AI transcript
0:00:08 Hey there, it’s Steven Dovner with one last reminder to come see Freakonomics Radio live
0:00:11 in Los Angeles on February 13th.
0:00:17 I will be joined on stage by Ari Emanuel, the CEO of Endeavor, and RJ Cutler, the documentary
0:00:23 filmmaker who made the recent Martha Stewart doc, as well as films on Billy Eilish, Elton
0:00:27 John, and coming soon, the Dodgers Yankees World Series.
0:00:30 I think it’s going to be an amazing night, at least on paper it is, you never know what
0:00:34 happens with a live show, and that’s part of the fun.
0:00:35 So I hope you’ll join us.
0:00:41 Tickets at Freakonomics.com/LiveShows, one word, get them fast, only a few left.
0:00:46 February 13th in LA, produced in partnership with LAist and SiriusXM.
0:00:54 I’ll see you there.
0:00:58 What does a hairdresser have in common with a lawyer?
0:01:06 How about an interior designer, and a doctor, an auctioneer, and a funeral director?
0:01:10 These are not jokes, I’m sorry, I wish they were.
0:01:14 What these jobs all have in common is that they require a professional license, which
0:01:19 is administered by a licensing board that is often made up of other doctors and funeral
0:01:22 directors and hairdressers.
0:01:26 This may not be something you’ve ever thought about, and I wouldn’t blame you.
0:01:30 It’s one of those things a friend of mine calls a meagotopic, meagot standing for it,
0:01:32 my eyes glaze over.
0:01:39 But when you think about how our economy works, these labor licensing rules are pretty important.
0:01:44 It is the most important regulatory institution we have in labor.
0:01:48 Rebecca Allensworth is a law professor at Vanderbilt University, and she’s written a
0:01:51 book about professional licensing.
0:01:56 The Americans like to think of our economy as open and dynamic.
0:02:02 Allensworth shows that in many ways it’s not, and that these licensing boards help too many
0:02:07 bad actors stay in their professions and keep too many good ones out.
0:02:11 And that’s why she called her book The Licensing Racket.
0:02:16 Professional licensing is too onerous for certain professions, and it just makes the barriers
0:02:22 too high, it keeps people out, and the investment in what you’re getting for that regulation
0:02:24 is not worth it.
0:02:30 And then, for the professions that are left, medicine, nursing, law, now we need something
0:02:31 like a licensing board.
0:02:34 Only what we have is terrible.
0:02:37 By the way, a working title for the book was “Board to Death.”
0:02:38 [laughter]
0:02:39 BOARD, presumably.
0:02:40 Yeah.
0:02:42 So, it had three problems.
0:02:44 One, it was dorky word play.
0:02:49 Two, there was this problem that maybe I was over-claiming by talking about death in the
0:02:51 title of a book about licensing.
0:02:54 And then the other one, of course, being that it sounded like the book was going to be boring.
0:03:00 But the over-claiming point, you know, I do think that it’s dangerous, literally, in
0:03:05 the sense that there’s a lot of doctors and lawyers out there who are just plain dangerous.
0:03:12 And we give them a lot of trust and a lot of power as professionals.
0:03:16 And 20 percent of the American workforce is subject to professional licensing.
0:03:21 The system is sanctioned by state governments across the country, and it has been expanding
0:03:22 like crazy.
0:03:28 Today, in an episode of the Freakonomics Radio Book Club, how much licensing is too much?
0:03:32 And where has this system gone especially wrong?
0:03:39 80 percent have a history of major discipline, often for over-prescribing, for malpractice,
0:03:41 for sex with patients.
0:03:43 The racket is real.
0:04:00 The solution, that’s the hard part, but we’ll get into all that starting now.
0:04:06 This is Freakonomics Radio, the podcast that explores the hidden side of everything with
0:04:17 your host, Stephen Dubner.
0:04:22 At Vanderbilt Law School, Rebecca Allensworth teaches contracts and antitrust law.
0:04:27 Those are pretty standard law school topics, but when she was starting out, she got obsessed
0:04:33 with a topic that very few legal scholars, really few scholars from any discipline, have
0:04:34 studied closely.
