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The tyranny of regulations licensure and permits

Essays on the tyranny of regulations, licensure, and permits. It's way past time to restore the liberty of the individual. Compiled by Robert D. Gorgoglione Sr.

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The tyranny of regulations licensure and permits

  1. 1. 1 _____________________________________________________________ ESSAYS ON The Tyranny of Regulations, Licensure and Permits It’s Way Past Time to Restore the Liberty of the Individual! _____________________________________________________________ Perfectly Free and Unfettered by “The State” “No cause . . . has perhaps more promoted in every respect the general prosperity of the United States than the absence of those systems of internal restrictions and monopoly which continue to disfigure the state of society in other countries. No law exists here directly or indirectly confining man to a particular occupation or place, or excluding any citizen from any branch he may at any time think proper to pursue. Industry is in every respect perfectly free and unfettered; every species of trade, commerce, art, profession, and manufacture being equally opened to all without requiring any previous regular apprenticeship, admission, [permit] or license.” --Albert Gallatin Sec. of the Treasury under Thomas Jefferson, 1810 ____________________________________________________________________________________________________________ Compiled by Robert D. Gorgoglione Sr. _____________________________________________________________
  2. 2. 2 _______________________________________________________________________ Fascism’s Tyrannical Use of Licensure “To sustain its power and achieve its economic ends, fascism seeks to make its people economically and psychologically dependent on the government. [This] enhances the governments ... control over its' citizen's economic activities. Fascism also installs the mandatory government license as a central economic weapon, for compulsory government licensing of businesses allows the political hierarchy to control the nation's economy without the appearance of totalitarian coercion. Altruistically phrased, vague licensing standards such as the national or community interest, local needs, or the personal qualifications of the applicant preserve a facade of justice and due process to conceal unlimited governmental power. Exactly such elastic standards for government licenses prevailed in Nazi Germany.” “AMERICA’S FASCIST ECONOMY” Charlotte Twight The Independent Institute _____________________________________________________________
  3. 3. 3 _____________________________________________________________ Words of Wisdom from David O McKay Governments are the servants, not the masters of the people. All who love the Constitution of the United States can vow with Thomas Jefferson, who, when he was president, said, I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man. He later said: To preserve our independence, we must not let our rulers load us with perpetual debt. We must take our choice between economy and liberty, or profusion and servitude. If we run into such debts, we must be taxed in our meat and drink, in our necessities and in our comforts, in our labors and in our amusements. If we can prevent the government from wasting the labors of the people under pretense of caring for them, they will be happy. The same prudence which in private life would forbid our paying our money for unexplained projects, forbids it in the disposition of public money. We are endeavoring to reduce the government to the practice of rigid economy to avoid burdening the people and arming the magistrate with a patronage of money which might be used to corrupt the principles of our government. . . . In conclusion, I repeat that no greater immediate responsibility rests upon members of the Church, upon all citizens of this Republic and of neighboring Republics than to protect the freedom vouchsafed by the Constitution of the United States. Let us, by exercising our rights under the Constitution: (1) Preserve our right to worship God according to the dictates of our conscience, (2) Preserve the right to work when and where we choose. . . . (3) Feel free to plan and to reap without the handicap of bureaucratic interference. (4) Devote our time, means, and life if necessary, to hold inviolate those laws which will secure to each individual the free exercise of conscience, the right and control of property, and the protection of life. “Free Agency—A Divine Gift,” Improvement Era, May 1950
  4. 4. 4 _____________________________________________________________ DEDICATED TO The Great Thomas Jefferson For the following reasons: Thomas Jefferson on Government 1. I have sworn upon the altar of God, eternal hostility to every form of tyranny over the mind of man! 2. The true foundation of Republican government is the equal right of every citizen, in his person and property, and in their management. 3. Still one thing more, fellow citizens – a wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement: and shall not take from the mouth of labor the bread it has earned--this is the sum of good government. 4. Were we directed from Washington when to sow and when to reap, we should soon want bread.
  5. 5. 5 5. Agriculture, manufactures, commerce, and navigation, the four pillars of our prosperity, are the most thriving when left most free to individual enterprise. (Free enterprise competitive capitalism). 6. If we can prevent the government from wasting the labors of the people, under the pretense of caring for them, they will be happy. 7. Whensoever the General Government assumes un-delegated powers, its acts are un-authoritative, void, and of no force. 8. I consider the foundation of the [Federal] Constitution as laid on this ground: That "all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people." [10th Amendment] To take a single step beyond the boundaries thus specifically drawn around the powers of Congress is to take possession of a boundless field of power, no longer susceptible of any definition. On Religion: 1. Can the liberties of a nation be thought secure when we have removed their only firm basis, a conviction in the minds of the people that these liberties are of the gift of God? That they are not to be violated, but with His wrath? 2. We hold these truths to be self evident, that all men are . . . endowed by their Creator, with certain unalienable Rights, that among these are Life, Liberty, [ property] and the pursuit of happiness. 3. Among the most inestimable of our blessings is that . . . of liberty to worship our Creator in the way we think most agreeable to his will; a liberty deemed in other countries incompatible with good government, and yet proved by our experience to be its best support. 4. In matters of religion, I have considered that its free exercise is placed by the Constitution independent of the powers of the government. Now a final quote from the great Constitutionalist Thomas Jefferson: An atheist . . . I can never be! _____________________________________________________________
  6. 6. 6 _____________________________________________________________ “Upon the Alter of God” THOMAS JEFFERSON Champion and Defender of Individual Liberty And American Constitutional Government _____________________________________________________________
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  8. 8. 8 ________________________________________________ Acknowledgements I would like to give recognition and thanks to the late Leonard Reed (1983), founder of the Foundation for Economic Education, the staff of The Freeman magazine, and of course the authors of these beautiful and inspired essays without which this book could never have been created or seen the light of day. I sincerely feel that it was with the guiding hand and inspiration of Divine Providence, that I was able to compile and organize these essays as they now appear in this book, “The Tyranny of Regulations, Licensure and Permits” It is my firm, but humble prayer, that these essays which may have been lost and forgotten in some old and dusty magazines, will inspire present and future generation with not only a burning love of Liberty in their hearts, but also a burning desire to defend the God inspired principles and precepts of Americanism and Constitutional government with “their lives, their fortunes and their sacred honor.” May we all seek out the guiding hand of Divine Providence in our righteous endeavors in the defense of American individual Liberty and Limited Constitutional Government. Robert D. Gorgoglione Sr. 3713 Deloy Dr., Apt 4, Idaho Falls Idaho, 83401 1-208-290-9022, robert.gorgoglione43@gmail.com August 3, 2012 ________________________________________________
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  10. 10. 10 _____________________________________________________________ INTRODUCTION The sanctity of private property is the most important bulwark of privacy. University of Chicago law professor Richard Epstein wrote that “private property gives the right to exclude others without the need for any justification. Indeed, it is the ability to act at will and without need for justification within some domain which is the essence of freedom, be it of speech or of property.”[ Without private property, there is no escape from [the power of the State]. Property rights are the border guards around an individual’s life that deter political invasions. Those who disparage [private] property often oppose any meaningful limits on government power. John Dewey, for instance, derided “the sanctity of private property” for providing “freedom from social [(government) control.”[3] Socialist regimes despise [private] property because it limits the power of the state to regiment the lives of the [individual and the] people. A 1975 study, The Soviet Image of Utopia, observed, “The closely knit communities of communism will be able to locate the anti-social individual without difficulty because he will not be able to ‘shut the door of his apartment’ [or home] and retreat to an area of his life that is ‘strictly private.’”[4] Hungarian economist Janos Kornai observed: “The further elimination of private ownership [of property] is taken, the more consistently can full subjection [of the individual] be imposed.”[ The property right that each citizen has in himself is the foundation of a free society. As James Madison observed, “Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses.”[8] The property that each citizen has in his rights is the foundation of his ability to control his own life and strive to shape his own destiny. _____________________________________________________________
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  12. 12. 12 _____________________________________________________________ Contents The Tyranny of Regulations, Licensure and Permits _____________________________________________________________ Prologue - It’s Time to End Occupational Licensure __21 Chapter 1 - “The King is Dead”___________________25 Chapter 2 – Paving the Road to Serfdom__ ________31 The Beginnings of Motor Vehicle Licensing----------------------------33 The Fallacious Arguments for Driver’s Licenses-----------------------34 Licensing replaces the Common Law Right to Travel-----------------37 Chapter 3 - Does Occupational Licensure Protect Consumers?______________________ __41 How Licensing Limits Competition---------------------------------------42 The Effects of Licensing on Consumer Prices---------------------------43 The Effect of Licensing on the Quality of Services and Consumer Safety--------------------------------------------------------45 Licensing Boards Controlled by Professions They Regulate----------48 Regulations Serve the Interests of the Regulated by Reducing Potential Competition---------------------------------------48
