Occupational Regulation and the Threat That We’ll All Die Without It

During the past one hundred years, a myriad of occupations have become regulated by the state. In your city it is very likely that barbers need to be registered or licensed by government bureaucrats before they are legally entitled to work. The same probably applies to landscapers, engineers, cosmetologists and doctors, to name only a few. The argument goes that if the state does not regulate who can, and cannot, practice then hapless customers will end-up doing business with crooks who will defraud them, make them sick or, even worse, kill them.

However, the “safety” argument is very paternalistic and treats customers as boobs who cannot make decisions for themselves. It is a lie, of course. When customers decide whom to do business with they use a complex mix of criteria including things like price, reputation, risks, education, friendship and registration with private organizations such as the BBB. It is illogical to argue that interference with individual choice by regulators and their “one size fits all” policies result in more safety, or better outcomes, for customers. In fact, if history has taught us anything it is that results are always worse when central bureaucrats interfere with the freedom of citizens to make their own decisions.

It is more telling that the “safety” argument is discredited by real world data. For example, consider that engineers in the UK do not need to be licensed for the vast majority of engineering work (the exceptions are very specific and limited, such as reservoir design). In spite of this, Buckingham Palace and the Tower of London have been standing for hundreds of years. We don’t hear of electrical explosions killing people, or Bentleys erupting in flame. Nor do we hear the UK public, or even politicians, demanding that engineers be licensed. (Note that engineers in the UK can voluntarily register with the UK Engineering Council and put “CEng” after their names, and it is up to customers to decide whether they require that particular designation, or not.)

In fact, regulation can give a false sense of security to customers because it does not guarantee competence for the task at hand. Licenses are held-up as sufficient proof of ability, credibility and future performance, which of course they are not. Furthermore, public safety is undermined when regulators purposefully conceal wrongdoing by members or make it difficult for the public to learn the histories and reputations of their members.

So, if the safety argument falls flat, then why do regulated workers and their regulators continue to support a system that tramples on the rights of free citizens to enter into contracts with whomever they wish? The reason is centuries-old and dates back to the rise of medieval guilds when trade and occupational cartels evolved to monopolize whole industries and occupations in order to keep competition low and prices high. (One of the more curious facts about regulation is that the initial drive for it always comes not from the politicians or the public but rather from the workers themselves.)

Today the term “guild” has been replaced by terms such as “college”, “association” and “board”. Think “cartel” whenever you hear the words “medical college of physicians”, “board of cosmetology”, “provincial bar association” or “board of licensure of interpreters for the deaf “. Under the guise of public safety these organizations exist solely to benefit those already in the trade, and to keep out those who would dare intrude upon their revenue stream.

Before World War I, occupations were generally very open to all who wished to practice. However, the Great War resulted in a great consolidation of power by the state (called “war collectivism” by Murray Rothbard [1]). It was this boundless power that attracted the occupational monopolists like moths to a flame1.  Due to the very poor optics, politicians were often initially hesitant to bring occupational monopolies into existence, and so they created state-sanctioned boards that oversaw the voluntary registration of workers in their trades. On the surface, voluntary registration appears to be compatible with a free and peaceful society. It does not necessarily diminish competition, nor does it prevent non-registered workers from earning a living. But, as Milton Friedman highlighted, voluntary registration is the slippery-slope to the ultimate end goal of all occupational cartels: compulsory state licensing [3].

Licensing employs the full coercive power of the state and is neither peaceful nor voluntary. Things can get very serious for the unlicensed individual who crosses over into regulated turf. The competence, training, history and reputation of the worker or business that are relevant to the customer may have no relevance to the overseers: the state can deprive anyone of the ability to earn a living if it deems that services or products are being provided without a state-granted license in a protected occupation. Imagine how frightening it is when a person receives a “cease and desist” letter demanding that he stops working even though customers are lined-up to do business with him.