0:04:36 Professional licensing boards.
0:04:39 Let’s start by defining some terms.
0:04:44 A licensing board is a regulatory body that’s ostensibly part of the state that decides
0:04:49 who can enter a profession, what qualifications they’re supposed to have, and then also whether
0:04:54 somebody has done something that deserves a revocation of their license or a restriction
0:04:55 on their license.
0:05:01 It’s created by a state statute, but these boards are mostly made up of members of the
0:05:02 profession.
0:05:07 People who are working full-time as doctors, respiratory therapists, hairdressers, take
0:05:12 a couple days off a year to serve on this board and moonlight as their own regulators.
0:05:13 Okay.
0:05:15 So that’s what a licensing board is.
0:05:16 What is it not?
0:05:19 Well, it’s not really a governmental agency.
0:05:24 I don’t think that it’s made up of people who have the public good in mind.
0:05:30 They may think they do, but it really is more like a professional association, a group of
0:05:35 like-minded professionals who are looking out for the interests of the profession.
0:05:39 Early on in her research, Allensworth did what you would expect a legal scholar to do.
0:05:43 She read everything she could find about professional licensing.
0:05:47 She sifted through legal databases to try to understand first the broad strokes of the
0:05:50 system and then the nuances.
0:05:55 She checked out the economics literature on licensing, and she worked all of this into
0:05:58 a critique that she was starting to build.
0:06:00 Before long, her work was being cited by the Supreme Court.
0:06:05 She was invited to speak in Congress and in the Obama White House.
0:06:09 At this point, her critique was legalistic and theoretical.
0:06:14 She’d never actually attended a meeting of a licensing board, but when she did that,
0:06:16 the obsession deepened.
0:06:18 I went to the first licensing board and I was so shocked.
0:06:22 I have a friend who’s a journalist, and I was like, “Someone should write an investigative
0:06:24 journalism piece about this.”
0:06:29 I kind of meant her, and then as I was saying it out loud, I was like, “Yes, someone.
0:06:31 Maybe like me.”
0:06:35 Allensworth wound up embedding herself for four years in the licensing system of Tennessee
0:06:37 where she lives.
0:06:39 She attended many board meetings.
0:06:44 She interviewed more than 180 people covering 28 professions.
0:06:48 She started writing some journalism on the subject, and now she has published her book,
0:06:54 The Licensing Racket, How We Decide Who Is Allowed to Work and Why It Goes Wrong.
0:06:58 The minute you start reading, you can see why she wanted to call the book “Board to
0:06:59 Death.”
0:07:01 It’s so time-consuming.
0:07:02 Sitting there, you don’t know what you’re going to find.
0:07:04 You have to sift through all of it.
0:07:05 You have to make these relationships.
0:07:09 You have to spend enough hours in that room that the people on the board know who you
0:07:10 are.
0:07:14 They know you’re going to put in the time to understand what they do, and then you have
0:07:17 to say yes to everything.
0:07:19 You have to talk to everyone.
0:07:23 And that’s how Rebecca Allensworth came to understand how the licensing system works.
0:07:27 As she describes it, the path to licensing usually starts small.
0:07:32 Members of a profession, often backed by a professional association, will approach a
0:07:36 state legislature with a proposal for licensure.
0:07:42 These proposals, known as practice acts, set the scope and entry requirements and ethics
0:07:44 rules for a given profession.
0:07:50 Once a profession secures its initial licensing law, it gains control of the regulatory board
0:07:51 that oversees it.
0:07:59 Today, there are around 300 licensed professions in the U.S. regulated by around 2,000 licensing
0:08:00 boards across the country.
0:08:03 How did all this get started?
0:08:06 Some of the first licensees were physicians.
0:08:11 Licensing started out with medicine in the late 19th century, and it was limited to the
0:08:14 learned professions so-called.
0:08:19 Until about the ’70s, since then it’s just been a straight line up the number of licensed
0:08:23 professions and the people covered by professional licenses.
