Simpson on Licensing

During an online discussion on whether physicians should be forced to work during pandemics as a condition of retaining their medical license, the discussion turned towards the appropriateness of medical licensing in general.

Steve Simpson of the Institute of Justice had the following excellent comments to make in response to some questions. With his permission, I'm reposting his remarks here.

With respect to the question that doctors know up front that they agree to certain terms before they accept a license, hence they've voluntarily contracted to any associated obligations:

First, doctors do not consent to medical licensing in the sense in which that consent could legitimately be said to impose further obligations on them, the way one consents to the obligations in a contract.

Doctors do not get to decide to practice with a license or without a license. They are compelled to practice with a license whether they want to or not. So it is wrong to claim that they somehow consent to whatever obligations come with licensing. The state offers them the "choice" of practicing with a license or not practicing at all. That is not a choice the state has to authority to impose upon doctors, any more than it has the moral authority to offer citizens the "choice" of being enslaved citizens or not being citizens at all. I could say much more about this, but I'll leave it at that.

With respect to the concern that private medical licensing groups would have a conflict of interest between setting high standards vs. retaining their members (and hence government would be better at protecting the public from shady practitioners):

Second, your view that private medical licensing would constitute an inherent conflict of interest because it would be doctors essentially engaging in self-regulation is wrong on many fronts. The fallacy at the root of your view is that individuals are capable of objectively governing the lives of others but not capable of governing their own lives because of their own self interest in the latter situation but not the former. There is much to say to this, and reading Atlas Shrugged would be a good place to start in learning why that view is the exact opposite of the truth, but let me say just a couple things.

You say that there is no guarantee that private medical boards will set high standards or improve them as necessary. But there is, and it's the best guarantee that has ever existed--rational self interest. Doctors are neither insane, nor irrational (indeed, if they were, I submit they would not be doctors now would they). Nor are their patients. Doctors have no desire to harm or injure their patients, for, among other reasons, if they do they will not remain doctors for very long, they will have no patients, they will get sued, etc.

Moreover, there is no guarantee that state regulatory boards will set high standards either. Indeed, state regulatory boards have no incentive whatsoever to keep current with the latest developments in medicine and to ensure that their standards are high. What is the cost to them if they do not do so? They are committees, and thus each individual can always shuffle off the responsiblity for their failures to someone else, and even if they are found to have failed to set high enough standards, they suffer no consequences whatsoever. Their income and careers are not on the line, they will never be fined or sanctioned for their failures, and rarely, if ever, are any regulatory boards ever held accountable for their failures.

But there's another mistake in your thinking about this that many people make, which is to consider any regulatory boards to be separate from the professions they regulate. This is flawed as a matter of both history and common sense. Historically, occupational licensing has typically been championed by the very professionals who are to be licensed. They do this both to "professionalize" their industries--because it is much better to be "state licensed" than simply to be qualified--and to make it much harder for others to compete with them.

As a result, all occupational licensing agencies or boards that exist today are composed of the very professionals that they regulate. This makes perfectly good sense when you consider that no one else is qualified to regulate them. Who is going to decide what the proper standards for doctors are but doctors? Likewise lawyers, plumbers, carpenters, engineers, architects, stenographers, morticians and funeral directors, barbers and cosmetologists, florists, etc. Do you know what standards even a licensed florist or interior decorator must meet to be qualified? I don't. So who, but other florists and interior designers are going to regulate the florists and interior designers?

The term for what I am talking about is "regulatory capture," which simply means that the idea that regulatory boards and agencies of any type are somehow "separate" from the industries they regulate and thus "objective" is utter, unbridled nonsense. It is a pipe dream. It is the sort of thing that we all believed in fourth grade when we thought that committees should run the whole wide world because that would be "fair." My point is not simply that regulatory capture is likely to happen.

My point is that occupational and industrial or economic regulation is virtually impossible without regulatory capture, and, indeed, the regulators actively want the participation of the industries they regulate because otherwise they would not know what the hell they were doing. So your view that regulatory boards are somehow more "objective" and less "conflicted" than private boards is just not true factually and by the very logic of what such regulation aims to do.

And with respect to occupational licensing in general:

I could go on about occupational licensing all day. At IJ, we've done quite a lot of work on the subject, so if anyone is interested in more concrete examples of how licensing evolves in a given profession, check out our website, particularly the economic liberty cases and some of our research publications (www.ij.org). Or just shoot me an email (or ask a question here) and I'll do my best to answer it or direct you to more information.

The idea that licensed workers voluntarily consent to the obligations imposed on them by states is really unjust in more ways than I mentioned. As a lawyer, I see this all the time.

The states in which I'm licensed are constantly imposing new requirements, like mandatory pro bono, additional "continuing legal education" and the like to which I never consented and that are burdensome, costly, almost always a complete waste of time, and useless from the standpoint of improving my qualifications. In fact, what does motivate me to do a good job is precisely the opposite of all of these (and more) unchosen obligations.

I am motivated by the chosen obligations I freely decided to accept when I became a lawyer. My own desire to produce excellent work, to give my client the best work I can, to win my cases or at least to outlitigate the other side at every step, and to constantly produce a better brief or better argument or better analysis than I did the last time out.

But even if those things didn't motivate me, I and every other regulated professional would be motivated by the desire not to be embarrassed or to develop a bad reputation (and I have both colleagues, clients, and judges to worry about) or the other things I mentioned in my last post. In fact, I have never in my 15 year career met anyone who was ever motivated to produce good work by the states in which they were licensed. I could produce consistently incompetent and crappy work for years before any of the three states in which I'm licensed would take notice. My colleagues, my employer, my clients, and all the judges I appear before would take notice long before the state bars.

So my point is that the notion that we voluntarily assume the obligations of our state licenses is both a classic moral inversion--because it is in fact the voluntary obligations that motivate professionals and regulated occupations to produce high quality work--and it is illogical in that it contradicts the supposed purpose of licensing, which is to impose obligations on regulated occupations that they did not choose, because, allegedly, they can't voluntarily regulate themselves. See the contradiction? On the one hand, the obligations of licensing are "voluntary." On the other, licensed occupations can't be self-regulated because "voluntary" regulation would not work. Heads they win, tails we lose.

Thank you, Steve, for this great impromptu analysis!

Here's the full discussion thread, which includes links to additional articles on licensing by Alex Epstein ("End Government Licensing") and Shirley Svorny ("Medical Licensing: An Obstacle to Affordable, Quality Care").