Zadekpedia

Ask BobAsk a question of every episode, 2009–2023 — answers cite the minute

Occupational Licensing

7 min read

Part of Regulation and the administrative state.

Start here

Every episode (8)

Who argued it

Michael Tanner ×2 · Dick Carpenter · Jessica Thompson · Ilya Somin · Jonathan Rothwell · Clint Bolick · Anthony Sanders

Economic Liberty · Public Choice Theory · Criminal Justice Reform · Federalism · Constitutional Law · Regulatory Capture · Education · Minimum Wage

Background

Definition and framing

Occupational licensing is a government permission slip to work: a worker must satisfy requirements set by a licensing board or government agency rather than please a consumer or an employer. Dick Carpenter, identified as Senior Director of Strategic Research at the Institute for Justice, defines economic liberty as the right to earn an honest living free from unnecessary government intervention, and says licenses now affect about 25% of the workforce in the United States New data shows that occupational licensing does nothing to increase quality (2022). Michael Tanner gives a similar figure, stating that between 25 and 30 percent of all jobs in America today require permission from the government to practice one’s occupation Libertarian Anti-Poverty Policy (2019).

Bob Zadek frames licensing as a supplicant’s request for governmental permission — asking whether one may braid hair, arrange flowers, or decorate an apartment — and says he despises the word “license” Derek Khanna - What’s Stifling Innovation? (2014). He argues licensing is a relative economic newcomer, not a founding-era practice, and that the founders believed people should enjoy the fruits of their labor and transact with whomever they wish New data shows that occupational licensing does nothing to increase quality (2022).

Permissionless innovation

Derek Khanna, in an episode on what stifles innovation, supplies the Silicon Valley term “permissionless innovation”: you have an idea, gather friends, build an iPhone app or website, and launch in the morning without asking permission, obtaining a license, hiring a lawyer to map the regulatory environment, or paying off a local city council member. Most such ideas fail, he says, but the environment lets them happen; Mark Zuckerberg launched Facebook without asking anyone’s permission Derek Khanna - What’s Stifling Innovation? (2014).

Khanna contrasts this with car manufacturing: the last new American entrant to the American car market was Chrysler Motors in 1936, followed by Tesla, and the absence of successful new entrants in 75 years shows something is wrong. Bob Zadek attributes the real bar to entry not to manufacturing cost but to the established franchise system, protected by laws in all 50 states and by federal law, which in most states denies Tesla the right to sell cars other than through a franchise dealer. He compares this to requiring Apple to sell only through Best Buy, and likens the taxi cartels that resist Uber to the same pattern: established businesses at risk are the enemy of technology, and those bars hurt every consumer Derek Khanna - What’s Stifling Innovation? (2014).

The Louisiana casket case

Damon Root, discussing the libertarian legal movement, describes the Louisiana casket case. Under the state law, selling a casket required being a fully licensed funeral director — many hours of study, thousands of dollars in course fees, and embalming roughly 25 dead bodies, a year or two of one’s life. Bob Zadek interjects: just to build a wooden box. Root notes that Louisiana permitted burial without a casket, imposed no requirements on casket design or materials, and had no health or safety regulations dealing with caskets at all; the only regulation protected funeral directors’ income Overruling Government Overreach: Damon Root on the Libertarian Legal Movement (2014).

Monks who had built traditional handmade wooden caskets for their own use began selling them to fund repairs to their abbey, and the state moved against them for lacking funeral-director licenses. The Institute for Justice brought the case, arguing there was no conceivable legitimate government purpose the law could serve — the deferential legal standard — and the court agreed it failed the smell test on every level. Root says Louisiana fought all the way to the U.S. Court of Appeals, the level below the Supreme Court, and that Tennessee and Oklahoma had similar laws on the books Overruling Government Overreach: Damon Root on the Libertarian Legal Movement (2014).

Root places the issue within a philosophy of free labor and a libertarian reading of the 14th Amendment as protecting economic rights, including protection from regulations that serve no legitimate health or safety purpose and act as economic protectionism Overruling Government Overreach: Damon Root on the Libertarian Legal Movement (2014).

Licensing as a barrier to escaping poverty

Michael Tanner, whose book The Inclusive Economy is the subject of the episode, argues many barriers to the poor sit at the state and local level: zoning laws that prevent affordable housing, land-use laws that drive up rent, police and criminal justice enforcement, school systems, and licensing boards that prevent people from practicing their profession Libertarian Anti-Poverty Policy (2019).

His example is Louisiana cosmetology. To become a beautician or cosmetologist, one must take a lengthy course, buy the textbook, pay for instruction, and pass a test given only twice a year and only in Monroe, Louisiana — a two-day test with a fee and a large number of chemistry questions. Tanner walks through the obstacles for a poor single mother on welfare: scraping up course money, finding childcare, arranging transportation to Monroe, paying for a hotel room for two nights, and, on failure, waiting six months to repeat it all. He says such requirements protect the monopolies of those already in the profession and keep out competition, and that they have a long and racist history Libertarian Anti-Poverty Policy (2019).

Quality and consumer choice

In a 2022 episode built around a new Institute for Justice study, Bob Zadek argues no one hiring an interior decorator, barber, or yoga instructor asks first whether the person is licensed; people rely on recommendations, Yelp, samples of work, and meetings. He asks why a massive licensing regime exists when no one relies on it, and says the answers are all bad New data shows that occupational licensing does nothing to increase quality (2022). Carpenter’s framing is that licensing is justified as protecting public health and safety but frequently serves as an anti-competitive barrier that fails to improve service quality while imposing significant costs on the economy and aspiring workers New data shows that occupational licensing does nothing to increase quality (2022).

Across episodes: the same argument, more data

The topic recurs across the episodes without a change in the underlying argument. The 2014 Khanna episode treats licensing as one instance of permissionlessness denied, alongside franchise laws and taxi cartels; the 2014 Root episode supplies the casket litigation and the 14th Amendment economic-liberty frame; the 2019 Tanner episode ties licensing to poverty and gives the cosmetology example; and the 2022 Carpenter episode adds a study and the claim that licensing does not increase quality. The later treatment is distinguished mainly by the turn to hard data and by the breadth of the 25% workforce figure, not by any concession from the earlier position.

Backlinks