0:08:28 This idea of belonging and meaning and prestige plays a big role because people started to
0:08:31 look around and say, “Our work matters.
0:08:34 Our work is just as important as this licensed profession.
0:08:38 Therefore, we need to make sure that we get a licensing law for ourselves.”
0:08:42 I’ll give you an example, right about the time that people were starting to confront
0:08:48 the idea of alcoholism in the ’70s and ’80s, there became a shortage of therapists that
0:08:53 could help you overcome your addiction, and so AA became a big thing.
0:08:58 Then these AA group leaders wanted to have a little bit more training and professionalism.
0:09:02 They wanted to become therapists themselves, and so there was a new profession called alcohol
0:09:04 and drug abuse counselors.
0:09:07 The idea was that it was going to be a relatively easy license to get, and it was going to increase
0:09:10 access to care.
0:09:14 Over the years, this profession looks around and says, “What we do is just as important
0:09:15 as any other therapist.
0:09:17 In some ways, it’s even more important.
0:09:18 Overdose risk is really high.
0:09:20 This is life or death.
0:09:22 We need the same level of licensure.”
0:09:28 It just got ratcheted up to now to where it takes more hours of practice to be an alcohol
0:09:34 and drug abuse counselor, like internship type hours, than it does to become a physician.
0:09:35 Okay.
0:09:39 All the licensed professions you write about have boards, and earlier you said that the
0:09:41 board situation is terrible.
0:09:43 Why is it terrible?
0:09:48 Because of self-regulation because it’s dominated by members of the profession that may want
0:09:53 to look out for the public, but are much more seasoned in looking out for the profession.
0:09:57 The policing and disciplinary functions are just not performed well.
0:10:00 Yes, but also the red tape.
0:10:04 These boards are responsible not only for disciplining and policing their professions,
0:10:08 but also deciding how high are those barriers to entry, who’s going to get over it, whose
0:10:12 criminal record is too bad, and they take it too far.
0:10:16 And then in the disciplinary side, they abandon public protection.
0:10:19 Here’s a sentence from the book “Jacket” that I particularly love.
0:10:24 “When Rebecca Allensworth began attending board meetings, she discovered a thicket of
0:10:27 self-dealing and ineptitude.”
0:10:29 The self-dealing we can get to later.
0:10:31 Let me hear a favorite example of ineptitude.
0:10:37 The failure of medical boards to be able to tell when somebody is lying to them may be
0:10:40 one of the most inept things I had to watch.
0:10:44 So it’s really interesting reading about all the reasons for that and all the ways in which
0:10:48 a licensing board, even if well-intentioned, is underpowered.
0:10:52 That would seem to be most prominent in medical boards, right?
0:10:54 It’s also a problem in law.
0:10:57 The argument is you have to know the profession, you have to know everything about it to regulate
0:10:59 it, and that’s the expertise they’re looking for.
0:11:03 But then they miss what I would say is even more important expertise, which is the regulatory
0:11:05 expertise.
0:11:10 You write that licensing boards, quote, “combine the most dangerous features of a professional
0:11:14 association,” and I have to say, I’d never really thought about professional associations
0:11:15 as dangerous before.
0:11:20 And the government agency, boards have all the interests and incentives of a private
0:11:24 club and the police power of the state to back them up.
0:11:27 When I first read that, I was sure that you were overstating your case.
0:11:30 By the time I finished your book, I was pretty certain that you weren’t.
0:11:38 But if I read that out of context, I might take you for some kind of deep state conspiracist.
0:11:43 Maybe you are, but can you give me a sense of why you’ve got such a harsh indictment
0:11:44 in that sentence?
0:11:48 First of all, I actually love the deep state, and that’s what I want to bring to licensing.
0:11:51 I want the bureaucrats doing this.
0:11:56 The problem with the way licensing is done is that full-time employees of the state are
0:11:57 given no power.
0:12:02 A lot of the forehead slapping that I saw when I watched these boards regulate was done
0:12:06 by lawyers and staff of the board who knew better than the members of the board.
