The Purpose of Licensing

Abstract

THESE statements represent the divergent views held on licensing. Practitioners of licensed occupations usually support licensing on the ground that it is in the public interest; many economists, on the other hand, feel that such licensing is designed to give monopoly power to members of the occupation. Which view is correct? What is the evidence? A survey of occupations and businesses regulated and the requirements for entry imposed indicates that the least restrictive types of regulations were imposed for the public welfare while the most restrictive types appear to have been established to benefit practitioners of the regulated occupations and businesses. A closer examination of those occupations most restrictively regulated, such as law, medicine, barbering, etc., however, indicates that a belief that society knows the future better than the individual has been responsible for licensing. The idea that the individual knows what is best for himself has given way before the concept that it is society which can best judge. Table 1 presents a survey of the types of regulations that pertained to residents of Chicago on January 1, 1960. The table divides them into those regulations administered by the city and those administered by the state; it further divides them into those pertaining to occupations and those pertaining to types of businesses. The regulations themselves have been categorized by the severity or restrictiveness of the regulations. For each category of regulations the percentage of occupations or businesses which must meet certain requirements is given. Some requirements seem to have been established in the public's interest while others have a tenuous connection, if any, with the welfare of consumers. Interpretation of which regula-