  13. 13. 13 Chapter 4 – Scandals___________________ _____51 How Regulations Encourage Abuse and Corruption-------------------52 Chapter 5 - Government Licensing: The Enemy of Employment__________ _ _____57 “Are You Certified?”--------------------------------------------------------58 More Requirements Are Road Blocks to Certification-----------------59 Entrepreneurship, Not Bureaucracy is the Answer----------------------60 Chapter 6 - Unemployment Compensation____ ____63 Transfer Payments and “Legal Plunder”---------------------------------65 Unemployment Compensation Encourages Idleness-------------------67 Creating Employee Disincentives-----------------------------------------68 An Invitation to Deceit and Fraud-----------------------------------------70 Conclusion--------------------------------------------------------------------71 Chapter 7 - Let the People Own the Airwaves___ ___75 Freedom of the Press but No Freedom of Broadcasting----------------76 Four Reasons for Abolishing the FCC------------------------------------78 How the Licensing of the Press Came to an End------------------------78 Licensing of the Airways Leads to Censorship--------------------------80 FCC “Blue Book” and “Mayflower Decision” Leads to Censorship and Control of Programming ---------------------80 The “Communications Act” Forbade Censorship and Then Supplied the Means of Doing it-------------------------------81
  14. 14. 14 Increasing Regulation in the name of “The Public Good”----------------------------------------------------------82 Massive Propaganda Campaign for Regulating Television------------82 New Ideas and Innovations Thwarted In FCC Hearing Rooms-------83 Competition Improved BBC Programming------------------------------85 Government Control Equals Government Ownership------------------85 The Myth of the “Peoples Airwaves” and the “Sacred Public Trust”----------------------------------------------86 Competition Efficiently Allocates limited Resources ------------------87 Government Control of the Airways leads to Inefficiency and Monopoly ---------------------------------------------88 Chapter 8 - Psst! Wanna Buy a Bridge for Cash?_ _91 Act 389 is a Revenue Enhancement Scheme ----------------------------92 Act 389 A Demands Personal Proprietary Information ----------------92 Act 389 will force Some Businesses to Shut Down---------------------93 Chapter 9 - Engineering Regulation: The Return to Medievalism_____________ ____95 Licensing Demanded by the Occupations to by Regulated------------97 “The Greatest Harm is done By the Hack WITH a License”----------98 Coercive Licensing Restricts Entry into a Profession ------------------99 Licensing Encourages Favoritism, Fraud & Corruption--------------100 Regulatory Licensing Violates Human Rights (Liberty)-------------104 Alternatives to Licensing That Protect the Public---------------------105
  15. 15. 15 How Licensing Destroys a Professional’s Integrity-------------------106 Chapter 10 - The Economics of Smoking Bans_ ___111 Smoking Bans Can Hurt or Even Shut Down a Business------------113 Licensing: Method of Destroying Private Ownership----------------115 Chapter 11 - A Triumph for Bootstraps Capitalism_ 119 An Unlicensed Entrepreneur in Action---------------------------------120 Regulatory Prohibition Creates Unemployment and Poverty-------121 Court Decision Ends Barrier to Employment Opportunity----------122 The Ability of an Individual to Gain Control Over His Own Destiny----------------------------------------------------123 Chapter 12 - A Tale of Two Situations________ ___127 The Tyranny of the “Food Safety Inspection Service”----------------127 The Tyranny of 25 References, $10,000 and 6 Months---------------128 Chapter 13 - The Fraud of Seat-Belt Laws____ ____131 Death by Seat Belt and the Tyranny of “Prior Restraint”-------------133 “It’s for Your Safety” and the Road to Tyranny-----------------------134 Chapter 14 - "Affected with a Public Interest"__ __139 Tyranny in the Name of the “Public Interest”--------------------------140 Private Interests (Individual Liberty) Violated in the Name of the “Public Interests”------------------------------------141 Private and Public Interests Are Not Susceptible to Differentiation --------------------------------------------142 The True Meaning of “Public Interest”: Coercion Writ Large-------142
  16. 16. 16 Let Each Support His Own, Without Forcing Other ------------------143 Label a Business as “Public” and then Take Control------------------144 Tyranny in the Name of “Universality of Demand”-------------------146 A “Public Utility” is a Government Granted Monopoly--------------147 Chapter 15 - How Nineteenth-Century Americans Responded to Government Corruption_____ ___153 Creating Cartels Through Licensure and Regulation------------------155 Government Intervention Encourages Fraud, Corruption and Collusion-----------------------------------------157 Legislation to Forbid Merger of State and Corporate Power---------158 Chapter 16 – Property and Liberty__________ _____163 Private Property: The Bulwark of Privacy------------------------------164 Warrantless Searches and “no-knock raids” Violate the Privacy of Private Property---------------------------------166 Licensure Limits Choice of Occupation, Right of Contract and Competition--------------------------------------168 Private Property Ownership Gives the Individual the Ability to Resist Government Tyranny-----------------------------170 Chapter 17 - Liberty and Individual Responsibility __175 Competition Eliminates Scarcity; Creates Abundance----------------176 Social Order at the Sacrifice of Liberty---------------------------------177 The Rule of Private Property and Liberty for All----------------------178 Private Property Encourages Honesty and Accountability-----------179 The Need for Limited Government as a Referee ----------------------181
  17. 17. 17 The Need to Control Government---------------------------------------183 Constitutional Limits and the Limits of Constitutions----------------185 Individual Responsibility and Political Restraint----------------------186 Conclusion------------------------------------------------------------------188 Chapter 18 - Private Property and Government Under the Constitution_________________ ___193 The Economic Concept of Ownership----------------------------------195 The Common Law Boundaries of Private Property-------------------195 The English Whigs on Property and Government---------------------196 The Founders and Framers on Property and Government------------197 The Bill of Rights on Private Property----------------------------------201 Where Have All Our Property Rights Gone? -------------------------205 Chapter 19 - Individual Rights______________ ___211 The Nature of Government -----------------------------------------------212 Revolutionary Ideals of the Founders-----------------------------------213 Current Suppression of Rights -------------------------------------------216 Running up Against Everyday Controls --------------------------------217 Budgetary Tyranny of Government Spending -------------------------219 Democratic Despotism Violates the Rights of Individuals-----------221 All Other Rights Vanish in the Absence of Property Rights---------221 Property Rights Are Human Rights-------------------------------------223 For Sale: A Precious Birthright------------------------------------------224
  18. 18. 18 Chapter 20 - Individual Liberty and the Rule of Law 227 Definitions of Liberty and Law------------------------------------------228 Law and the Ambush of Liberty-----------------------------------------231 Liberty: Encouraged or Destroyed by Law-----------------------------238 The Value of Liberty and the Role of Law-----------------------------242 The Rule of Law-----------------------------------------------------------243 Epilogue - Obey the (Natural) Law________ _______247 APPENDIX 253 Industrial Revolution: Freeing the Market 254 The Proper Role of Government 268 Government Should Be Based Upon Sound Principles---------------268 The Correct Role of Government----------------------------------------269 The Most Important Function of Government------------------------- 270 The Real Meaning of the Separation of Church and State----------- 271 The Source of Governmental Power: “We the People”---------------271 Natural Rights are from God---------------------------------------------272 The Proper Function of Government -----------------------------------274 The Powers of a Proper and Just Government------------------------- 274 The Constitution and Self Government---------------------------------276 Local Government Essential to Liberty---------------------------------276
  19. 19. 19 Things the Government Should Not Do --------------------------------277 The Dividing Line Between Proper and Improper Government-----278 The Nature of “Legal Plunder”-------------------------------------------279 Government Cannot Create Wealth -------------------------------------279 The Basic Error of Marxian Socialism----------------------------------280 The Real Cause of American Prosperity--------------------------------281 A Formula for Prosperity: Limited Government and Free Enterprise------------------------------282 An Example of the Consequences of Disregarding These Principles----------------------------------------282 The Power of True Liberty from Improper Governmental Interference-----------------------------------283 But What About the Needy? ---------------------------------------------283 The Better Way ------------------------------------------------------------284 What Is Wrong With A “Little” Socialism? --------------------------284 Three Reasons Americans Need Not Fall For Socialist Deceptions --------------------------------------------284 How Can Present Socialistic Trends Be Reversed? ------------------284 Summary Thus Far--------------------------------------------------------285 Fifteen Principles Which Make For Good and Proper Government--------------------------------------286 All Right-Thinking Americans Should Now Take Their Stand-------------------------------------------290
  20. 20. 20 _____________________________________________________________ Government Enforced Monopolies Another questionable but extremely common practice is to use the police power to give ourselves monopolistic protection against competitors. This would be called a criminal conspiracy and branded as extortion if forcibly engaged in without government protection and approval. Today in the United States, monopoly protection is afforded by the police power in nearly every line of economic activity: in the professions and trades; in transportation and communication; in agriculture and labor; in finance, banking, and many other lines. How does this vast system of government enforced monopolies stand the conscience test and the application of the Golden Rule? If we desire for ourselves the freedom to enter a trade or occupation when and where we choose, we should allow our fellow men this same right. If we believe we should be left free to purchase goods or services from any person who offers them for sale, how can we forcibly restrict the freedom of other members of the buying public and still live the Golden Rule? -- H. VERLAN ANDERSON Many Are Called, But Few are Chosen _____________________________________________________________
  21. 21. 21 _____________________________________________________________ PROLOGUE _____________________________________________________________ It’s Time to End Occupational Licensure By Michael A. LaFerrara May 10, 2012 _____________________________________________________________ A virulent epidemic is violating American’s rights and sapping the U.S. economy: occupational licensure. The statistics are astounding. According to Forbes’ Suzanne Hoppough, from 1960 to 2007 the percentage of U.S. workers belonging to a licensed profession rose from 4.5 percent to 28 percent. In all, writes Hoppough, occupations requiring a government license in at least one state—including dentists, plumbers, hairdressers, secretaries, librarians, wallpaper hangers, and florists—rose from 80 in 1980 to 1100 by 2008.