0:12:12 And as far as it being dangerous, what I mean there is nobody’s watching, nobody’s sitting
0:12:16 in on these board meetings, nobody really knows what’s going on, and everyone assumes,
0:12:20 “Hey, my doctor has a license, my real estate agent has a license.
0:12:22 There must be something going on there.”
0:12:23 There’s more than that.
0:12:27 You may have a license, but there’s a lot that can be buried within a valid license
0:12:30 that is still not very good for consumers.
0:12:31 Exactly.
0:12:36 The very first board meeting I went to was about a doctor who had traded drugs for sex
0:12:38 with 11 of his patients.
0:12:42 And most of that hearing, which was the hearing in which he got his license back, was about
0:12:49 how they could impose this chaperone requirement, but not alert the patients, not tip them off
0:12:52 to the idea that there was anything wrong.
0:12:58 So there’s a lot of cover-up power that a license can give, which makes it really dangerous.
0:13:01 And in that case, who were the members of the board?
0:13:06 Did they have any relationship with the person whose license was being considered?
0:13:10 Well, no, and that’s part of why I resist the word “corruption” when I talk about
0:13:11 this problem.
0:13:16 None of the members of the board knew him personally, had any connection to him, had
0:13:19 any stake, really, in him getting his license back.
0:13:26 On the other hand, most of them were physicians, and most of them saw this person as having
0:13:27 started out somewhat like them.
0:13:30 Sure, he definitely made some very different choices.
0:13:32 He lost his way.
0:13:38 He had three different kinds of addiction, and that is something that especially physicians
0:13:45 are likely to see as having a lot of explanatory power, as capable of being rehabilitated.
0:13:47 And it’s all about second chances.
0:13:53 You cite many examples of professionals who face discipline from their licensing board,
0:13:57 but then they encounter, as you put it, a system full of second, third, and even fifth
0:13:58 chances.
0:14:05 And you write that a lot of these regulatory failures come from the most legitimate professions,
0:14:07 you call them, like medicine.
0:14:09 Talk about the Michael Lopalia story.
0:14:12 His was a story of many, many chances.
0:14:17 Lopalia was using his license to deal drugs and to make money.
0:14:21 He got in the crosshairs of the licensing board over that first incident.
0:14:24 They came to his house and they found a whole bunch of drugs that he wasn’t supposed to
0:14:28 have, some for fun, some maybe he’s selling.
0:14:29 So they put him on probation.
0:14:34 But then while he was on probation, because he had lost his DEA number, which allows him
0:14:42 to prescribe these more high dose opioids, he starts trading in Suboxone, which Suboxone,
0:14:46 even though it’s used to treat addiction, can also be abused and also has a large street
0:14:48 value.
0:14:54 So he does this, he gets caught for it while he’s already on probation with the board.
0:14:55 And then he gets another chance.
0:14:59 He gets his license back, the restrictions that they put him on after that hearing were
0:15:03 basically the same as what they had on the first one.
0:15:04 What does he do after that?
0:15:11 Well, now his prescribing is even more limited, in part because he’s facing a federal indictment
0:15:13 for this same conduct.
0:15:16 So he goes door to door doing COVID tests.
0:15:17 This is high COVID, right?
0:15:20 So he finds people who want a second opinion.
0:15:25 They want a doctor’s note that says, “I don’t have COVID” even after a positive test.
0:15:27 He does that for $50 a piece.
0:15:33 This is just somebody who has used their license not to treat patients, not in the best interest
0:15:35 of patients, but really for their own gain.
0:15:38 His license was ultimately revoked, yes?
0:15:39 That’s right.
0:15:45 So after all this, and after he was sentenced in his federal case to 18 months in prison,
0:15:50 they did revoke his license in an order that gives him another path back to licensure.
0:15:54 Would the revocation have happened if not for the federal criminal charge?
0:15:58 I am sure that it would not have.
0:16:02 And even with the federal criminal charge, it wouldn’t have happened if his story hadn’t
0:16:04 become so public.
0:16:06 And how did the story become so public?
0:16:10 I wrote about it in the New York Review of Books, and it also was featured on an episode
0:16:12 of This American Life.
0:16:16 I think there was a lot of pressure on the board to pull his license at that time.
