February 27, 2014 11:10AM

Does Occupational Licensing Make Sense?

The standard argument for occupational licensing — government‐​imposed limits on who can supply medical, legal, plumbing, and other services — is that such laws protect the public from low‐​quality provision of these services.

This argument is not convincing on its own: licensing limits the quantity of services provided, raising price, and thus harming consumers. A necessary condition for licensing to make sense, therefore, is that any improvements in service quality outweight the losses from higher prices.

new study, however, finds that when de‐​regulation allows nurse practioners to perform more tasks without doctor supervision, the price of well‐​child medical exams declines (as implied by standard economics), with no “changes … in outcomes such as infant mortality rates.”

In at least this case, therefore, licensure is all cost and no benefit.