Obama Finally Gets An Issue Right (Sort Of): Occupational Licensure
Free-market advocates have long argued that occupational licensure laws do a lot of damage but little or no good. The first strong challenge to such laws I can recall reading was in Milton Friedman’s 1962 classic Capitalism and Freedom. Not content to pick off the easy and obvious cases, he went after the hardest one, licensing of doctors, and argued that people would be better off without it.
Since then, many economists have made similar arguments against licensure, ranging from risible and obviously anti-competitive instances such as interior designers to professions like medicine and law where poor quality work can have serious consequences. In this recent article published by the Foundation for Economic Education, for example, Robert P. Murphy argued that market mechanisms such as competency certification are far superior to licensure.
Rarely have I come across interest in this issue from liberals, probably because they’re so habitually inclined to think that government regulation must improve upon market results that they don’t take critiques of licensure seriously. (One counter-example, however, is the fact that some left-leaning law professors are willing to stick their necks out and criticize the way state licensing of attorneys harms poorer people, a point I discussed here.)
So it was surprising to read that in President Obama’s proposed budget, there is a small (by federal government standards, anyway — $15 million) amount of money for a study of occupational licensing requirements in the fifty states. That idea got a favorable shout out on the leftist site Vox. Writer Timothy Lee observes that “many states have expanded licensing rules to professions where it doesn’t make much sense,” and links to a study by the resoundingly libertarian Institute for Justice showing that occupational licensing has grown like kudzu over a southern field in summer.
I would like to offer up one cheer for this initiative, which is, I think, unique in the entire history of the Obama administration. What else has it done that has not expanded the scope and power of government?
Even the tiniest glimmer of understanding among “progressives” that regulation can be counter-productive is a good thing, an intellectual breakthrough that could lead much further.
But one cheer is enough.
For one thing, Congress does not have any constitutional power to appropriate money for this purpose. Under Article I, Section 8, which lists the permissible objects for federal spending, there is nothing about giving states money for the purpose of conducting studies. Whether for a good purpose or a foolish one, federal grants to state governments are not authorized and as Judge James Buckley forcefully argues in his book Saving Congress from Itself, need to be stopped completely. (I reviewed his book last month.)
For another, studies by the states of their licensing laws aren’t necessary and won’t do any good.
State government studies are not necessary because this subject has already been studied extensively. For much less than $15 million, state officials could all acquire a copy of Professor Morris Kleiner’s sharply critical book Licensing Occupations. Those officials could also inexpensively compile a mountain of scholarly papers showing that licensing imposes high costs in exchange for negligible consumer protection.
Besides, state-commissioned studies are likely to be wishy-washy affairs written more to please the officials who send the money rather than to provide robust analysis.
The real difficulty, however, is that occupational licensing is a special interest group political problem, not an honest policy mistake. We have licensing laws around the country in numerous fields – taxi drivers, hair-braiders, flower-arrangers, security alarm installers, massage therapists, and so on – because practitioners successfully lobbied for licensing as a means of limiting competition.
If Obama or anyone else is really interested in eliminating those laws, political leadership is essential. Even though licensing is a state concern, there is no reason why Obama couldn’t use his presidential bully pulpit to inform those Americans who still listen to him that these laws are detrimental to consumers. If he were to do that, drowsy eyes would pop open: “Did I just hear him say that downsizing government can be good?!”
Most people are at best vaguely aware of licensing laws and their effects. That makes it easy for interest groups to get their way with politicians, who happily accept campaign support from them in trade for maintaining the anti-competitive status quo.
If Obama is truly serious about this, he ought to speak out, not merely toss some money into the budget.
Article originally published on Forbes.com.