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The Guild-ed Age
Occupational Licensing as “Opportunity Hoarding”

One defining characteristic of decaying blue model institutions is that they serve insiders well, while making it harder for striving outsiders trying to climb the ladder. Think of our heavily regulated and subsidized higher education system, which delivers fantastic rewards to top administrators, while creating an exploding class of low-paid, disposable adjuncts. Another example, as Richard Reeves and Edward Rodriguez point out in a Brookings Institution post, is overly restrictive occupational licensing, which can favor skilled professionals at the expense of less-credentialed workers with the same skills:

Licensing can act as a form of “opportunity hoarding,” allowing those with resources and connections to benefit from the higher incomes flowing from these occupations, in part by preventing others from competing with them. As Reihan Salam points out, questionable licensing extends well up the income distribution. Dentists in North Carolina prevent other professionals from providing teeth-whitening—even though the procedure is relatively straightforward. Insurance brokers in Utah play a similar game by attempting to make free equivalents of their service illegal. If nurses were allowed to perform more routine medical procedures, doctors would make slightly less, but nurses could earn more and overall health care costs would likely fall.

Middle and working class Americans in 2016 are expressing unambiguously that they feel that America’s current political and economic system is rigged in favor of elites, and that they aren’t going to take it much longer. Though Donald Trump and Senator Bernie Sanders are answering this sentiment with their own varieties of statism, it is actually the decrepitude of the blue model—the expansion of government power at the behest and to the benefit of various interest groups—that is to blame for much unfairness. Occupational licensing might not get voters as impassioned as invectives against illegal immigration do, but it really does represent a way that elites have used their political connections to stick it to the less-connected, and reasonable reforms increase opportunities for those seeking upward mobility.

It won’t be easy to reform licensing. Just as traditional universities will resist any challenges to their dominant market position, and just as teachers’ unions will resist reforms that would hold them accountable to student performance, professional guilds will fight to keep their racket in place. But it may be that the upsurge in left and right populism alike will impel elites to change their tune and intensify current pressure for reform. The White House has recently moved against licensing, and a bipartisan California commission is making promising suggestions to the Golden State legislature. Here’s hoping that elected officials follow through.

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  • White Knight Leo

    When I graduated college, I had to present my senior thesis to a board that was partly comprised of licensed professionals from the profession my degree was directed towards. You can imagine their reaction when my thesis was that licensure should be abolished. And the looks on their faces when I compared it to “guild socialism” were pretty funny. They passed me, though.

    • FriendlyGoat

      Did you understand at the time (as much as you probably do now) that you likely picked the best topic to insulate you from the possibility of them NOT passing you? The may fight for this stuff in the legislature, but bashing a student for seeing through the ruse?

      • White Knight Leo

        They passed me. They had me up there for an hour answering their questions, but they told me when I started my project that the goal was to be able to defend my thesis adequately, not convince them that I was right.
        .
        What really made my heart sink was the meeting they were having when I walked in early – they were talking about how one of our profession’s biggest sources of business was going to shut down, and all the professionals who did that kind of work would be flooding the rest of the profession. You can imagine what I was feeling at that point. And then I get up there and say that the purpose of licensure isn’t to protect the public but to exclude competition.
        .
        But not only did they pass me, I got an A. Of course, I did agree that our state’s licensing board had been much better than many other states, and many other professions even in our state. Since some of them had friends on the board, that probably helped me.

        • FriendlyGoat

          I’ll assume, first of all, that you got an A because you did a good job on it. If you can really defend a thesis, then your thesis is most likely right. But that doesn’t keep any of them (or us) from wanting to protect their (or our) gravy trains. It’s just that they would have had a hard time flunking a student on that too-transparent score.

          Perhaps our error is in having let certain professions unduly influence legislatures. People who are not dentists are actually the most qualified, for instance, to declare that tooth whitening is not dentistry, flower arranging and interior decorating do not pose ANY safety risks to the public and that insurance “brokerage” is nothing but getting quotes from carriers.

          • White Knight Leo

            “I’ll assume, first of all, that you got an A because you did a good job on it.”
            .
            Thank you for assuming so. My TA told me I did, as did the professor who was advising me; but they both told me that I had better have every I and t dotted and crossed if I wanted to get that thesis past the review board. So I like to think I worked pretty hard on it.
            .
            “But that doesn’t keep any of them (or us) from wanting to protect their (or our) gravy trains.”
            .
            No it doesn’t. My father is in the profession (he’s why I got into it), and he was horrified when I told him what my thesis was. I replied “Dad, I got my idea from listening to you complain about your colleagues.”