  22. 22. 22 The economic cost is incalculable. Licensure restricts the supply of workers in the occupations affected, stifling innovation and entrepreneurship, suppressing competition, and driving up prices. And the violation of American’s rights to liberty and the pursuit of happiness are patent: We are forbidden to act or contract in accordance with our judgment, forbidden to pursue our happiness as we see fit, forbidden to earn a living in these areas unless we have permission, in the form of a license, from “The State”. What drives the licensure epidemic? It is fueled, in large part, by the established members of the various occupations themselves, through myriad professional organizations such as the National Association of Mortgage Brokers, American Dental Association, and the Cleveland Bar Association. Writes Hoppough: “These modern-day guilds have replaced organized labor as the main vehicle for workers seeking to shield themselves from competition.” Institute for Justice President William Mellor observes that they are “monopolies created by the government.” But by seeking government “protection,” the guilds have sold their souls to the devil. Statists are beginning to discover the extortive power that government licensure accords them, and they are using that power against those who have helped hand it to them. Consider a few examples: • A Florida legislator threatens a doctor with loss of his medical license for exercising his First Amendment rights. • • A proposed Massachusetts law would force health care providers to treat Medicare and Medicaid patients as a condition of their medical licenses. • • Beginning next year, New York lawyers will be required to perform fifty hours of free legal services as a condition of their law licenses. Licensure is anti-freedom, anti-American, and pro-statism [Socialism]—it violates our rights, squelches our liberties, and throttles the economy in myriad ways—and it is high time for Americans to call for its abolition. Without licensure laws, how would we know whether a person or company is of sufficient credibility, quality, or safety to do business
  23. 23. 23 with? By reference to the various companies and institutions that fill the vital demand for information about credibility, quality, and safety. Consumers want such information (hence the concern), so, in a free market, where people are free to act and to do business in accordance with their own judgment, profit-seeking businesses and nonprofit institutions arise to provide it. Indeed, such organizations already abound. Consider, for instance, occupational accreditation that is voluntarily instituted in various professional and trade associations, such as the American Dental Association through its Commission on Dental Accreditation and the National Institute for Metalworking Skills. Consider also Zagat, which rates restaurants; Underwriters Laboratories (UL), which provides product safety testing for a wide range of industries; and the American National Standards Institute (ANSI), which provides a wide range of services including personnel certification and accreditation. [The same with those who graduate with doctorates and masters degrees etc. from colleges and universities.] Subscribe to the “Journal for People of Reason”. If Americans want information about the credibility, quality, and safety of the people and organizations with whom they do business, they do not need to get such information from the government (nor can the government competently provide such information). Rather, they need freedom—and the goods and services that flow from self-interested people operating under the principle of supply and demand in the marketplace. It is time for Americans to call for an end to occupational licensure and to demand, instead, that the government PROTECT and NOT VIOLATE our rights. _____________________________________________________________
  24. 24. 24 _____________________________________________________________ “. . . You must have a permit.” "Guilty," said the judge, and he fined Mr. and Mrs. Owner $20 plus $10 in court costs, but "That’s not all," said the judge—"You have illegally built your little tree house and therefore you are hereby ordered to tear it down. If you fail to do so you will be held in contempt of court, and yes, I will send you to jail. Don’t you know you can’t build anything without a government permit?" in the United States of America, the land of the free. "No," said the judge, "you cannot keep the building inspector off your property." "Yes," said the judge, "it is your property—but you cannot keep the inspector away. Government has a right to inspect. You are wrong, you cannot build a house on your own property without a permit; and because you have continued to build your house in violation of the law, I sentence you to jail—to jail, Mr. Property Owner." And the king is dead. _____________________________________________________________
  25. 25. 25 _____________________________________________________________ Chapter 1 "The King is Dead" By Leonard Franckowiak October 1979 _____________________________________________________________ Mr. Franckowiak was a businessman In Chicago. His business included a weekly radio program in behalf of freedom, entitled We Still Have 55 Per Cent (referring to the portion of personal earnings not taken by taxes). "The King Is Dead"is from the script of a recent broadcast. _____________________________________________________________ Jean and I and our two daughters, Cindy, age 9, and Gretchen, age 4, spent a delightful four days camping along the Illinois River. It was a most peaceful and rewarding trip: no telephones, no television—just nature and family and our modern-day camper. And just as was predicted, after the hiking and the cook-outs and the marshmallows and a game or two of Old Maid or Mickey Mouse, Cindy and Gretchen were ready for bed, and Jean and I spent the late hours of the night in quiet enjoyment and reading. Well, without television, what can one do? Might as well read a book. Reading is a good habit to return to and, besides, who knows? We might even learn something! Anyway, Jean was reading a novel and I was reading Professor Ben Rogge’s new book, Can Capitalism Survive?—which brings me to the point of all this. Cindy saw the book and said, "Daddy, what is ‘capitalism’ or whatever that word is?" And, well, I was called. (Don’t you see? Somebody—even though she’s nine years old—somebody wanted to know what capitalism is.) And I
  26. 26. 26 was thrilled to answer. Four hours later, with Cindy sound asleep, I was still talking about capitalism. Well, that’s not true either, but there I was, on the spot—my daughter wanted to know what capitalism is, and I had to come up with a simple answer which hopefully would make sense and satisfy her curiosity. What should I say? Finally: "Capitalism," I said, "is where you’re free to do anything you want as long as you don’t hurt anybody; you can do things without a license from government." Well, with a little discussion about drivers’ licenses and building permits, Cindy was satisfied, but by then I had been set to thinking. I started thinking about all of the licenses and permits required by our government, and I came to a stark realization. "Why," I thought to myself, "the king is dead!" One by one I began to review those occupations which now require a government license: beauty operator, barber, doctor, lawyer. . . . The government is becoming the great Controller . . . plumber, real estate salesman, insurance broker, bus driver. . . . In the name of public good we all work or don’t work in our chosen professions at the convenience of “The State” . . . certified public accountants, engineers, architects, and taxicab drivers. . . . Why, “The State” has absolute control over our very means of livelihood . . . pharmacists, nurses, teachers. . . . We need permits to operate a bank, a liquor store, a restaurant or a grocery store. There isn’t a profession or business in America that isn’t under the control of government—not one place, in all of America, the land of the free. I even needed a permit to camp at Starved Rock. Capitalism, the king, is dead! I didn’t have the heart to tell my daughter Cindy. My mind began to swirl. I called to mind the case of a man in Shelby, Michigan. He was going to build a new house for himself to replace his old broken-down shack. He was going to build a house, that is, until the county building inspector came along. You see, the owner hadn’t taken out a building permit to build his house. "No," the inspector said, "there wasn’t anything wrong with the way the house was being built." The owner was doing good work and "yes, the new house would be a lot nicer for the neighborhood" and "yes, the owner was building the house on his own land," and "no, the neighbors were not complaining." As a matter of fact, the neighbors were helping. Well, then, what was wrong, Mr. Inspector?
  27. 27. 27 "Well," said Mr. Inspector, "for one thing, you must have a set of stamped approved plans, and yes, by all means, you must have a permit. You can’t do any building without a permit." And so the owner was hauled off to court. "No," said the judge, "you cannot keep the building inspector off your property." "Yes," said the judge, "it is your property—but you cannot keep the inspector away. Government has a right to inspect. You are wrong, you cannot build a house on your own property without a permit; and because you have continued to build your house in violation of the law, I sentence you to jail—to jail, Mr. Property Owner." And the king is dead. And so is the tree house in Hackensack, New Jersey. You see, some nice people there wanted to build a tree house in their backyard, and they know about permits. They know the law: You can’t do any building without a government permit—so they went to the building department for a permit. But the inspector told them there was no tree house listed in the building code, so, no, they couldn’t get a permit. "If it ain’t listed in the code, you can’t build it." But, my goodness, other people in town have tree houses; why can’t we? thought Mr. and Mrs. Owner. So they had carpenters build the little tree house. It cost $400. "No," the inspector said, he didn’t think it was a safety hazard but "it’s not listed in the building code, and, well, the tree house was built without a permit." "Guilty," said the judge, and he fined Mr. and Mrs. Owner $20 plus $10 in court costs, but "That’s not all," said the judge—"You have illegally built your little tree house and therefore you are hereby ordered to tear it down. If you fail to do so you will be held in contempt of court, and yes, I will send you to jail. Don’t you know you can’t build anything without a government permit?" in the United States of America, the land of the free. And the roofers and the carpenters need licenses to operate and so do the truck drivers and the morticians. No, you can’t bury the dead without a license.
