Featured Post

Medical licenses are not rent-seeking

Like many of you, I read James Hanley’s fascinating post the other day about rent-seeking.  I look forward to his upcoming post wherein he offers more detail on his proposed amendment to ban it. Whether or not I agree with it, I have no doubt it will be well-worth reading and considering.

That said, there was something in his first post that I feel merits a dissenting response.  Specifically:

Types of special privileges include monopoly and cartel protections, subsidies, tariffs and quotas, preferential tax treatment, and barriers to entry such as occupational licensing.

He elaborates later:

  1. Occupational licensing does not mean an end to regulatory requirements for safety and health. For example, I used to drive a cab, for which I had to earn a cabbie’s license. Eliminating that special license would not mean that I couldn’t be required to have a safe driving record, or that the vehicles I drove could be required to go through regular safety checks.
  2. Licensing should not be confused with credentialing. Those with credentials could charge more because they’d be more trusted. Those without credentials would find it harder to get customers, would have to charge a lower price, and would find it hard to retain customers unless they proved themselves in performance.
  3. While the public tends to believe that occupational licensing is for consumers’ benefit, occupational licensing laws are most often sought after by practitioners in the various industries. Liberals don’t generally believe businesses have the customers’ best interests at heart, and I only ask them to consider that general position here as well.

Perhaps unsurprisingly, I do not agree with him here. While I have no great love for the tedious and laborious process of obtaining a medical license, I believe it is far more than a professional form of rent-seeking.

First, a concession.  As James alluded in his piece, this was the element of his argument most apt to raise hackles with his liberal friends, among whom I would number myself.  He offered to go into greater detail in the comments to his post, and for all I know may have already addressed everything I will lay out from this point forward.  I have not have the opportunity to read all the comments in detail, so if this entire post is superfluous, I apologize in advance for wasting everybody’s time.

However, let’s assume I have something novel to say.  My counter to James has a few facets.  That said, I will begin with yet another concession. According to Baizer Kolar P.C.,  professional licensing, more specifically efforts to prevent licensure of other, potentially-competitive professionals in the same field, most certainly can be a form of rent-seeking.  An easy example is the well-documented tension between some physicians and nurse practitioners, which in some cases has taken the form of lobbying against licensure for the latter by the former.  While there are, in my opinion, legitimate reasons for objecting to licensure for healthcare providers if you feel their practices are unsafe, I would be a fool to deny that physicians have engaged in asinine and counter-productive efforts to elbow other health professionals out of a position to compete with them.  To whatever extent James’s proposed amendment would mitigate the harms from this kind of idiotic turf war, I’m all ears.

But medical licenses serve a few very useful purposes, the loss of which would be a harm to consumers and patient safety.

While the requirements for licensure vary from state to state, they all pretty much require a few things.  You have to have graduated from an accredited medical school, have completed some degree of post-graduate training, and have passed all three steps of the United States Medical Licensing Exam (USMLE).  This is, to my mind, a minimum standard of competence that anyone who would hang out a shingle as a doctor should meet.

Without licensure, the onus of determining if a provider’s credentials are sufficient to assure competence falls unduly upon the patient.  Assuming that James wishes to retain medical school accreditation under his new system, we would then expect patients to know that Johns Hopkins is accredited but, say, Northern Idaho Correspondence School of the Health Sciences isn’t.  If some fly-by-night entity crops up that offers “accreditation” outside of the LCME, to what degree would patients be responsible for parsing that distinction?

Further, a medical license does more than merely communicate to patients.  It also confers a set of privileges.  Without licensure, how will it be determined who can write prescriptions for amoxicillin or Vicodin?  As unpleasant as obtaining a medical license may be, it’s nothing compared to the process I have had to go through to get privileges at the hospitals where I practice.  Would I need to go through a similar process with each and every pharmacy (or, at least, pharmacy chain) before they will agree to let me prescribe medication?  Again, assuming that we’re not jettisoning the requirement for some kind of expertise before prescribing privileges are conferred, without licensure how will this expertise be verified?

Finally, licensure provides a level of protection for patients in the case of physician misconduct or incompetence.  Patients who believe they have been harmed by a reckless, impaired or negligent physician can complain to the board of licensure at no risk to themselves.  (Having been the lucky recipient of a wholly meritless complaint once, I am not unaware of the potential the system has for abuse.)  Absent board oversight, the only recourse a patient who suffered at the hands of such a physician would have would be a lengthy and potentially costly malpractice suit.  Since the bar for winning this kind of lawsuit is actually quite high and all manner of harms can be done without outright malpractice being committed, getting rid of licensure actually would leave patients are greater risk for harm than before and let many physicians who ought to be penalized off the hook.

I can see James’s argument that licensure has the potential to be a form of rent-seeking, and as such understand why he would be in favor of abandoning it.  But licensure serves many useful purposes, which we should not try to do without.

Please do be so kind as to share this post.
Share

190 thoughts on “Medical licenses are not rent-seeking

  1. FWIW, Hanley did acknowledge to me in the comments that some industries/professions might be legitimately licensed, but he shifted the burden to make such an argument to them. Which I think you have done sufficiently here.

    Report

  2. I can imagine a lot of this stuff being done without the government. You could, for example, leave it to hospitals and rating agencies to differentiate between LCME and some bogus agency. The government could recognize them, or not, as a basis for whether or not they’re Medicare/Medicaid eligible (though this is the sort of thing that complicates anti-rentseeking measures).

    The result would be a distinction without a difference, to a degree. It might be preferable, though the same ends could be met by confronting current regulation levels.The same people who would oppose that would also apply a lot of informal pressure to keep whatever non-government regulation scheme would replace it.

    And a lot of the barriers aren’t actually government at all. One example I like to use is the fact that my wife has delivered over 1,000 babies and performed hundreds of c-sections (including many problem ones in a high-volume hospital). More than he vast majority of residents coming out of residency. Yet while she can perform obstetrics and does, she cannot become an obstetrician without going back through residency for another three years. Which is insane. But the most hospitals won’t grant privileges without that specific set of credentials, no matter how many babies she delivers. And as far as I know, it has nothing whatsoever to do with government regulations.

    Report

    • I think the prescription issue is a big one. Now, a libertarian like Hanley might oppose the very idea of substances being controlled, but presuming such a system remains in effect, you would need the government determining who had this power; I don’t think you could leave it up to private groups. Unless those private groups were overseen by the government, else I could declare myself a private group and grant myself the power to prescribe, just like that. One way or another, the government would have to be involved.

      Report

  3. I think the argument would be that your second objection (that licensing confers a necessary “set of privileges”) can be addressed by credentialing. Pharmacies and hospitals (and perhaps insurance companies) need only deal with physicians that are credentialed by agencies they respect. Pharmacies, for example, would simply decline to fill prescriptions from doctors credentialed by some fly-by-night mail order organization. Your third objection (licensing providing a level of protection in case of physician misconduct) is manageable in the same way; if the same credentialing organizations that pharmacies and hospitals respect remove their credentials from an incompetent physician, he or she would effectively be unable to practice from that point on. And in light of this, perhaps your first objection is addressed as well; if patients can rely on hospitals and pharmacies to deal only with properly credentialed physicians, they need not be fully aware of the ins and outs of the credentialing process.

    I think the problem comes in with the possibility of collusion. Can patients really rely on hospitals, pharmacies, and insurance companies to act in the patient’s interests? Unlikely. Hard to be sure that the incentives always and everywhere line up on the side of the patient here.

    Report

    • I considered putting in something about using hospital credentials as a substitute for licensure in the OP, and worried that it was already long enough without it.

      I think using hospital privileges as a substitute for state licensure is problematic for a variety of reasons.

      1) As we have seen in Texas recently, hospitals can choose to grant or withhold admitting privileges for ideological reasons unrelated to competence. If the only hospital in town is a Catholic institution that refuses to sanction contraception or abortion (not meaning to pick on Catholics, but simply choosing a ready example), then trying to set up a practice that offers such services is a non-starter.

      2) Let’s say Provider X commits some kind of professional error or malfeasance while on staff at Our Lady of the Worthless Miracle. The hospital could well be named as a defendant in any ensuing litigation, and thus has an interest in minimizing or covering up any harms done by one of its physicians. It may well, as you say, collude with the physician to protect itself.

      3) If hospital privileges are a means by which local pharmacies grant prescription privileges, that stifles competition in the local community. I can’t open a private practice to compete against the hospital-owned practices. It would comprise its own local healthcare monopoly.

      As far as locating the power to confer privileges with some other entity (say, the various speciality Boards like the American Board of Pediatrics and so on), how is that superior to licensure? If anything, it gives patients even less protection than a state license board, because at least the latter has some connection to the government and thus could (in theory) be reformed by sufficient popular unhappiness.

      Report

      • Regarding locating the power to confer privileges with some non-governmental entity, I agree this provides no particular advantage. Apparently doing so makes the system less coercive. Though from the point of view of a particular clinician, the difference between being coerced by the government or some credentialing institution is minimal. The difference between the two regimes approaches zero as the “non-coercive” system becomes more effective.

        Good point about the possibility of collusion for ideological as well as financial reasons.

        Report

    • I’m going to respectfully disagree clawback. I agree that the problem you point to exists, indisputably. And my amendment would not solve it; it would only prevent government from codifying that private practice.

      But there is an advantage in the market in that with sufficient demand alternatives can arise, and unlike with politically mandated rules it doesn’t take anything like a majority to achieve it, just enough demand that meeting that demand is remunerative.

      From my own experience, my physician in Eugene, Oregon, was part of a medical practice that was part of a larger group that was associated with the only hospital in the city (although there was another, smaller, hospital in the adjacent town/suburb). That hospital was a Catholic one, and put some restrictions on physicians’ practices. So my physician and a couple of his partners broke away to form their own medical group, and to the best of my knowledge didn’t face any more such constraints.

      Now I’m not making a nirvana argument, that with the magic of the free market we’ll all have rainbow unicorns and non-wetting puppies. I’m just arguing that given that there will always be pressures to seek rents, allowing them to be codified in law makes it even more unlikely they’ll be broken down than just allowing the market to operate will.

      Report

      • “…that with the magic of the free market we’ll all have rainbow unicorns and non-wetting puppies…”

        And that, my friends, is the problem with libertarianism: the REAL political ideologies are all too happy to make bullshit promises!

        Report

      • Sure, and I’m actually quite sympathetic with that argument. I don’t need the government protecting me from bad haircuts. I’m also fine with the guy fixing my brakes not being licensed, and I agree this fact is indeed telling. I just think it’s interesting to explore the limits of the principle that credentialing can substitute for licensing. I suspect that certain characteristics of the practice of medicine undermine the effectiveness of market signals. Some limiting characteristics may be inherent (patients’ limited ability under stress to make optimizing decisions, for example), but others may be due to rent-seeking. My understanding is that many prescription drugs are far safer than their over the counter counterparts, for example. Unraveling who’s doing the rent-seeking here and why is hard to do, but the problem goes away if patients are free to make informed decisions about their own, say, bronchodilators.

