A Radical Way to Rein In Occupational Licensing

To be clear, I would prefer it if the state and local governments dismantled their excess occupational licensing on their own. But that does not seem to be in the cards. And these days we have a deregulation-leaning federal government, and a fair amount of willingness to think outside the box, so let’s put that to good use. National preemption could clear away state and local licensing, or at least significant parts of it, in one fell swoop.

Federalizing occupational licensing would be legally tricky. For instance, the 1889 Supreme Court case Dent v. West Virginia established the right of the states to require medical licenses. So under one view, we might need this and other court decisions to be modified, perhaps on the grounds that much licensing legislation exists to restrict competition and perhaps violates principles of equal protection and non-discrimination. Still, we do now have a Supreme Court that places some value on economic liberty.

Possibly congressional action could be taken too. For instance, the National Labor Relations Act of 1935 preempts the ability of the states to regulate labor unions, and Congress could pass something analogous to establish control over many parts of occupational licensing.

If need be, Congress could keep regulatory authority with the states in areas where differences in local conditions matter for determining the best laws. But is there really a sound reason why one city or state should license makeup artists and massage therapists but another should not?

Defenders of American federalism may be loath to take such steps, and I share some of their concerns, based on a fear of centralized power. But are state and local governments, in this capacity, truly representing the interests of the governed or are their actions reflecting valuable local information? Are competitive pressures really checking their ability to stick with bad, wealth-destroying policies? Or rather have political technologies evolved in such a way that those governments are being systematically captured by special-interest groups for the purposes of income protection?

If my idea sounds too ambitious, a smaller first step against anti-competitive licensing would have state governments preempt requirements at the city level, as Tennessee did last year. That doesn’t raise major constitutional issues, and at least it limits the possibility that American cities become a crazy patchwork of mobility-limiting interventions.

Keep in mind that the alternative to my suggestion is not the status quo but rather a regime where occupational licensing becomes progressively worse at multiple levels of government. The defense of liberty requires changes, and sometimes that means recognizing that small, local governments are infringing upon our rights rather than protecting them.

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Tyler Cowen

Tyler Cowen is a Bloomberg View columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include “The Complacent Class: The Self-Defeating Quest for the American Dream.”