  28. 28. 28 What is capitalism, Cindy? Capitalism was a system, Cindy. It was a system practiced in a country called America—the sweet land of liberty; it was a system where every man, woman and child were free to follow their own special star; it was a system where people were free to do anything peaceful so long as they did no harm to their fellow man. Capitalism was a system which gave the people of our country the highest standard of living on earth and in the process allowed them to enjoy the blessings of liberty and the dignity of human existence, free from the intervention of “The State”. Can you go work when you’re a teenager, Cindy? Well, I suppose so—if you get a work permit. Can we have a tree house in our backyard, Gretchen? Well, yes, we do have an OSHA-approved stepladder for you to use, and we could get a licensed contractor to build it for us, but you see, we need a government-issued building permit. What’s a permit, Daddy? Daddy, what is capitalism? The king is dead, and we still have 55 per cent. _____________________________________________________________
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  30. 30. 30 _____________________________________________________________ Privileges Replace Rights Licensing replaces the common-law right of travel with a privilege that “The State” dispenses—and withdraws—at whim. It implies that we are silly children eager to drive without bothering to learn how; only the fatherly “State” saves us from automotive annihilation. That grants rulers enormous power over all our behavior, not just our driving. Driving is merely another way to travel between Points A and B, as folks have for centuries. Philosophically, drivers should no more seek the state’s permission before hitting the road than did wagoners before shouting “Giddy-up!” Author Simson Garfinkel notes, “Our Founding Fathers never could have envisioned today’s driver’s license. It would have been inconceivable to [the] likes of Washington, Adams, and Jefferson that one day travel between a person’s home and work, or between nearby cities, in a carriage owned by that person, would be transformed from a right into a privilege to be granted and revoked at the pleasure of ‘The State’.” _____________________________________________________________
  31. 31. 31 _____________________________________________________________ Chapter 2 Paving the Road to Serfdom By Becky Akers November 2007 _____________________________________________________________ Becky Akers is a freelance writer in New York City. _____________________________________________________________ It’s the stuff of nightmares and science fiction: a society so depersonalized and regimented that survival depends on producing the correct credentials. Sometimes it’s a fingerprint or other biometric; more often it’s a document. Without that totem there’s no trading, no traveling, no transaction of any kind. A demand for “Papers, please” pesters people at every turn, whether they’re buying a loaf of bread or enrolling a child in school. The citizen whose identification is lost, stolen, or—chillingly— revoked by the government becomes an instant pariah. He finds himself in a state of nature worse than any Hobbesian could imagine: not only is Everyman at war with him, but so is Everyman’s technology. The United States took a giant leap toward this harsh horror with the REAL ID Act. Passed in 2005, due to take effect next year, REAL ID is “vital to preventing foreign terrorists from hiding in plain sight while conducting their operations and planning attacks.” Or so its sponsor, U.S. Rep. James Sensenbrenner (R-Wis.), wants us to believe. “By targeting terrorist travel, the Real ID will assist in our War on Terror efforts to disrupt terrorist operations and help secure our borders.” But REAL ID actually targets—and hits—American drivers. The bill standardizes licenses so that whether they’re issued in Alaska or Florida, they display the same data: name, date of birth, gender, a “digital photograph,” the holder’s signature, and home address (“permanent home address: no PO boxes; no exceptions,” as Bill Scannell of unrealid.com puts it—even for spouses fleeing abusive
  32. 32. 32 marriages and other vulnerable folks). It then forces each state to “provide electronic access to all other States to information contained in the motor vehicle database of the State.” Translation: REAL ID enables bureaucrats in California or Connecticut to learn anything and everything about someone in the Carolinas. It also puts that data at the feds’ fingertips, granting them and others unlimited access to information about us—and the unlimited power such knowledge brings. Ominously, REAL ID also mandates that licenses include “a common machine-readable technology, with defined minimum data elements.” Who will “define” those “elements”? The Department of Homeland Security. Many experts think the department will require RFID (radio-frequency identification) chips as one “element.” Manufacturers and warehouses control inventory with RFID because it uniquely identifies each product and tracks its movement. Substitute “person” for “product,” and you’ll understand the state’s enthusiasm for this technology. REAL ID puts your driver’s license on steroids, pumping it up to a national ID that must be flashed on authorities’ demand. Intriguingly, Americans who scarcely mutter when taxes chomp a third of their paycheck, who submit without fuss to pat-downs at airports, who trust government to school their children, are outraged at REAL ID. So are state legislatures, though a cynic might attribute that to fear that the feds will steal some of their power over us. As I write, two states have passed laws rejecting REAL ID and 28 are deliberating about doing so. As you read, more have probably joined the revolt. Meanwhile, despite their fury over REAL ID, Americans continue to ignore the dragon’s teeth from which it sprouted: driver’s licenses. The state has so habituated us to these permits that virtually no one questions them. Even champions of limited government who protest at having to seek permission before selling a product or buying a gun seldom object to licensing drivers. Most people see it as not only a legitimate function of government but a desirable one. Shouldn’t the state protect us from the maniacs who would otherwise clog our roads? But compelling citizens to ask permission before driving cars they’ve bought on roads they’ve paid for is lethal to liberty—and, often, to drivers. The state wants us to think its licensing protects us. Indeed, it would like us to commit the same error regarding its control of all things
  33. 33. 33 automotive, from road design and maintenance to enforcement of traffic laws to regulation of automobile design and manufacturing. But in all these areas, “The State” is a sponge, not a safety belt, sopping up all the money and power for miles. Protecting us is merely an excuse for controlling us. And, true to form, the authority that licensing handed “The State” spread like an oil slick. Having saturated our automotive lives, it’s now seeping into more and more crannies that have nothing to do with cars. The Beginnings of Motor Vehicle Licensing In the beginning states licensed anyone who paid a fee. They didn’t test competence, vision, or anything else. Many contented themselves for years with this pay-off; decades sometimes passed before they also forced drivers to satisfy a bureaucrat that they could see and decipher the government’s highway markings. Massachusetts and Missouri were both robbing drivers by 1903, but it wasn’t until 1920 that “Massachusetts. . . passed its first requirement for an examination of general operators” and “Missouri had no driver examination law until 1952,” according to Carl Watner at voluntaryist.com. Nor were Massachusetts and Missouri alone in picking drivers’ pockets. By 1909 “twelve states and the District of Columbia required all automobile drivers to obtain,” that is, buy, licenses. These permits generally listed only the operator’s “name, address, age, and the type of automobile he claimed to be competent to drive.” No demonstration of skills was required, and drivers usually ordered licenses through the mail. And so taxpayers whose money had bought and paved the roads now paid the government yet again so that it would allow them to use those roads. Prior to licensing, this arrangement was known as “highway robbery.” Regardless, the driver’s competence—and the government’s as well—didn’t matter. In fact, the 12 states that extorted licensing fees from drivers in 1909 had issued “a combined total of 89,495 licenses . . . between January 1 and October 4[;] but only twelve applicants were rejected for incompetency or other reasons during this period—two in Rhode Island and ten in Vermont.” No wonder Watner emphasizes, “Our contemporary belief that drivers licenses were instituted to keep incompetent drivers off the road is a false one.”
