The Role of Economic Liberty in the United States
Articles,  Blog

The Role of Economic Liberty in the United States


We’re very excited and, and honored to have
uh the acting chairman of the Federal Trade Commission here with us today. She’s a good friend to the organization, also
a good personal friend. I’ve known her for years. She served at the commission for 11 years,
that was sort of mentioned or alluded, alluded to by Senator Cruz, and became a commissioner
in 2012 before being designated to serve in her current position in January of this year. Chairman Olhausen is an expert in privacy
and trade law and before working for the commission she was an adjunct faculty at Antonin Scalia
Law School at George Mason University where she taught about privacy and unfair trade
practices and wrote a number of articles on antitrust uh competition law. There she was also senior editor of the antitrust
law journal and a member of the ABA’s task force on competition and public policy. She later worked at Wilkinson Barker Knauer
the law firm here in Washington, D.C. where she became partner specializing in FTC issues. I mentioned at the outset she’s a great friend
of the organization, she’s also a good personal friend. Please join me in welcoming acting chairman
of the FTC Commission, Maureen Ohlhausen. (Applause) Uh well thank you to Dean and to the Federalist
Society for hosting me today. I’m thrilled to be here with so many friends
and colleagues uh who’ve worked on these issues with me over the years and who I know care
deeply about them as I do. Um, I’m also so pleased to follow my former
boss and old friend Senator Ted Cruz. You can see what an inspiring boss he must
have been uh when he was leading the FTC’s office of policy planning. Um and I’m really delighted to say that even
all these years later uh, we are both uh continuing to work hard to advance the economic liberty
of American people and I’m honored to build on his thoughtful remarks. I’m also having getting my … there we go. My little stand on to the, the podium. Um so my ongoing fight for economic liberty
is fueled by my personal belief in the power and the benefits of free markets. Now we sometimes take free markets uh and
competition for granted. And we treat these institutions as if they’ve
always existed. Or if they just sprung you know forth fully
formed. Uh but these important institutions exist
only where individuals are free to exercise their economic liberties. So, the liberty to own, to exchange, to compete. And the most relevant for today’s topic, the
liberty to pursue work at a job of one’s own choosing. These individual economic liberties exercised
en masse, foster free markets. And the benefits of free markets include innovation. Uh new business models. Economic opportunity, jobs put simply, and
financial growth and greater access for consumers to more and better products at lower prices. And these benefits and more come from free
markets, and free markets are only possible because of economic liberty. Now because I believe economic liberty is
so important, indeed fundamental to our American way of life, I’ve spent much of my career
working to advance it. And I’m particularly proud of the work, my
role in the work started in 2001 by Chairman Tim Muris as Senator Cruz mentioned. Uh which uh along with our advocacy, we also
worked to limit antitrust immunity for any competitive private actions under the color
state authority. Uh and that works at the foundation for our,
some of our recent successes. Most notably the FTC Supreme Court victory
in the North Carolina dental case. But despite such important court wins, far
too many job seeking American’s still face a sea of government red tape between them
and the job that they want to do. And the FTC’s mission is to protect consumers. And sometimes as in occupational licensing,
that may mean protecting consumers from excessive government regulation. And today I’d like to tell you a little bit
more about how as acting chairman of the FTC I will carry out my commitment to economic
liberty with a particular focus today on occupational licensing. So, the most durable restrictions on competition
typically flow from government. Government over reach diminishes economic
opportunities, and such overreach can also happen at the behest of market participants. So, where an innovator needs permission from
the government to enter a market, I call it the mother may I problem. But there’s also a brother may I problem. And that problem occurs when a competitor
controls market entry, often through some kind of regulatory permission. And in either case, such regulations can endure
for decades. So, some occupational licensing is essential
to protect our public health and safety, but when abused, unnecessary or excessive licensing
threatens our economic liberty. And the trend here is not good. In the 1950s less than five percent of jobs
required a license and today nearly 30% of jobs require one. And some studies suggest that the result has
been over 250 million fewer jobs and billions of dollars in costs to consumers. And today licensing requirements go far beyond
doctors and nurses and electricians and school bus drivers. And now they extent to auctioneers, interior
designers, florists, makeup artists, hair braiders and numerous other occupations. The public safety and health rationale for
regulating many of these occupations ranges from the dubious to ridiculous. Sumers, consumers can easily evaluate the
quality of interior designers, makeup artists, hair braiders, florists and others, and consumers
already do. Market dynamics naturally weed out bad service
providers without placing consumers in harm’s way. For many other occupations added regulation
limits the number of providers and drives up prices. And these costs often dwarf any public health
or safety need and ultimately harm consumers by limiting their access to better and new
services. Now other evidence suggests that such regulations
are unnecessary or overly strict. So, studies by the Institute of Justice, I’m
delighted that Clark is here today, his organization has done a fantastic job in this space. So IJ and other organizations have found that
different states regulate different occupations. So, all states have licensing requirements
for about 60 occupations such as doctors and school bus drivers and truck drivers. But more than 1,000 jobs are licensed in one
state, that are licensed in one state remain completely unlicensed in another. And moreover, states impose very different
licensing requirements such as the number of months of training required, even for the
exact same occupation. And this uneven licensing of the same occupation
and different requirements for the same license across states strongly suggest that many occupational
licenses don’t advance public health safety or other legitimate public health protections. Now the growth of unnecessary and over broad
occupational licensing hurts many average Americans who want to enter these occupations. And as Senator Cruz already mentioned, lower
and middle income Americans are especially impacted but as are military families and
veterans. For example, because military families move
a lot, occupational licensing uh, uh, blocks jobs opportunities for what we call the trailing
spouse. The one who goes along with them. And a new state may have additional or different
licensing requirements that that trailing spouse must fulfill simply, simply to practice
