Thursday, August 5

Public choice theory and occupational licensing

What is the purpose of occupational licensure? An exhaustively researched paper by Paul J. Larkin Jr. provides evidence. Larkin directs The Heritage Foundation’s project to counter abuse of the criminal law, particularly at the federal level, as senior legal research fellow in the Center for Legal and Judicial Studies. Here is the conclusion of the paper:

George Bernard Shaw once quipped that “all professions are a conspiracy against the laity.” Although overstated for effect, Shaw’s aphorism contains considerable truth. The public benefits from laws regulating who may diagnose disease, prescribe medication, and perform surgery. But not every regulatory program can be justified on the ground that it is necessary to protect the health and safety of the community. It would be risible to defend occupational licensing restrictions for barbers, cosmetologists, and hair-braiders on the ground that those restrictions are critical to the community because they protect the public from bad hair days. The true purpose of those laws is to benefit members of a favored profession by allowing them to raise prices. Elected officials pass such laws to give those workers economic rents in return for political rents. The effect is to quietly subsidize regulated parties without having to openly appropriate them money from the treasury raised by taxes on the public. And politicians achieve that result with-out telling the electorate about the income transfer and while euchring the public into believing that the legislation is in their interest, not that of the benefitted special interest group.

The laws protecting hair care, however, do not stand alone. Numerous state regulatory schemes function simply as a means of limiting entry by potential rivals in order to protect incumbents against competition and allow them to raise the price of their services. Indeed, occupational licensing schemes often serve no other purpose. When that is true, occupational licensing statutes are just another form of crony capitalism, and the public is the loser. It is time for the Supreme Court to acknowledge what is actually going on with occupational licensing and to intervene in order to protect the public from the worst excesses of that practice.

The full paper is available at Heartland Institute: Public Choice Theory and Occupational Licensing.