        Report

      • I just think it’s interesting to explore the limits of the principle that credentialing can substitute for licensing.
        Absolutely. And exactly what should be happening with or without my amendment. Even if we never agree on the exact limits.

        I suspect that certain characteristics of the practice of medicine undermine the effectiveness of market signals.
        I think that’s entirely plausible. I strongly suspect medicine has a stronger case for licensing than any other profession. Maybe engineering, too–those dudes can hurt a whole lot of people at once with their mistakes

        Report

      • James,
        Licensing can be done on a small scale for engineering though. Actually, I’m pretty sure a license isn’t required, so much as getting approval from the gov’t that your plans are not going to hurt others.

        … that’s not certification, and it’s not licensing either. But it provides some of the same protection…

        I wonder if it functions better?

        Report

    • Pharmacies, for example, would simply decline to fill prescriptions from doctors credentialed by some fly-by-night mail order organization.

      Why would they? I guess some might do it for paternalistic reasons, but I don’t see why they would have any financial incentive to do so. The obvious benefit of filling these prescriptions is that they make money—what’s the cost? If the patient suffers an adverse effect from taking the wrong medicine, which the pharmacy dispensed exactly as prescribed, the pharmacy isn’t the one left holding the bag.

      Report

  4. Medicine is also unique in that there are many situations where the “customer” is incapacitated or otherwise unable to make an informed decision. In those cases it’s really important to have a baseline standard of care that’s enforced by the government since the traditional market transaction has completely fallen apart.

    Report

  5. Well, that’s the end of a beautiful friendship, and before I ever got to taste that fresh lobster.

    But I kid. This is exactly the kind of discussion we should have in response to my proposal, and I hope my reply can do it justice.

    First, granted that I’m nothing like an expert on all professions, I think medical doctors have the best prima facie argument for occupational licensing. Whereas incompetent counsel can provide grounds for appeal in a legal case, death accepts no appeals. And I think the Supreme Court would take that into consideration as they interpret the amendment.

    Second, though, I think that the “tension” between physicians and nurse-practitioners that Russell mentions is but one demonstration that what justification there may be for occupational licensing at some level has been extended to cover areas that almost indisputably are forms of rent-seeking. I would expect the legal interpretations of the amendment to look for the boundaries between the legitimate areas of licensing and the rent-seeking areas because that’s how the Supreme Court tends to work. And we could look forward to a new cottage industry for law professors in publishing law review articles arguing about those boundaries (this amendment could be a boon to law profs aspiring for tenure, a whole new untapped area to write law review articles about, with law journals eagerly snapping them up because with the field so new almost every article could be considered groundbreaking!)

    Third, I should make clear something I probably did not before. While I am advocating that someone should be allowed to practice medicine (at least at some level, perhaps just a low one) without a license, I am not advocating that just anyone should be allowed to “hang out a shingle as a doctor,” without actually qualifying as a doctor. The signals to consumers need to be as accurate as we can make them, so the word “doctor,” or perhaps more precisely, the word “physician” and the initials “M.D.,” should should be limited to those who have achieved those qualifications. So if I want to go to “Joe the Medical Guy,” knowing that “Medical Guy” indicates he has no professional training, I think that’s very much between him and me and nobody else’s business. But if Joe is hinting that he has credentials he doesn’t have, so that I’m going to him under a misapprehension about his qualifications, he’s committing fraud. So it’s legitimate to specify qualifications for using certain terms, because that’s crucial for consumers to have appropriate information for their own decisions.

    I don’t agree, though, that in any case the burden of knowledge falls unduly on the patient. Consumers deal with the burden of knowledge all the time. There’s no occupational licensing for the mechanic who works on the brakes of my car–and who can kill me dead as surely as a bad physician can. But he does have some certifications from various training programs that give me confidence. If a medical practitioner has certifications saying she’s been trained in certain medical procedures, patients can trust her in those procedures, and their trust in her capacityto do any others, well, there’s a fuzzy area between where that’s caveat emptor and where it’s fraud, but that’s the norm in many areas.

    At one point you explicitly say licensure confers a “set of privileges.” Aha! You walked right into my trap! I have you, Mr. Occupationally Licensed Rent-Seeking Phsycian, defending your precious economic privileges. Except, yes, I think prescribing drugs probably is a unique role, or at least in a very very select set. I would certainly listen to an argument that limiting prescription writing privileges to those with specialized training is more rent-seeking than public-safety, but I’d be standing by your side listening very skeptically. As, again, I think the Supreme Court would be.

    Finally, as to lawsuits. Under my proposed regime, the bar for demonstrating malpactice would, I am confident, decline dramatically. A showing that Joe the Medical Guy was engaging in practices that he had inadequate training for would dramatically expose him for liability. It’s doubtful, in fact, that he’d be able to get an insurer to cover him from claims. The occupational licensing itself is part of what makes malpractice claims difficult to prove, and that difficulty would likely still remain in the case of those who could demonstrate they had the proper training.

    In summary, I would fully expect that:
    1. doctors would lose some of their privileges, but not all of them;
    2.that the Supreme Court would look for the proper balance between privileges that are predominantly rent-seeking in nature and those that protect patients from market failures that unduly endanger them;
    3. that a combination of other accrediting bodies and the willingness (or lack of) of insurers to cover various practitioners would mean the resultant structure would not result in an increase in patient harm;
    4. it would result in substantial consumer savings as people went to lesser qualified people for lesser issues (really, I don’t need a physician for stitches and a tetanus shot, do I?) who would charge lesser prices; and
    5. to protect themselves from legal claims and/or losing their insurance, those lower-level practitioners would routinely refer patients to those more qualified for tougher cases.

    Oh, a final thought on surgeons. If you want to let some untrained yahoo operate on you in his garage with a set of ginsu knives and a hacksaw, I say that’s your business. But of course no insurer will cover that guy, no hospital will let that guy operate in their facilities (nor would their insurers let them), and no insurer will cover the cost of such an operation. For liberals, the biggest concern here, I expect, would be that those without health insurance might have no other choice than the guy with the hacksaw and ginsu knives. But A) that would be no different in my proposed regime than in the status quo ante-Obamacare; and B) if Obamacare or some successor program is permanently installed as they hope, this concern simply disappears.

    Report

    • And once again, as with almost every single comment I’ve made on this issue, I managed to bungle an end tag. Surely that’s some kind of sign that I lack any competency, and none of you should take me seriously on anything.

      Report

    • A question, actually along those lines.

      Would caps on medical malpractice liability fall afoul of your proposed amendment? That actually seems like it’d be a form of rent-seeking, and the data currently implies it’s more a benefit for insurers than doing anything for public health.

      Report

      • I haven’t thought about that. I’d defer to someone who understands that stuff better, at least until I had time to give it thought (which would involve trying to get an answer from someone who understands that stuff better). I’m supportive of you making an argument one way or the other, though.

        Report

    • Head off for dinner, and look at what happens to comments!

      Just a few thoughts before I head to bed soon.

      1) It seems to me that the primary effect of eliminating licensure would be to relocate oversight from a licensing board to the judiciary, as well as putting more of a burden to shoulder the costs of bringing a suit onto wronged patients.

      2) What about those “physicians” who have a degree of some sort from a non-accredited medical school? Suppose a person graduates from a medical school that doesn’t enjoy LCME recognition, and has never bothered to pass any kind of now-redundant licensing exam, but has some claim of legitimacy at putting “MD” behind his/her name. Who validates that claim? Who says he/she can or cannot advertise his/her services as provided by an appropriately trained physician? I went to a relatively obscure medical school that doesn’t proclaim its legitimacy, but as it was accredited its obscurity was no impediment. To what degree do we expect patients to verify the credentials of their prospective providers?

      Report

  6. Consumer protection from professional incompetence seems to be the main reason to license medical professionals.

    But protection from unethical conduct is the main reason to license legal professionals, accounting professionals, and other sorts of people who handle their clients’ money. It is less clear to me that such dangers are protected against better by barring entry into the profession as opposed to direct legal punishment, either through criminal law or tort law.

    Report

    • Direct legal punishment for people who steal money doesn’t seem to help
      with a lot of the small time criminals who work at fast food type places.

      For one thing, the employer is often reluctant to prosecute as it might make them look bad.

      Report

    • The problem with using criminal law or tort law to prevent lawyers from acting unethically is that it requires a separate action. Prosecutors often go without punishment for withholding evidence from the other side under the doctrine of immunity. Its rather rare for prosecutors to get in trouble for the unethical actions and the result of those actions is an innocent person loosing years of his or her life in prison. In private practice, if a person is a victim of an
      unethical lawyers, they still need to find an ethical lawyer to file a suit or hope that the prosecutors take up the case.

      Using licensing does not offer perfect protection against unethical behavior from lawyers but it does decrease the chance of it more reliably than a lawsuit under criminal or tort law since that latter might not happen. Another reason to license lawyers is so that people who hire new lawyers have somebody that has at least a theoretical knowledge of whats going on rather than somebody who needs to have his or her hand held by the judge and guided through procedural issues of the case.

      Report

      • Isn’t a separate action still required under licensing? Somebody has to actually take action, right?

        Another reason to license lawyers is so that people who hire new lawyers have somebody that has at least a theoretical knowledge of whats going on

        This assumes every person needing a lawyer is a moron incapable of detecting any signals of competency/incompetency.

        Report

      • J- I work with many Pro Se clients and also those who are represented by attorneys. Very few of either group know what the important legal issues are re: their case. They don’t know, either group in general, what they need to do, how the courts work in any but the most ” I saw a bunch of Law and Order’s” manner or what their actual rights, privileges and powers are. The people i see aren’t dumb for the most part, but they don’t have the info. Heck a lot of good lawyers won’t even get involved with a case in an area they aren’t familiar with because they don’t know enough about the issues and they are lawyers.

        Report

      • greg,

        I wasn’t asking if they knew the law. I was asking if they could distinguish between legal practitioners who knew what they were doing and those who didn’t. We do this in all kinds of commercial transactions without being able to know how to do the work ourselves, so I’m curious what makes us think people can’t do it here.

        I’m also curious why you think–or at least it appears to be the necessary logic–that there’d be many legal practitioners willing to regularly screw up. What kind of business model is that?

        Report

      • James,
        A good deal of people’s business transactions, percentage wise, are done really, really stupidly. Most of these decisions aren’t ones that people get multiple shots at, either.

        The stupidity can be on many levels — greed, inability to see lack of good faith on the counterparty’s part, lack of foresight/poor planning, lack of research, belief in other people’s good nature.

        Report

      • I don’t think plenty of people can actually tell whether they are getting good legal representation. I can see if you are a business person who regularly works with lawyers you would likely be able to tell good from bad. I work in family law and i really don’t think people understand when their lawyers are making the fight worse and not doing some basic parts of their job. The people i work with have never been through a divorce so they really don’t know what its supposed to be like. It depends on how often you have to interact with the law and lawyers to really be able to judge how good an attorney is.