her, his or her profession in that state. And occupational licensing also blocks veterans
seeking to return to civilian employment. And these folks deserve better. So, if such regulations aren’t protecting
consumers, why do they exist? So often such regulations reflect regulatory
capture, replacement or over reach. Indeed, as in the FTCs North Carolina dental
case, it’s often not the state government acting, but self-interested active market
participants imposing occupational licensing requirements to prevent competition. Now public choice theory recognizes that regulators
are most likely to grant private uh, excuse, grant private economic gain to special interests
when the cost of that concentrated benefit can be spread among many consumers. A bunch of consumers paying a little bit um
of a extra cost, uh but a concentrated benefit to the practitioners. And unfortunately, occupational licensing
is really the poster child for that uh phenomena. By protecting themselves from competition
incumbents in an industry can often limit choices and raise their prices, gaining at
the expense of everyone else. So, this brother may I problem is precisely
what I would like to work with interested parties including the states to prevent and
eliminate. Now often state and local legislators are
only hearing from one side of the store, uh one side of the story, from the party who
will receive the concentrated benefit. And they often don’t hear about how such regulations
will impose costs on the very constituents they wish to protect. And state and local legislators must hear
both sides of the story. So, to be clear, I believe in federalism and
the important principles that embodies. And I am a member of the federalist society
after all and have been for a long time. If politically accountable state actors clearly
articulate a policy and decide to displace competition with state regulation and then
actively supervise it if they need to, we at the federal level must and should respect
that decision and their constituents will hold them accountable. Often, however, such regulation reflects not
the expressed will of the people through the political process, but rather regulatory capture
by a narrow group of special interests. It often lacks accountability to the state’s
legislators and voters and imposes high costs on consumers. And this is especially true when a state delegates
regulatory authority to a licensing board controlled by the profession itself. And studies suggest that in some states market
participants control more than 90% of the licensing boards. And when market participants control state
boards that impose regulations on competitors, self-interest may well supersede consumer
welfare. So, what can the FTC do? A lot, and we’re doing it. So, I’ve created an economic liberty task
force within the FTC to advance economic liberty with a particular focus on reducing occupational
licensing regulations. And I’ve been thrilled with the reception
that this task force has received so far. People are very interested in this and we’ve
heard, or I’ve heard, from state legislators, governors, consumers’ organizations, news
outlets and individuals across the country who are interested in what we’re doing and
looking to team up to bring back economic opportunity. And the task force has already started coordinating
the use of the FTCs tools to increase economic liberty. So, we have two primary tools, advocacy, and
enforcement. Senator Cruz talked about our advocacy work. So, since the 1970s, the commission has issues
hundreds of advocacy comments and amicus briefs to state boards and self-regulative, self-regulated
entities. So as a first step, my economic liberty task
force has collected the materials on these past advocacy efforts into a special area
of the FTC website focused on economic liberty. And this portal which you all can find at
ftc.gov/econliberty highlights the FTCs important work on competition advocacy and occupational
licensing. And it also gathers the many existing FTC
resources into a central repository for other stakeholders and it showcases select state-based
occupational licensing reform efforts. And we’re continuing to expand resources at
this site and we welcome your suggestions. So, you can email suggestions to the task
force at [email protected] Now as the next step, the task force is seeking
input from an array of parties and trying to build partnerships. Now, fortunately, many people, including state
leaders want to expand economic opportunity. And this is a time of change and many Americans
are demanding less regulation and more economic opportunity. And I hope to create a new level of partnership
with governors and state AGs and state legislative leaders and other state and local official,
officials. So, I’ve got good reason for optimism in developing
these partnerships. And governors and legislators in many states
are already identifying problematic occupational licenses. So earlier, this here is just one example. Earlier this year Governor Pete Rickets of
Nebraska launched an occupational licensing reform initiative and things are moving pretty
quickly there. And in fact, the FTCs office of policy planning
just submitted comments on four Nebraska reform bills. And building on this effort, last week the
FTC hosted a Twitter Chat with me and Governor Rickets office. And I was very heartened by the enthusiastic
response that we received. So, through partnerships, the task force will
continue the FTCs efforts to help states include competition analysis when reviewing new and
existing regulations. So, by combining the FTCs expertise and stakeholder’s
knowledge and partnership with state actors, I believe we can help improve competition,
help Americans seeking jobs, allow innovation to flourish, and enhance consumer choice. Now of course in some instances enforcement
may be an appropriate tool, consistent with the Supreme Court’s ruling in the North Carolina
dental case and other state action cases. But the primary work of the FTCs economic
liberty task force will be advocacy and partnership. So, to just to wrap up here and get to our
wonderful panel discussion. The late Jack Kemp said, “There are no limits
to our future if we don’t put limits on our people.” Limits on economic liberty not only hurt the
economy and the free market system, they also hurt American consumers and workers in their
everyday lives. And as the country struggles to revitalize
it, economic opportunity for everyone, we have a unique chance to challenge unnecessary
occupational licensing. So together with the many excellent reform
organizations and with state and local and federal partners, we can remove longstanding
barriers to economic, uh to competition and therefore expand economic liberty. So, thank you and I look forward to the discussion. (Applause) So, oops, is this working? The table mic. Oh, table mic, excellent thank you. Could we get your name tag Maureen? There we go. I think you should know who I, who I am. Exactly. Excellent. So, to my left is Larry Spiwack, President
of the Phoenix Center for Advanced Legal & Economic Policy Studies. Uh it’s a nonprofit uh center that studies
broad public policy issues related to governance, social and economic conditions, with a particular
emphasis on law and economics of the digital age. To his left is Dr. Michelle Connolly, professor