But helping the customer is not the goal of any cartel, and professional guilds are no exception. Consider that license holders are often restricted in the types of advertising they can carry out, even though advertising can play a key role in informing potential customers about the capabilities and reputation of the worker or business. Furthermore, set fees are sometimes mandated in an attempt to keep prices high. As Professors Love and Stephen point out, “Restrictions on advertising and prohibitions on using fee-levels to attract business are used to restrain competition from ‘breaking out’ between existing suppliers.” [4] Lew Rockwell highlights the fact that licenses can sometimes be revoked for “unprofessional conduct, a term undefined in law”, and that unprofessional conduct has “included such practices as price advertising.” [5]

It is very typical for laws that regulate occupations to be vague, thus giving bureaucrats and regulatory boards great leeway in determining who can, and cannot, practice. For example, one piece of legislation defines engineering as “any act of designing, composing, evaluating, advising, reporting, directing or supervising wherein the safeguarding of life, health, property or the public welfare is concerned and that requires the application of engineering principles”. One can only imagine the countless scientific occupations that could conceivably fall under this extraordinarily broad definition. Also, note the use of the term “public welfare”, a term that has been used to justify all sorts of atrocities committed by those who crave authority over others.

Such broad definitions not only increase the power and scope of the controlling authorities, but they also discourage those in tangential occupations from engaging in activities that might be deemed to intrude upon the work of other regulated occupations, activities that could nonetheless be immensely helpful to customers. One can only imagine the countless inventions and innovations which have never been allowed to come to fruition due to this dampening effect. Moreover, some workers and businesses are driven underground in order to “fly under the radar” thus concealing their reputations, and entire business transactions, from public view. When business is driven underground customers are less likely to seek protection from the courts or the police when things go wrong.

Innovation is also negatively impacted when licensing requires graduation from accredited schools. Because accreditation is given only when the curriculum of a school falls within a narrow range of acceptability, experimentation and exploration by the school is suppressed. Another sinister side-effect of the control exerted by professional cartels and their accreditation boards is the pressure sometimes put on schools to reduce student admissions in response to perceived threats to industry salaries or price levels caused by an increased supply of graduates [5].

Basic economics teaches that monopolies are impossible to sustain in a free society without state support. History teaches that even state-enforced monopolies eventually crumble. Today, politicians are starting to recognize the high costs that are incurred by citizens when cartels are legislated into existence. Consider that the Greek government is presently deregulating 160 different professions. The affected “professionals” such as pharmacists and lawyers, whose foremost concern should be for the public (if you listen to the oaths they commonly take), are not happy one bit. In fact, they have launched strikes in protest thus depriving the public of their services [6]. New Hampshire is considering the deregulation of a suite of occupations including athletic training, fish & game guiding, court reporting and massage therapy [7].

It is nonsensical to claim that public safety requires occupational cartelization. Financial reality and the truth will ultimately prevail. And we shall remain alive and well, and very safe, long after the professional regulators and their monopolies are gone.

1 This period also witnessed the rise in the use of the term “professional”, a term that was applied to those individuals who were regulated by the state and consequently assumed to be in possession of skills and knowledge far superior to those of the non-regulated non-professionals [2].

References:

[1] Ronald Radosh and Murray N. Rothbard, eds., A New History of Leviathan (E.P. Dutton & Co., 1972).

[2] William L. Anderson, “False Convictions: Another Sorry Legacy of Progressivism”, http://www.lewrockwell.com/anderson/anderson313.html (Lewrockwell.com, April, 2011).

[3] Milton Friedman, Capitalism and Freedom (The University of Chicago Press, 2002).

[4] James H. Love and Frank H. Stephen, “Deregulation and Professional Boundaries: Evidence from the English Legal Profession”, Business and Economic History, Volume 26, no. 2 (Business History Conference, Winter 1997).

[5] Lew Rockwell, “The Trouble With Licensure”, http://www.lewrockwell.com/archives/fm/08-90.html (Lewrockwell.com, Aug. 1990)

[6] “Deregulation to Open Professions”, http://www.neoskosmos.com/news/en/Deregulation-open-professions (Neoskomos.com, Jan., 2011).

[7] “Licensed Professionals Speak Out Against Deregulation”, http://www.wmur.com/video/26957451/detail.html (WMUR New Hampshire, Feb., 2011).

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