        Family law attorneys are not always the most highly thought of members of the bar. Burt, Mark or the other law talking types can chime in with their opinions, but that is what i gather from other lawyers and judges.

        Report

      • greg,

        So is this really different from any other field? Or is Kim right, that consumers relentlessly make stupid choices (from her perspective, let’s not; she doesn’t bother to give their perspective)? Should we license everything to protect consumers?

        Obviously that latter point is hyperbolic, but the point is that just saying “oh, there are bad practitioners out there” is insufficient basis for requiring licensure, or we in fact have justified licensing everything.

        And as I pointed out previously, the guy who works on my car’s brakes does not need occupational licensing. I’m a lot less likely to be severely maimed or killed by a lawyer’s error than by his. So what’s our standard?

        Report

      • Greg,

        I would also add that to the extent you are right and I am wrong, that licensing has a built-in exception to my proposal and would not be affected by it. You and I might argue differing positions before SCOTUS on the case, but if your argument is better, you would likely win and such licensing would be upheld as not violating the rent amendment.

        Report

      • James,
        If you hire a liar (“oh, yeah, of course I did a Manual J calculation…”), but never know about it, you’re still getting cheated.
        If you hire a serial exaggerator, who costs you $10,000, by any measure, you’re still getting cheated.
        If your counterparty successfully conceals termite damage, costing you thousands in court/arbitration costs, you’re still getting cheated.

        I’ll allow that I’ve used a certain amount of sleight of hand — the times when folks are getting cheated generally wind up being “low frequency transactions” mostly done by “low information people” with little knowledge of even that they could be getting cheated.

        If you go on a number of transactions basis, rather than how much money is spent, people don’t act nearly as stupidly.

        Report

      • J- I was mostly responding to your point “This assumes every person needing a lawyer is a moron incapable of detecting any signals of competency/incompetency.” This isn’t correct. Plenty of smart enough people don’t know all sorts of things that lead them to be unable to make an educated choice. We live in a world of specialization where there is oodles to know about many, many things.

        Report

      • greg,

        I agree, but it doesn’t build a case. It’s just a first step. There are indeed oodles of such things, so what is our principled standard for distinguishing between them, so that we neither license nothing at all nor license everything?

        Bad things can happen to good people, or oh, won’t someone think of the children…that’s just not enough.

        Report

      • James, you asked, “so what is our principled standard for distinguishing between them, so that we neither license nothing at all nor license everything?”

        I think the answer to this, at least in the legal profession (which I might or might not be joining shortly), is two fold. First, I would point to the importance of the service being offered, and the likelihood and cost of screwing up. I have been part of the Immigration Clinic for the past year and a half, and it was a little disconcerting at first that the fate of another person rests, in some sense, on how I do my job. I get that a hairdresser can accidentally stab someone in the neck, and that most jobs can cause serious harm when things go wrong. But, at least in the non-visa immigration context, the issue is usually whether someone remains detained, whether they are deported to a country were their safety is not guaranteed, whether they get to remain with their family–these are both life changing issues, and incredibly easy to f up.

        The second point I would make (and has been made above) concerns the information asymmetry between lawyers and (some) clients. It is really hard for the average person to know whether the settlement reached by their lawyer is actually reasonable, or to know whether the lawyer has pled the proper grounds for relief in deportation proceeding. I licensing regime which says that only these certain people may engage in the practice of law helps solve this by making sure everybody is at least minimally qualified, and, more importantly, giving people an avenue, when they think their lawyer might have messed up, to to ask other people knowledgeable in the field to investigate whether the lawyers actions met some standard of conduct.

        There are a great many people who are easily deceived by fancy law talkin (remember most of my experience is in immigration were this is a real problem). The licensing regimes helps ensure that there are fewer charlatans to take advantage of them when their legal rights and responsibilities are on the line, and, if they suspect that has happened, it gives them a mechanism to investigate it without filing suit.

        Finally, please don’t take this as a wholehearted defense of the current regime. I would have little problem with a system that significantly narrowed what it meant to engage in the practice of law. But there seems, at least to me, to be a core over which a restriction on who can practice is desirable/necessary.

        Also, thanks for writing this–very interesting stuff.

        Report

      • Galen,

        I agree those are the general contours of a principled distinction. There could be endless quibbling about individual cases, of course, but that’s the right track.

        I will say, though, that I worry that the licensing itself could exacerbate the problem in some cases. That is, if I know the guy who’s helping me doesn’t have the state’s stamp of formal approval, I might as a client retain residual doubt about his qualifications and be more apt to challenge a settlement he proposes. But if the guy is all officially stamped by the state, well, a lot of people take that as authoritative, and it could provide the guy some room to hide some shenanigans behind a wall of authority.

        I know that A) to some extent professional standards limit that, and that’s a good thing, and B) every lawyer in the room is immediately thinking “there’s loads of clients who don’t believe I did my best for them despite my license, but they’re frickin’ lunatics.” And that’s all surely true, but my concern is also, I think, true. These three things are not mutually exclusive, but all exist together in some proportions.

        That said, I don’t think it’s necessarily the best idea to try to go after every aspect of a profession and strip away its licensing. As you note, there are many different aspects of the legal profession (or medicine, etc. etc.), and I’m content to chip away at the less defensible limitations on competition. As Roger notes at the top, baby steps are good.

        Report

  7. Let me add this. If there are certain aspects of the medical profession that justify occupational licensure, can we simultaneously work from the other end and ask what aspects of the profession don’t justify occupational licensure? That is, rather than taking an all-or-nothing approach from either end, can we look for a mid-ground range of agreement?

    Report

    • This would seem wise. And, in some ways, is already what we have.

      Many masseuses claim certain health benefits from their work. But we don’t (at least to my knowledge) require licensing for them and, if we do, it is certainly not on the order of what we require of doctors. We also have different requirements of and different privileges for psychologists as compared to psychiatrists (though I never remember which is which).

      I imagine you’re arguing here for this to be expand and perhaps even within an individual’s role. E.g., no special licensing is required to take a patients height and weight, one license is required to administer shots, and another is required to perform surgery.

      Report

    • For the record, I’m actually somewhat sympathetic to the argument that patients should be able to have greater access to certain medical services without a doctor’s order. I may think it’s silly, but if people want to irradiate themselves with unnecessary CT scans or exsanguinate themselves with blood tests I think are pointless, so long as it’s on their dime I don’t have a big objection. I don’t think it’s a good idea, mind you, but I’m open to the argument that people should be able to enact their bad ideas without my interference.

      I think there are arguments for retaining the need for a medical provider order for special populations (children, mental incapacity), if a third-party payer is expected to foot the bill, or if there is a threat to public health with inappropriate use (eg. antibiotic overuse, already a problem because of sloppy, lazy medical care). But if you want to loosen the rules about who gets what on their own say-so, I’m pretty much OK with that.

      Report

  8. I would argue that most licensure does serve some kind of purpose other than just pure rent seeking. Every profession tries to, and usually does, justify their cartel. It is usually related to how great it will be for consumers.

    Well, as a consumer, I beg to differ. Just spitballing here, but like others have already written, you could replace a licensing board with a certification board. Certification could start at the same standards now required of doctors. You could require non certified doctors to get signed waivers before performing certain treatments. Certified doctors could band together and brand themselves as such, so consumers would know the value of choosing them.

    If prescriptions are the issue, then make a requirement that only certified doctors can write prescriptions (the health risks are somewhat obvious). This would likely lead to a situation where nurses and non certified doctors form division of labor coops with certified doctors, using the certified doctors to necessary functions.

    I am not trying to argue for each of the above points. They are just off the cuff. The point is that if the doctor cartel was broken we can safely assume that hundreds of millions of people would immediately begin to try to solve these very problems. Some ideas would work. Some would not. Those that worked would spread, those that didn’t would lead to people going back to the drawing board. If uncountable attempts to solve the problem don’t do so, well as a last resort we could agree that, well in this narrow area licensure actually is the best solution.

    What we have here are different world views or paradigms. Some say they cannot imagine any way to solve these problems other than a licensed cartel. Others say let us free up markets to try to solve these issues in a way which does not lead to the potential for extracting rents out if consumers. Licensure may be the only way to solve a problem. But I wouldn’t start there just because we can’t imagine a free market solution.

    Report

    • Roger,

      I think your last two paragraphs are exactly spot on. The market, as much as anything else, is a system of distributed intelligence engaged in problem solving. Regulatory agencies–as much as I think they are necessary in certain cases–unavoidably constrain the operation of that distributed problem solving.

      Or to riff off you in another direction, there’s a phrase in evolutionary theory that’s appropriate, which is “the god of the gaps argument.” If people can’t imagine how something could have evolved, they fall back on the assumption that it could not have, and invoke god. I think an identical–not analogous, but identical–type of argument occurs in these discussions. If we can’t–ourselves–imagine a market solution, we fall back on the assumption there isn’t one, and assume that any solution must necessarily be regulatory. “Government of the gaps” arguments, perhaps. (Heck, to the extent I’m only a moderate libertarian who believes some regulation is in fact necessary, maybe I sometimes am making that kind of argument.)

      Report

      • I think viz certifications, we do have some real world examples of third party certification in certain areas of consumption. “Ethical consumption” niches are filled with a lot of certification bodies and schemes. It’s a mixed bag with some notable successes, but also some spectacular failures. Now granted, there are some difficulties that these certifications face in traceability that wouldn’t be applicable to an entirely domestic market.

        Certification schemes are being tried in other areas. The problem with simply doing away with existing structures is that there’d be a significant period where you’d see substantial costs associated with trial and error, or in some cases the creation of an even more flawed system for a number of years due to structural flaws with the existing medical infrastructure. There’s a little bit of difficulty when discussing doing changes to a system where “inefficiency” or “flaws” involve people losing health or lives rather than cheating on say dolphin safe tuna nets.

        Report

      • I like the “god of the gaps” analogy.

        We are indeed dealing with two ways of thinking. One is that complex things come from design, the other is that complex things come from either design or evolutionary type exploration. Nobody denies the potential of top down design. But many people ignore or deny the potential of complex adaptive problem solving systems. It sounds like wishful thinking to them.

        Ferguson, Smith, Darwin, Hayek and similar thinkers documented another way of problem solving.

        I suggest we harness the power of both.

        Report

      • Darwin

        This might be nitpicky, and we’ve had this discussion before, but you’re wrong about that. Evolution doesn’t “solve” any “problem” at all. Nor does “order out of chaos”, as that term is generally understood.

        I agree, tho, that there are two types of thought processes going on here.

        Report

      • It’s a mixed bag with some notable successes, but also some spectacular failures.

        Yes, that’s the nature of markets.

        Government appears to be more successful with these things, because they have fewer spectacular failures (regulatory schemes actually disappearing). But the primary reason they have fewer spectacular failures is not because the schemes actually prove themselves beneficial, but because their regulatory schemes don’t face real competition. Government regulatory programs are the Harlem Globetrotters of certification.