0:16:22 In a case like that, how much evidence does a board have or seek out?
0:16:28 They’re essentially acting as a court, but in an actual court, the judge and the prosecutors
0:16:33 have a lot more opportunity, it seems, to gather evidence than these licensing boards
0:16:38 do, or maybe not more opportunity, but maybe more incentive, I hate to say.
0:16:40 That’s the big word there, incentive.
0:16:45 I don’t think there’s much legally constraining the evidence that a board could gather and
0:16:46 consider.
0:16:51 The real constraint is resources and incentives.
0:16:56 Resources meaning this is typically a volunteer board where they don’t have all these investigators
0:17:00 going out to look through all these files and talk to witnesses and so on, yes?
0:17:04 Well, they do have investigators, and these would be, in most cases, full-time employees
0:17:06 of the state.
0:17:12 But their salaries are paid through the board, and that’s all through licensing fees.
0:17:16 There’s this conflict of interest where the doctors on the board want to keep fees low
0:17:18 for the rest of the doctors.
0:17:22 Their revealed preferences are that they’re happy with minimalist regulation.
0:17:24 They don’t feel like there’s a real problem here.
0:17:30 It becomes very low information trials, and in some cases, not very adversarial.
0:17:36 What happens when misconduct is bad enough that the criminal justice system gets involved?
0:17:38 What do the licensing boards do then?
0:17:40 Do they feel chastised?
0:17:44 Are they themselves ever subject to penalty?
0:17:46 They’re not subject to penalty.
0:17:52 What I found is that the presence of some sort of criminal proceeding almost froze the
0:17:54 board in its tracks.
0:17:57 I was watching the medical board and the other prescribing boards in Tennessee because doctors
0:17:59 aren’t the only ones that can prescribe.
0:18:01 Who else can prescribe in Tennessee?
0:18:06 Nurse practitioners, physician assistants, some dentists.
0:18:09 So in this one day, there was this big, splashy arrest.
0:18:15 I think they arrested 30 Tennessee professionals for dealing opioids.
0:18:19 This is the federal government, and most of them didn’t have board discipline.
0:18:23 I had been hearing all along that the real problem with discipline is that they just
0:18:24 don’t have the information.
0:18:28 They don’t know who’s screwing up, and they don’t have resources to figure it out.
0:18:33 Well here we have a sudden, very public set of information.
0:18:37 These 30 providers might be ones that you’re going to want to at the very least temporarily
0:18:41 suspend their licenses, which you can do without much process.
0:18:45 And just meeting after meeting, nothing’s happening.
0:18:46 Nothing’s happening.
0:18:47 Meaning they were not called up to the board?
0:18:49 They were not called up.
0:18:50 It was like it never happened.
0:18:52 It was just silence.
0:18:57 So you’re saying if I’m a doctor and I’m selling opioids out of my car trunk and I get charged
0:19:02 and whether I’m convicted or not, you’re saying that then my medical licensing board,
0:19:06 which you would suspect would call me in for discipline or a hearing or something.
0:19:08 They just don’t even call them.
0:19:11 They do eventually, but it didn’t happen for a long time.
0:19:16 I asked about this, and it was like, well, we can’t really proceed against their license
0:19:18 because there’s this Fifth Amendment problem.
0:19:23 If they say anything in their licensing proceeding that’s self-incriminatory, that’ll go in their
0:19:24 criminal thing.
0:19:25 So that’s one problem.
0:19:29 Now, that doesn’t answer the question of why you don’t summarily suspend it on an emergency
0:19:30 basis.
0:19:31 You can do that without their testimony.
0:19:36 And then they’re saying, well, also it’s just an accusation.
0:19:39 And we’re about to have a whole lot more information.
0:19:44 Like there’ll be either a trial or a plea, and then we can act.
0:19:49 We’re talking now a year or two before these cases get resolved.
0:19:51 During which time they’re still seeing patients?
0:19:57 Yes, although the criminal system knows all of this and doesn’t want that to happen.
0:20:01 So the criminal judge is in the position of basically restricting their license, which
0:20:04 is what the board was supposed to be doing.
