‘The Licensing Racket’ Review: There’s a Board for That

The restrictions and costs of professional licensing don’t apply only to doctors and lawyers. Hairdressers, decorators and others must deal with them too

By Alex Tabarrok. He reviews the book The Licensing Racket: How We Decide Who Is Allowed to Work, and Why It Goes Wrong by Rebecca Haw Allensworth. Excerpts:

"hair braiding has been practiced for at least 30,000 years. For most of that history, no government license was required. Yet today, in many American states, hair braiders must obtain a license—and that often means hundreds of hours of cosmetology training that costs tens of thousands of dollars."

"Nearly a quarter of American workers now require a government license to work, compared with about 5% in the 1950s. Much of this increase is due to a “ratchet effect,” as professional groups organize and lobby legislatures to exclude competitors."

"Governments enact occupational-licensing laws but rarely handle regulation directly—there’s no Bureau of Hair Braiding. Instead, interpretation and enforcement are delegated to licensing boards, typically dominated by members of the profession. Occupational licensing is self-regulation. The outcome is predictable: Driven by self-interest, professional identity and culture, these boards consistently favor their own members over consumers."

"At the Tennessee board of alarm-system contractors, most of the complaints come from consumers who report the sort of issues that licensing is meant to prevent: poor installation, code violations, high-pressure sales tactics and exploitation of the elderly. But the board dismisses most of these complaints against its own members, and is far more aggressive in disciplining unlicensed handymen who occasionally install alarm systems."

"“the board was ten times more likely to take action in a case alleging unlicensed practice than one complaining about service quality or safety.”"

"She finds similar patterns among boards that regulate auctioneers, cosmetologists and barbers. Enforcement efforts tend to protect turf more than consumers."

"it was these competitor-initiated cases, “not consumer complaints alleging fraud, predatory sales tactics, and graft,” where boards gave the stiffest penalties."

"You might hope that boards that oversee nurses and doctors would prioritize patient safety, but Ms. Allensworth’s findings show otherwise. She documents a disturbing pattern of boards that have ignored or forgiven egregious misconduct, including nurses and physicians extorting sex for prescriptions, running pill mills, assaulting patients under anesthesia and operating while intoxicated."

"the board system is not designed to protect patients or consumers. She has a lot of circumstantial evidence that signals the same conclusion. The National Practitioner Data Bank (NPDB), for example, collects data on physician misconduct and potential misconduct as evidenced by medical-malpractice lawsuits. But “when Congress tried to open the database to the public, the [American Medical Association] ‘crushed it like a bug.’”"

"the AMA and the boards limit the number of physicians with occupational licensing, artificially scarce residency slots and barriers preventing foreign physicians from practicing in the U.S. Yet when a physician is brought before a board for egregious misconduct, the AMA cites physician shortage as a reason for leniency."

"but when it comes to allowing foreign-trained doctors to practice in the U.S., the claim suddenly becomes something like “patient safety requires American training.”"

"We deregulated airlines, trucking and natural gas, reducing prices and increasing efficiency. It’s time to deregulate the professions. Alarm installers, interior decorators and hair braiders should not require a license. In cases where health and safety are at issue, Ms. Allensworth suggests replacing occupational licensing with narrowly tailored regulation. Chefs don’t require an occupational license to cook, but we do require commercial kitchens to be inspected for sanitation."

"Many European countries offer combined undergraduate and medical degree programs that take only six years, compared to the eight or more years required in the U.S."