The first hint that the real goal of occupational licensing isn't to protect consumers' health and welfare is that far too many of the professions that are licensed pose practically zero risks to ordinary people. Among the professions that are licensed in various U.S. states are florists, hair braiders and casket sellers. What are the chances that consumers will be wounded by poorly arranged bouquets of flowers or that corpses will be made more dead by defective caskets?
The real goal of occupational licensing is to protect not consumers, but incumbent suppliers. Most occupational-licensing schemes require entrants into a trade to pass exams — exams designed and graded by representatives of incumbent suppliers....
But what about more “significant” professions, such as doctors and lawyers?
The case for licensing these professions is no stronger than is the case for licensing florists and hair braiders. The reasons are many. Here are just two.
First, precisely because medical care and legal counsel are especially important services, it's especially important that competition to supply these services be as intense as possible. If the price of flowers is unnecessarily high or the quality poor, that's unfortunate but hardly tragic. Not so for the prices and quality of the services of doctors and lawyers.
Too high a price for medical visits will cause too many people to resort to self-diagnosis and self-medication. Too high a price for legal services will cause too many people to write their own wills or negotiate their own divorce settlements. Getting matters wrong on these fronts can be quite serious.
Won't, though, the absence of licensing allow large numbers of unqualified doctors and lawyers to practice? No.
People are not generally stupid when spending their own money on themselves and their loved ones. Without government licensing, people will demand — and other people will supply — information on different physicians and attorneys. Websites and smartphone apps will be created that, for a small fee, collect and distribute unbiased information on doctors and lawyers. People in need of medical care or legal advice will be free to consult this information and to use it as they, rather than some distant bureaucrat, choose
One thing I think sometimes gets lost -- the critique of licensing often focuses on where licensing is too restrictive - e.g. hair braiding or taxis or simple medical procedures.
But it is just as likely to fail because it is insufficiently restrictive. People will always say to me that they certainly want their brain surgeon to be a licensed physician, implying that licensing is appropriate for certain extreme skills. But would you really choose a brain surgeon merely because he or she was licensed? I would do a ton of research in choosing a brain surgeon, research that would go well beyond their having managed to pass some tests 20 years ago.
The same applies for restaurants - my standards go way beyond whether they have a 3 basin cleanup sink and have sufficiently high temperatures in their dishwasher.
The criteria for licensing is never "just right". Either it is too restrictive and eliminates competition that would provide me value; or else it is insufficiently stringent such that I have to perform the same due diligence I would have in the absence of any licensing regime (though perhaps with less robust tools since licensing likely stunts development of such consumer tools). And even if it happened to be well-calibrated for me, it will not be well-calibrated for my neighbor who will have a different set of criteria and preferences.