of the pract – uh, eh, of the practice in the economics departments at Duke University. I’m not sure I said that right. Uh Professor Connolly’s research in teaching
focuses on international trade, telecommunications policy, media policy, education, growth and
development. Uh and then last but not least we have Clark
Neily, uh who joined the Institute for Justice as a senior attorney in 2000. And actually, it was really um fun Clark as
Senator Cruz was talking about the, the casket issue, that’s how I first met you right? So, I helped draft an FTC brief on this idea
that you had to be a funeral director to, to sell caskets. And the people who were defending it said
well the FTC has this rule. And so, I, we got to draft a brief that says
that is not what that rule says and that is not what it means. Um so each panelist will, will start off uh
with some opening remarks. So, Larry? Well thank you very much. Um it’s a delight to be here. Um I was trying to tell my liberal friends
that I was going to be doing a Federal Society event and uh, I was trying to describe what,
what we do here. And I don’t know if you all read the Wall
Street Journal on Friday, it was a lead editorial on uh, Judge Gorsuch but this quote’s just
too good. Quote, (clears throat) excuse me, “You’d think
The Federalist Society is some secret society and Dan Brown novel. As far as we know their conferences are public
and no torture rituals are involved.” Am I at the right place? (Laughter) All right, just checking, okay. So, without question and, and I’m so glad
that, that Maureen has highlighted this. It’s such a big deal for, for the American
economy to get it moving and, and sort of the overreach of government and regulation. And without question that occupational licensing
is, is just has a huge effect on our economy. Even the Obama administration, right before
they left office they, they’re council of economic advisors put out a piece said um,
roughly one quarter of U.S. workers require occupational licensing. So, this is something that is very much in
our economy. So just to get the discussion started, let’s
just talk about for a moment sort of, what’s the rationale for occupational licensing? And I, I thought about it a lot and I came
to the conclusion that it’s what I like to call the Holiday Inn test. What do you mean by the Holiday Inn test? Why you’re about to perform brain surgery
on me, are you a doctor? Why no, I stayed in a Holiday Inn Express. Right? That’s the argument, right? We don’t want untrained people doing things
that could harm uh, consumers, right? And, and not only that because it is a license
you, the, the argument is that if there is some sort of malfeasance that you could then
take that license away and you’ll never be able to practice in that field again and be
banished to eternity. So, that, that’s the argument in favor of
that. Uh, and obvious examples you know doctor’s
and let’s face it folks we’re all largely lawyers in this room and we all have an occupational
license. Um and you know there’s a degree of technique
and, and skill with that and we’re officers of the court. Um however as Maureen has pointed out, very
often the public health and safety rationales or other rationales, I love this line, range
from the dubious to the ridiculous. And I, I think that really is true. So, I think when you start talking about occupational
licensing, I mean there’s some hard questions involved right? Because public safety is, there is some legitimate
nut there to do this. Um so, so what are we trying to achieve arguably
with occupational licensing? Well are we trying to establish some sort
of minimum certification? You know right, we all went to law school
for three years and took the bar and had to take professional responsibility exam. Um okay well that could be there but is that
a government requirement? Right and by way of example my wife is in
the makeup industry. Uh she’s run several counters, she runs the
uh, plug the counter, the Charlotte Tilbury counter over at Nordstrom’s and Tyson’s. Okay now to be, to get that job to run the
makeup counter she had to get certified as a makeup artist because there are certain
health issues involved with putting makeup on people’s faces. But she didn’t need a certification. Now if she wanted to be an esthetician which
involves quasi medical stuff then she does have to get a license. But you know clearly the market dictated whether
or not you’re qualified or not. Um if I want to be a mechanic, well I might
have been you know, grew up on a farm. But you know, you know and I’ve worked on
tractors my whole life and I’m, you know I can rebuild something with you know like a
wrench and blindfold. Okay, I don’t need certification but the market
can determine whether or not you’re a good mechanic or not. And you have a reputational aspect in that. So again, a lot of these issues are you don’t
need that and the market can take care of that assuming that there’s no public health
and safety. Um, but so where, where, where then is the
rub? And I think for me a lot of occupational licensing,
the reality what’s driving this is, is, although I think what Maureen raised with the brother
may I is a large degree, but I really think that it comes down to it is just a very convenient
source for local and state governments to extract rents in the form of a, another form
of a tax. Uh D.C. government tried that a couple years
ago, where in addition to our bar dues we’re going to have to a pay a professional fee
and it’s just very easy just to attach – It’s one thing okay I’m going to pay 25 bucks but
I mean I’m reading some of the literature just the outrageous, what the cost for annual
license. And this is just a way of taxing. So, it’s not even to me I think even a way
of, of, I don’t think there’s any shortage of lawyers out there um by way of example. But it’s a way that the government can extract
a tax if you want to do business. And when you tax something you get less of
it or surely less quality of it. Um so again and we’ll go for the bigger discussion
of you know, what is that compelling license? Then more importantly and I look forward to
the discussion, what is exactly that we do about this? I think Senator Cruz had a very excellent
point about sunshine is the best disinfectant and maybe that’s a lot. Um these are very entrenched interests um
and then you couple that with revenue to a state. Sometimes shame is your best policy although
some administrations have no shame. Um you know, do we do some sort of preemption? I mean you run into a 10th amendment issue. Um do we have an antitrust concern? And to talk about the North Carolina dentist. Um and then you even have a due process concern
and, and we’ll talk about this when we start talking about some of the law, but I did a
piece, it just reminded me listening to Maureen’s speech. I do a lot of work on dealing with municipal
broadband works. The government um fighting uh the private
sector and that’s never a good idea. And there was actually a case last year out
of the D.C. circuit dealing with railroads. And um, and they sued Amtrak and it turns
out the D.C. circuit ruled the Amtrak’s statute unconstitutional, it violates due process
because in that case what the court found was that essentially you can’t be both a competitor
and a regulator at the same time. Even if you are nominally the government. That just violates all basic things. So, these are all avenues in how we pursue