  34. 34. 34 Given the loot lifted from drivers, you might expect the push for licensing to have originated with government. But the blame actually belongs to the American Automobile Association (AAA), those seemingly innocuous folks who rescue stranded motorists and rate motels. AAA’s website says the club was founded in 1902 by “1000 auto enthusiasts demanding a response to a lack of highways suitable for automobiles”—and we can all guess from whom they “demanded” this “response.” Wikipedia adds that these “enthusiasts” were “typically wealthy.” But their newfangled toy with its exhaust and loud engine irritated their neighbors, and they fought “widespread public disapproval of the automobile and its noise” at a time when there were roughly 17,000,000 horses versus 23,000 cars. How better to win this battle than to enlist the government’s power and prestige? A certificate testifying to the state’s approval should silence the spoilsports whose fastest stallions were eating the Model A’s dust. Departments of motor vehicles (DMVs) have come a long way since then with their eye charts, driving exams, and surly clerks. DMVs fool Americans into equating licensed driving with safe driving. But there’s no proof behind that supposition because we don’t know how many motorists neglect to ask permission. This invalidates statistics on who causes accidents. The AAA warns in “Unlicensed to Kill”: “[The] methodology [of researchers who study licensing and safety] has limitations. . . . [I]t is hard to arrive at reliable findings for unlicensed drivers simply because so little is known about them.” Belief that licensing makes safer drivers is just that. So who needs research? Intuition alone tells us that licensing contributes to safer roads, doesn’t it? Not necessarily. We won’t debate the relationship driver’s exams bear to the real world, nor whether an applicant is a better driver because he knows what behavior the law dictates when encountering a school bus on a divided highway or the exact moment at which headlights must legally shine. Even if the bureaucrats who devise these tests know what they’re doing, licensing has unintended—and dangerous— consequences like all government fiats. The Fallacious Arguments for Driver’s Licenses Unlicensed drivers who crash are likelier to run rather than stay to offer help or first-aid—or to receive it themselves: “Drivers with suspended, expired or revoked licenses may flee, rather than risk explaining to a police officer why
  35. 35. 35 they are driving,” says a report at deadlyroads.com. “This is especially true in California, where some estimate as many as 1 million unlicensed drivers occupy that states [sic] highways. Many drivers with no license are illegal immigrants, who risk deportment [sic] with any law enforcement contact.” Other places complain of the same hazard. Sylvia Lazon of the University of Missouri-Columbia School of Law claims that “The large number of immigrants driving without a license is creating a public health hazard. . . . In rural Missouri, there is no public transportation and driving is a necessity, with or without a license. . . . The unintended consequence is that these drivers create public health hazards.” By law, unlicensed drivers cannot purchase insurance. Not only does that increase the pressure to flee an accident, but those who can’t or don’t flee are usually unable to pay for damages. Government’s greatest talent lies in destroying life and property, judging by its thousands of years of warfare. Why then do we expect it to save lives and property on the highway? It’s no accident that driving has been considered inherently risky for as long as the state has monopolized the design of roadways and heavily regulated that of automobiles. Perhaps that’s because the incentives that prompt private entrepreneurs to produce safe products go missing from government: “Bureaucrats do not lose money when the death rate rises,” economist Walter Block notes in “Theories of Highway Safety.” “Nor is the road manager rewarded, as in private enterprise, if a decline in accidents occurs.” Those who design and maintain roads bear little responsibility for them; they duck behind sovereign-immunity laws when their lack of initiative and innovation kills us. We don’t know what free-market versions of roads and cars would look like, just as most Americans before the creation of UPS and Federal Express didn’t realize how slow the Post Office was at delivering mail. But it’s reasonable to suppose that if a completely free market prevailed in the automotive industry, we’d benefit from radical improvements. For sure, no company could stay in business if its products were as lethal as the government’s roads. Annual “traffic deaths” in the United States have hovered at roughly 42,000 for the last decade—about 22 deaths out of every 100,000 users. (The number has very slightly declined since there are more licensed drivers now, from 23.21 deaths per 100,000 users in 1994 down to 21.54 per 100,000 in 2004, according to the “Fatality Analysis Reporting System Web-Based Encyclopedia” of the federal Department of
  36. 36. 36 Transportation.) That’s almost double the fatality rate of firearms. Many of these deaths occur when the victims are using cars and roads exactly as the government intends; they aren’t speeding nor have they bent an elbow except to turn the ignition key. Yet despite years of tragically high fatalities, government constantly shifts the blame for its lethal roadways. Accidents are the driver’s fault, never the state’s for stupidly designing and poorly maintaining roads. Politicians reinforce this with incessant propaganda in favor of seat belts and against speeding, cell phones, and impaired driving. The advertising they buy with our taxes, the tickets and fines and prison sentences their enforcers dispense brainwash most victims into blaming themselves or their fellow drivers for mishaps. They sue each other, not “The State”, while those “at fault” pay fines to the very system that maimed them or killed the loved ones riding with them. Meanwhile, Americans continue forking over their funds and freedom to the DMV. Those funds enormously enrich government, given the fees, taxes, and penalties it extracts in return for bestowing on us a privilege we already own as a right. Exactly how much is transferred from drivers to their masters can’t be determined. First, despite REAL ID’s zeal to consolidate information about us in a central database, government feels no compunction to return the courtesy: each state compiles its own records on what it charges drivers—and that varies in both amount and type from state to state. Secondly, reckoning the total by adding columns from the individual states is impossible because so many of the fees are obscured or never reported. Take just one category: traffic tickets. Municipalities often hide their income from this source lest their state demand a cut, so no one knows how much money tickets generate each year. The National Motorists Association estimates that state and local governments rake in between $3.75 and $7.5 billion annually—and that excludes parking tickets. Now add fees for car registration, driver’s licenses, license plates, and title certificates, as well as taxes on automotive sales, insurance, gasoline, and parking, to say nothing of parking meters and tolls. [What a racket!] (Newsday reports that New York City alone collected 126 million tolls solely for crossing to and from the island of Manhattan in 2006; these range from a couple of bucks for motorcycles to $36 or more for a truck with 5 axles.) Then there are the quirky taxes some localities impose, such as New York’s “vehicle use tax.” We owe much of this to licensing: decades ago, it became the wedge enabling the state to drive a huge financial stake through our cars.
  37. 37. 37 Licensing replaces the Common Law Right to Travel But licensing’s biggest hit-and-run is philosophical. Licensing replaces the common-law right of travel with a privilege that “The State” dispenses—and withdraws—at whim. It implies that we are silly children eager to drive without bothering to learn how; only the fatherly state saves us from automotive annihilation. That grants rulers enormous power over all our behavior, not just our driving. Driving is merely another way to travel between Points A and B, as folks have for centuries. Philosophically, drivers should no more seek the state’s permission before hitting the road than did wagoners before shouting “Giddy-up!” Author Simson Garfinkel notes, “Our Founding Fathers never could have envisioned today’s driver’s license. It would have been inconceivable to [the] likes of Washington, Adams, and Jefferson that one day travel between a person’s home and work, or between nearby cities, in a carriage owned by that person, would be transformed from a right into a privilege to be granted and revoked at the pleasure of the state.” Most states use the “privilege” of driving to control their residents, as parents do teens. Licenses can be revoked for a long list of infractions, many of which don’t pertain to driving. Minnesota will suspend a license for “providing false statements regarding insurance coverage” and “moving violations.” But it also takes it away for such disobedience as “truancy,” “underage consumption of alcohol” or even the “attempt to unlawfully purchase alcohol or tobacco,” “failure to pay child support,” and “out-of- state conviction.” Ohio is more draconian. It doles out “points” for all the usual “traffic offenses” and then some, but there are plenty of nondriving capers that will send you to your room—for keeps. Ohio repeals its permission to drive for “dropping out of high school, drug-related offenses, unsatisfied civil judgments, delinquent, unruly, or habitual drug user (juveniles), failure to appear in court on a bond, liquor law violations, medical condition that would impair your driving ability [and who decides that?], tagged as a ‘problem driver’ in the National Driver Registry, insurance noncompliance, unresolved out-of-state ticket, out-of-state alcohol- or drug-related offenses.” Cleveland, Columbus, and Coshocton may one day surpass New York as walkers’ cities.
  38. 38. 38 Ceding the state authority over our automotive lives has a final consequence, this one likely intended: the Associated Press reports that “Traffic stops are the most frequent way police interact with the public, accounting for 41 percent of all contacts. An estimated 17.8 million drivers were stopped in 2005.” The threat to freedom is so obvious that even a bureaucrat quoted by Carl Watner lamented it: “[T]he average adult American citizen [has] more direct dealings with government through licensing and regulation of the automobile than through any other single public activity. . . . [T]he incidence of arrest [for violation of motor vehicle laws] by armed police in the United States has undoubtedly reached the highest point for any civilization, democratic or totalitarian, in recorded history. While ours is assuredly a free society [this was written in 1968], it has nonetheless become commonplace for an American citizen to be arrested by an armed officer of the law. . . . One may well question whether the instincts of a free people will not one day be impaired by the habit of being arrested without protest.” Liberty never grants the state a license to license. Why have we? _____________________________________________________________
  39. 39. 39
  40. 40. 40 _____________________________________________________________ Licensure Limits the Consumers “Freedom of Choice” . . . the regulations enforced are more likely to serve the interests of those regulated—by increasing their income, by reducing their potential competition—and favor the interests of higher-income consumers over those to whom price and availability of a service may be more important than the formal education or skills of the service provider. The rationale for occupational licensing assumes that the interests of consumers can be generalized, when in fact different consumers value different things. More importantly, this rationale assumes that government regulations function as they are intended. But research into the actual effects of licensing laws proves that by reducing the number of providers of a service and increasing the price of that service, they hurt most consumers more than they help them. Given this evidence, the best way to protect consumer health and safety would be to let them choose their own services in a free market. _____________________________________________________________
