The founding myth of professional licensing bodies is that they’re necessary for consumer protection and quality control. I find myself wondering whether this is 50% bullshit or 100%.

The oldest profession

Employers have run in-house worker’s comp pools for as long as people have been getting sick1. But when a few american organizations started selling flat fee health services in the 20s, doctors got really, really mad.

In 1929, prepaid or flat fee medical plans in Oklahoma and LA had their founders banned from practicing medicine2. In 1933, Sidney Garfield started the Kaiser Foundation Health Plan, was charged with unprofessional conduct, and lost his license1. (If you’ve been to google in mountain view, you’ve seen the kaiser permanente creek, which is I’m guessing where they hid Garfield’s body).

In 1937, the HOLC sponsored the Group Health Association because health costs were causing people to default on their mortgages. The Washington DC medical and the AMA opposed the GHA, tried to have it banned, and lost in the supreme court.

The AMA probably opposed early health insurance because they thought it interfered with their livelihood. One of my sources said the old pricing model used a sliding scale to charge people differently based on what they could afford1. Flat fee and prepaid systems undercut that. (This argument ends up being nuanced and I’m not sure I believe it – click through to the source and search for Reuben Kessel for more detail).

This isn’t a new problem.

The hippocratic oath given by medical schools today was written by a guy named Louis Lasagna (cool name), doesn’t feature the phrase ‘do no harm’, and is about wishy-washy modern concepts like privacy, not overprescribing, and not playing god.

The ancients gave no shits about these things and had zero chill in them and began their version this way:

To hold my teacher in this art equal to my own parents; to make him partner in my livelihood; when he is in need of money to share mine with him; … to impart precept, oral instruction, and all other instruction to my own sons, the sons of my teacher, and to indentured pupils who have taken the Healer’s oath, but to nobody else.

To translate from the original greek: pay your dues and don’t snitch.

Licensing is sometimes necessary and often evil

There are a lot of ways that professional licensing systems suck for consumers and society at large. I think we tolerate them anyway because regulatory capture is inevitable. You can’t have people practicing a skilled profession without licensing because you end up with the dallas rogue brain surgeon.

Given the need for licensing, you need skilled insiders to tell you how to license. People go into the profession to make money, so are predisposed to protect their ability to do so. And that’s the ballgame.

Ironically, the health insurers that the AMA opposed in the 30s became the enablers of medical price inflation after government created tailwinds for HMOs in the 60s. Health care spending went from 5.2% of GDP in 1960 to 8.6% in 1977.2 If you’ve watched any my hero academia, you know that while this doesn’t seem like a dramatic difference, it’s basically doubling.

The system we have now is pulling its weight at both the ‘limit supply’ and ‘don’t snitch’ goals of the ancient hippocratic oath: it’s expensive to become a doctor, it’s difficult for comparison shoppers to access a doctor’s treatment or surgical outcomes, and it’s impossible to find out in advance how much medical treatment costs.

A lot has been written about this topic. Adam Smith wrote about the economic impact of guilds. (In his opinion, net negative). There are lots of good modern econ papers about the impact of occupational licensing.

The good news: more flexible licensing regimes can be a win. One example is states that allow dental hygienists to run their own practice (vs working under the supervision of a dentist) experiencing economic wins, as well as presumably cheaper prices for the consumer.

The Washington State Practice of Law Board summarily all quit in 2015 in a fight with the state bar association over ‘legal technicians’, a non-lawyer role that was supposed to make legal help cheaper. It’s not good news that they quit, but it’s good news that this kind of innovation is being discussed.

We can do better.

Licensing as a platform

I’m reading a paper about corruption that thinks most of political philosophy is about disentangling ‘government as a platform’ from ‘government as elite rent-seeking’.

Occupational licensing has its own version of this problem: the professions exist in an uneasy, ‘can’t live with us / can’t kill us’ truce with society at large. (Sometimes you can kill them – france did it in 1791). ‘Professional ethics’ sounds like something we want but ends up protecting the industry as often as its customers.

What is a licensed profession? A bundle of schooling, testing, test administrative bodies, oversight boards, and curriculum and rule-making bodies.

Imagine a meta-professional-licensing body that has the goal of disruption and innovating professional licenses. Licensing bodies would be hosted on top of it, and as long as they play nice, they get to stay. Like every platform, the meta body will need to do moderation to ensure the quality of its participants. There will be some thorny malpractice insurance involved.

This can be tricky with professions that are already in some way regulated by the state, like medicine or law. But interestingly, new york state doesn’t name the NYS bar association, or any particular licensing body in JUD 478. All it says is you can’t do (long list of stuff) without:

without having first been duly and regularly licensed and admitted to practice law in the courts of record of this state, and without having taken the constitutional oath.

‘duly and regularly’ seems like an achievable goal.

Also, you don’t have to start with medicine and law. ‘What do consumers need’ is as interesting as ‘what does the state demand’. There may be professions or tasks where we don’t want mandatory legal licensing, but we do want standardized training and testing so consumers can shop wisely.

As always, the lesson of uber here is that if you make something people desperately desire and it more or less works, it’s very hard for the state to crack down on you.

The question here isn’t ‘do we need professional licensing at all’ – the answer there is probably yes. The question is ‘can anyone do this more nimbly and fairly than the government’. If the answer to that is yes, get ready.

Notes

  1. Health Insurance, Morrisey, Chapter 1 ↩ ↩2 ↩3

  2. History of Managed Health Care and Health Insurance in the United States, Fox + Kongstvedt, Chapter 1 ↩ ↩2