        This is the fundamental flaw in Mike Schilling’s comment below. He is assuming, it appears to me, that the current regulatory scheme has proven itself. But in the absence of competition, what basis is there for such an assumption?

        Report

      • Nob,

        Your concern amounts to a statement that change is difficult and risky. More specifically, deregulation is difficult and risky.

        I basically agree. Any transition needs to be handled with care. Unexpected problems are sure to develop along with expected and unexpected benefits. There are of course systemic processes which can be used to reduce the downsides, discover the risks and separate the real from the imagined.

        Report

      • Stillwater,

        You’re correct that evolution doesn’t “solve problems.” It is, nonetheless, an unequalled example of spontaneous order.

        Years ago in grad school I had these types of discussions with fellow students. Most I’ve mercifully forgotten, but I do remember one arguing that it was because the economy had gotten some much more complex that we needed more top-down regulation. My contrary belief was that the more complex something gets the more impossible effective top-down regulation becomes, and the more it becomes absolutely necessary to rely on the spontaneous order resulting from distributed intelligence.

        Report

      • Government appears to be more successful with these things, because they have fewer spectacular failures (regulatory schemes actually disappearing). But the primary reason they have fewer spectacular failures is not because the schemes actually prove themselves beneficial, but because their regulatory schemes don’t face real competition. Government regulatory programs are the Harlem Globetrotters of certification.

        Government solutions don’t appear out of the aether, generated by the well meaning paternalism of a bureaucrat. They’re usually the result of failures in areas without regulation of some sort and a reaction to those perceived failures. Medical licensing, for example, is one of those fields where a proliferation of unrestricted “certification” and “teaching” programs in the postbellum United States led to a substantial increase in quackery. Something like half the “physicians” surveyed in the 1890 census came from dedicated schools intended to push practices like homeopathy, and there was a thriving trade in alternative medicine that aimed to prey on the ignorance of people.

        Licensing laws came about as a way of putting some restrictions on how these certifications and claims can be measured. The AMA eventually had to work with government to push medical licensing because of the complete and utter failure of market forces to rein in the abundance of quacks practicing dubious homeopathic “medicine” in the world. Given the current proliferation of really dubious quasi-medicine and fringe quacks even with medical licensing, I’m not sure if putting things back to the 1880 status quo would really be an improvement.

        Report

      • Roger, James,

        My broader point is that to some extent a lot of regulation is the result of complex, adaptive trouble solving coming to the conclusion that government regulation is the best way to deal with certain problems.

        Now it’s possible to relax parts of it to see if we can do better, but I don’t think it’s helpful or even particularly accurate to classify most regulatory structures as arising inorganically. In most cases they’re adaptations produced by legislative means to deal with problems that were considered inadequately addressed by non-governmental solutions.

        Report

      • Natural selection solves for persistence. Patterns which persist, persist, and patterns which don’t, don’t. (Paraphrasing Steve Grand’s tautology)

        Evolution is in effect an unguided, undesigned search algorithm for patterns which persist. In this framework life can be viewed as as an emergent complex collection of solutions to the problem of persistence. This is not to say evolution is inherently progressive though as it creates problems almost as fast as it does solutions. This feeds back into the process and leads to new problems and the need for new solutions.

        Science is a self amplifying search algorithm for explanations of natural phenomena. Markets are self amplifying search algorithms for the coordination of human effort in terms of scarce resource. Democracy is a political search algorithm.

        The algorithms are similar in some ways, different in others, however they all have the potential for complex emergent design.

        Report

      • Definitely different then, as my definition does not in any way require intentionality, though it would permit it. Ferguson and Hayek similarly argue against intentionality as being dominant in cultural evolution as well. Human action more so than human design.

        Report

      • my definition does not in any way require intentionality, though it would permit it. Ferguson and Hayek similarly argue against intentionality as being dominant in cultural evolution as well. Human action more so than human design.

        Roger, could you elaborate on this? Especially the connection between human action and intentionality? Most people, libertarians more than most!, equate human action with intentionality. So the paragraph strikes me as incoherent. Probably due to something I’m ignorant about re: F’s and H’s views of things.

        Report

      • “Markets, red in tooth and claw”

        I would say this is more of a difference than a similarity. In markets you are of course not actually allowed to eat or directly injure your competitors. You are allowed to compete, but the competition must be by convincing your customers that they are better off cooperating (exchanging) with you than the other guy. Markets thus compete more constructively and less destructively. It is in effect an arms race to create better terms of voluntary cooperation.

        In properly designed markets we compete to cooperate better, to solve problems better for consumers.

        Report

      • Without being too long winded, the idea is that what emerges from the complex interaction of a lot of narrow intentional acts is an unintended larger design.

        Nobody is in charge of delivering food to NYC. And nobody even needs to want to feed New York. However, if incentives and institutions are properly structured people just selfishly pursue their own interests and the feeding emerges (with notable exceptions to the rule).

        The strangest thing though is that even the institutions themselves don’t have to be designed (though they could be). They can evolve via cultural evolution. Darwin read Smith and was almost certainly inspired by him.

        I have to eat dinner now, but can link you to better sources.

        Report

      • The AMA eventually had to work with government to push medical licensing because of the complete and utter failure of market forces to rein in the abundance of quacks practicing dubious homeopathic “medicine” in the world.

        Nob, does it not strike you that this could be a very uncritical reading of the AMA’s story about why it sought licensing? The AMA had to do it. I mean, they really didn’t want to, but they were forced into it. Their own self-interests had nothing to do with it; they were purely concerned with the public’s interest. You can trust them, really. ;)

        Report

      • “Markets, red in tooth and claw”

        As Roger notes, Darwin was probably influenced by Smith. And there’s long been a (regrettably small) subset of economists who have seen the similarities between natural selection and markets (less than an identicality, more than a mere analogy).

        And just as “nature, red in tooth and claw” is now understood to be a misnomer that dramatically underplays the significance of cooperation in evolution–the extent to which cooperation is often favored by selection–“markets, red in tooth and claw” is identically a misnomer that dramatically underplays the significance of cooperation in markets.

        Report

      • Nob, does it not strike you that this could be a very uncritical reading of the AMA’s story about why it sought licensing? The AMA had to do it. I mean, they really didn’t want to, but they were forced into it. Their own self-interests had nothing to do with it; they were purely concerned with the public’s interest. You can trust them, really. ;)

        Oh it’s certainly not entirely altruistic I’ll grant that. But just because it wasn’t 100% altruistic and self-sacrificing, doesn’t make it illegitimate. Also one will note that they weren’t entirely successful in shutting out alternatives, as the existence of osteopathic medicine demonstrates.

        Report

      • However, if incentives and institutions are properly structured people just selfishly pursue their own interests and the feeding emerges

        And is making sure they’re fed an intention? Is that something you care about? Is realizing that goal an intention of yours?

        If so, then the argument for spontaneous order is justified by intentional design. The only difference is the mechanism.

        Report

      • And is making sure they’re fed an intention?

        Actually, no! If I import chicken into New York, I don’t really care what they do with it, as long as they pay me. The intent is to get money in exchange for chicken, and if they want to use it for modern art, private sexual perversions, street hockey, dog food, or human food, what’s that to me? In fact if the chicken street hockey market heats up and the NYCCSHL (New York City Chicken Street Hockey League) starts paying more for chicken breasts than New York restaurants do, the people will just have to find some other food.

        And keep in mind, even if I, for some, reason, oppose modern art, dog food, chicken street hockey and private sexual perversions and want my chicken to only go to human consumption, A) I can’t actually control that, because some smart restaurateur I sell to may engage in arbitrage, re-selling the chicken to the NYCCSHL, and B) I have no intent to ensure all New York is adequately fed, and little clue as to what that task actually entails; only the small little intent of feeding some small portion of those people some small part of their dietary needs.

        Report

      • Nobody designed English, however it was certainly affected by countless intentional actions and various mistakes. Nobody designed common law, but it emerged from countless decisions and cases. Nobody sets the exchange rate of GE microwave ovens compared to iPhones. They emerge.

        Here is a long quote from DR Steele, which is part of an argument building upon Hayek’s earlier work…

        “Hayek presents two alternatives: Either an institution was designed by a single mind and its operation conceived in advance, or it evolved by a group selection process entirely independent of human understanding. But there is a third possibility, which I suggest accounts for most of cultural evolution: that evolution proceeds by a process in which design and insight play an indispensable role, though the process as a whole is undesigned…

        The evolution of the bicycle shares some qualities with Hayekian evolution. The course of the development is spontaneous, and it would obviously be unwise to try to direct it along a predetermined path. It may even be seen as a form of natural selection, since although conscious choice is vital, no single person’s choices (or the choices suggested by a single formulated program) determine the evolutionary path. Indeed, it is just about conceivable that an innovation might be made and disseminated by an almost unconscious process, a slip of the pen at the drawing board, or a misreading of figures at the factory, followed by careless imitation. A modern bicycle could not have been devised “from scratch,” without generations of experience of trial and error. Numerous promising-looking innovations that were unsuccessful and a few, perhaps inauspicious, departures that worked have cumulatively resulted in something that embodies, in a sense, more knowledge than any individual could possess.

        On the other hand, we did not have to wait, in order for the bicycle to improve, for those civilizations that chose silly bicycle designs to be exterminated, outbred, or conquered by those with better bicycles, nor for the bicycle to make such a contribution to the efficiency of one group that this group became mysteriously yet evidently superior to other groups, so that members of the other groups applied to join the superior group, thereby incidentally and uncomprehendingly adopting its bicycle design. It would not matter if the more successful bicycles were made by patently unsuccessful, declining, and despised groups;insofar as the bikes worked, they would be copied. Every stage in the bicycle’s evolution depended upon some people’s being able to appreciate what was an improvement and what was not.”

        End quote. http://mises.org/journals/jls/8_2/8_2_1.pdf

        A good place to start on cultural evolution is with Boyd and Richerson. They have oodles of papers available on line. Some of the evolutionary concepts they bring to culture are the effects of selection and transmission biases. Certain actions are easier or more likely to be copied than others due to various biases. Utility bias, simplicity bias, integration bias, conformance bias, status bias, ease of testability bias, and so on. Cultures can be said to evolve even with conscious actors making rational choices. What emerges out of these countless choices is beyond the design of any agent.

        Report

      • James,

        And is making sure they’re fed an intention?

        I agree with you on this, at least within the paradigm we’re discussing. My question to Roger, tho, was more at the meta level: does Roger think that intentionally designing systems that feed the poor, or whatever, are important to pursue?

        That might seem like a trivial distinction, but I don’t think it actually is. Roger argues against liberals as advocating for policies which intentionally interfere with market principles in order to accomplish – suboptimally – certain goals. His argument, tho, is to intentionally create certain systems that meet those goals without interfering with market principles – or as less as possible – because the outcomes is more optimal. My argument here (again, perhaps trivial) is that the decision to implement that policy results from intention. Eg, because the best way to make sure that there’s no potato shortage in NY is to allow the market to supply those potatoes, I advocate against a top-down policy regarding their supply.