  41. 41. 41 _____________________________________________________________ Chapter 3 Does Occupational Licensure Protect Consumers? By John Hood November 1992 _____________________________________________________________ John Hood is research director of the John Locke Foundation in Raleigh, North Carolina, and a columnist for Spectator (N. C.) magazine _____________________________________________________________ It takes more to become an auctioneer in North Carolina than just experience, desire, and above-average verbal dexterity. It also requires a license from the North Carolina Auctioneer Licensing Board. Similarly, while a flashy television ad and a good reputation can give retailers of hearing aids a competitive edge in Missouri, they won’t sell a single device without first obtaining a license from the state’s board regulating hearing aid dealers. While many Americans know that their doctors, lawyers, and other specialized professionals are closely regulated by state boards and commissions, most don’t know that barbers, plumbers, morticians, “cosmetic artists,” and a host of other occupations–1,000 at last count—are regulated, certified, or licensed by “The State”. What consumers don’t know is nevertheless supposed to help them. Advocates of government licensing and other occupational regulations contend that unless the state has a hand in guaranteeing quality, consumers will receive shoddy and overpriced
  42. 42. 42 services. And professional organizations frequently support government regulations on their members in order to “protect them from fraudulent and unscrupulous competitors” and to maintain the reputation of their profession. In most cases, professions are licensed by state boards or commissions, established by legislatures, and staffed by gubernatorial or legislative appointment. These panels establish and monitor entrance requirements for new practitioners, handle consumer complaints, and undertake disciplinary actions against professionals who violate state regulations. The average number of occupational licensing and regulatory boards in a state is 17, but the number ranges from 29 in California to five or six in such states as Wyoming, where only professions like doctors, lawyers, and dentists are regulated. But while the promise of occupational regulation is great, research shows that it is rarely fulfilled. In the United States, at least, these regulations typically raise the price of services without significantly raising service quality—and indeed, in many instances regulation appears to lower the quality of services consumers buy. How Licensing Limits Competition One of the most well-known effects of occupational licensing and regulation is reduced competition. The theory is that by excluding some providers of a service from the market, regulations reduce competition and form a kind of “cartel” in which service providers can afford to charge high prices without fear of losing customers. Potential competitors are excluded by state requirements regarding years of education, college degrees, apprenticeships, or licensing examinations. In some states, barbers or hair stylists must receive at least an associate (two year) college degree, despite the fact that even the trickiest tasks they perform—dealing with treatments or chemicals, for example—can be mastered through on-the-job training. Similarly, while everyone would like to visit the highest-skilled dentist (if it cost no more to do so), surveys of dental practice find that about 80 percent of the work performed by dentists are routine tasks that can be performed by a high-school graduate with only 20 months of post-secondary-school training. Experience requirements seem particularly arbitrary, related less to minimum competency than to excluding people from the profession. Until
  43. 43. 43 recently, becoming a master plumber in Illinois took longer than becoming a Fellow of the American College of Surgeons. Similarly, an Oregon board regulating cosmetology raised the number of training hours required for entry from 1,500 to 2,500. According to Cato Institute author David Young, pressure for the change came not from disgruntled cosmetology consumers but from beauty schools that were able to charge more tuition and serve more consumers in school training salons. In addition, experience standards frequently govern not just how much experience a potential professional has but also where that experience is gained. In New York City, a “master plumber” must have 20 years of experience as a “journeyman” under a master plumber in New York City. Ten years of experience in Philadelphia or Akron do not count. Some states require U.S. citizenship for licenses, which might make some sense for lawyers trained in French or Islamic law but not for other professions, including doctors, where knowledge of a particular culture is not needed or can be gained on the job. Other states impose residency requirements, with the same apparent irrelevancy to actual job performance. Licensing examinations frequently reflect their true purpose of excluding competition more than their ostensible purpose of guaranteeing quality. A national exam for landscape architects, required in many states, was studied by consultants to the California Board of Landscape Architects in 1983. They found that fewer than half of exam questions had a direct relationship to public health or safety. On the portion involving history, 40 out of 45 questions were unrelated to the job. In another section, 32 of 98 questions were found to require more advanced knowledge than that normally considered “entry level”—in other words, they expected new landscape architects to mirror experienced architects in knowledge. These kinds of barriers to entry seem to be designed not so much to aid consumers as to aid those already in the professions regulated. After all, if new entrants to their professions are few, established professionals have less competition and thus can afford to charge higher prices without driving their customers into the arms of lower-priced competitors. The Effects of Licensing on Consumer Prices Researchers have found it difficult to estimate the precise impact of licensing and other regulations on price, because of the way these impacts
  44. 44. 44 are generated. Not surprisingly, it is difficult to guess at how many people would enter a given profession if regulations were lifted, and how prices would adjust to the enhanced competition. Moreover, licensing boards affect not only the specific occupations they regulate, but also new or innovative occupations that may compete with them by offering to solve a particular problem or provide a service in a whole new way. One example of this effect is the return of midwives as a low cost substitute for obstetricians and hospital-based birthing. According to a 1987 survey, 16 states prohibit the practice of midwifery. Seventeen states have licensing or registration laws governing midwives, and 17 have no law specifically prohibiting midwives from working (because professional regulations are constantly evolving and changing, these figures may understate or overstate the regulation of midwives). Because in-home births assisted by midwives cost significantly less than hospital stays, it is not surprising that medical boards have sought regulation of midwives. The midwife case demonstrates how risk enters into the professional licensing picture. Though midwives may challenge this assumption, most people believe that in-home childbirth is more risky than birth at the hospital, chiefly because hospitals have equipment and specialists with which to intervene should complications or atypical medical problems develop. Thus, potential parents who choose midwifery over the traditional approach are apparently taking a risk in exchange for a price break. By disallowing this type of consumer risk, licensing boards may advance their notion of consumer safety—at the expense of lower-price choices for consumers. Despite the difficulties in gauging price effects, researchers have been able to estimate how far prices might drop if licensing were lifted. In a 1978 study, Lawrence Shepard of the University of California at Davis examined the price differences between dentists in states where out-of-state licenses were honored to those in states where such licenses were not honored. In the latter group of states, dentists moving into the area had to meet new state or local licensing requirements, thus increasing the barriers to entry in those areas. Therefore, recognizing out-of-state licenses is to some extent a less restrictive form of regulation. Shepard found that the price of dental services and the average income of dentists were 12 to 15 percent higher in the states where out-of-state licenses were not honored. In other words, regulation increases price,
  45. 45. 45 and the more restrictive the regulations, the higher the price will be. In the early 1980s, a set of studies by Canadian researchers found that licensing regulations imposed on some 20 professions increased potential earnings of professionals by nearly 27 percent. The Effect of Licensing on the Quality of Services and Consumer Safety Consumers might still think these inflated prices to be a bargain if they resulted in higher quality services. Unfortunately, this is not the case. Several studies have shown that regulations reduce the quality of services and consumer safety. Quality declines because the quantity of professionals falls. Even if the professionals remaining in a field after the advent of regulations are more qualified than their pre-regulation predecessors, consumers can still suffer from reduced quantity and availability of services. There are several ways reduced quantity leads to reduced quality. 1. Substitution. When consumers cannot find a professional to provide a service—or if they cannot afford the higher prices charged by professionals with scant competition—they frequently try lower-quality substitutes. Homeowners may try to do their own electrical work, for instance, because licensed electricians are few and charge high hourly rates. 2. Over-training. Ironically, if high licensing barriers permit only the most skilled professionals into the market, more routine tasks which could be performed by less-qualified entry-level professionals are performed by the highest-qualified ones. This, in effect, wastes their expertise and their time. The minutes or hours a dentist spends on routine maintenance, for instance, leave less time to perform delicate operations. 3. Visit tradeoff. Consumers maintain their health and safety not only because of the skills of the professionals they use but also because of the frequent visits to or by their professionals. Therefore, if regulation boosts the price per visit or reduces the number of professionals, thus reducing the available appointment times for each consumer, consumer health and safety will suffer. Obviously this is especially true in the case of medicine. It may take an incredible amount of skill and resources to treat a serious disease, which in its early stages can be prevented—if detected by regular vigilance. Similarly, regular visits to an accountant to keep financial records and tax
  46. 46. 46 plans in good order can be less expensive and more productive in the long run than once-a-year tax-a-thons for some consumers. Researchers Sidney L. Carroll and Robert J. Gaston have studied the various effects of professional quantity on service quality for a number of professionals. In general, they found that licensing and other regulations can reduce quality by reducing quantity. Here are a few examples of professions they studied: • Electricians: Carroll and Gaston found that licensing restrictions such as prior experience and oral licensing examinations reduced the number of electricians offering services in a given area. Then they compared the availability of electricians with rates of accidental deaths by electric shock. They found that “restrictions that reduce the density of electricians are significantly associated with a rise in the rate of death from accidental electrocution.” Possible explanations for their finding could be that homeowners were attempting their own electrical repairs or installations, or that homeowners ignored potential warning signs of electrical problems because the prospect of paying an electrician to look at them was too daunting. • Dentists: Relying on surveys of dentists, Carroll and Gaston estimated that licensing restrictions lowered the number of dentists available in a given state (judging by the number of dentists complaining of being “too busy” or having long patient waiting lists). Relating these data to other information about the dental health of patients in 22 states, the researchers found that smaller numbers of dentists per capita were associated with, for example, more widespread tendencies among those who own false teeth to never wear them, indicating “that the dentures, for whatever reason, were not satisfactory.” • Plumbers: Carroll and Gaston found that the number of plumbers per capita was associated with the retail sales of plumbing supplies, indicating that as plumbing services were made less available or more costly, consumers were more likely to attempt repairs themselves. • Real Estate Brokers: In those states with licensing requirements for real estate brokers, Carroll and Gaston found that the number of brokers per capita was low and that quality of service was correspondingly low, at least measured by how long houses remained unsold on the market.
