Recently I met with a couple who were in need of some legal services. They wanted to meet with me because they wish to pursue their chosen profession, but to do so they each need a license from the state. Unfortunately, the state conditionally denied their application for the license required to enter their industry and they need an advocate to help persuade the state to “allow” them to exercise their right to produce their own livelihood, that is, their right to live.
This couple has spent the better part of their lives going through rigorous education to be able to make a living doing something they love. Their educational pursuits have led them to earn multiple degrees including bachelor, masters, and doctoral degrees, and they have spent hundreds of thousands of dollars in reaching these educational feats. In return for their hard work and dedication they have only sought to be able to use their training to support themselves and to provide for their children.
Apparently, that is not enough for the Almighty State to bestow upon them the blessings of being allowed to produce in their industry of choice.
Their situation is not unique. There is hardly a services occupation that does not require a license these days. To name only a few of those occupations which require a license in my state: barber, nail technician, landscape architect, massage therapist, contractor, acupuncturist, and electrologist.
“What’s the big deal?” you may ask. Well. . . nothing. . . if you’re an advocate of coercion, but as liberty lovers we must see licensure for what it is: an immoral exercise of force and an overly burdensome restraint on trade.
Licensure, plain and simple, is a violation of the right to liberty. Ludwig von Mises recognized that “Government is a guarantor of liberty and is compatible with liberty only if its range is adequately restricted to the preservation of what is called economic freedom.” Ludwig von Mises, Human Action: A Treatise on Economics; The Scholar’s Edition, (2008), pg. 283. One of the many reasons why government licensure is incompatible with liberty, therefore, is because, as discussed below, it is destructive of economic freedom.
By natural right, and as recognized in a free market economy, anyone can pursue any means of providing for himself so long as in doing so he does not act fraudulently or otherwise violate the rights of others. The state mandated license turns the free market upside down. It prohibits everyone from producing in a given industry except for those who are granted the privilege of doing so by the state. The state, in such a scenario, absorbs all individual rights unto itself and then divvies up some of those rights in any number of ways, ranging from the granting of only one license to one individual or firm (monopoly) to granting a number of licenses to multiple individuals or firms (quasi-monopoly).
Under a licensing system, such as we have today, if someone attempts to exercise his natural right to provide for himself without the state’s nod of approval, that person goes to jail. Imprisonment for supporting oneself in an honest and non-fraudulent manner which does not infringe on the rights of others just doesn’t seem right does it?
The state and its advocates (statists) reason that such grants of monopoly are justified on the grounds that the state is protecting the health and safety of the consumer. After all, it is the state’s responsibility to protect the consumer against fraud such as persons feigning to have credentials and abilities which they do not. This reasoning, however, while at first glance seems sound, is based on two false premises.
First, it presumes that the market is incapable of establishing the needed producers. The statists believe that only the government can determine the proper criteria for what constitutes a producer who has the consumer’s best interest in mind. Under this belief system, the state is best equipped to determine what factors and characteristics the market requires in a barber, a contractor, a psychologist, and various other service oriented occupations. History alone, however, has shown that it is the market that is the great regulator of producers and protector of consumers. It is the market that constantly shifts and changes to supply consumers with what they demand and persuades producers to cater to consumers or go out of business.
Second, it “protects” rights through preemptive state action. Although protection is a proper role of government, that role becomes active only upon the violation of a right. Preemptive protection is offensive in nature, and therefore, is itself a violation of natural rights. In a free society, therefore, it is only after fraud or another violation of rights takes place that the state has the right to intervene on behalf of the consumer.
Licensure also makes bad economics. In the first place it limits the supply of labor in spite of demand, thus creating shortages in some cases and a skewed pricing system in others. If the labor market were unfettered, the consumer would be guaranteed the most accurate prices and the availability of the highest and most efficient quality. With a defined labor market under a licensing system the consumer is paying a monopoly or quasi-monopoly price, not a free market price. In other words, the price is not accurate, and in most cases, it is inflated. Just take a look at the monopoly granted by professional licenses, such as medical and legal licenses. Certainly licensure is a causative factor in the outrageous prices charged by those professions.
Further, in a cost-benefit analysis of licensure, the scales certainly tip toward disadvantageous results. The only sure benefactor of licensure is the state, which benefits through the increase in its own power. The licensees also derive some benefit from the licensure system through their grant of monopoly or quasi-monopoly privilege which permits them to unfairly secure a market share without having to deal with the competitive forces present in a free market.
Unlicensed competitors, on the other hand, suffer because they are denied the ability to produce for or sell to the state-created monopolized market, thereby limiting their profit potential. Even the license fee itself can be cost prohibitory causing the unlicensed competitors with little capital to stay out of the market altogether.
Take, for example, the hail service taxi cab industry in New York City. If an individual in New York City wanted to start a hail service taxi cab business he would have to plan on saving or raising approximately $189,000 to purchase a taxi cab medallion (license), without which he could not participate in the industry. Contrast that untenable price with the seed money likely needed to start the same business in a free market — the price of the car. (And then consider if the other licensing requirements for the vehicle such as the smog license, registration, etc. were removed, the needed entrance capital would be even less.)
Licensure also hurts the consumer because he is denied the opportunity and the right to purchase from producers who he might otherwise prefer. Through licensing the state has essentially told the consumer that what he thinks is irrelevant because the state has established itself as the omniscient and omnipresent consumer — the ultimate consumer. By commanding that the individual obtain a license from the state before producing in the desired industry, the state would have us believe that it, not the many millions of individual consumers in the market, is in the best position to know what you and I want and need.
