Milton Friedman has been called by many the most influential economist of the 20th century. His writings combine provocative assaults on conventional economic wisdom with lucid explanations of why individuals flourish when they can exercise choice under a regime of limited, decentralized government and free markets. Nowhere does Friedman make his case more compellingly than in his 1962 book, Capitalism and Freedom. This small volume not only contains an overarching philosophy of government, but also applies that philosophy to some of the most vexing problems in economics and politics.
Two such problems are the role of government in education and occupational licensing. (These issues represent two of IJ’s four core mission areas.) Influenced by Friedman’s seminal case for school choice and vouchers, IJ has worked hard from its founding in both the courts of law and the court of public opinion to make school choice a reality. His work on occupational licensing is perhaps less widely known, but has also been central to our mission from the outset. When the Institute seeks to break down arbitrary barriers to entry-level entrepreneurship, we are inspired by his words. Friedman wrote:
The overthrow of the medieval guild system was an indispensable step in the rise of freedom in the Western world . . . . [M]en could pursue whatever trade or occupation they wished without the by-your-leave of any governmental or quasi-governmental authority. In more recent decades, there has been a retrogression, an increasing tendency for particular occupations to be restricted to individuals licensed to practice them by the state. Estimates are that as much as 20 percent of the occupations in today’s American workforce condition entry through licenses or permits of some sort. Twenty years ago estimates were in the range of 10 percent. Fifty years ago, they were a mere five percent. We come across new examples of licensed occupations frequently, an array that ranges from lawyers to beekeepers. The pattern for cartelization is almost always the same: an occupation is faced with an influx of newcomers who compete with the established practitioners; soon, established businesses begin calling for “professionalizing” the occupation or standardizing services; before long minimum standards are proposed and a trade association is formed; the association then calls for legislation to mandate and enforce qualifications. Legislation is enacted and entry into the occupation is conditioned or even closed.
IJ clients who try to drive taxicabs, braid hair or sell caskets are continually confronted by regulatory regimes that evolved in just this way. Today we’re seeing similar trends for interior designers, teachers, massage therapists, landscapers and others.
The barriers created are costly, as Friedman notes:
The most obvious social cost is that . . . licensure almost inevitably becomes a tool in the hands of a special producer group to obtain a monopoly position at the expense of the rest of the public. There is no way to avoid this result.
Guess who sits on the cosmetology boards? The funeral boards? Always a majority will be members of the very profession that is regulated. In Oklahoma and Tennessee, respectively, five and six members of the states’ seven-member funeral boards were themselves funeral directors. Can you guess how they voted on proposals to increase their competition?
In the years since Capitalism and Freedom was published, Milton Friedman’s views have been vindicated in many ways, including the Institute for Justice’s efforts to break open the public school monopoly and tear down occupational licensing schemes. Milton Friedman gave us the blueprint; it is now our honor to do all we can to secure his vision.Chip Mellor is IJ’s president and general counsel.