  47. 47. 47 • Veterinarians: Carroll and Gaston found that “the more strict the barriers to obtain a License, the fewer practitioners there are and that this results in an under-discovery of animal disease, thus possibly increasing the risk of infection to both healthy domestic animals and ultimately people.” For example, the researchers found that incidence of rabies was higher in those jurisdictions where there are strict limits on veterinary practice. Other studies have found a similar relationship between licensing and quality—namely that where one is found, the other usually is not. For instance, the Federal Trade Commission studied incidence of fraud in the television repair industry in three jurisdictions: Louisiana, which licenses repairmen; California, which registers them; and Washington, D.C., where the profession is not regulated. Fraud was more frequent and prices were 20 percent higher in Louisiana than in the other jurisdictions. Licensing Boards Controlled by Professions They Regulate While research on licensing regulations has generally found limited or counterproductive effects for consumers, the issue is complicated by the fact that all consumers are not created equal. Some have more resources and expertise than others have. Licensing laws are supposed to help those consumers without the necessary knowledge or luxury of finding high quality services in the marketplace by substituting the good judgment of government regulators. Unfortunately, licensing regulation seems to have the opposite effect—it benefits the most advantaged consumers at the expense of the least advantaged. First of all, lower-income consumers, by definition, will be most hurt by price increases due to licensing. They are the ones most likely to turn to more dangerous “do-it-yourself” substitutes, or to simply stop purchasing a service, deeming it less important than other goods and services they must buy with their limited resources. Furthermore, lower-income consumers frequently form the market tapped by innovators who seek to provide services at lower cost. To the extent that barriers to entry included in licensing laws reduce the potential profits of an entrepreneur or inventor, they are less likely to take the risk of entering the market. Licensing boards are frequently controlled by the professionals they regulate, whether formally (i.e., state bar associations governing the practice of law) or by
  48. 48. 48 political pressure. Thus potential innovators who offer quality services at lower prices become the target of professionals already in the market who don’t want their collective boats “rocked.” It is certainly true that many consumers do not have expertise to judge the quality of services, but that doesn’t necessarily suggest that government would be better at it. In The Rule of Experts, David Young points out that even if only some consumers shop wisely for quality services, that creates competitive pressures on professionals to ensure their quality, thus helping everyone. When government sets the standards for quality, rather than quality-conscious consumers, the standards are more likely to be dictated by political pressures, by established professionals concerned with potential competition, than by consumer demand. Importantly, savvy or knowledgeable consumers may still be able to shop around for the best doctor or electrician or plumber under a regulatory atmosphere and, indeed, can afford the higher prices charged. Other consumers aren’t so lucky. And in extreme circumstances, wealthy consumers can travel to other, less regulated jurisdictions to obtain services not offered in regulated areas. Again, lower-income consumers cannot afford to do so. So, while occupational licensing is supposed to help those least able to help themselves—consumers who might be “taken advantage of” in a free marketplace—the reality is quite different. Regulations Serve the Interests of the Regulated by Reducing Potential Competition Recognizing the detrimental impact of licensing and other regulations on price and other consumer interests, some states have tried to reform the operation and makeup of state licensing boards. In many cases, reform has focused on the tendency of professionals being regulated to dominate the membership of regulatory boards. To introduce consumer interests into the process, some states have required so-called “public” board membership, in which non-professional people are nominated to licensing boards. But these reforms apparently do not significantly change either the operation of licensing boards or the barriers to entry they enforce in specific professional fields. Saundra K. Schneider, a professor of political science, examined the operations of 16 licensing boards in Missouri, trying to relate decisions to such factors as board size, budget, and the existence of “public” members.
  49. 49. 49 She found that “the presence of voting public membership has no effect on any aspect of board decision making.” Similar studies in Michigan and California found that board decisions were no different after non- professional people were nominated, and that” public” members preferred to serve on advisory boards rather than on enforcement boards with detailed work to do or the responsibility for judging the conduct of specific professionals. One problem might be what economists call “regulatory capture”—the tendency for regulated industries to dominate their regulators because of the technical nature of relevant information or because those regulated are ultimately the source of information for those who are doing the regulating. In other words, the negative impact of licensing boards is not related to the membership of the boards but to their very nature. These boards are supposed to represent the interests of consumers in various professional fields, but the regulations enforced are more likely to serve the interests of those regulated—by increasing their income, by reducing their potential competition—and favor the interests of higher-income consumers over those to whom price and availability of a service may be more important than the formal education or skills of the service provider. The rationale for occupational licensing assumes that the interests of consumers can be generalized, when in fact different consumers value different things. More importantly, this rationale assumes that government regulations function as they are intended. But research into the actual effects of licensing laws proves that by reducing the number of providers of a service and increasing the price of that service, they hurt most consumers more than they help them. Given this evidence, the best way to protect consumer health and safety would be to let them choose their own services in a free market. _____________________________________________________________
  50. 50. 50 _____________________________________________________________ Enormous Temptations and Corrupting Influences In other words, the use of what Albert Jay Nock called “the political means” of acquiring wealth—taking it—rather than “the economic means”—earning it—is seductive. By its expansion into all areas of everyday living, government is creating temptations on a massive scale. It is easy to fault individuals who succumb to temptation, but one should do so only with the realization that government-wrought temptations are today ubiquitous and overpowering. Thus, it is not that people on both sides of the government dispensary are morally weaker than those of earlier times: The problem is the incredible size and scope of the government dispensary, and the very notion that government may take from A to give to B or regulate the peaceful activities of A to benefit B. In pursuit of privileges, favors, and contracts, people often ignore the rule of law and thereby risk ending both their own careers and the careers of those in government who assist them in return for some form of payoff. Thus, as the daily news reports show us, the existence of the government dispensary with its enormous temptations and corrupting influence is not only theoretically indefensible, it is a very real human tragedy which brings people down at the peak of their powers who otherwise would have lived decent lives and had productive careers. _____________________________________________________________
  51. 51. 51 _____________________________________________________________ Chapter 4 Scandals By Joseph S. Fulda December 1987 _____________________________________________________________ Joseph S. Fulda was Assistant Professor of Computer Science at Hofstra University. _____________________________________________________________ It is impossible to read a newspaper or listen to a newscast nowadays and fail to be impressed by the degree to which our society is beset by scandals, large and small. This was not always so. There was a time when scandals were infrequent, if not rare, deviations from the norm. In short, they were scandalous. Today, they are the norm—commonplace and expected, almost natural. An exploration of the varied causes of this recent and unsettling phenomenon, which we shall undertake here, is necessary if one rejects the conventional wisdom that today’s scandals have arisen from the character defects of our current leaders, politicians, and businessmen—who, it is believed, are morally inferior to and more venal than those of yesteryear. In studying news reports over the last few months, several socio-political trends largely responsible for the huge increase in indictments precipitated by scandals clearly emerge. First, there are more requirements and prohibitions set by the law, the courts that interpret them, and the administrative agencies that apply them than ever before. And even where the requirements or prohibitions are longstanding, the focus, energy, and skill brought to their enforcement is a recent development. Naturally the more laws and regulations there are
  52. 52. 52 to be broken, the more violations will occur. And the more effort applied to discovering such violations, the more will be discovered. It is not that this generation has discovered more mala in se, the political theorist’s term for acts wrong by their very nature and apprehensible as such to any civilized man. Rather it is the extreme proliferation of the mala prohibita, the designation classically given to acts simply declared crimes by the state. Into this category fall many of the ancient victimless crimes, but also, and even here in capitalist America, many economic “crimes.” For example, it is a felony to purchase five per cent of a company’s stock without notifying the government. This not only is an abridgment of the freedoms of speech and enterprise, it is hardly apprehensible as wrong by its very nature. Even worse, it is also a felony to aid someone’s nondisclosure of five per cent ownership, by holding the stock for him. What we have here, then, is a situation, where a mere bailment is treated as a serious crime, its triviality masked by such terms as “parking securities” and “stock fraud,” which to the general public sound so ominous. Then there are also the numerous restrictions on mere possession, which have included illegal substances, controlled substances, contraband, fireworks, gold, firearms, burglars’ tools, and whatnot. Also burdensome are the many restrictions on the peaceful exchange of goods and services between consenting adults. For example, it is felonious for a stockbroker to lend a client more than a specified percentage of the means needed for a securities purchase. What once would have been seen as an act of brotherhood or at least a common business practice has become a “margin violation,” punishable by a prison term. Furthermore, when services are exchanged, even between friends, both parties are required to report the service received as barter income or face federal charges. One can’t even exchange small favors without the intrusion of the taxman. How Regulations Encourage Abuse and Corruption On and on the list goes—and we haven’t even begun to enumerate the restraints and mandates placed on business enterprises. But the idea is already clear: The index of proscribed and prescribed actions far outstrips the security needed by civilized men for social intercourse. And the longer this irrational and capricious list grows, the longer will be the list of
  53. 53. 53 offenders. It is well to recall Jefferson’s comment on this trend already evident in 1816. “Our legislators,” he wrote, “are not sufficiently apprised of the rightful limits of their power: that their true office is to declare and enforce only our natural rights and duties. . . . The trial of every law by one of these texts would lessen much the labors of our legislators and lighten equally our municipal codes.”[1] Second, there has been an almost unimaginable expansion of government- sponsored programs, government-funded programs (grants and subsidies), and government regulation of privately sponsored and funded activities. As I discussed in an earlier article,[2] such programs provide almost limitless opportunities for abuse, both for the legislators, bureaucrats, and regulators dispensing the funds, permits, or contracts and for the corporations and individuals seeking to receive them. And both sides, givers and takers, have used these opportunities. An excellent and timely description of this process comes from William Stem, formerly CEO of New York State’s Urban Development Corporation—a huge government agency “that does everything from building convention centers to financing economically depressed mushroom farms.” Mr. Stem candidly admits that “[t]he fact that government is involved in so much in New York . . . creates the motivation to influence government. And the process of influencing government is always sleazy. . . . It’s a side of liberalism that was not predicted, and I think not completely understood. . . . [T]he government becomes very much organized to push through the interests of whoever makes their influence felt.”[3] In other words, the use of what Albert Jay Nock called “the political means” of acquiring wealth—taking it—rather than “the economic means”—earning it—is seductive. By its expansion into all areas of everyday living, government is creating temptations on a massive scale. It is easy to fault individuals who succumb to temptation, but one should do so only with the realization that government-wrought temptations are today ubiquitous and overpowering. Thus, it is not that people on both sides of the government dispensary are morally weaker than those of earlier times: The problem is the incredible size and scope of the government dispensary, and the very notion that government may take from A to give to B or regulate the peaceful activities of A to benefit B. In pursuit of privileges, favors, and contracts, people often ignore the rule of law and thereby
