Friday, June 13, 2014

Optional Licensing

"Cyn! Guess where I am."
--Tess McGill (Working Girl)

It appears more people are waking up to the downside of mandatory occupational licensing. Far more workers require some form of occupational license today compared to a few decades ago.

As the post observes, this forcible intervention raises cost to consumers. It also serves as a barrier to entry in many fields, which hits low income workers particularly hard.

The merits of optional, rather than mandatory, licensing is discussed. Individuals could legally practice in a profession such as medicine, law, or finance without a license. However, some might choose to achieve certification to signal quality and commitment to the profession. Those without licenses would provide services to those who are less prices sensitive (assuming certified individuals would charge premiums).

Consumers might also be attracted to unlicensed individuals because they may be sources of novel services. Because they are less subject to constraints that may be imposed by licensing institutions, unlicensed providers are more likely to think entrepreneurially and to innovate.

Because mandatory licensing limits the quantity of goods and services available to consumers, relaxing licensing requirements improves standard of living.


dgeorge12358 said...

Trade licensing almost inevitably becomes a tool in the hands of a special producer group to maintain a monopoly position at the expense of the rest of the public. There is no way to avoid this result.
~Milton Friedman

dgeorge12358 said...

Consider also the willy-nilly growth of the Social Security number. When the numbers were created in 1935, they were supposed to be used for one thing only, to record individual workers’ payments into the Social Security system.

Eight years later, Franklin Roosevelt decided all new federal record-keeping would be based on the numbers.

In 1962, the IRS adopted them as taxpayer identification numbers. And after Congress permitted states to use the numbers for welfare payments and driver’s licenses in 1976, they mushroomed: food stamps, school lunches, federal loans, even blood donations required Social Security numbers. These days it’s almost impossible to open a bank account or hook up your telephone without one.
~Glenn Garvin