Monday, August 31, 2020

1889 Institute: if licensing laws protect consumers, why are they blatantly anti-consumer?

If Licensing Protects Consumers, Why Are Licensing Laws Blatantly Anti-Consumer?
By Mike Davis, 1889 Institute

Once upon a time, there was a small island whose economy revolved around scuba-diving tourism. The island's legislature considered scuba dangerous. Inexperienced divers would surface too quickly and get the bends. The legislature, wanting to make diving seem safer, passed a law banning sharks from designated scuba diving zones. There were no known shark attacks, nor were sharks frightening divers into surfacing too quickly, but people felt safer. This is what most occupational licensing schemes look like. Legislators give the public a sense of security, while giving powerful insiders protection from competition. The laws do almost nothing to help consumers. They’re futile. They are also deceptive.

Some licensing takes the deceit one step farther. Instead of just telling the sharks not to eat people (which they weren’t doing anyway) the legislature gathers a group of great whites to police the no-shark zone. The great whites chase away the sand sharks that might bite an occasional toe, and in return they get to feast on divers. These schemes charge practitioners with policing other practitioners, while giving them a range of protections from the consumers they are supposed to protect.

Occupational licensing is often cloaked in “consumer protection,” as if consumers are helpless to look out for their own interests. But most often those requesting licensing are members of the regulated industry. Some may seek to protect their livelihood from another licensing board. If music therapists are not licensed, they may fear the psychology board will run them out of business. But if that were their only motive, they would ask the legislature to declare music therapy beyond the authority of the psychology board. Fear of persecution may start the engine, but monopoly profits are the driving force. Licensing allows licensees to charge more for the same work by making it harder for a new competitor to challenge established practitioners. At best, licensing does vanishingly little to protect consumers.

At worst, licenses empower practitioners to abuse consumers. Every occupational licensing scheme in Oklahoma would violate federal antitrust laws, if anticompetitive state policies were not exempted by federal caselaw. This exemption is based on state autonomy, not on good market policy. It gives special interests a leg up. Antitrust laws are overused and imperfect, but they do represent the free market ideal of unrestrained competition. Consumers benefit if a new competitor can offer the same service at a better price or better service at the same price.

If legislators can’t see that Oklahoma’s licensing laws protect licensees at consumers’ expense, they should be replaced. Most of these regimes predate all our legislators, but the lack of movement in undoing these anticompetitive, anti-consumer, and anti-American laws is unacceptable.