        Now, I don’t want to intentionally imply that I’m ignorant of the distinction in play here. It’s just that wrt policy, the argument that intention doesn’t matter seems like a category error.

        Report

      • My first or second comment on this post hit on the advantages of design AND spontaneous order. Not one or the other, but both. Hayek leaned more toward spontaneous. Others to top down design. My quote of Steele represented more of a blended approach.

        Report

      • Stillwater,

        I think I get you. I’d say that if spontaneous order is not providing for something that we really do want it to provide for, then we don’t have much choice but to go for design. It will still have its limitations, but in the specific case those limitations are likely to be less than the limitations of spontaneous order that specific case.

        I think those cases are rarer than many other people will think they are, but I do believe they exist, particularly with regard to the most vulnerable members of our society (children, the cognitively/mentally disabled, the old and infirm).

        Report

      • Re: “god of the gaps” argumentation

        I think most people are, at least occasionally, guilty of this type of argument, and it’s not limited to the pro-regulation types. Given any regulation that has exceptionally perverse incentives, and you can usually find someone saying, “well, a market solution will eventually make everything all right.”

        I’m not accusing James or Roger of making that type of argument. In fact, they’re explaining how markets account for complexity in a way that centralized design or direction does not, and they both, if I understand them correctly, make room for non-market solutions if those seem to get us to our goals sooner.

        My only point, though, is that it’s always possible to lapse into this kind of argumentation, regardless what side of the fence one is on.

        Report

      • Kim, I would like to address this question. As I am typing with my two fingers and iPad, here is an awesome article on moral intuition, heuristics, emergent order, markets and a bit of game theory (as applied to markets and collectivism). It is written by Cosmides and Tooby. My guess is that Chris will not be impressed.

        If the link doesn’t work googling this title will.

        Evolutionary Psychology, Moral
        Heuristics, and the Law
        Leda Cosmides and John Tooby

        https://dl.dropboxusercontent.com/sh/fgplt8p8qazo3gd/nLDpwzAIDu/cosmides.pdf?token_hash=AAH1mWR6D2N1aCWqiL4SzMB3F83fy1V8FHfKPJ9syGD0lw&dl=1

        Report

      • Kim,
        I think game theory has a lot to do with emergent order, especially in emergent market order. The article I linked to above references some of it, including the free rider problem inherent in collectivist solutions.

        I would like to point out that there is a substantive insight in economics. People can accomplish incomparably more via division of labor and exchange than they can alone. Smith and later Ricardo fleshed out the whys, but the extent of the productivity increases is simply hard to fathom. Specialization, cooperation and exchange with comparative advantage can lead to productivity increases in the thousands, millions or more. And we cannot just produce more, we can also produce things which are inconceivable alone.

        That said, specialization, cooperation and exchange can be organized in two ways. By imposed top down order, or by voluntary, bottoms up, emergent order (see my Boudreaux link at bottom of page) and by any combination thereof. Cuba does have an economy absent much in the way of property rights or free markets.

        Long set up to say that the essential truth of the prisoners dilemma is that though cooperation pays, defection/cheating pay better. If your playmate is planning to cheat, you should cheat too otherwise you are a sucker. If he is planning to play fair, you can score more by cheating.

        Regardless what he does you are better off screwing him over. Same for him, he is better off screwing you over. But if both of you plan to screw each other over, what is the point of even trying to cooperate or play together? Cooperation makes no sense as revealed by the prisoners dilemma.

        The solutions to the prisoners dilemma involve aspects that are inherent in markets:
        1) first solution is to create a credible promise that anyone cheating or defecting will be penalized. They will be fined, or imprisoned, or shamed in such a way that the net payoffs of cheating are changed. It now makes no rational sense to cheat. This changes the nature of the game where the rational strategy is to cooperate, not defect.

        2) the second, related solution is exit rights and choice. If we can choose who we play with and continue to play with we can effectively choose the fairest, most cooperative partners. Since market activity absent cheating is positive sum, this is kind of another type of credible punishment. Cheaters don’t get to play any more. This creates a dynamic attractor toward fair cooperation.

        3). The third related feature is reputations. It behooves each of us to create a reputation or brand as a trusted cooperative partner. It also behooves us to “out” cheaters. Again a dynamic attractor of the system is toward transparency and cooperation.

        Report

    • That is, if we destroy the current system for keeping quacks and charlatans away from the practice of medicine, another one will eventually evolve. and it might even be superior.

      Report

    • The point is that if the doctor cartel was broken we can safely assume that hundreds of millions of people would immediately begin to try to solve these very problems. Some ideas would work. Some would not. Those that worked would spread, those that didn’t would lead to people going back to the drawing board. If uncountable attempts to solve the problem don’t do so, well as a last resort we could agree that, well in this narrow area licensure actually is the best solution.

      But isn’t this how we got to the current protocol? Even into the late 1800’s the profession was almost completely unregulated:

      The profession was, throughout the country, unlicensed and anyone who had the inclination to set himself up as a physician could do so, the exigencies of the market alone determining who would prove successful in the field and who not. Medical schools abounded, the great bulk of which were privately owned and operated and the prospective student could gain admission to even the best of them without great difficulty

      (source. Warning, von Mises).

      Over time the American Medical Association developed and convinced the enough of the public that strict licencing was necessary for the public good. This licencing went through many forms, including registration laws, until eventually evolving into the state-based boards and school accreditation that we have today. Is your suggestion that even once licensure has been naturally selected as the best solution, every few decades or so we should still de-regulate and see if voluntary association will win out this time?

      Report

      • Excellent question trizz. I pondered a way to make a similar point – that the currently existing licensing regime resulted from “spontaneous order” (in some sense of that term) – and couldn’t quite figure out how to say it. So … thanks!

        Report

      • Dude, Kazzy, have you looked at the number of crazy people who think you can cure cancer with magnets? Wishful thinking plus lack of scruples create a LOT of incentives for bad signalling and horrible information. There wouldn’t be so many people selling herbal supplements online if it weren’t such a lucrative business.

        Report

      • Or for that matter, look at half the posts Russell regularly has to make on quackery on things like Soylent, or anti-vaccination movements. There’s a lot of quasi-scientific bullshit out there that gets accepted as gospel. Imagine how much worse it would be if those were considered legally equivalent to a licensed physician.

        Report

      • Nob,

        I was referring more to the ability to research a potential service provider.

        I’m still pretty sure medicine would be one field we’d want an exemption to James’s proposed amendment, but other fields could probably better lend themselves to independent credentialing because of the internet.

        Years ago, if you wanted someone to come in and fix your toilet, you maybe asked a neighbor or a friend for a plumber recommendation and largely hoped that you got a good price on good service. Nowadays, you can log onto Angie’s List or Yelp or any other number of sites and get a sense of the quality of a variety of local plumbers, you can independently research likely problems to better aid you in determining if your plumber is tacking on a bunch of unnecessary extras, and get a sense of the going rate for different procedures and price shop.

        Report

      • Over time the American Medical Association developed and convinced the enough of the public that strict licencing was necessary for the public good.

        More correctly, they managed to convince enough legislators that it was either in the public’s interests or in the legislator’s interests.

        And then a top-down rule was created that limited challenges from alternative regulatory approaches.

        That’s not spontaneous order. That can’t be stressed too much. The concept of spontaneous order is an idea directly opposed to the top-down imposition of effectively unchallengeable rules. If we start calling the latter spontaneous order, then we have obliterated an important distinction, the whole distinction between markets and government. Change the terms if we must, but don’t obfuscate analytically significant distinctions.

        Report

      • Nob,

        That shit’s already happening. The current regulatory regime obviously is doing little to prevent it. So it’s meaningless to point to it as an outcome, or particular problem, of a change from the current regime.

        Report

      • I think stating that quack proliferation has become more widespread with the rise of the internet is meaningless. It’s an outcome of information proliferation that Kazzy suggested would make things “different” than the status quo ante 150 years ago. In which case I think it’s meaningful insofar as telling us what limits we might expect from consumer choice if we were to change the status quo on licensure.

        Report

      • And then a top-down rule was created that limited challenges from alternative regulatory approaches.

        That’s not spontaneous order.

        James, I want to ask you a question, and not to challenge your views but because I want to understand the distinction you’re arguing for here. So I really mean this in all seriousness. Why does the situation described by trizz not comport with the concept of spontaneous order if that concept is neutral regarding government intervention? Is any solution that involves government necessarily not an example of spontaneous order?

        Maybe a clear summary of what the term means is in order here, since it could be – and quite likely is in fact the case – that I’m confused about what it means.

        Report

      • Stillwater,

        OK, I’ll try to clarify rather than obfuscate (wish me luck).

        Roger, in talking about feeding New York, gives a good example of spontaneous order. Part of what’s going on there is that no one entity is trying to exert control over the whole of the issue, but different entities are operating–in some ways competitively, in some ways collaboratively, and in some ways independently–to handle various portions of the problem.

        If one part can be done better (New York’s got a potato shortage!), no top-level person has to recognize the problem, and in fact nobody at any level even has to understand the cause of the problem. Price sends a signal of a shortage, reason unknown, and somebody recognizes that signal and says, “hey, at that price I can make money buying potatoes in Joisey and selling them in New York!” and the shortage eases.

        That’s spontaneous order. On the other hand, if some top-down “NYC Food Supply Administrator” scans his daily reports and notices that there’s a potato shortage, and drafts a policy to deal with it, that’s not spontaneous order, but an authoritative response.

        Let me shift to another type of example, drawn from research on common pool resources. One way to control overuse of the commons is for an authoritative body to draft a set of rules detailing who can have access and how much of it, and then task the same or another authoritative body with enforcing those rules. Another way is to let the management “bubble up” so to speak, from within the community itself. In Spanish fishing villages, for example, fishermen monitor each other to prevent overuse of their fisheries by all meeting at the docks in the morning and evening, where they can eye each others’ equipment, operating hours, and catch, and exert social pressure on “cheaters.” No single person created these rules. Nobody alive today could tell you exactly how these rules came about. Nobody has been tasked with special authority for enforcing these rules. And as time passes and certain conditions change, the rules evolve. A new technology may be approved or disapproved, not by any authoritative vote, but by discussion that leads to a general consensus.

        In spontaneous order, no rule can simply be imposed from above, but must come to strength through general consensus.

        [Sidenote: I make no claim that spontaneous order is always superior. That’s in no way my point here.]

        Is any solution that involves government necessarily not an example of spontaneous order?
        Hey, no fair putting me on the spot and making me think hard. But, no, that’s a fair question, and my answer is that I don’t think I’d say that. Government certainly constrains spontaneous order when it makes top-down rules, but in some ways it also adapts to spontaneous order, and in some ways can promote it. I’m working this part out on the fly, so bear with me.