          • FriendlyGoat

            I’ll bet your Dad still loves you anyway.

          • White Knight Leo

            He does. And he’s told me several times since then (I graduated about 4 years ago) that he understands a little better where I was coming from. And, to my astonishment, a lot of the stuff I brought up keeps coming up at our professional society meetings, and I’ve been told that it was even talked about at a meeting of the licensing board. So I’m mildly infamous now, if nothing else, in our profession, even if I’m known only by my fruits rather than by name.
            .
            It’s going to be interesting when I finally apply for my license in 2017.

          • FriendlyGoat

            Well, evidently you have not “damaged” things so much that licensing no longer exists, eh?

          • White Knight Leo

            No, and I had no illusions that I would. But ironically the following year there was an attempt by our new legislature to do exactly that: abolish licensure in our profession, among a host of others. Our professional society’s lobbyist got us removed from the list, but I believe most of the ones on the list did get deregulated to a large extent.
            .
            My profession is actually (to my knowledge) the oldest licensed profession; licensure in my profession actually dates back to at least the Roman Republic, and possibly earlier (I don’t know how the Egyptians handled it, but my profession did exist then), so it would be quite radical for ours to actually get deregulated.

          • rheddles

            I didn’t realize they licensed the oldest profession.

          • White Knight Leo

            I said oldest licensed. Meaning the oldest of the professions that require licenses. That one doesn’t require a license.
            .
            Surveying required a license as far back as the Roman Republic, and I’m pretty sure my colleagues had to have licenses in Egypt too (of course they were just called “rope-stretchers” then). Possibly even as far back as Babylon.

          • rheddles

            Actually it does in Nevada. But all you have to do to get the license is pass the health check. Apparently there are no standards of performance that the board evaluates. Too bad.

          • White Knight Leo

            “no standards of performance that the board evaluates”
            …. No comment.

          • White Knight Leo

            “It’s just that they would have had a hard time flunking a student on that too-transparent score.”
            .
            Ah, now I understand what you meant. No, I didn’t select my thesis on that score. But the guy who went up before me did a really short thesis on the merits of various kinds of open-source and freeware and their use in our industry; it was as non-threatening a thesis as one could possibly have, and they passed him having asked just 3 questions.
            .
            One of the people on the board was in the profession, but he had just finished teaching the semester as an adjunct professor. He told me afterwards that the only thing they’d known about my thesis before I got up there was the title, which didn’t give away anything but that it was about licensing. I don’t know if my TA did that to give me a fighting chance, or if that’s just how they did things (I was too shell-shocked at the time to ask). And he also told me that he thought I was probably right, but he also made a half-joke about how I would have been better off giving that thesis the previous semester, given what had just transpired in our profession.

    • Fat_Man

      Guts ball, Leo.

      • White Knight Leo

        Thank you.

        • Fat_Man

          Da Nada.

  • GS

    Well, I am not sure that the “less-credentialed workers with the same skills” even exist in my profession – if they do exist, I am yet to meet any, and over my 40 yrs in the field I have not seen them [disclosure: biopharma research, doctoral level].

    • WigWag

      If you work in biopharma you know that the single biggest villains are the CROs (contract research organizations) that dramatically escalate the costs of clinical trials, while reducing the liklihood of success. We were much better off in decades past when pharma ran their own clinical trials, but those days are gone. There may not be a problem with credentialism in your industry, but there is a problem with outsourcing. The CROs conduct most phase 1 and phase 2 trials in places like Moldova, Georgia, the Philippines and Vietnam. Why do they do it? Because it’s dramatically cheaper and the CROs pocket the difference. The biggest CROs like Quintiles, Parexel and Covance are so huge that they’ve actually gotten bigger than the companies they run trials for. As big as they are, most Americans don’t even know they exist.

      The only way to bring down pharmaceutical costs is to dramatically reduce the cost of drug discovery. Everybody complains that the cost of new drugs, especially biologics, has gone through the roof, yet when assigning blame no one mentions that it costs well over $1 billion to bring a new drug to market (thanks to relatively new FDA rules it does cost less to develop drugs for orphan diseases).

