A License to Steal?
John Kindley and nmsnow recently conducted an interesting (if somewhat acrimonious) debate in these pages (see Mitt Romney's Planet) on the subject of professional licensing. Supporters of licensing believe that it is the best way to ensure that professionals such as doctors, lawyers, and real estate agents are competent to perform their tasks. Libertarians, on the other hand, regard licenses as nothing more than state-imposed monopolies that do nothing more than raise prices, unfairly exclude some people from the professions, and do little to raise professional competence. That is to say that they are little more than a license to steal. Needless to say, these two positions are irreconcilable. However, I believe that distributism offers a way out of this dilemma, a way that addresses the concerns of both sides, and vastly improves the present system.
The reason we need, or think we need, a system of licenses is that the professions provide services of such a specialized nature that the ordinary consumer simply cannot judge their services. I certainly cannot judge the work of a neurosurgeon, and am in less of a position to do so at the time I need one. The license at least guarantees me that the surgeon has had a certain level of training, and re-training and has passed some sort of examination. This may be, as the libertarians claim, thin cover, but at least it is some cover.
On the other hand, John Kindley ably sums up the arguments of Milton Friedman against licenses. On the whole, I must say that I do not find Friedman's totally convincing. Mostly, I wish that Milton, who claims to be an empiricist, would occasionally look at the empirical world. The fact of the matter is that medical licensing in the United States is of relatively recent origin; it didn't come about until the early 20th century. Prof. Friedman doesn't need to speculate about what a medical system looks like without licenses; he could have simply looked to the 19th century. At that time, “doctors” earned their right to practice by taking 9 to 18 months of courses at a local doctors college, a for-profit institution often run by local physicians. The student would never have seen a cadaver or touched a microscope, and would know little of pharmacology. Quackery and incompetence were the order of the day, and the shortcomings of the system became apparent in the great Influenza Epidemic of 1918, which afflicted 25% of the population. Few people would be tempted to return to 19th practice.
Nevertheless, Friedman does point to real abuses of the system. There is no question that when the state assumes control of the licensing process, members of a given profession use the law to raise their own incomes and limit their own liabilities. (In the interest of full disclosure, I am a real estate agent, and we are past masters of the art of using the law for these purposes.) Medical boards (as well as Bar Associations and other professional organizations) frequently overlook abuses by their own members. And given the frequency with which doctors and other professionals are successfully sued, there are valid arguments against the claim that licenses guarantee a standard level of competency.
Of course, some have a simple solution to this last problem: they would simply end or restrict the right to bring a lawsuit against doctors and other professionals. However, restricting a citizen's right to bring a tort is a violation of both constitutional and common law, not to mention common sense. Removing the penalties for incompetence will only encourage the worst practices and discourage the best. This is clearly the wrong solution.
I believe it is clear that we need a system of licenses; however, it is not clear that these licenses need to be directly granted by the state. Rather, there is another vehicle of ancient and honorable lineage that could fill this role, and do it in a manner consistent with both professional competence and the free market. That institution is the guild. Rather than have the state grant licenses, let the state license any number of guilds to do the job. The guild would take responsibility for anyone to whom they granted a license. That is, a person who has harmed by the incompetence or malpractice of a doctor, lawyer, real estate agent, etc., would not sue that doctor or lawyer, but would sue his guild. The guild, and each of its members, would be financially responsible for malfeasance by any one of its members. If a suit were successfully carried against a guild, that guild could in turn sue the doctor involved in an attempt to recover their losses and their reputation.
This would force the guild members to take responsibility for each other. An incompetent member of the guild could have his license revoked by his colleagues, and they would be more than willing to do so, since such an incompetent threatens not only the reputation of all of the members, but their financial health as well. The guilds could set their own education, training, and practice standards. By common consent of the members, and by their internal and mutually agreed-on constitution, the guild would have the right to audit the practice of each of its members, and would likely do so at regular intervals for its own protection. Instead of one vast AMA, there would be all sorts of competing guilds, all with their own approach to medicine (or law, or whatever.) These guilds would compete with other guilds on service, science, and price, and the market, as well as science, would get its say. Over time, best practices would win out, as the worst practices fell victim to the market and the tort system.
One might ask, “Why would any doctor join a group where he has to take financial liability for all the other members of the group?” The simple answer is that he already does; this is what insurance is. Insurance is merely a method of cost averaging. A competent doctor, who has never had a claim or a complaint, nevertheless pays in his insurance premiums for all the mistakes of his colleagues. The difference is that now he does not get to choose the colleagues with whom he will share this liability. Under a guild system, a doctor would not have insurance at all; his guild fees would cover that, and he, as a member of the guild, could pass judgment on which of his colleagues he will share the liabilities.
The role of the state would be to license the guilds, set some minimum standards to prevent outright quackery, and audit them to ensure that they had the financial stability and resources to stand behind their members. This would greatly reduce the role of the state without eliminating it entirely. The state would do things that it is equipped to do, while guilds could provide a wide variety of competing services and prices. Further, it would be much easier for the public to judge the overall performance of a guild than to judge individual doctors or lawyers. John Kindley wants a system were he could practice law as an apprentice, and I suspect that any number of guilds would be willing to do this, since it would lower their costs and provide them with a way to develop talent without relying on the expensive law schools.
In this area, as in so many, I believe that distributism provides creative answers to the practical problems that we face everyday.
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