        I can think of two ways government adapts to spontaneous order. One is in the street-level implementation of laws and rules. Was there ever a top-down order that 5 mph over the speed limit (or in some places more) is de facto acceptable, even though technically illegal? I think, rather, that it’s just police adapting to the reality of the innumerable individual decisions of the public. And that’s just the easy example; this goes on in all kinds of policy implementation. The development of infrastructure also follows spontaneous order sometimes; government reacting to the infrastructure needs created by the innumerable decisions of the public to move hither and yon, and of course infrastructure development in turn shapes the subsequent innumerable decisions about moving hither and yon, so it can be both a reaction to and a stimulant of spontaneous order.

        I would also say that the changing laws on same-sex marriage are a form of spontaneous order that involves government. The governments approving SSM are largely being responsive–reactive, adaptive–to changing social realities, which are themselves not driven from the top down. A critic could argue that many of these changes, particularly the early ones, were top-down authoritative court rulings, and they might have a good argument, but even so such rulings would have been unimaginable prior to the bottom-up social changes.

        And as far as government actively stimulating spontaneous order, I think that’s much rarer, but not impossible. Just spitballing here, but Brown v. Board of Education didn’t require any white people to agree to see black people as socially equal, but that’s been one of the (slow) effects over the years. And a government that said, “We’re annexing this territory over here and only making absolutely minimal zoning rules (fire safety, etc.)” is certainly going to create a condition for spontaneous order to develop.

        But if I’ve thought through this right, shooting from the hip, government involvement with spontaneous order is mostly oriented around having a light regulatory hand and reacting to what the public is doing (effectively, just ratifying and supporting decisions made in a distributed, non-authoritative, manner). And intuitively, that sounds about right to me.

        I know I didn’t give a specific definition there, but I didn’t happen to stumble across or think of one that sounded really clarifying to me, so I settled for storytelling. I hope it worked well enough.

        Report

      • James, this is exactly what I was looking for. I know that precise – or even workable – definitions are hard to arrive at in a vacuum. Or even in a context. This was perfect. Really good stuff. Thanks. What you wrote is very clarifying.

        Report

      • There is an historical irony in how licensing was set up John D Rockefellers father described himself as botanic physicians and sold exilrs which were good for whatever might have ailed you. The irony is that John D and his son John D Jr. thru the Rockefeller foundation laid a lot of the groundwork for modern medical education and the licensing system. John D himself believed in homeopahty also.

        Report

      • : I’m not sure I understand this point.

        If markets are flawed *and* governments are flawed, what is the advantage to turning over the applecart? Shouldn’t you only completely overhaul the system when you are very, very sure that you your overhaul is going to be better by a wide, wide margin?

        I’m not sure I find the acknowledgement that hiring a new guy is a crap shoot to be a good reason to fire the guy you have working for you at the moment.

        Report

      • Tod,

        I think there are two separate issues there. One is the “don’t overturn the applecart unless you’re sure” argument. As a self-proclaimed Burkean libertarian, I can’t readily discount that argument. But I think I gave a sufficient argument about why rent-seeking in general is bad, with repeated emphasis that regulation justified on other grounds would still stand, that I’ve at least addressed that criticism. That’s not to say I think everyone has to believe I’ve addressed it satisfactorily–that’s a matter for their judgement, not mine.

        The other issue is the simple snark about markets. And “markets aren’t quite what they’re supposed to be” (not pretending to directly quote Mike there) is a pointless argument, even a pointless snark, as long as one’s preferred alternative is subject to the same criticism. Standing alone, it smacks of the nirvana fallacy.

        Put another way, one can’t prove the superiority of one’s own preference just by pointing to the flaws of the other’s preference.

        Report

      • These actions violate the rules of the game. They are the equivalent of saying baseball won’t work because some of the players will cheat. It is true that people cheat at games, the appropriate response is not to condemn the game it is to condemn and penalize the cheaters.

        Report

      • These actions violate the rules of the game.

        Hmmm. What game? The game that’s actually played? The ideal game that would be oh so much better (if only we could get everyone to agree with the rules!)?

        More to the point tho, how does anything Tod said violate any rules? He’s talking about a pragmatically justified decision to hire/fire people based on a low probability of making things better.

        Report

      • I’m not saying governments always make better decisions than markets. No American with either any influence or a lick of sense either believes that or says that. Also, they demonstrably don’t.

        Now, do markets (as they exist in the real world, not in some Hayekian utopia) always make better decisions than government? Nope, but there are lots of people, many of them quite influential who will assure us that they do.

        Now, which statement dos that make it more worth criticizing?

        Report

      • Come one, Mike, who do you think you’re fooling? A “let markets handle it” comment frequently gets a snark from you, while a “regulate it” comment never–in my memory–gets that kind of response.

        But, OK, it turns out you actually do know better? Good, I’m willing and happy to believe it. But truthfully it’s absolutely the first time you’ve ever given me the impression you actually have that understanding. Previously you’ve done a really good job of persuading me that you didn’t get it at all. It’s probably been 6 months or more since I finally gave up on you,* and wrote you off as the type of blind ignorant ideologue who assumes the regulation is always superior to the market status quo ante. If you’re not really that ignorant about it, you’ve done yourself a disservice in coming off that way.
        ______________________________________
        * Last winter when I first figured we’d be coming through SF last summer, I thought, I’d like to have lunch with that guy. Buy late spring, I thought, fish that, he’s not worth the time.

        Report

      • Eh, ok, so you don’t really understand after all, do you? Rent-seeking is in large part about government setting, or at least purposely manipulating prices, so start snarking.

        Or if you think it’s OK for government to manipulate prices on fruit, dairy, taxis, imported goods, etc., but not cellphones or baseball tickets, then its up to you to explain why the one and not the other.

        I confess myself…disappointed.

        Report

      • SW,

        By the rules of the game I am using an analogy for the customary rules of markets including property rights and contract law. Where production, employment and exchange (and competition to produce, employ and exchange) are voluntary.

        My comment was aimed at the red in tooth and claw comment (not at Tod’s argument, which James addressed). Red in tooth and claw implies violence. Violence is prohibited in markets. You are not allowed to burn down your competitors factory. You are not allowed to physically restrict competing employees from getting to the job. You are not allowed to force a customer to do business with you absent a voluntary contract they agreed to.

        When violence and physical coercion or harm are involved you have by definition jumped out of voluntary market behavior.* I am aware that every society has a mixed economy with some non market stuff such as monopolies in defense. But these are not free market institutions any more than a thing with pointy edges is a circle.

        Did you ever see the movie “the Last Boy Scout” with Bruce Willis? It opens with a pro football scene where the running back is so pressured to score that he pulls out a pistol and shoots the defenders. This is not football. This is violence and by definition violates all rules of the game. Burning down a competitors factory is as unacceptable in markets as shooting defenders is in football.

        There are winners and losers in sports and markets according to the rules. In markets losers are those that miss out at an opportunity to cooperate.

        * Coercion is allowed in markets and football to discipline cheaters. The police are allowed to use force to arrest the running back who is no longer playing by the rules. Similarly markets do require contract violators and property trespassers to be penalized.

        Report

      • Hmmm. What game? The game that’s actually played? The ideal game that would be oh so much better (if only we could get everyone to agree with the rules!)?

        Which game are we talking about now? Basketball? Gymnastics? Cycling?

        Does your question apply any less or any more to those than to markets? Do we have officials in those games? Is anybody here arguing for the elimination of officials in any of those games?

        Report

    • So, can you help me understand the difference between a licensing board and your proposed credentialing board? Because it seems like little more than calling the same thing a different name to me.

      (I hope that doesn’t read as snark. The question is sincere.)

      Report

      • Thanks for the reply.

        Actually I was conceding that licensed doctors (licensed by the good old government) might still be necessary to write prescriptions due to safety reasons. I would not argue that there is never any good reason for licensure. Just that there are a whole lot of abuses.

        The question becomes are there ways we could reduce the power of the doctor cartel to restrict the supply of doctors without, on net, harming consumers/patients, and preferably advantaging them. To the extent the answer is potentially yes, then I suggest we move in this direction. This will involve experimentation and cultural evolution, not just argument.

        Report

  9. Regarding the impact of malpractice insurance on health care costs, could we not also address this via the free market? For instance, could we give certain doctors the power to say to customers, “I do not carry malpractice insurance. As such, I ask that you sign this waiver clearing me of all responsibility for anything short of deliberate harm. In return, my fees are 1/2 that of other providers”? Basically, a “you pay for what you get” program, wherein lower fees doesn’t necessarily mean lower quality of care, just less consumer protection. And while a counter might say, “You’re leaving poor people unprotected from bad doctors,” I’d still argue that this would be preferable to simply not getting care.

    Thoughts?

    Report

    • Sure. I think medical tourism already works this way. I can fly to Bankgok to get knee replacement surgery at much lower cost, at a hospital staffed entirely by doctors trained in the West. But if they screw up, I doubt U.S. courts would have jurisdiction (Burt, Mark?)

      Report

      • That sounds right, James. The exception would be if the doctors marketed directly to the US in such a way as to establish the requisite “minimum contacts” for jurisdiction. But even then (though med mal is hardly an area where I’m particularly knowledgeable), I strongly suspect that the relevant substantive law to apply would be the law of the foreign country. So if the foreign state lacks a relevant med mal cause of action, you presumably wouldn’t be able to sue even if there were minimum contacts establishing jurisdiction.

        Report

    • Thoughts?

      Kazzy, and I mean this mostly in jest, but you know that card you get for being a good liberal? You can go ahead and send that back now. “address this via the free market?” Alarm bells should be ringing here. “‘you pay for what you get’ program” More alarm bells ringing right about here. “I’d still argue that this would be preferable to simply not getting care.” And here you’ve crossed over into the dark side entirely. We need Keynes-Rawls refresher courses of some sort for those flirting with these sort of speculative deregulatory ideas.

      So, on a far more serious note, the policy options for providing care for the vulnerable extend well beyond the options outlined here. Single payer for instance. Provide quality health care without having patients trade off protections. NobAkimoto has already done an excellent job describing the kind of quackery and predation that can occur. I’d point to a Bloomberg piece that exemplifies what kind of health care world “you get what you pay for” yields.

      Report

    • 1. The impact of malpractice claim caps and insurance on cost of medical care is “iffy” to say the least. Most of the congressional hearings on this issue have noted that caps haven’t had any impact on malpractice insurance premiums. Some data suggests physicians rolls have increased since the passage of Texas’s tort reform act, but the numbers really only seem to be keeping up with population growth.

      2. Requiring people to sign waivers that essentially waive away the potential for incompetence is…well unethical is one way to put it.

      Report

      • and ,

        It wouldn’t be a requirement. It would be an option.

        Think of it like this: When I rent a car, I can opt to pay extra money for a more comprehensive insurance plan that covers me in the event things go wrong. Or I can waive this and assume more risk.

        If limiting the liability on doctors and shifting this responsibility more so (but not entirely) towards patients results in more affordable care, why is that necessarily a bad thing?