that but I think that’s the way to just start the discussion about a very complicated issue. So, I’ll turn that over to my good friend
Michelle. Thank you. (clears throat) Thank you. Um so as the only economist on the stage and
unlicensed because there is no license … um but I think we haven’t really had to argue
for that because it doesn’t seem that droves of people are running to uh get econ degrees
so I think we’re safe. Um so as Larry was mentioning there are many
legitimate health and safety concerns, issues about asymmetric information that, that justify
the use of licenses in certain professions. Uh a couple things to note though is that
the market is changing rapidly and certainly the internet is something that is very quickly
changing the issue about asymmetric information. And certainly, helps uh with issues of rogue
actors. Um also it’s not clear to me or at least I
haven’t seen any studies that really demonstrate even in cases of health or safety recurrent,
uh, considerations, that the outcomes in states with more stringent or more onerous uh licensing
requirements, if they actually have demonstratively better health uh, outcomes, health or safety
outcomes. That seems something that might be worth considering. Now this panel is really focusing on the cases
where there are not so many legitimate reasons for uh arguing for occupational licenses. Um I have stolen a lot of details from the
uh, Institute for Justice so thank you for that and sorry if I preempt you. It’s very obvious when we see that there are
widely varying requirements for the same type of license in different states. If these requirements are so crucial, then
that would argue they would need to be quite harmonized. Um it’s also very obvious when only a few
states have licenses for particular occupations. Um so the one that I really loved was uh for
interior designers. There are only three states that require it
plus the District of Columbia. So, you will all be happy to know that you
are protected from, from bad designers and in D.C. in 2012, to get a license as an interior
designer in D.C. you had to pay $925, have six years of combined education and experience,
and pass an exam. I don’t know what the exam looked like. Do you? Oh yeah, it’s a bar exam for interior designers. Oh, it’s excellent. You know, and then obvious other examples
are shampooing, florists, cosmetologists, tree trimmer, which I’ll get back to later,
teacher’s assistant and sign language entrepreneur, interpreter, sorry. You need an interpreter for me as well. Um, now clearly in economics we call this
a barrier to entry. Um and this is the exclusion of new members. Uh this exclusion is promoted by either existing
members or by potentially competing professions. Uh the types of barriers are multiple. There are cost barriers. Even a relatively small fee of a few hundred
dollars can be an effective barrier for someone in a low-income situation. Time is a very effective barrier. If you have many years of uh time when you
are not able to earn a living because you have to satisfy this experience requirement,
if you’re from a low-income household again that’s going to be a sufficient barrier for
you to not be able to join this occupation. And then we have a ver – an even more extreme
case of caps on the numbers of licenses. So the most well-known example are certain
cities put total caps on the number of licenses for taxis. Um as a consequence the license itself becomes
a commodity. Uh the uh medallions in New York City go for
over a million dollars each. I don’t find that the quality of my cab service
in New York City is worth a million dollars. I also thought I’d add a term that I haven’t
really seen within this discussion but it’s a term we use in economics. It’s called DUPS. Directly Unproductive Profit Seeking activities. And the definition of this is an activity
that uses real resources in rent seeking activities in order to, to increase profits, but it itself
produces no output. Um the key about DUPS and this can exist,
this is clearly a situation when we have some of these unreasonable licenses. We also have it in trade policy and many other
economic scenarios. But it’s always promoted by organized groups
and as Maureen was saying concentrated groups which makes it easy for them to organize and
have an incentive to get these concentrated benefits. And it’s at the cost in this case, of two
groups. It’s the cost of potential entrants who are
usually without much money and not organized, have no real means of organizing. And at the cost of consumers who also are
not easily organized to lobby against this. Also, the consumers may have relatively small
costs. As a social group, it’s a huge cost but the
individual doesn’t have the incentive to try to lobby against it. Um and this makes regulatory capture very
easy. Unless we want to be more benevolent and say
this is regulatory over reach. But the results of directly, of DUPS, I’ll
call them DUPS because I like that term, is that it restricts production and employment. It raises prices and it harms both potential
market entrants and consumers. And one thing that I thought was very interesting
about what others have said is that the key about the harm to potential entrants and um,
and what effects that has. So, I was looking at the Institute for Justice
report and the professions that were being hit by that. And the, if you look at the population that
is in those occupations, the average income is around thirty thousand dollars. Uh slightly more men than women. But what is very interesting is that men and
minorities are over represented in this group relative to the general population. So, this is a exact socioeconomic, these are
socioeconomic groups that we observe in economics are having significant problems with long
term under employment or unemployment. So, these are exactly the occupations where
you want to lower those barriers to help them and they’re the people who are getting hit
by it. And they’re usually getting hit by it by other
professional groups who are making much more money and simply don’t want lower cost competition. Um the, the second thing that I noticed from
Maureen’s statements is that because of the differences in the state licenses and lack
of reciprocity across states, um this harms labor mobility at a national level. And the example of the military wives is illustrative,
but more generally, when we look in economics at uh, any kind of shock. Whether it’s a technological shock, and industrial
shock, a trade shock, it gets concentrated on certain industries. And those are usually geographically located. And if people who had a great deal of national
labor mobility, then the workers are able to move to other areas and the shock gets
dissipated much more quickly. So much of the harm that our workers incur
when there are these massive exterior shocks is because there is a lack of labor mobility
for many reasons. But to the extent that we know that these
types of licenses are only increasing that, we know that that’s only amplifying the negative
shocks to these workers. It’s going to be important for spouses like
military spouses, but really for spouses of any dual income household where the primary
earner has a need either because of a shock or for a positive reason to move to another
state. So again, these licenses are hampering uh
the socioeconomic group that’s having the hardest time in terms of long term uh, under