      What’s happened to large pharma is horrifying. These companies hardly develop new drugs any more. They purchase compounds from biotech companies and the academic sector, they throw in a little medicinal chemistry of their own and then they outsource the clinical trials for those compounds. All pharma is any good at any more is FDA compliance and marketing.

      If you do biopharma research in the context of large pharma, you know that Ph.D. level investigators are at the bottom of the food chain. It’s the lawyers and the business operation folks who rule the roost.

      There’s a lot wrong with biopharma today, but the best place to start looking for culprits is in the secretive and sleezy world of the CROs.

      • Anthony

        “…It’s the lawyers and the business folks who rule the roost.”

        • WigWag

          GS is right, small companies don’t have the wherewithal to conduct their own trials, but large Pharma does. They can but they don’t. So many other industries have witnessed dramatic price reductions for consumers because disintermediation has allowed these industries to dramatically reduce costs. We’ve seen this in industries as diverse as the limo/taxi industry, lodging, long distance telephony and stock brokerage. The pharmaceutical industry is going in the opposite directions; its introducing big, fat, belching intermediaries into an industry also weighed down by bureaucrasy. The CROs are the most miserable and inefficient intermediaries imaginable. Is it any wonder that drug discovery is becoming harder and harder while the costs to develop those drugs skyrocket?

          But it’s actually worse than that. It’s easy enough to conduct CRO-directed trials of cancer drugs

          • Anthony

            I defer to your clinical/medical experience relative to CROs. But licensure as referenced and in your initial response thereto highlight factors which may or may not inhibit small business aside from disintermediation’s credentialed impact. Your point on biopharma contextually,for me, just brought clarity.

          • WigWag

            Anthony, if this general subject interests you at all, I highly recommend a relatively new book by Vincent DeVita, the former head of the National Cancer Instiute at NIH. The title of the book is “The Death of Cancer.”

            DeVita is an extremely interesting character. He was a prestigious member of the world of elite biological scientists while at the same time he was quite an iconoclast. He’s been retired for several years, and has become more iconoclastic as he’s gotten older.

            The book is not really about the subject of this Via Meadia post, but it does provide an unvarnished view of the intertwined worlds of the biomedical research establishment and the drug discovery business.

            DeVita was at the center of both worlds. He is quite elderly now and he wrote the book with his journalist-daughter.

            The book is actually an easy read and in a few spots it’s laugh-out-load funny.

            Anyway, if the subject interests you I suspect you might enjoy it.

            http://www.amazon.com/gp/aw/d/B00W1B1SKC/ref=tmm_kin_title_0?ie=UTF8&qid=&sr=

          • Anthony

            Well, you know me and iconoclasts (as well as my appreciation for a laugh-out-loud funny interlude). Thanks much, WigWag.

          • f1b0nacc1

            Interesting that you should mention this one. Since my wife was diagnosed 2 years back, I have been reading quite a bit about this subject (as you might imagine), and ran across this one at the end of last year. An excellent work, and yes….sometimes quite funny!

          • WigWag

            f1b0nacc1, as long as you have a personal interest in this, let me recommend one more book (warning; its available on Amazon but its very expensive). The book is entitled “Cancer As A Metabolic Disease” and the author is Boston College researcher, Tom Seyfried. Full disclosure; I know Tom and have been involved in very minor collaborations with him.

            Tom is certainly an iconoclast, but unlike many iconoclasts in his field, Tom is no quack; he has hundreds of publications in peer reviewed journals. Though most of his research pertains to glioblastoma (brain cancer), his work may be relevant to many other cancers as well.

            Tom is an expert in the Warburg Effect. Warburg, who won the Nobel Prize in 1924, made the remarkable observation that cancer cells generate energy from the non-oxidative breakdown of glucose (a process called glycolysis) as opposed to healthy cells which produce energy by the oxidative breakdown of pyruvate in the mitochondria.

            After the discovery of oncogenes (cancer promoting genes) in the 1970s, scientific interest in the Warburg Effect essentially disappeared; as of late, interest in the theory has been rekindled because of the promise it offers for developing new therapeutic interventions. The idea is this; if almost all cancer cells, respirate differently from almost all normal cells, targeting the abnormal form of respiration through drug intervention offers a way to attack the cancer cells while sparing normal tissue.

            There are actually several drugs in development which target fermentation, which is essentially how cancer cells respirate but have literally no impact on cells which respirate in the normal way.