0:20:11 So now you have a totally inexpert criminal judge or federal judge saying, you can prescribe
0:20:14 this, you can’t prescribe that, which is goofy.
0:20:20 And then in the end, there was a lot more forgiveness even after the conviction than
0:20:21 I expected.
0:20:24 The idea there was, well, let’s not pile on.
0:20:26 Obviously, this doctor’s been through a lot.
0:20:30 They have a criminal conviction, a huge ding on their record.
0:20:36 And they also see how devastating a federal criminal conviction can be on your career.
0:20:37 They don’t want that for themselves.
0:20:40 They think this is punishment enough.
0:20:44 And then there’s this heartbreaking part of it that’s like, and they’ll never practice
0:20:46 on you and me anyway.
0:20:47 What does that mean?
0:20:48 Spell that out.
0:20:54 For board members, I’m giving them the most credit possible without fully realizing they’re
0:20:56 saying they’re not going to be able to take private insurance.
0:20:59 They’re not going to be able to work in the highest end hospitals.
0:21:04 They’re going to be doing things like working in prisons, working for the VA.
0:21:09 And that’s not really the set of patients that I’m super worried about protecting.
0:21:11 Those patients are lucky to get care.
0:21:14 You write about what you call these fallen professionals.
0:21:19 Louisiana is one state you looked at to see what share of physicians working in prisons
0:21:21 have a history of board discipline.
0:21:23 What are the numbers there?
0:21:24 80%.
0:21:25 80%.
0:21:31 Have a history of major discipline, often for overprescribing, for malpractice, for sex
0:21:39 with patients, the lower down in the market you go, the rate of discipline goes up.
0:21:44 In the legal profession, which is your profession, should I assume as with medicine that the
0:21:52 lower you are on the income chain, the more likely you are to have a lawyer who has been
0:21:54 disciplined and you may not even know about it?
0:21:56 We really need more data here.
0:22:00 I would love if my book could inspire more kind of empirical work here.
0:22:06 But what I do know is that as you receive discipline from your bar association, your
0:22:10 likelihood of working at a firm goes down.
0:22:16 And your likelihood of working for yourself and in particular in working in immigration,
0:22:22 injury law, and indigent defense goes up as you receive discipline from your bar.
0:22:26 Those are the three categories of clients that are particularly vulnerable.
0:22:32 You explain in the book how complaints against professional licensees can come from a variety
0:22:33 of sources.
0:22:34 They might come from law enforcement.
0:22:37 They might come from the licensing board’s own investigators.
0:22:42 But one thing that surprised me is that boards rarely hear complaints brought by consumers
0:22:43 or customers.
0:22:44 Why is that?
0:22:51 Why do licensing boards rarely hear directly from the patients of doctors, the clients
0:22:56 of lawyers, I don’t know, maybe someone whose haircut went terribly wrong?
0:23:00 The whole point of a license on a licensing board is the idea that consumers don’t really
0:23:02 know what they’re getting.
0:23:04 Let’s take restaurant food.
0:23:08 Maybe it’s contaminated and not handled properly and you might get sick.
0:23:10 And so we have some regulation for that.
0:23:14 But as far as like what’s tasty, what’s hot, what arrives on time, consumers know what
0:23:16 they’re getting.
0:23:18 Licensing exists because we don’t know what we’re getting from our professionals.
0:23:21 We don’t know what the right legal advice is.
0:23:22 We don’t know if we have cancer.
0:23:23 That’s why we go to the doctor.
0:23:29 But then when it comes to complaints, we rely on customers complaining about their professionals.
0:23:35 And then there’s this other problem, which is that sometimes the bad conduct is stuff
0:23:36 that the customers want.
0:23:38 Like selling opioids.
0:23:43 Selling opioids or getting your lawyer to help you commit a crime.
0:23:48 So it’s a very bad way of figuring out where is the misconduct.
0:23:53 And then the licensing boards figure, well, consumers don’t know what’s good practice,
0:23:55 what’s good medicine, what’s good law.