or unemployment. Now just so I don’t sound too, too against
certain things, okay and no one will really be able to see this. I wanted to put this on a slide. But I’m going to provide a evidence that people
could use to argue you do need licenses for certain things. This is what I do on the weekends, which is
my chainsaw. My steel chainsaw. And people could argue that that is a you
know, social security issue. But um, just to have something positive. Thank you, Michelle. Uh Clark? Well I um, when you started talking about
DUPS I was afraid you really had stolen my thunder because I’m here to talk about the
role of judges, um in failing to protect economic liberty. Fortunately, it was not, it was just an acronym. Um I’d actually like to push back on this
premise that there are some jobs that justify occupational licensing. I’ll give you an analogy. I mean I’ve done nothing but occupational
… not nothing, but I’ve done a lot of occupational licensing litigation in the 17 years that
I’ve been with the Institute for Justice. Um I should give a shout out to my friends
Josh Windham and Rob Johnson who are in the back. To paraphrase Yogi Berra, I’d rather fight
for economic liberty with you than with the best people in the world. (laughter) So, um imagine if, if you have a couple of
toddlers as I do at home and, and you have a problem with um, with rats. Fortunately, we’re in a rental house so it’s
not actually my fault. Um we do. Now um, one possible way of dealing with the
rats would bring, would be to bring in some timber wolves. And those are the regulators. And these particular timber wolves are wild,
ravenous and maligned. Now is that a rational way to deal with your
pest problem is to bring in some timber wolves? They’re going to be real effective in going
after the rats, unlike regulators going after incompetent practitioners. Um what you discover very quickly is that
um, that when you create a regulatory body with the idea of excluding incompetent practitioners
and going after unethical licensees, they don’t do any of that. They devote virtually all of their effort
to keeping out non-licensees. That’s what they do. It’s called regulatory capture. It’s a Nobel prize winning theory, you can
look it up. Um but occupational licensing, whatever uh
hopes we might have for it, completely fails uh to pass the test uh of empirical analysis. There’s virtually no uh economic uh data to
suggest that it does anything good, and abundant economic data to show that it’s absolutely
disastrous for productivity and for innovation. Why is America the wealthiest, most prosperous
nation the world has ever seen? Well I think it’s because we are a country
in which people have always felt that if you come here you will be able to reap the just
rewards of your effort of your industry. And I emphasis, I’m going to put the emphasis
on just and come back to that in a moment. Anybody know what the most patented device
in the history of America is? Mousetrap? It’s the mousetrap. 4400 patents. 95% of them to first time, amateur inventors. Why do people keep on inventing mouse traps? Is it for the fame of being the most recent
of those 4400 mouse? No? Is it for the sheer creative joy of venning
– No. It’s to make money. It’s to make money. And either America is going to be a place
that encourages that kind of innovation or we’re not and we are sliding, very quickly
in world rankings of economic liberty. Why? Because we are abandoning the rule of law. It is no longer the case that America would
stand head and shoulders above every other country in the world if you are an inventor
and you had something amazing to bring to market and you got to pick any country in
the world. There was a time when it would be a no brainer
and that time has passed. Uh depending on what survey you look at we’re
something around 15 or 16 in world rankings of economic liberty and we’re sinking. Why? Because we are abandoning the rule of law. Why are we abandoning the rule of law? Because our judiciary is systematically failing
to fulfill its roles as a truly independent branch of government and to give any meaningful
substance to The Supreme Courts long standing recognition that each and every one of us
has a constitutional right to earn a living free from unreasonable government interference. They say it, and they have said it for over
a century and for the past 65 years they haven’t meant it. How do we know? Because they protect this so called right
with something called the rational basis test, which for those of you who don’t practice
law is a fraud and a charade invented by The Supreme Court to provide the appearance of
judicial review with none of the substance. If I sound a little exercised it’s because
I’ve been litigating rational basis cases like Captain Ahab for the past 15 years. Um but we’re going to put a harpoon through
the cold, black heart of the rational business test I’m sure. Um here’s why it’s extraordinarily important. There are two reasons. I want to illustrate it with an actual case. Um you know when you’re, when you’re in the
business of trying to vindicate economic liberty you have to look for the most ridiculous occupational
licensing laws you can find. Why? Because so many people have a preconception,
right? Show me a picture of a chain saw, aaahh! Surely some bureaucrat must be charge of who
can pick that thing up. Uh my sister’s a doctor in Maine, virtually
everybody thinks she should be licensed. I used to by the way, but I’ve known too many
regulators in the time I’ve been working. Oh and by the way let me add one thing to
what, to affirm a point Senator Cruz made. I wish I had a dollar for every time I’ve
been litigating an economic liberty case and we get to a break in a deposition or something
like that and uh, my opposing counsel if we still have a good relationship which is sometimes,
um during a break will look at me and say, “you know ah, you know Clark I was on your,
I was on your website last night and I was looking at some of your cases and I’m going
to tell you, I totally agree with you on all those other economic liberty cases. I mean not this one, this is one different,
but all those other ones.” Uh it happens all the time. So craziest law we ever found. Occupational licensing law. Louisiana alone among the states requires
a license to be a florist. Not making that up. Take two flowers, put them together in an
aesthetically appealing way … probably we’re okay with the centerpieces because I only
see one flower. But if you put another one in that vase um
you, that would be illegal to do in Louisiana without a government issued license. At the time we challenged that law in 2003
they had um a licensing exam that required would be florists to come and do four floral
arrangements in four hours that they would then have to take up to a table um at which
were sitting judges who were not theoretically disinterested bureaucrats. You got to hand it to Louisiana, they never
do anything halfway when it comes to this kind of stuff. They would bring working florists in from
the industry to judge your work and determine if you were good enough to compete with them. Anybody want to guess what they usually said? 65% fail rate on the Louisiana florist exam. It was actually harder to become a florist
in Louisiana than to become a lawyer. The bar exam had a 67% pass rate so go figure. All right, does anybody, does anybody really
wonder why the state of Louisiana licenses florists? Do I sound like I’m acting, asking a rhetorical