            Seyfried is an expert in this area and his ideas, which were once considered to be pretty far out, are now entering the mainstream at a faster and faster rate. If he’s right; cancer is basically a disease of damaged mitochondria (which is the site where normal cells produce energy). When the mitochondria are damaged, cells use the altered form of energy production which leads to the uncontrolled growth which is the hallmark of cancer.

            Seyfried takes it a step further, which still places him outside of the mainstream thinking by his more traditional colleagues. Most scientists believe that cancer has its inception when genes that regulate cell growth mutate because of genetic factors, environmental factors or bad luck. Seyfried believes that cancer has its inception when mitochondrial damage induces cells to utilize altered and inferior forms of energy production. He believes that the mutations in growth regulating genes are an epi-phenomonon. That when cells divide so rapidly naturally mistakes pile up and the mutations associated with cancer begin to develop. Of course, its not necessarily ether or; it could be that both phenomena are at play in cancer. Seyfried believes that its actually altered metabolism that is ultimately responsible for the mitochondrial damage that leads to cancer.

            Obviously this is all very technical and I’ve made it as simple as I know how. I am linking to two attachments; Seyfried’s original article on the subject; its technical, but understandable by a non-scientist making reference to a standard medical dictionary. If you find it at all interesting, you may want to look at Tom’s book.

            With someone with an active interest in this area, I thought you would find some of this intriguing.

            Best of luck!

            http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4493566/

            http://www.amazon.com/Cancer-Metabolic-Disease-Management-Prevention/dp/0470584920

          • f1b0nacc1

            Many thanks! I will take a look at both with great interest….
            I owe you one…

          • WigWag

            Happy to. Notice that I’ve added a third link that you might find helpful.

      • GS

        the smaller companies do not have the wherewithal to do the trials themselves.

  • FriendlyGoat

    Speaking to the last paragraph, we’d be better served to spend more time examining the differences between “left” populism” and “right populism” than imagining they both are going to somehow join together to “impel elites to change their tune”.

    • Kevin

      Sensible. I suspect that this year’s elections are going to see a lot of revisions to the conventional wisdom and how we think about politics and electoral competition.

      I wonder if Trump wins if we might see a reinvigoration of Congress as a counterweight to the Excutive as both parties in Congress might feel the need to overse the Executive rather than one being a cheerleader for their guy.

      • FriendlyGoat

        If Trump wins the presidency, Republicans is Congress will go into overdrive trying to pass far, far, far right legislation with no expectation whatsoever that Trump would not sign every piece of it that does not die in a Dem filibuster in the Senate.
        He is not running as a Democrat or as an Independent. He is running as a Republican and the only places they will restrain him is in not building the great wall he gets elected on and not allowing the deportation of labor they depend upon.

        This is why we need to talk about what “right” populism is. As of now, people think it is a wall and mass deportation.

        • Kevin

          I have no idea what Trump would do if elected, beyond something on immigration. I suspect a populist centrism as he tries to bolster his popularity and portray himself as someone independent of special interests and ideologues in either party.

          I don’t see Sanders as much of a populist. As near as I can tell, his support is drawn from people on the outer edges of the clerisy – students, underemployed college grads, etc. He is not getting support from private sector unions or working class Democrats in general.

          As an aside those of his supporters I know don’t really want to see him win the nomination, but rather to tweak Clinton for her ties to banks, etc. as well as signal their dissatisfaction with the political economy.

          • FriendlyGoat

            Sanders is on the way to not being nominated, I think. Clinton against Trump or Clinton against Rubio nominated ONLY by the convention is where we’re headed, as far as I can tell. Clinton has a good chance of winning.

            If Trump wins, though, I do not see him defying ANYTHING that Republicans really want. Tax cuts, budget cuts, military interventions, judges, agency de-regulation, you name it. The Trump “populists” seriously have no idea what they are seeking to enable. The screw-over of working people would be inevitable and gargantuan.

  • Jeremy Klein

    Gov’t-level licensing is simply wrong. Gov’t does not exist to protect citizens from their own incompetence in picking a physician, lawyer, plumber, hairdresser, or accountant, nor is gov’t competent to determine who is a competent professional in any field. When gov’t pretends to do so, via the medical practice acts, or any other licensing scheme, it reduces competition and raises prices, thus hurting mostly the poorest citizens. In my own profession, if the medical practice acts and the FDA were abolished, medical costs would drop like a rock, health insurance companies and gov’t entities such as Obamacare would disappear, I might make less money than I do now, but more of my patients would be able to receive the care I and they think they should have.

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