The constitutional frame: licensing as a presumption against liberty
In a discussion of a proposed “Libertarian Constitution,” Timothy Sandefur described licensing as a way of saying that the government owns your rights and will give them back if it thinks that is legitimate. What licensing says, on his account, is that a person may not do a thing unless government permission is obtained. He allowed that rare circumstances exist where licensing is appropriate — his example was that one does not want somebody building a nuclear reactor without having beforehand learned how to do that and gotten a degree in nuclear physics — but argued that such requirements get overused and expanded until existing businesses persuade the government to impose a regime that makes it impossible or illegal to compete against them Timothy Sandefur on The Libertarian Constitution (2021).
Sandefur tied this to a constitutional provision barring government from depriving people of the fruits of their labors: a licensing requirement so burdensome or so unjustifiable in terms of public safety that it deprives a person of the ability to earn a living without good reason would, under that provision, be unconstitutional. He extended the logic to the right to live a peaceful life of one’s choosing, offering the hypothetical of a state making it illegal for people to live together without a marriage license, which he noted no state has done. He also said the most obvious historical example of abusive marriage licensing was the use of licensing laws to prohibit intermarriage between the races in the years before the Supreme Court found that unconstitutional in the 1960s Timothy Sandefur on The Libertarian Constitution (2021).
Bob Zadek framed the discussion around the presumption of liberty — the idea that an activity is presumed permitted and the burden falls on government to show otherwise — and asked Sandefur to explain it. Sandefur said the libertarian constitution contains a presumption that all persons are at liberty to enjoy and use their life, liberty, or property in their best judgment, and that when government infringes that right the courts determine whether the government has constitutional authority and a genuine justification. He contrasted this with what he called the progressive Constitution, under which a person is not free unless able to persuade the public to grant freedom through a democratic vote Timothy Sandefur on The Libertarian Constitution (2021).
Licensing boards and regulatory capture
In a later episode, Zadek characterized licensing as a set of statutes that declare an activity unsusceptible to competition, noting that others can obtain a license but that the cost, time and standards are designed to discourage entrants rather than invite them. He asked Dick Carpenter about licensing boards — the bodies that set the rules for obtaining a license and act as gatekeepers for who may perform an activity New data shows that occupational licensing does nothing to increase quality (2022).
Carpenter explained that a licensing board oversees everything about the license itself: the requirements, the fees, the policing of the fence, and the gatekeeping function. The board is created by enabling legislation; when a bill is passed and signed by a governor, it establishes a board to oversee the license, and that board is immediately populated by people already in the occupation, often the same people who lobbied for creation of the license. The result, in Carpenter’s phrase, is regulatory capture: the occupation is captured by people from the occupation itself, who are given government power to regulate who may enter it. He said such boards typically have five, nine or eleven members, almost always people already in the occupation or licensed in it, sometimes with one or two non-occupational or public members New data shows that occupational licensing does nothing to increase quality (2022).
Testing the quality justification with Yelp data
Zadek asked Carpenter about a study he led, published by the Institute for Justice, that used data-driven analysis to test the central claim in defense of licensing boards — that they protect the public from bad service. Carpenter said the claim that licensing increases quality of service is a testable proposition, and that the data used was Yelp data, which he described as a form of crowdsourcing that lets consumers report their experiences and rate quality The Presumption of Liberty & Occupational Licensing (2022).
The study examined differences in quality of service within six occupations across nine comparisons, comparing states that had a license with states that did not, or states with more severe licensing requirements against states with less severe ones. Carpenter described the design as giving licensing proponents the benefit of the doubt: if the quality claim were true, quality should be higher in the licensed or more severely licensed state than in a neighboring state without a license or with a lighter requirement. Across all comparisons, he said, licensing did not improve quality of service, and the findings were similar to those of other researchers using similar analysis. The occupations examined were interior designers, locksmiths, manicurists, tree trimmers, barbers and cosmetologists. In two comparisons, Carpenter said, quality was actually less in the more burdensomely licensed state than in the less burdensomely licensed state The Presumption of Liberty & Occupational Licensing (2022).
The Cadillac effect and measured economic costs
Carpenter described two categories of cost from licensing: those that can be quantified economically and those harder to quantify but still borne by consumers individually. On the second, he invoked what Milton Friedman called a “Cadillac effect”: licensing forces every consumer to buy a Cadillac in a licensed occupation, preventing a consumer who is willing to accept a Chevrolet level of service from buying it. The disproportionate effect falls on consumers who cannot afford the licensed service and are forced either to do without or to perform the service themselves. Carpenter cited a classic study from about 40 years earlier finding that licensing actually increases threats to public health and safety, because people who cannot afford a licensed provider do their own electrical work and harm themselves. Without a license, he said, an occupation has multiple tiers of service providers and the consumer is free to choose the tier he can afford The Presumption of Liberty & Occupational Licensing (2022).
On quantified costs, Carpenter cited work by Morris Kleiner, a professor at the University of Minnesota, and a co-author, examining the aggregate costs of licensing. Because a license artificially inflates prices and wages, the study asked what consumers would pay without a license versus what they are forced to pay with one. Looking state by state and combining across states, and using the states with good data available, they found that in about 36 states lost economic output ranged from about $28 million in Rhode Island to $840 million in California. Nationally, Carpenter said, licensing costs the economy somewhere between $6.2 and $7 billion in lost output. A second measure, misallocation, reflects labor diverted from occupations matching a worker’s skills and interests; the misallocation cost ranged from $675 million in Rhode Island to $22 billion in California, and nationally between $184 and $197 billion. Carpenter described these as annual numbers and the costs as staggering The Presumption of Liberty & Occupational Licensing (2022).
Across episodes
The topic is treated in the 2021-11-08 episode with Timothy Sandefur and in the 2022-11-21 and 2022-11-22 episodes with Dick Carpenter. The treatment shifts from constitutional theory to empirical and institutional argument: Sandefur supplies the presumption-of-liberty frame and the claim that licensing regimes are unconstitutional when they deprive people of a living without good reason, while Carpenter supplies the account of regulatory capture, the Yelp-based quality study, and the Kleiner cost figures. The excerpts show no disagreement between the guests and no development of one guest’s position by another; the later episodes extend the earlier constitutional argument into evidence rather than revising it.
What the sources do not cover
The excerpts do not identify the state in which the teeth-whitening case arose, the name of any bill or statute, or the holding of any case beyond Sandefur’s reference to a 1960s Supreme Court decision on intermarriage. They do not give the title or institutional affiliation of Dick Carpenter, nor the name of Kleiner’s co-author, nor the date of the Kleiner study beyond “several years ago.” The excerpts also break off at several points — at the heading of the teeth-whitening case, at the good moral character requirements, and mid-explanation of the Yelp study’s data points — so the content of those sections is not available here.