question? I’m not. I’ve actually only ever met one person who
had some wonder, who actually did not know why this law was. I’ve, I’ve talked to people on airplanes,
I’ve talked to little kids who just fell off the turnip truck. The only person I’ve ever met who had some
question about why this law was enacted was wearing a robe. Not making that up. A federal judge upheld this law. Uh partly on the basis of the alleged but
totally false physical dangers of unlicensed floristry. Which apparently include infected dirt and
misplaced corsage pins. It’s written, you can look it up. All right so what are we going to do about
this? Well I think what needs to happen is the judiciary
needs to get back in the business of fulfilling its customary truth seeking role. I don’t actually care that much whether they
strike down these laws or uphold these laws. What I care a lot about is that they stop
lending their imprimatur to this kind of corruption. And I’ll say that again. This is corruption. When the state of Louisiana requires a license
to be a florist, that is a corrupt abuse of power and we’ve got to get the judiciary out
of the business of rubber stamping it. Again, I don’t care that much whether you
strike it down or uphold it, but don’t pretend to believe it. When the state of Louisiana comes in and says
somehow with a straight face, I don’t know how he did it, my opposing counsel. That a possible explanation for licensing
florists is the physical dangers of unlicensed floristry. That’s not true and that shouldn’t, that shouldn’t
fly in a court of justice. Again, whatever the standard of review might
be. So, there are a variety of things we can do
I think to move from here to there. Um my colleague Rob Johnson has actually um
uh, written a wonderful brochure um, tell them what the name of the brochure is Rob? Rob Johnson: Boards Behaving Badly. Licensing Boards Behaving Badly. You can look it up, and we have a whole suite
of suggestions and what it boils down to essentially is occupational licensing should not be a
policy of first resort as it is now. It should be a policy of last resort. And we have this in, beautiful inverted pyramid
to convey graphically that there’s like a dozen different things you can do if you have
concerns about chainsaw waving weekend warriors who happen to go out and I guess open a shingle
as a arborist or whatever. By the way, that’s a heavily regulated industry
in case you didn’t know. So, um that’s the takeaway. Two things. We need the judiciary to get back in the,
in the business of at least not pretending to believe what no one would believe. Get back in their customary truth seeking
role and saying hey, you know what, I’m not telling you what to do but I am telling you
you’re not licensing florists to protect the public. Done. Second, convince policy makers to flip their
approach. Do not go to occupational licensing as a policy
of first resort. It is a policy of last resort. Thank you. Thanks Clark and thank you for …. (applause). Yes, I love your Captain Ahab reference there. You’re getting the full from hell’s heart
I stab at thee effect here so excellent. So, um everyone I think has done a fantastic
job of sort of touching on these different factors that play into why we have occupational
licensing, why we shouldn’t have occupational licensing. Um I think one of the, the interesting factors
as well is it’s often seen as a binary yes or no thing rather than you know, should we
have certification. Should this particular practice be licensed,
that only a dentist can do it rather than dental therapist or some, something there. So, there’s lots of complexities here. But I’m going to jump right to the last question,
uh and, because I want to have time for audience questions. Is what else can we do or should we be doing
to try to make a dent in this? You know the tools at the federal level are
somewhat limited. Right? I often get that question, what are you going
to do? You know we, we did the North Carolina dental
case, we’ve tried to clean up the case law on state action immunity, I’ve tried to shine
a spotlight on it, we’ve done our advocacy. What else are we missing? What else should we, can we be doing? So, I’ll just sort of throw that open to the
panel. Well I’ll start I guess, if I may. So, a couple things I think to get sort of
a little more specific. Um, The Supreme Court has got to decide where
it stands on this question of occupational licensing. This was a, there’s an extraordinary William
O. Douglas quote um, and there’s a case in which he says in dissent that, “I had always
thought that um the right to earn a living was the most precious right that man possesses.” And then within a year he wrote the worst
occupational licensing decision in Supreme Court history, a case called Williamson v.
Lee Optical in uh, I think it was 1954 or 55. And that to me illustrates the extraordinary
cognitive dissidents on this point. Um and if you actually look at any test the
Supreme Court has ever promulgated for determining what is a fundamental right, which is Supreme
Court speak for meaningful, um the the right to earn a living and put food on your family’s
table undoubtedly qualifies. And so, this failure to step up and provide
any meaningful protection for economic liberty um is not an act of judicial principal. Um it’s an act of judicial abdication. And so, point one is that the courts need
to get back in the business of treating occupational freedom like the fundamental right that it
is, and I think this would tend to provoke a kind of an important dialogue where instead
of uh, another thing that Senator Cruz said that I agree very strongly with is the truth
is important. And right now, we have the judiciary participating
in a truth hiding process with the other branches. Take an antitrust case for example. They try to get at the truth in those cases,
but in an economic liberty case? Quite the opposite. They try to suppress the truth. So, I think if we could get the courts and
the legislature into an honest dialogue about what are the legitimate ends of government
and are you exercising power legitimately in this case, um we would begin to see positive
motion. It wouldn’t be an overnight cure. There’s no such thing, but this would begin
to move us in the direction of an honest national dialogue about the abuse of this power which
we are absolutely not having right now. So, Michelle you are an unlicensed doctor
sitting up here on the, on this stage with us, right? Yes, you have a PhD. No one cares about the health of Duke students. Right, yes so is there any sort of economic
test that we should be applying here to say whether this is you know a, a worthwhile type
of regulation or whether we’re into the economic protectionism, dead weight loss world. I think a lot of studies could be done. Labor economists could certainly work on this. And they’re also many dimensions in … with
which to attack this. One are, you know there are positive claims
by those arguing this helps. So, does it? If there’s no evidence of that, that lowers
the relevance of that claim. Secondly, we could look at things like uh,
uh, does it interfere with growth and productivity and employment. And since we have state by state variation
that can help. We can also look at cross country variation
in these things. So certainly, empirical studies I think give