Additionally, from a purely logical stand, the statists’ sustaining of the licensure system is unfeasible, because economically it is the same as bribing government officials, which is an illegal act. Rothbard explained that bribery of a government official is merely “a price for the payment of a service,” the service being “the failure to enforce the government edict as it applies to the particular person paying the bribe.” Murray N. Rothbard, Man, Economy, and State with Power and Market, Scholar’s Edition, (2009), pg. 1141. Thus, when a government official accepts a bribe, he grants the briber informal permission to engage in business which the briber is otherwise prohibited from doing, but which the briber would be able to do in a free market. In this sense, the acceptance of a bribe is “identical with the sale of a government license to engage in a business or occupation.” Id. The statists would certainly condemn bribery of government officials, yet they advocate its logical equivalent, licensure.
Licensing (and bribes for that matter) also fails the logic test because it simply creates an unnecessary interruption in the free market and then tries to move the market back in the direction of a free market. It is like digging a hole just to fill it half way back up. The state says “no one can work in Industry X” but then schizophrenically declares that “to whom I grant a license can work in Industry X.” What the?
I say cut out the middle man (license). Through licensure the government does nothing other than disrupt the natural process of mutually beneficial exchange, but in doing so hurts the consumer and competitor and makes the overall economy less efficient.
The problems associated with licensure are varying and extensive, but perhaps most devastating is that it makes those who are dependent on it Oliver Twists as they bring their empty bowl before the state and plead to be given something, anything, “more.” In a free society those Oliver Twists would be able to fill their own bowl to overflowing and then use the excess to benefit others through economic production.
It is no stretch to say that by means of the licensure power the state can permit the individual to eat or it can condemn him to starve. So long as the government has the power to issue licenses to live, we cannot claim to be free, and living without freedom is not much of a life. Fortunately, we still have a license to kill unsound and coercive government measures, so let us use that license to regain our right to live.
Copyright © 2010 Campaign for Liberty
“I also spoke at length for the repeal of the ordinance of the city licensing merchants, hawkers, taverns, and ordinaries, desiring that this might be a free people, and enjoy equal rights and privileges, and the ordinances were repealed.” (Joseph Smith, History of the Church, Vol. 6, p. 8.)
Great article – always amazes me how people get deceived on this one. I do not have the right to stop someone entering the honest profession of their choice. Therefore I cannot delegate any such power to government to do it on my behalf. End of argument.
Even some the staunchest of libertarians go all weak in the knees at the thought of eliminating the accreditation process for heart surgeons.
It’s a useful litmus test – hard-core Friedmanian or limp-wristed pot legalizer?
The accreditation process for heart surgeons does not have to be state-mandated or administered. It can be privatized.
A good analogy would be the company UL (Underwriters Laboratories). See http://en.wikipedia.org/wiki/Underwriters_Laboratories.
The point is that government isn’t necessary to keep us “safe”. There are private means available to do the same thing, and do it better, safer, more efficiently than any bureaucracy can hope for.
That’s a great point Michael. Here’s a good article by Mark Thornton on UL: http://truth.skylerjcollins.com/2009/05/safety-and-free-market.html
Great post Jerry.
“Hard-core Friedmanian”? Seems like a contradiction in terms…
Excuse me. I meant “Friedmaniac”.
:)
Interesting article. Very thought-provoking.
A few years ago, I wrote a humorous essay about a spaceman from another planet who had come to earth. To all appearances, he looked human, so he went around observing our ways. One of the confusing things to him was the principle of “licensing” by the state.
In this case, he wanted to purchase a car (in the hopes of meeting an attractive female that was in the commercial that advertised it). After purchasing it, he was confused at the requirements to register it, insure it, inspect it, and license it. He had no intention of ever driving it. He just wanted to possess one.
He eventually reached the determination that the licensing process was simply a method of raising revenues for the state. Otherwise, if he just wanted to own or collect cars–even if he never wanted to drive one on a public street–he still had to purchase licenses for them.
Licensing of firearms is the prerequisite for seizure of them. In Bosnia, when the Serbs captured villages and towns, they would go to the prefecture, get the gun registration records, and go to homes to seize them. If the guns were no longer in the possession of the owners or were sold without documentation, it was assumed that they had been provided to the resistance and the owners were executed.
Licensing in a profession, as you mentioned, provides state control and a revenue stream of private activity. You have to have a business license. You have to have a license to practice many professions. You need a license to have a garage sale! For cryin’ out loud!
In Europe (I served a mission in France), no “church marriages” are recognized by the state. Before you can get married in a church, you have to get married by the state. Afterwards, you can go to the church or temple to get married. That’s how they license marriage. In the US, the state grants authorization to ministers to perform marriages, so long as the clergymen complete the appropriate forms to register as an agent of the state. Once that’s done, a pastor can lawfully sign the wedding license. Shouldn’t we question the very principle of the state granting a marriage license?
In religion, “licensing” became common among sectarian Christian churches. Instead of receiving authority by prophecy and by the laying on of hands, the churches of men organized schools and theological seminaries to promulgate their doctrines and ordination became a process of licensing. Credentials replaced divine authority.
The whole process becomes so pervasive that, eventually, no one questions it. Why not let private agencies provide proof of credentials instead of having the government do it. Some will argue that it’s a necessity to protect citizens from those who might prey upon them. That has been the excuse all along to expand the nanny state.
Perhaps it won’t be long before we’llll need to pay a licensing fee to be a blogger. After all, we wouldn’t want to have unauthorized opinions get out there! It would be the new “Stamp Act” of the 21st century.