        To CC’s specific objections, I recognize that this is a very imperfect solution. I propose it presuming that the bulk of our system remains as is and that single payer isn’t an option. And a PFWYG system wouldn’t be related to the care itself, but the level of patient protection offered. A top doc could say, “I’d like to cut my rates and limit my exposure to time-consuming and costly lawsuits. I’ll make that option available to patients.” The vast, vast majority of doctor visits do not result in malpractice suits. Yet we all pay insurance for these each time we visit the doc. Why not give people the option to avoid this part of the system, assume what is likely to be very little risk, and have access to quality care for less?

        Of course, all this assumes that the costs would drop. I don’t know the numbers on that but I do know I often hear grumbling about how malpractice insurance is a very big part of health care costs.

        And, ultimately, if it makes me a bad liberal to ponder these ideas… well, bad liberal it is.

        Report

      • Russell,

        As a final thought. To the extent you are correct, you have nothing to fear from my amendment. If the policies are not primarily about granting rents, but about general regulation for the protection of the public, then these policies are in the clear.

        Report

      • Kazzy,
        Encountered a never event, well you signed away your rights to redress beforehand.

        Who do you suppose is going to bear the increased risks? The well-to-do, the middle-class, the underclass? Can those who bear the increased risk afford the trade off, or might there be other tools for increase access to affordable care? Also, in the negotiations between patient and doctor over signing or not signing these waivers, who is more vulnerable? The sick patient or the doctor who, by the way, has an information advantage? There’s a similar bank to home buyer information imbalance going on here, bank:homebuyer :: doctor:patient, wherein one party regularly engages in the activity and for the other party, engaging such agreements is a rarer event. How might geography, say the patient is in an isolated part of the country for instance, impact the relative positions of the parties?

        Our antennae should be up as to the kinds of abuse that can emerge in these situations, and I think it is fair to say that liberals are frequently concerned about setting a floor beneath which no one falls. Yes, even at the expense of curbing agreements where the two individual parties consent. See for instance the sweatshop discussion. You’ll find deference to the atomistically constructed individual in economic affairs in the libertarian camp. The option of the already vulnerable signing away their rights in exchange for access to affordable care pulverizes that floor of minimum standards – altogether leaving the vulnerable with further to fall.

        And if malpractice insurance is really interfering with the ability of doctors to provide care, then maybe the state should assume the insurer role in place of private companies entirely (exact parallel is difficult, but like the UK).

        Report

      • It is possible my idea is an awful one. I was offering it as a “What about this…” rather than a fully formed policy recommendation. You raise fair objections, some of which cause me to question my own thinking behind it.

        That said, I struggle with the notion that even just entertaining such a notion calls into question my liberalish credentials. You are right to point out that the system I propose has the potential for abuse. But when I considered it in my mind, I did not think about it from such an angle. I thought about freeing up doctors to offer care closer to its true cost and thus allowing more people to access the care they need. It might fail in this endeavor, perhaps spectacularly, but the underlying goal I sought hardly seems mutually exclusive with liberal ideology, such that I should be setting off any kinds of alarm bells.

        Report

      • Kazzy,

        I get where you’re coming from. The tradeoff is a real issue, and you’re right to want to think about it.

        As one example of this tradeoff, we know that safety improvements in automobiles have saved a tremendous number of lives. But at the same time, they have have made cars more expensive. Mandating safety features prices newer cars out of range for some people, who, if they could, would be willing to spring for some, but not all of the available safety features. This means they end up driving less safe cars than they otherwise would. That particular set of consumers is actually made less well of by the mandates.

        Are the safety mandates worth it nonetheless? They might be. There are certainly reasonable arguments on that side.

        But is it wrong for a liberal to ask the question? I hope not, because that would imply that liberalism is unwilling to give consideration to costs as well as benefits. And while some liberals (and conservatives, and libertarians, and….) will of course be that way (humans being humans), the ism itself certainly shouldn’t. None of the isms should, and I think none of them inherently do.

        Report

      • Pish. What sort of liberal actually shops at Whole Foods? Maybe glibertarian leaning MattY type liberals.

        REAL liberals shop at Trader Joe’s, local co-op groceries, make use of Community Supported Agriculture and/or farmer’s markets in some combination.

        Report

  10. Isn’t the way that the “consumer” interacts with the health care market enough to make it an exemption to your amendment? If I am in a car accident and knocked unconscious, I can’t make an informed decision about whether I see Dr. X with a boatload of credentials or Dr. Y with zero; I just end up where ever the ambulance takes me and with the doctors who’s on call that night. As such, it seems appropriate that the government does its best to ensure a minimum level of competency across all doctors.

    This might not extend to all specialities. Dermatology, for instance, probably doesn’t see many emergencies. But at least certain ones.

    Report

    • Kazzy,

      In cases like that it very well might be. And I’m quite comfortable with considering that type of situation as an exception.

      Believe me, I can’t overemphasize just how much I am unworried about the legitimate exceptions not being recognized, given that the ultimate decisions would be in the hands of a Supreme Court that is, by its nature, mostly conservative about radical changes. I’m far more inclined to think they’d not go nearly as far as I would think they should, rather than going much farther than Russell thinks they should.

      This is especially true since, as we’ll see, my amendment explicitly reaffirms the general economic regulatory power, and says the ban on granting rents is not meant to deny that power. That means evidence of general social benefit is, so to speak, an affirmative defense of a rule (although “affirmative defense” is not technically correct terminology in this area of law). So the very fact that fairly persuasive arguments can be made this readily for certain areas of the medical profession is a pretty good indicator that were I to argue against them before the Supremes, I’d be the one fighting the uphill battle. And I think liberals who worry about this going too far, being too radical, really can take a lot of comfort in that.

      I’m actually quite sanguine in my expectations that the amendment would be less effective than I would actually prefer, and less effective than my friends here fear. That’s probably about the ideal political outcome.

      Report

      • Mike,

        I’ve repeatedly said I don’t think the Court will get it perfect, so let’s start with that caveat. The big question is, who do you think is going to get it right more often, legislators or judges? Especially when there’s huge incentive to lobby Congress and shower them with cash?

        Report

      • James,

        You’re talking a lot about SCOTUS in this thread, but won’t the impact of such an amendment be so broad that courts all over the country, even not just federal courts, will be reviewing laws (or applications thereof) for consistency with this new provision? Do you imagine that all discernible types of application of this amendment will eventually be dealt with by SCOTUS, so that in effect all of those applications are eventually reviewed, with stays being granted all the way up in every case, so that nothing really takes effect until SCOTUS reviews? It seems to me that SCOTUS won’t really be in charge of how this gets applied in practice, at least over a fairly long period of time, unless they start taking take a considerable number of cases on it every year for a number of years. How do imagine the application of this amendment working out administratively within the court system?

        Report

      • Michael,

        I imagine it working out pretty much as you suggest, slowly and over time. Lower courts will at first have to work without authoritative guidance, and there’ll be lots of conflicting opinions. SCOTUS will choose from among those conflicting opinions the ones they think will best bring the outlines of the amendment into focus, particularly focusing on similar cases with contradictory lower court results (e.g., the 5th Circuit rules one way on local cable monopolies, the 2d Circuit rules a different way on them). They won’t take lots of cases, because it’s just one area of law. But every case they do take will be perused by interested legal scholars, relevant practitioners, and lower judges (on as as-needed basis), and its logic extended to other cases.

        There’s no way on earth it could possibly all be resolved in a short time. A highly optimistic expectation would be about a generation just to get a really good start on bringing the Court’s jurisprudence into focus.

        Report

      • Gotcha. You were mentioning Scotus so much and not the lower levels that it seemed like you thought that Scotus would be adjudicating all these changes as an initial matter. Good to be clear that you envision a generation of uncertain and varying impact across the land.

        Report

  11. When an occupation becomes “special” for whatever reason, it will eventually be gamed. It is this reason I hold no occupation outside of contempt.

    Report

    • The courts have remained relatively incorrupted to date. There’s a whole lot of professionalization that goes on in the legal profession, to the extent that most judges–particularly those who manage to get themselves nominated to the federal level–really do try to avoid even the appearance of conflict of interest (that’s why there was such a flap about Scalia a few years ago, he crossed the line of appearances, at least). You can directly and legally “bribe” a legislator, but there’s no way to legally do that with judges.

      Right now we have situations where corporations have a huge incentive to try to corrupt judges–every regulatory case (particularly, perhaps, in environmental law) where an adverse decision could cost them tens of millions of dollars, sometimes hundreds. But as far as I know, we don’t see evidence of it hapening.

      I’d say if the judiciary becomes corrupt, it won’t be because of an amendment like this, but because of a much deeper problem, a fundamental rot in our system. I don’t think such a future is impossible, but I don’t think I see real signs of it at present. In fact, if anything, I’d say the heightened media scrutiny of the modern era–for all its ugliness and stupidity–makes it harder for such a corruption of the judiciary to take root as a norm. (crosses fingers)

      Report

      • To riff off this answer (because I can!), I’ll ask did you ever see the movie “Pelican Brief.” The plot, as best as I can remember (spoiler alert), involved a conspiracy by some polluting company to assassinate two judges because it was believed that they would rule in favor of some environmental regulation that would harm the company. It was assumed the president would name two people who would rule against that rule.

        That may or may not have been a good movie, but the assassination plot was so needlessly complicated, so risky, and so unpredictable in its outcome (how could a company be sure that a president’s nominee would fall in line about a particular case?????), and the reason it it was so was what James describes here: the courts have their own functioning and are not corrupt, at least not according to our most ready definitions of the word “corruption.”

        Report

      • You can directly and legally “bribe” a legislator, but there’s no way to legally do that with judges.

        Right now we have situations where corporations have a huge incentive to try to corrupt judges–every regulatory case (particularly, perhaps, in environmental law) where an adverse decision could cost them tens of millions of dollars, sometimes hundreds. But as far as I know, we don’t see evidence of it hapening.

        So far as I can tell there’s actually some extensive cases of it happening on the state level in locations where the judiciary is mostly elected. The most extreme example I can think of is West Virginia, where Massey Energy basically funded the challenger of a crucial liability case. The challenger won, and then promptly cast the deciding vote to reverse the decision that had originally awarded the plaintiff a big reward against Massey.

        Granted in Caperton v. Massey SCOTUS ruled that the conflict of interest should’ve warranted recusal, but note that the decision was only a 5-4 decision and rather perversely, John Roberts argued in the dissent that SCOTUS’s decision would reduce public confidence in the judiciary.

        A concise explanation of the whole phenomenon is rather amusingly most easily found in the wikipedia entry for John Grisham’s The Appeal which was his activist novel intended to put a spotlight on electing judges. http://en.wikipedia.org/wiki/The_Appeal

        Report

      • It’s a stupid practice, but until the kinks are worked out at the federal level (and even after that) the vast majority of cases are likely to fall under the purview of an elected judge than an appointed one.

