Get the podcast

Jumping through Hoops

Dr. Morris Kleiner on Occupational Licensing

Milton Friedman’s Capitalism and Freedom has sold over a million copies, but when it was first published in 1962 it introduced Americans to a very different worldview from the prevailing winds of increased spending and regulation.

While today most economists have conceded that Friedman was correct in his recommendations to reduce trade barriers, cut unnecessary spending, and reform welfare to eliminate the disincentives to work, some of his key ideas remain controversial. Friedman took a radical stance against all forms of government licensing — including the licensing of doctors, which he said leads to inferior care and the establishment of a medical cartel.

For some, this pill is too bitter to swallow. Consumers, the story goes, demand licensing and registration of occupations that require in-depth knowledge and extra precaution, such as medicine. However, as Friedman pointed out, it is rarely consumers who lobby the government to institute licensing requirements, but rather existing professionals seeking to keep out the competition. He writes:

Licensure therefore frequently establishes essentially the medieval guild kind of regulation in which the state assigns power to members of the profession.…The most obvious social cost is that any one of these measures, whether it be registration, certification or licensure, almost inevitably becomes a tool in the hands of a special producer group to obtain a monopoly position at the expense of the rest of the public. There is no way to avoid this result.…The members [of the profession] look solely at technical standards of performance, and argue that we must have only first-rate physicians even if this means that some people get no medical service — though of course they never put it that way. Nonetheless, the view that people should get only the “optimum” medical service always leads to a restrictive policy. — Chapter 9, *Capitalism and Freedom*

Against a one-size-fits-all “cadillac” healthcare system, groups of nurse practitioners have come up with legislation to break through medical monopoly to offer primary care services. Some of these bills, such as California’s SB 491 were introduced only to be defeated — despite support from the AARP — because of the stranglehold of more powerful lobbies like the American Medical Association.

Today, the battle over occupational licensing is playing out in the states, with California among the strictest (nearly 1/5 of working Californians need a license for their jobs). Dr. Morris M. Kleiner, a professor and AFL-CIO Chair in Labor Policy at the Humphrey School of Public Affairs, is a leading expert on licensing who studies the economic impact — seen and unseen — of forcing people to jump through hoops before practicing their chosen profession.

Dr. Kleiner joined to discuss a report he published for the Institute for Justice last year titled, At What Cost? State and National Estimates of the Economic Costs of Occupational Licensing.” He and is co-author estimate that licensing costs nearly 2 million jobs, and hundreds of billions of dollars. Some of these costs can be understood clearly — services in licensed industries are more expensive. Others are less obviously measurable, such as the misallocation of resources — particularly of human capital — when people are forced to either fulfill burdensome licensing requirements or abandon their vocation in favor of less productive work.

While there may be some benefits to those with the time and resources to jump through government hoops, this reward accrues at the expense of the most disadvantaged members of society — the poor and unskilled.

Kleiner will talk about which states are leading the way to reform, and how groups like the IJ are fighting the government in court on behalf of our vital economic freedoms.

LINKS

RELATED SHOWS