Is Professional Licensing a Racket?
Licensing covers 20 percent of the U.S. workforce, from physicians to hair stylists. It’s overseen by an institution that this week’s guest calls “a thicket of self-dealing and ineptitude.”
What does a hair-dresser have in common with a lawyer? How about an interior designer and a doctor? An auctioneer and a funeral director? This isn’t a joke; I’m sorry, I wish it were. What these jobs all have in common is that they require a professional license, which is administered by a licensing board that is often made up of other doctors and funeral directors and auctioneers. This ... may not be something you’ve ever thought about, and I wouldn’t blame you; it’s one of those things a friend of mine calls a MEGO topic — “MEGO” standing for “my eyes glaze over.” But when you think about how our economy works, these labor-licensing rules are pretty important.
Rebecca Allensworth is a law professor at Vanderbilt University, and she has written a book about professional licensing. We Americans like to think of our economy as open and dynamic; Allensworth shows that in many ways it’s not, and that these licensing boards help too many bad actors stay in their professions and keep too many good ones out. That’s why she called her book The Licensing Racket. As Allensworth says:
Professional licensing is too onerous for certain professions, and it just makes the barriers too high. It keeps people out, and what you’re getting for that regulation is not worth it. And then for the professions that are left — medicine, nursing, law — [where] we need something like a licensing board, what we have is terrible.
Early on in her research, Allensworth did what you’d expect a legal scholar do: She read everything she could find about professional licensing, she sifted through legal databases, she checked out the economics literature. Before long, her work was being cited by the Supreme Court and she was invited to speak in Congress and at the Obama White House. At this point, she’d never actually attended a meeting of a licensing board. Once she did that, her obsession deepened. Allensworth wound up embedding herself for four years in the licensing system of Tennessee, where she lives. She attended many board meetings and interviewed more than 180 people from 28 professions.
Today, there are around 300 licensed professions in the U.S., regulated by around 2,000 licensing boards across the country and covering about 20 percent of the American workforce. The system is sanctioned by state governments across the country, and it has been expanding like crazy. I talked to Allensworth for this week’s episode of Freakonomics Radio, to find out how much licensing is too much. I hope you find our conversation as interesting as I did.
You can hear this week’s episode of Freakonomics Radio, “Is Professional Licensing a Racket?”, on Apple Podcasts, Spotify, or wherever you listen to podcasts. A full transcript is available on our website.
I want to share one last reminder about our live show in Los Angeles on Thursday, February 13th at the Wilshire Ebell Theatre. I’ll be joined onstage by Ariel Emanuel, the C.E.O. of Endeavor, and R.J. Cutler, the documentary filmmaker who made the recent Martha Stewart documentary as well as films on Billie Eilish, Elton John, and many others. I think it’s going to be an amazing night, so if you’re in Los Angeles, I hope you’ll join us. Tickets at freakonomics.com/liveshows.
Also on the Freakonomics Radio Network this week
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Hank Green is an internet phenomenon and a master communicator, with a plan to reform higher education. He and Steve talk about the video blog that launched Hank’s career, the economics of the internet, and how a cancer diagnosis prompted him to become a stand-up comedian.
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The Economics of Everyday Things: School Photos
Picture day is an annual tradition for American families — and, for the companies that take the photos, a lucrative one. Zachary Crockett smiles for the camera.
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Exactly like taxes on everything except the air you breathe.