        I’d be interested actually, to see what the breakdown in rent-seeking laws are between federal and state levels. An initial reaction tells me states are more inclined to provide things like tax breaks and incentive structures for firms, but that’s not backed by enough empirical data.

        Report

    • It’s a stupid practice, but until the kinks are worked out at the federal level (and even after that) the vast majority of cases are likely to fall under the purview of an elected judge than an appointed one.

      Not necessarily. A state law in violation of the U.S. Constitution provides for a federal action. A case could begin in state law, but even then it would only be the initial stage of the process (and any problems there are a flaw of state judicial systems, not the amendment), but it could also begin in federal court.

      Report

  12. I’m eager to read James’s next installment when he publishes it. I can say that one concern I already have (a concern, not an objection) is that our system of legal jurisprudence is, for lack of a better word, very thick. By that I mean, an amendment to the constitution or an existing clause in the constitution in most cases can, at the very most, only nudge things a certain direction. Look at the fate of privileges and immunities, or the commerce clause, or any other contentious part of the constitution.

    Again, this is a concern and not an objection. It might even turn out to be a reason to support the amendment if one otherwise is uneasy about it.

    Report

  13. ,

    You’ve written a good response, but as far as I can tell, you are not claiming that licenses aren’t rent seeking like your header claims, you’re justifying reasons that the should be / are. Please correct me if I’m mistaken as I read this briefly and passed by a lot of the comments.

    Report

    • From James’s post:

      [F]rom Joe Stevens’ The Economics of Collective Choice:

      “[R]ent-seeking is attempting to use the political process to allow a firm or group of firms to earn economic returns in excess of their opportunity costs.”

      The remainder of his piece (and the expected thrust of the follow-up) would be why such things should be banned. My response above was an attempt to demonstrate that medical licensure (which I readily concede can have elements of rent-seeking) is not merely an example of same, and should not be eliminated because the risk/cost to the public would be significant.

      Report

      • Russell,

        I’m glad you referenced that quote. There’s an important and subtle point here. I assume that in the absence of licensure, even if it caused some decline in your net income, you (or at least some physicians) would still prefer being a doctor to your next best career alternative. So taking that definition very strictly, yes, occupational licensure creates rents.

        But I want to add two big caveats to that. The first–which is too complex to go into at great depth (although maybe we could bribe James K to do so)–is that while economist agree on the general concept of rent, the precise delineation of rent-seeking behavior is tricky enough that there is reasoned disagreement about its precise boundaries. There are border cases.

        Some might think that lack of precision in itself makes the amendment a bad idea, but that kind of imprecision exists in most of our constitutional law anyway. There is no authoritative agreement on the precise boundaries of “equal protection,” for example. And I’ve seen constitutional law scholars point out that even something as apparently precise as our requirement that a president be 35 years of age is only so because we have general agreement that we begin counting years of age after the first full year, but of course in some countries they begin counting years of age within that first year.

        Second, I fully recognize that rents can be a side-effect, rather than an intent or a primary effect. I believe I wrote (or at least I certainly tried to write) my proposed amendment to account for that. It targets policies whose purpose is to create rents, or whose primary effect is to create rents.

        So while much of my rhetoric may have been a bit overbroad, and led to the justifiable interpretation that I intended to root out all policy-based rents, damn all the consequences, I want to clarify that my goal is actually more modest than that. I hope that becomes clearer when people see the text of my amendment, and if the text does not make that clearer, well, it’s a work in progress and I’m open to suggestions for rephrasing. (Heck, whatever I actually draft, if this idea were to ever get off the ground it’s a good bet my draft wouldn’t be the final one anyway.)

        Report

      • I actually wouldn’t be all that worried about a decline in my income were medical licensure to go the way of the dodo. A license to practice is the bare minimum requirement to be a physician. If anything, it’s our credentials as a practice that serve as a basis for our rates, which would be unaffected by the changes you propose.

        Is there some market pressure for less-credentialed providers in the area? Sure. One of those doc-in-a-box storefront express clinics opened up around the corner, staffed by thinly-qualified providers for cheap. I imagine we might see a proliferation of such stores at even lower prices if licenses were no longer required. But since we offer higher-quality care at our rates, we would presumably leave them relatively unchanged.

        Report

      • I actually wouldn’t be all that worried about a decline in my income were medical licensure to go the way of the dodo. A license to practice is the bare minimum requirement to be a physician. If anything, it’s our credentials as a practice that serve as a basis for our rates, which would be unaffected by the changes you propose.

        That doesn’t surprise me much. And it indicates that the market is determining your income, rather than the law, which is how it should be.

        Is there some market pressure for less-credentialed providers in the area? Sure. One of those doc-in-a-box storefront express clinics opened up around the corner, staffed by thinly-qualified providers for cheap. I imagine we might see a proliferation of such stores at even lower prices if licenses were no longer required. But since we offer higher-quality care at our rates, we would presumably leave them relatively unchanged.

        That’s exactly what I expect would happen. And I think it would be a good development to have more doc-in-the-boxes (great phrase). Wal Mart is experimenting with clinics like that. To my mind, those are great for lower income and sans insurance folks because it means they are more likely to get primary care. We don’t need a Lexus for everything; sometimes a Hyundai is perfectly sufficient, and better than nothing.

        Report

      • I would probably draw an analogy to an auto-rickshaw, rather than a Hyundai.

        Are those kinds of medical establishments better than nothing? For a very limited number of things, maybe. But not for any kind of quality care. Even something as seemingly straightforward as an ear infection, if treated serially at such establishments, could well lead to serious problems being overlooked because it’s not the provider’s job as such places to think about things like whether or not a child’s hearing is being adversely affected and whether an audiology referral or other intervention is warranted.

        But I digress…

        The pressure we felt as a response wasn’t in terms of our fees, but our accessibility. We now have office hours every day of the week to obviate the appeal of going to the express care place because it’s convenient. Which, as you say, is the market working the way it should.

        Report

      • because it’s not the provider’s job as such places to think about things like whether or not a child’s hearing is being adversely affected and whether an audiology referral or other intervention is warranted.

        Are you sure?

        And even if the provider does not see their job that way, is the child worse off going to that provider or going to no provider at all?

        Report

      • Russell,

        “My response above was an attempt to demonstrate that medical licensure (which I readily concede can have elements of rent-seeking) is not merely an example of same, and should not be eliminated because the risk/cost to the public would be significant.”

        I take this to mean “yes, it’s rent seeking, but it’s for a good reason”. Is that correct?

        Report

      • Are you sure?

        Yes. I’m sure this is not true in all circumstances, but it’s been true enough often enough in patients I have personally seen that I feel quite strongly about it.

        And even if the provider does not see their job that way, is the child worse off going to that provider or going to no provider at all?

        If there is no other available provider? That provider. However, if it’s simply a matter of convenience, then quality is a much more important consideration.

        Report

      • “We don’t need a Lexus for everything; sometimes a Hyundai is perfectly sufficient, and better than nothing.”

        Although one could make the argument that if it weren’t for government regulations defining minimum standards of safety and performance, the Hyundai wouldn’t be good enough, and would in fact be dangerous. Which is kind of what Dr. Saunders is saying.

        Report

      • Although one could make the argument that if it weren’t for government regulations defining minimum standards of safety and performance, the Hyundai wouldn’t be good enough, and would in fact be dangerous.

        I’m pretty sure you and I are in agreement on the merits of that argument.

        Report

    • No, or certainly not wholly correct. Medical licensing serves purposes that I have already gone to great length to describe which are wholly independent of any economic return on the part of physicians. I have, further, explained in comments that licensure has almost no bearing on the revenues my practice earns, which are based much more on the credentials conferred on us by private entities like the American Board of Pediatrics (much more cartel-like, if you ask me, which I’ll deal with in a later post) and the hospitals where we are on staff. I suspect these latter statements hold true for the vast majority of practicing physicians.

      Report

  14. Is it not possible then that a proliferation of quantity of law would create enough loopholes and slackness to provide for the means to be legally corrupt. Tax law being one example of many.

    Report

    • I’m honestly not quite sure how to answer that. Can you hold onto that until after my next installment, which has my proposed text for the amendment? That might help clarify both the question and the answer for us.

      Report

  15. It’s interesting that you offer a link to your issues with midwives. It seems to me that the American system of dealing with and certifying midwives has screwed a lot up – giving different privileges to different types of midwives, and requiring different levels of expertise (and competence) for different midwives (often having the least competent midwives being the only ones who can attend homebirths… how stupid is that?).

    I think the midwifery industry is a perfect distillation of the problems with licensure and rent-seeking. And, unlike licensure of barbers or florists, this is one that can have a serious and deadly effect on people.

    And, to be fair, much of Canada has screwed the whole thing up, too, but it seems better up here.

    Report

    • I would rather set my eyebrows on fire than invite yet another shitstorm like the comment thread on that post, but here’s what I’ll say on the issue —

      My opposition to licensure of non-nurse midwives to perform home births is because I am not at all convinced that they are sufficiently trained or equipped to deal with all of the contingencies that can arise from even the most commonplace-seeming delivery. I am far less opposed to nurse midwives, who would presumably already be licensed as nurses and whose training I respect. None of it approaches rent-seeking, at least not in my case, because the services I provide would not be in competition with those they offer. I simply don’t think they’re safe.

      Report

      • I’m in complete agreement with the non-nurse midwives (CPMs I think they’re called?). If I recall, you and I were on pretty much the same side at the end of that discussion.

        My point, though, was tangential to the thrust of that discussion. Homebirth-attending midwives (CPMs) get artificially segregated from NPMs, who practice in hospitals. In many (most?) jurisdictions, NPMs can’t legally attend homebirths. Any midwife who wants to attend homebirths (and, to be fair, some are well-trained and extremely competent) can’t be an NPM.

        In Ontario, midwives have far fewer privileges than doctors. Most midwives only have delivery rights at one specific hospital. The regulatory scheme artificially caps the number of midwives in Ontario (more so than it does doctors), forcing more women to OBs. (Though, again, this might be changing a bit.) That is classic rent-seeking.

        In Australia, it was/is the law that midwives had to be sponsored (for lack of a better word) by doctors. This was probably the most evident form of rent-seeking. An OB’s competition was directly reliant on the OB’s benevolence in order to be able to practice.

        I’m not suggesting that licensing is bad for doctors or OBs or midwives. I’m all on board, but there is rent-seeking going on. It doesn’t mean we have to abandon regulations, but we’ll only be able to construct decent regulatory systems if we, at least, acknowledge the existence of rent-seeking.

        Report

  16. Russell,

    The comments thread here has done a good job of further fleshing out what should or should not be considered rent-seeking. Even if there’s no actual consensus, I think the issues and details are clearer. Thanks for writing this post; I couldn’t have imagined a better response and discussion. (Well, other than that dream of all the OT folks hoisting me on their shoulders and popping champagne corks in my honor, but…)

    Report

Leave a Reply

Your email address will not be published. Required fields are marked *