you tools and evidence that could be put forward and um, I think unfortunately many of these
things are based on hypothesis or opinion or scare tactics. Um and aren’t based on any kind of empirical
evidence. Uh unfortunately I was very surprised at how
little the economics literature has done on this. Uh because it seems almost self-evident to
the economist. I was actually in the audience when the uh,
North Carolina dental case was being argued. Because you know, it’s an FTC case. And it was very interesting to me to see the
presumption uh, that a lot of the justices had, that if you had higher licensing standard
it would create better outcomes for, for consumers. And a, a complete sort of um, blind spot as
to the access issues, right? So, it’s the idea yes wouldn’t it all be great
if we all drove you know very expensive cars and they would be safer, but without paying
attention to all the people that would walking, right? And so, that’s one of the, the issues that
I think may be worth studying right. For example, in a state where you uh, uh didn’t
have a license or you had a lower license for certain health care providers, do you
actually have better outcomes because it has improved access. The FTC has actually filed comments to allow
nurse practitioners into the big box retailers right. To get the flu shot, the ear infection, those
kinds of things treated in a lower cost setting at hours that are convenient for people who
don’t necessarily get to take a, you know an hour of sick leave to, to go do something
like that. So, I love your, I love your suggestion. So, Larry do you have any, your idea, your
insight that a lot of this is basically a money generating activity for the state, um
I think has some appeal to it but, but one of the problems that I see is that you may
pay $200 license fee to the state but they may also require you to have you know 270
hours of um, training to be a hair braider. Mm-hmm (affirmative). Mm-hmm (affirmative). The state isn’t reaping that, that benefit. Right, right. So, do you see any way to sort of make, make
progress on that? Well I think it comes down to um, I, I just
go back to what Senator Cruz was saying. I mean sunlight is the best disinfectant. I mean when one does public policy um, I’ve
been doing this for a long time, one never has a giant eureka moment and go I am so sorry
I was wrong. Um you know, firms are not passive recipients
of regulation. Uh they manipulate the system, that’s the
environment that we live in. Um and so sunshine, I mean again there are
at, at the 90,000-foot level there are some compelling reasons for occupational licensing. I don’t think you can do that – I mean Clark,
I mean there was, I remember in high school reading about the 1792 outbreak of uh tetanus
from rusty um, uh corsage pins. (laughter) That a lot of people don’t know about. It’s very dangerous and you have to be very
careful about this. I’d hate to have that happen again. Um but I, I mean the fact that I think Maureen
that you’re bringing attention to this … and again, your line that we go from the sublime
to the ridiculous. And each case is going to be different. Again I’m, exception Michelle, we’re all lawyers
on this panel, right? We all take, and I use that as a, as a personal
example but you know, I’m not interested in the un, unlicensed practice of law. I’m – There is – I remember um years ago,
I was watching um David Bowie on MTV and he was, it was painting with David Bowie. And they said David what is the definition
of art? And he said well art is obviously in the eye
of the beholder and anybody should be able to paint if they want to, but it also implies
some degree of expertise and technique if one’s going to be professional about it. So, you do have some compelling state interests
but it’s this excess. So again, going back to my, what I said earlier,
the market may demand of qualifications. And the market can decide whether or not it
wants. Again, I use the example of if you want to
run uh, be a professional makeup artist there are some safety issues involved because you
don’t want people touching with dirty brushes and so forth and so on. Now maybe you grew up and you learned this
but you know, the market may demand that. That’s not going to mean that you couldn’t
open up your own salon and then people are going to be I don’t know if I want to go over
there, it’s kind of dirty. But again, the market can govern that. So, the requirements I mean, it’s interesting. Here’s a great example. Montgomery County is perfect, you just popped
in my head. The battle between volunteer fire fighters
and the unions is huge in Montgomery County, Maryland. And the unions have done everything that they
can to drive people who are voluntarily willing to run into a burning building and save people. That’s absolutely ridiculous. So, you see this all the time that we’ve had. So again, I got back to the point of public
policy making is an incremental process. It’s always you know, baby steps forwards. It’s victory at the margins. So, the fact that you are calling attention
to this is phenomenal because nobody has done this before. I mean you know you’ve had the Obama administration
kind of talked about it a little bit but now you actually have the acting chair of the
FTC going this is a major issue. If the goal is to get jobs, if the goal is
to drive the economy, this is clearly a problem. It is a complex problem, but now we are focusing
attention to it. And very often in public policy, when the
you know, the squeaky wheel gets uh greased, that’s what you do. Because again you know, you highlighted earlier. I mean you have the brother may I problem
added on to the state’s. And I think what’s interesting just going
back to the law for a moment having reread the North Carolina dentist’s case before this
event, I mean what was interesting about all the, with the exceptions of I think Justice
Roberts, the conservative wings, um Alito and Scalia and I think um Thomas wrote in
the dissent. You know their view of Illinois dentists was
in the Parker v. Brown immunity was no, the dentistry board was actually an action of
the government. So, it wasn’t part of you know, you get into
the active state supervision and so forth and so on and whether or not dentistry includes
teeth whitening. Teeth whitening. So, but the point is that policy starts, and
as you’ve done, Senator Cruz has, by bringing attention. That, that’s how the process gets starts. And then as Senator Cruz said I think so brilliantly,
when you start highlighting, you want to screw your consumers? Be at it. But you know, I’m on record and here’s – Which
then goes and what Michelle was talking about, a good analytical story. You know this, this is a very personal thing
to a lot of people. And so, unless you have the good analytical
story with the good data that all this doesn’t mean anything, then you turn it into an ideological
fight. And I think that is probably the most pro
consumer thing that, one of, you know that you can do. So, I think we have a few minutes for questions? Okay five. Is there a microphone to …? okay, uh maybe
Steve DelBianco first? Thank you, Steve DelBianco of NetChoice. And Maureen, you put a restraint on those
of us in the room who believe in federalism to say that this town can’t really issue mandates
or preemption to the states, but there’s an opening. The states have no such compunction about
preempting city and county governments. Whereas Michelle pointed out, occupational
