Occupational licensing should not be used to keep honest Americans out of work
When people hear that it is illegal to sell floral arrangements in Louisiana without government permission, or that you can go to jail for practicing interior design without a license in Florida, or that Utah requires more training to braid hair than to practice law, they tend to say, “That’s crazy.” But that’s only true if you think the primary purpose of such regulations is to protect consumers from bad apples. All too often, occupational licensing has a more sinister purpose: To protect industry insiders from competition and innovation.
Consider taxi cabs, for example. Until recently, most cities had a medallion system, whereby anyone who wanted to charge money for driving people around town had to apply for permission or purchase a medallion from an existing company. So valuable was the ability to participate in this government-created monopoly that New York City taxi medallions were selling for more than one million dollars in 2013. But now the price is less than a quarter of that amount and plunging. What happened? Two words: Uber and Lyft, which overwhelmed taxi cabs’ stranglehold on the transportation market with an irresistible combination of modern technology, superior service, and lower prices.
Speaking of New York City, the Internet erupted in howls of outrage last week over a law that permits only licensed kennels to provide dog-sitting services. Enforcement of that restriction will sideline sharing-economy services like Rover.com that match pet owners with pet sitters who typically charge far less than kennels do. And given the city’s well-known antipathy towards Airbnb—the Office of Special Enforcement reportedly devotes 95 percent of its time scrutinizing rental listings for violations of the city’s picayune rental rules—perhaps it was only a matter of time before dog-sitters got the same treatment at the hands of kennel operators that Airbnb providers have been receiving from the hotel industry and its friends in city government.
Ralph Waldo Emerson famously said that if a man makes a better mouse trap, the world will beat a path to his door. But nowadays his competitors are just as likely to beat a path to the nearest statehouse, with lobbyists in tow, seeking legislation to banish the innovator’s superior product from the marketplace. And nowhere is that shabby dynamic—crony capitalism dressed up as consumer protection—more pronounced than in the field of occupational licensing.