Letter from Washington: The case for, and against, occupational licensing
Based on the reports I’ve heard in the past week, it strikes me as overwhelmingly likely that the National Flood Insurance Program will lapse again sometime in December. On the other hand, I’d predict that the Senate will pass a long-term reform bill sometime in early 2012. Although neither is perfect, both the House-passed bill and the Senate Banking Committee bill contain a number of things that seem like very strong reforms to get the NFIP on the right track.
The one thing that isn’t dealt with—and probably can’t be dealt with—is the NFIP’s debt. The rules under which the program operates make the debt, currently a little less than $18 billion (and likely to go up this year), almost impossible to ever pay off. thus, debt forgiveness is going to have to happen one day, but probably can’t happen unless the United States balances its budget (difficult but not impossible in the near future) and it becomes a priority (also difficult but not impossible). I’d think that debt relief is probably likely sometime in the next 20 years but probably not in the next 10, and even that’s being optimistic.
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Florida state Rep. Bill Hager, R-Boca Raton, has introduced the long-awaited Florida Hurricane Catastrophe Fund reform bill, H.B. 833, in the Florida House of Representatives. His bill doesn’t move as fast or as far as I and others have proposed in the past but it does rather closely track FHCF Chief Operating Officer Jack Nicholson’s proposals to reform the cat fund. It seems like a step in the right direction.
Nonetheless, even if the bill becomes law, which it should, it won’t spell the end of Florida’s insurance ills. Real reform, this year or next, will require policies that raise rates for policies written through Florida’s Citizens Property Insurance Corp. and allow greater rate freedom in the private market. Still, Cat Fund reform, if it passes, will pull Florida back from the brink. For that reason alone, the proposal deserves very serious consideration.
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During a meeting of the American Legislative Exchange Council, a task force on commerce, insurance, and economic development, which I advise, considered a proposal from the Goldwater Institute that would have radically changed professional licensing. (Like all ALEC model legislation, the bill, of course, had no actual legal authority.)
Essentially, the model bill proffered by Byron Schlomach, director of Goldwater’s Center for Economic Prosperity, would have more-or-less ended all state-run professional licensing for everything and replaced it with a system of purely private licensing for everything. Under the proposed model bill, any private entity could issue a license to do anything on any grounds they decided on and, if someone forged a private license, the government could put that person in jail. (I asked if it would apply to brain surgery and Schlomach said “yes.”)
Thus, I spoke against it even though I am very sympathetic to the idea. (The task force voted unanimously to refer it for further study.) Ultimately, I think that much professional licensing ranks among the very worst things a government could do to the economy, entrepreneurship and individual initiative. It’s absurd that people need to go to beauty school to cut hair and even crazier that some states license interior decorators, coffin salespeople and all manner of other professions. Much professional certification, such as licensing of insurance agents, is almost entirely for the benefit of one industry or another. That said, I’d offer a very limited defense of licensing in some cases. Three quick rules come to mind:
- If one accepts that the government has any role in promoting public health and safety, it should probably have a role in some types of licensing.
Unless one wishes to deal with all risks to public health and safety via tort law in a post facto fashion, and I don’t, the state should have some role in preemptively maintaining public health and safety. The test for state intervention in these cases should go well beyond preventing people from doing things that are bad for them (smoking, drinking, eating fatty food) but instead, should focus on preventing things that have a significant chance of unwillingly depriving others of life, health, liberty and property. This includes preventing serious dangers (poisoned food, houses that collapse) that may not be apparent to observers and taking reasonable steps to prevent the spread of communicable disease.
This means that it’s reasonable for the government to require minimal sanitary standards in restaurants and thereby license food service managers, for doctors to be required to pass medical boards and for civil engineers who build public works to take tests first. The tests for these things, mostly, should be limited to the bona fide public safety aspects of their work.
For example, it’s sensible that people who cut hair and do nails pass something similar to the food service sanitation tests that make sure they have a minimum knowledge of dealing with blood-borne pathogens. Since there’s no public health risk in getting a bad haircut, however, there’s no reason that people who go to work as hair stylists should actually need to know how to cut hair. That’s for customers to decide.
- Much licensing is pretty reasonable as it is and, were it eliminated, we would see very little change from most perspectives.
For example, insurance agents and real estate agents are currently state-licensed everywhere. If we stopped requiring licensing, I suspect we’d see almost no change in those professions. Neither license is particularly difficult to get as it is and both, basically, involve tests to show that someone has the minimum of knowledge necessary to make sales in a competent manner. Almost nobody would hire people without training essentially equivalent to the current license standards anyway. Theoretically, there is a liberty interest in eliminating this type of licensing, since it isn’t necessary. Practically, I don’t believe we’d see any real change in these professions (or many others) if licensing were eliminated tomorrow.
- The greatest public benefits will probably be realized by focusing efforts to limit licensing in less-skilled professions.
I see a strong theoretical argument for allowing just about anyone to represent someone else in a civil court case. But I think the public benefits of allowing “lawyers” who hadn’t attended law school or passed the bar would probably be tiny to non-existent. Anyway, by almost any measure, the United States already has too many lawyers. making more people “lawyers” wouldn’t improve much of anything and could cause all kinds of chaos.
On the other hand, replacing the need to attend beauty school with a health and safety course of a few hours would open up reasonably well-paid jobs to lots of people. It should be a much higher priority for libertarian-minded people.
