 8:59am
Certificates are already issued at the federal level. I don’t know of any cert orgs that give a damn about where you live. Some might, I think some of the Kosher certs are local instead of national. But on the other hand, Microsoft is worldwide.
Christophe Biocca
Apr 4 2019 at 10:43am
On the other hand, it creates an even more effective mechanism by which regulatory capture can happen. The per-state licensing schemes means any state can decide that requiring licenses for hair braiders was a mistake, and reverse course. Make it a federal level system, and there’s no longer any way for one state to try removing/adding license requirements, and the other states to learn from that experience.
Vivian Darkbloom
Apr 4 2019 at 12:19pm
I don’t see this as an area where the experimentation argument carries much weight. Isn’t it possible that states, if free to do so, would tend to add more burdensome requirements to keep « foreign « competition out? This seems to be the current case. In any event, the benefits of uniform standards surely outweigh the ability to have 50 different schemes.
There are a lot of other ways in which our federal system is unnecessarily inefficient and duplicative. Why , for example, should corporations be required in many cases to file a tax return in each state and the federal government ?
Vivian Darkbloom
Apr 4 2019 at 2:31pm
I replied to this but it was deleted, apparently because of a typo in my name. Sorry, but I’m not going to re-write it.
Lauren Landsburg--Econlib Editor
Apr 5 2019 at 10:33am
Your comment wasn’t deleted. If you mistyped your name and it didn’t match your email address of record, it was likely held up by the spam filter. We’ll look into it. Most comments are published within 24 hours even when held up by the spam filter. You can always contact us at webmaster@econlib.org or econlib@libertyfund.org if one of your comments takes too long to appear.–[Econlib Editor]
Vivian Darkbloom
Apr 5 2019 at 11:39am
Thanks for your message. The comment appeared for a short time (during which I noticed the slight discrepancy in the name) and then it disappeared.
Viv
Lauren Landsburg, Econlib Editor
Apr 5 2019 at 3:08pm
I’ve located and published the comment. I fixed your nickname while I was at it. If it happens again, please just email us.
Vivian Darkbloom
Apr 6 2019 at 10:08am
Thanks Lauren. As far as my “nickname” is concerned, my friends call me Viv.
Mark Z
Apr 4 2019 at 6:17pm
Arguably, this is an example of how private ratings systems are better at responding to consumer (and producer) interests than the state. People often argue for government intervention because it can eliminate redundancy, but here state governments have every incentive to be redundant: they raise revenue via occupational licensing, and state politicians get campaign money from rent-seeking guilds. Meanwhile, there isn’t a different Yelp for every state.
robc
Apr 4 2019 at 9:02am
I mentioned it above, but I always use Kosher as the example of why government regulations are rarely needed. The USDA doesnt determine if something is Kosher, it is done by a series of private organizations. I don’t know why other food regulations couldn’t be handled the same way.
“Organic” should be handled the same way, instead of by regulation.
And same for most occupational licensing. Let a private org give certs and determine which cert you value.
Comments are closed.