The Blogosphere Is Having an Unlicensed Conversation About Occupational Licensing!
There has been some great talk in the blogosphere about occupational licensing over the past week. Matthew Yglesias began the discussion, and Conor Friedersdorf, guest hosting at Andrew Sullivan’s Daily Dish, has joined in. I may be a few days late to the discussion, but I can ascribe that to two words: State Fair.
While some of the larger national think tanks regularly take on this issue, we here at the Show-Me Institute cover occupational licensing more than most other state-based groups. It is great to see people engaged in the conversation, and I hope they enjoy getting punched in the face as much as I enjoy throwing the punches.
There really isn’t a more accurate example of democratic failure than occupational licensing. It is public choice economics at its most concise. A small group of people stand to gain financially from a very narrow policy action, and passionately advocate for it. A large group of people stand to be harmed very marginally from that same issue and so don’t care about it enough to spend time and effort becoming informed and fighting back. Politicians measure the gains for them to be made from satisfying the small group (campaign contributions, union support, etc.) versus the fallout from harming the larger group (there’s generally no fallout), and — voilà! — an entire industry becomes regulated with a few votes and the stroke of a pen, while the only person who shows up to complain about it is some jerk like me. You grandfather in the existing practitioners (or exclude only a small portion of them), and put the screws to future practitioners and the general public, neither of whom realizes at the time that anything is going on.
The purpose of licensing is always the economic gain of those practicing the occupation to be licensed (the regulatory push never comes from the outside — always the inside), but advocates are usually smart enough not to say that. Instead, the arguments actually advanced in favor of licensing are twofold: safety and search costs. The safety argument might be legitimate for a few professions (i.e., drug testing for school bus drivers) but very quickly devolves into a love of the nanny state — unless you really believe that the threat of a bad haircut actually involves your “safety.”
The search costs argument was always wildly overstated. It assumes that we need the state to license heart surgeons, for instance, so you don’t have to check references on your own while you are having a heart attack. (This is sort of a bad example, given that I think doctors and nurses may be one field in which the benefits of licensing outweigh the costs, but stick with me.) This general argument fails in that the employer is unlikely to have hired an unqualified person in the first place (the hospital probably confirmed that the doctor graduated from medical school), and how often do people really hire someone cold? You get references for plumbers, electricians, pediatricians, etc., from family, neighbors, or friends who have used those people before, and who are willing to recommend them. License or no license, reputation and referrals are what keep people in business, or drive them out of it.
The scam artists who successfully operate in the underground economy and show up at your house to do the roofing right after the straight-line wind blows the shingles off won’t be stopped by licensing laws. Even if I thought licensing laws protected consumers by limiting scams, I still don’t favor giving the government more power over our economic lives and taking the responsibility away from individuals to make better choices by checking references, calling the Better Business Bureau, etc. Others might disagree, but the evidence that licensing improves quality and protects the public is lacking.
I could go on, but this post is long enough. It is great to see people participating in this debate. Now, as they told me during my very brief boxing career, keep your hands up. …