Occupational Licensing Run Amok


I’m perennial frustrated by the status quo bias of most people’s thinking about political issues. If you’re faced with a very serious problem that can only be solved by regulation—climate change, for example—people get very exercised about the fact that increased regulation could increase the costs of many goods and services. Meanwhile everyone ignores the large set of existing regulations that are often targeting total non-problems.

Kevin Carey, for example, writes about occupational licensing in Indiana, a distinctly right-of-center state where they apparently even have a professional licensing process for hypnotists:

Yet the way our government has gone about choosing what kinds of postsecondary education demand which levels of official state scrutiny doesn’t really make much sense. In certain situations–heart surgery, for example–there’s an obvious societal interest in strong regulation of the labor market. But licensing hypnotists is crazy, and the same is true for massage therapists, hearing aid dealers, cosmetologists, and auctioneers–all of whom also need to be duly licensed in Indiana. I mean, what’s the worst thing that could happen at an auction run by an unlicensed auctioneer? The guy doesn’t talk fast enough and people are late for lunch?

The over-regulation of cosmetologists is not, as such, a huge macroeconomic issue. But the aggregate impact of all these minor inefficiencies—including the difficulties they pose for people who might like to relocate their businesses across state lines—is plausibly quite large. And unlike caps on greenhouse gas pollution or taxes that finance public services, there’s no real value in these regulations. Your average citizen is not closely monitoring the state of hearing aid dealer regulation, the only people paying attention to these bodies and lobbying their members are the incumbent stakeholders trying to insulate themselves from competition.