  54. 54. 54 risk ending both their own careers and the careers of those in government who assist them in return for some form of payoff. Thus, as the daily news reports show us, the existence of the government dispensary with its enormous temptations and corrupting influence is not only theoretically indefensible, it is a very real human tragedy which brings people down at the peak of their powers who otherwise would have lived decent lives and had productive careers. Third, with the advent of special prosecutors, full-disclosure requirements, and many other similar developments, the intense scrutiny placed on public officials and public figures is greater than that of any previous age. Facilitated by modern transportation, communication, and information processing systems, such scrutiny is urged on us by its advocates because of the pervasive corruption discovered in and following the Watergate era. And the more corruption discovered, the more intense is the push for yet more scrutiny. On the surface, it appears that this trend is not directly caused by the growth of government. After all, scrutiny from the press, encouraged by the very weakened state in which the courts have left libel law in the United States, can be as unrelenting as that of a U.S. Attorney, a state prosecutor, or a legislative panel. However, closer examination reveals that what really has occurred is the blurring of the all-important distinction between private and public. With almost everything heretofore considered private now considered public, such scrutiny is to be expected. And the continuing attenuation of the distinction between the public and the private is a direct consequence of the growth of government. Nor is scrutiny itself goal-free. Most of it is directed to discovering whether the person has violated some insignificant malum prohibitum or whether he has been involved in the abuse of the government dispensary. Only rarely does the scrutiny placed on persons in public life result from suspicion that a malum in se, unrelated to the government dispensary, has been committed. In sum, were government’s powers to grant subsidies, privileges, contracts, tax exceptions, licenses, and permits sharply curtailed and were government to refrain from declaring peaceful acts illegal, even today’s heightened scrutiny would yield little of substance. The public
  55. 55. 55 would soon lose interest in reading about probes, inquiries, hearings, and investigations—and scandals once again would be scandalous. Notes 1. E. Dumbauld, ed., The Political Writings of Thomas Jefferson, p. 55. 2. J. Fulda, “The New Bondage,” The Freeman, April 1982, pp. 243- 248. 3. P. Weber, “City of Scares: The Streets Were Paved with Gold Diggers,” National Review, June 5, 1987, p. 27. The article discusses the corruption scandals in both New York State and New York City, which magnify yet still typify the situation with government in general. _____________________________________________________________
  56. 56. 56 _____________________________________________________________ Government Regulations and Requirements Destroy Employment Opportunities Schools can administer tests and identify their own criteria for determining who is best, but there won’t be room for bureaucratic foolishness. Thus not only will there be attainable teaching jobs, but the quality of education will go up across the board. So will salaries. Schools will have to offer teachers wages at market rates in order to attract the best, with salaries increasing in those areas of undersupply. Also, fewer administrators and less overhead will mean more money for teachers and their immediate needs. Instruction will proceed without the need to jump through bureaucratic hoops. Most of this is probably obvious, and much is common knowledge. Let’s remember, though, that this is just one occupation. Today, most occupations are licensed, regulated, and ultimately controlled by the ever-present state. In some cases, the price tag for admission to the club is many times higher than it is for teaching. That gives us a ready explanation for why entrepreneurship is so difficult in today’s society, and why many people who want to work cannot find jobs. _____________________________________________________________
  57. 57. 57 _____________________________________________________________ Chapter 5 Government Licensing: The Enemy of Employment How Come Many People Who Want to Work Can't Find Jobs? July 1996 By Steven Yates _____________________________________________________________ Dr. Yates is Bradley Visiting Fellow at the Center for Economic Personalism at the Acton Institute for the Study of Religion and Liberty. He is the author of Civil Wrongs: What Went Wrong with Affirmative Action, published by ICS Press in 1994. _____________________________________________________________ Not long ago I found myself without a job. The experience offered me some insight into the causes of unemployment in American society. I knew that occupational licensure was both a stumbling block to would- be entrepreneurs and a spur to joblessness because it prices entry into markets out of many people’s reach and creates disincentives to hire. I now have firsthand experience of how government bureaucracy systematically blocks individuals’ efforts to offer services to others in order to improve their own well-being. When I found myself with no university teaching appointment last summer, I did what any responsible believer in individual liberty would do: I took
  58. 58. 58 stock of my strengths. I had seven years of full-time, university-level teaching experience, and additional years of part-time teaching. Though my doctorate is in philosophy, I had once been a science major with a year each of undergraduate mathematics, chemistry, geology, and physics. So I formulated my options and realized I had the background and skills to teach high school math and science. While there may be a glut of philosophy professors, there is a well-publicized shortage of math, science, and foreign- language teachers. It is one thing to grasp a problem or situation intellectually. It is quite another to experience it in “real time.” What I learned from the experience of actually seeking a public-school teaching job made me recoil in horror. “Are You Certified?” The first thing I did was go to a local high school with my résumé, and transcript in hand and advertise my availability to teach math or science. I naively thought my experience as a teacher, combined with the course work clearly evident on my transcript, would make an impression. I’d hoped that all I would have to do is apply and, perhaps, take a test to demonstrate my grasp of the subject, and I’d be set. No sweat, right? Wrong! A receptionist immediately confronted me and asked, “Are you certified?” Knowing what I knew about government licensing, red flags went up at once. I replied that I wasn’t, and requested more information. I was directed to an office about a mile away. There, again, I was unable to get past the receptionist who asked the same question, as if by rote. Again I said no and requested an application for certification. She had none, but gave me the phone number of the teacher certification division of the South Carolina Department of Education. I called and made an appointment. On the designated day I drove to the complex in downtown Columbia where a number of state offices are housed. The Department of Education takes up ten floors of the Rutledge Building; the teacher certification division is on the tenth floor. A women about my age gave me an informational package including brochures with titles like “Questions and Answers Related to Teacher Certification,” lists of
  59. 59. 59 instructions on “How to Apply for a South Carolina Teaching Credential,” request forms for official transcripts to be sent, a “Verification of Teaching Experience” form, a long application for an “Initial Teaching Credential,” another to take an Educational Testing Service standardized examination given four times a year, and so on. A final form required fingerprints of all ten fingers to be sent to the FBI; a memorandum identifying the specific legislation behind this requirement (something called Section 59-25-115) was included. None of this is free. The fee for the initial application for certification is $25. The registration fee for the standardized test is $30; the fee for the test itself runs anywhere from $25 to $85, depending on the content. The fingerprint review costs an additional $24. Because there are critical shortages of teachers in certain subjects, such as mathematics, the sciences, and foreign languages, the teacher certification division developed a Critical Need Certification Program. Since the purpose of that program is to get teachers into the classroom quicker, I initially opted to pursue it, thinking I could be teaching in less than a year. Wrong again. Despite the science and math on my transcript and my evident ability to research topics quickly, teaching in any of these areas required at least a bachelor’s degree, as well as a passing score on the equivalent National Teacher’s Examination. My degree was in philosophy; thus my seven-years-plus university-level teaching experience was meaningless. Even with a math degree, though, the most I could have gotten in one year was “conditional certification.” More Requirements Are Road Blocks to Certification A forest of additional requirements would have stood between conditional and actual certification, including (1) attendance at a pre- service institute at one of the local colleges “designed to prepare these prospective teachers for the opening of school and their initial involvement with students, peers and the instructional environment”; (2) attendance at eight once-a-month sessions during the school year “designed to provide a specific instruction component in addition to planning and interaction with other conditional teachers”; (3) attendance at an in-service institute the following summer “designed to address specific teaching techniques, classroom management, lab skills, etc.”; (4) attendance at four additional once-a-month sessions the following school year; and (5) completion of
  60. 60. 60 three education courses that address such matters as “student growth and development,” “exceptionalities [sic] of children,” “teaching of reading in the content area,” and so on. All that, of course, is in addition to the responsibilities teachers assume once they set foot in the classroom, including class preparations, grading, tutoring, informal counseling, and the like. The government stipulates this forest of extra requirements to obtain an occupational license. Some of the language is sufficiently vague as to drive a one-time logic teacher like me up a wall. What, for example, is a “specific instruction component”? And what do they mean by “student growth and development”? Do they mean something besides learning the subject matter of a course? But that is the nature of bureaucratese. Remember, too, that the bureaucrats who originate those brainstorms draw higher salaries than do classroom teachers. There are, of course, many would-be teachers willing to put up with this nonsense—they want to teach badly enough. That is fortunate, because without them there would be even greater shortages of qualified teachers. I decided I wasn’t one of them. My disdain for “educrats” is simply too great. While reviewing the licensing procedure I would have to go through to teach in a South Carolina high school, I thought of Francisco d’Anconia’s remark in Ayn Rand’s Atlas Shrugged about how “when you see that in order to produce, you must obtain permission from men who produce nothing . . . and your laws don’t protect you against them but protect them against you . . . you may know that your society is doomed.” Entrepreneurship, Not Bureaucracy is the Answer That may be overstating the case a little. But we know that public education is in trouble, and we know most of the reasons why. As we would expect from government bureaucracy, there are too many administrators and too few teachers, too much paperwork and too little teaching, too many discipline problems and too little freedom to do something about them, too much “self-esteem” psychobabble and too little encouragement of the values that lead to happy, successful lives. The source of the trouble: public education is not run by educators but heavy-handed bureaucrats obsessed with rules and procedures imposed from outside. For the bureaucrat, regulations matter, and for good reason: untying our hands would instantly send them scurrying to the want ads. As far as the actual

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