licensing with respect to taxes is only the beginning of it. Fairfax County where Larry lives, occupational
license on folks who do personal training at the gym. And then turn it into another economic – I live in the People’s Republic of Maryland
so I’m sorry. (laughter) But the economic liberty of people who have
an asset like a home, they have property rights and they want to be able to rent a room or
a home on Airbnb or Home Away, again all of those regulations are city and county level. So, I think we can partner with state legislators
who believe in economic liberty and property rights, for them to run bills that preempt
local authority with statewide standards. We could have a full agenda of a year’s worth
of good legislation and solve a lot of the problems without violating a federalist principal. Great, thank you Steve. This gentleman here? And I hope you’ll file, send us an email with
your ideas to econliberty. For uh, certain health and safety occupations
I can understand the argument for licensing in favor of nothing at all. But if you just compare licensing to a system
of registration and requiring them to post a bond for any damages they cause, is there
any advantage for the licensing compared to that kind of system? No. No the answer’s no. Can you hear me? The answer is no. (laughter) But really quickly while I have the mic if
I could revise and extend my remarks about judges um, there are some really amazing ones
out there. Um, Janice Rogers Brown and David Sintel wrote
a concurrence in a case involving federal milk regulation in which they applied rational
basis review, which they were obliged to do, upheld the law which they were probably obliged
to do and then Judge Brown went off on many of the things we’ve been talking about and
really pulled the veil back uh on both the legality and the wisdom of putting in the
hands of people who gave us the food pyramid to put them in charge of regulating occupations. These people told us the best things to eat
are French fries, pop tarts and white rice. Yeah let’s put them in charge of occupational
licensing. Great. Oh, and uh, also my friend Don Willet down
in Texas wrote the most pro liberty economic uh, or the best economic liberty decision
ever in a case involving eyebrow threaders. Look it up. It is a rousing, rousing defense of the most
fundamental right that Americans possess, which is the right to put food on their family’s
table. And I would also say sometimes we kind of
look at this kind of in a vacuum as if the um occupational licensing is the only bulwark
between you know, terrible outcomes for consumers. Well you know we have market forces. It’s very interesting that at a time when
consumers have much, much more availability of information uh from you know the web, from
online you know platforms and stuff like that, that licenses have gone, way, way up. Because it has reduced that consumer information
asymmetry. Uh there’s also that you know, you ask, is
there a demand for unlicensed brain surgeons. Um, perhaps not. I mean that’s … right? So, that’s, you know there are other elements
that may play a role in how services get offered. Right but at the same time, I mean you have
to pass the, the medical exams, right? I had to convince some professors to give
me my PhD. And so, it’s not as if you would go into a
doctor and there wouldn’t be evidence that they have training. So, in that sense it’s not clear to me what
the license is add, giving an added benefit. I think it’s more in the case where someone
is not highly trained that that, the informational asymmetry may, may be relevant. But I think that the web is doing a very good
job of, of reducing that problem. Could I, I just want to add one thing. Is anybody in the room, I assume a lot of
us are lawyers. Uh, oh by the way, Todd Zywicki back here,
if you ever want to hear uh, uh public choice theory in 45 minutes, go and beg him to just
give you the 45-minute lecture. It’s entertaining and informative. Uh, has anybody ever had to go and find a
lawyer for friend or a family member? Because I had to do that a few times in the
last few years and I will tell you that whether that person was or was not licensed in a particular
state was of exactly zero relevance to me. What I care about is reputational uh, um,
you know information. And if I can find somebody who’s had experience
with that person. And I’m concerned actually that occupational
licensing could lull people into a false sense of confidence. Oh, oh, uh this guy’s uh, uh, uh, uh licensed
by the state of Illinois. He must be great. No. And so, I think occupational licensing actually
might be counterproductive in some professions where you think it might help um for a variety
of reasons. One, one more? Up here? Uh Carl Zebo with NetChoice. One of the things that we’ve been talking
about is interstate work. It was mentioned about uh, insurance portability
across states and now with the internet I, as an attorney who’s licensed to practice
law in D.C., it would be great if I could practice law for my friend who lives in Virginia
but I can’t. What type of economic impact have you seen
to startup businesses? Like Zenefits encountered this problem where
you had to be licensed in every state. What type of impact on new businesses have
been suppressed by the licensing on a state to state level that eliminates kind of the
economies of scale model that the internet provides? Well I can give you one concrete example. Um there was a wave in, in the funeral industry
where corporate funeral homes essentially started displacing mom and pop funeral homes. Now mom and pop funeral homes turn out to
have a lot of economic inefficiencies. Essentially what you have is a funeral director
who reads the sports pages six hours a day and then comes down to meet with families
once in a while. That’s, there’s some inefficiency in that
system. Corporate funeral homes came along and squeezed
out a lot of that, those inefficiencies. Um maybe they brought some things that weren’t
so great but at least you know, if you wanted to you could, you could deal, you could get
a much lower cost uh funeral. Um Maryland actually is the only state in
the country I believe, maybe New Hampshire but in Maryland it is illegal for corporations
to own funeral homes. We challenged that law. Um you probably can guess what happened in
court so I won’t bore you. Um but, but in Maryland … oh and then there
are fifty, five zero grandfathered in corporations and guess what? They’re, those, those, those, the ability
to, to operate a funeral home in Maryland is very much like a taxi medallion. They sell, they’re allowed to sell them. They’re transferable and they sell for up
to half a million bucks. Why? Because it’s better to, to do – and so, here’s
the takeaway. It’s very clear that that law was put on the
books for one reason and one reason only and that is to keep out of state corporate funeral
homes from penetrating the Maryland market. And if you have any doubts about you know
why, is just go and ask a Maryland funeral director and they will tell you why that law
is on the books. And many of them love it and I don’t blame
them. I think … okay. So, uh, I’m glad people have lots more questions
but I think, I think we’ve run out of time so I just uh wanted to thank our panelists
for an excellent discussion and let’s all keep fighting for economic liberty.

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