0:24:00 I think the place where you see this the most is in allegations about sex abuse.
0:24:04 All professionals are very concerned, somebody could make up a story.
0:24:08 And the boards do act as kind of a gatekeeper for complaints like that.
0:24:13 None of this should stop a regulator from actually investigating and seeing whether it’s true.
0:24:18 Or if you get two or three very similar complaints, you might think that that’s a little bit easier
0:24:19 to believe.
0:24:26 Can anyone look up licensing board disciplinary action or investigative action on their lawyer,
0:24:28 doctor, et cetera, et cetera?
0:24:32 In Tennessee, you can look them up and you can see if they’ve had discipline.
0:24:33 You can’t do it nationally.
0:24:37 So somebody could have discipline in another state and you don’t know it.
0:24:41 There’s something called the National Practitioner Data Bank that keeps information about board
0:24:43 actions and malpractice.
0:24:45 That can’t be accessed by the public.
0:24:49 So it’s pretty opaque and it’s especially opaque for lawyers.
0:24:53 Lawyers really don’t want clients finding out about their business.
0:24:56 And how do you feel about that as a lawyer yourself?
0:24:59 As a non-practicing lawyer, I disapprove.
0:25:03 Maybe if I asked my husband, he would say no, no.
0:25:04 Is he a practicing lawyer?
0:25:05 He is.
0:25:06 He is.
0:25:10 He has shared with me the professional perspective sometimes of like, well, you know, a lot of
0:25:14 people complain about a lot of BS and, you know, I don’t know if I want people knowing
0:25:17 about every complaint against me.
0:25:18 That’s an understandable perspective.
0:25:24 If I just don’t know that we want to have that perspective, have the final say in regulation.
0:25:29 Remember, Rebecca Allensworth believes that the licensing racket, as she calls it, has
0:25:31 two main flaws.
0:25:35 It protects bad actors, which is what we’ve been hearing about so far, but also that it
0:25:40 keeps too many good people out of the occupations they would like to join.
0:25:41 So what does this do?
0:25:44 It kind of gives a leg up to people who already have a leg up in life.
0:25:46 That’s coming up after the break.
0:25:47 I’m Stephen Dubner.
0:25:48 This is Free Economics Radio.
0:26:00 We’ll be right back.
0:26:05 The legal scholar Rebecca Allensworth spent years investigating the power, reach, and
0:26:07 shortcomings of professional licensing boards.
0:26:11 Here’s how she puts it in her book, The Licensing Racket.
0:26:16 When it came to barriers to entry and restrictions on practice, boards went too far.
0:26:21 And it came to disciplining dangerous providers that didn’t go nearly far enough.
0:26:25 Before the break, Allensworth told us about the disciplining problem.
0:26:30 But she argues that the lockout effect of professional licensing is also damaging.
0:26:35 We license way too many professions, so we need to just get rid of licensing for many
0:26:36 professions.
0:26:41 When you look across the labor force in the US, you say that roughly one in five workers
0:26:44 in America do a job that requires a license.
0:26:48 What do you think is the appropriate share of workers?
0:26:50 Should it be a third of that?
0:26:51 Should it be a tenth of that?
0:26:54 I would say a third to a half.
0:26:56 The beauty professions are quite big.
0:27:02 A lot of the housing and trade ones, plumbing and electricians, I think are bigger.
0:27:07 The medical and legal professions, how big are they as a part of the whole workforce?
0:27:08 Really big.
0:27:13 About two thirds of the 20% are in the healthcare professions.
0:27:17 Nurses are totally dwarfed by nurses.
0:27:22 And I think that there’s a significant number of professionals that have to have some sort
0:27:26 of license as a nurse that maybe don’t need to be licensed.
0:27:27 So you’ve got Allens.
0:27:29 I think they should be licensed.
0:27:31 Nurse practitioners, they should be licensed.
0:27:36 But licensed practical nurses is a lot of professions within professions that we lump
0:27:37 in there.
0:27:39 They’d have to change their name, though, wouldn’t they?
0:27:41 They really would, yeah.
0:27:43 Unlicensed practical nurses.
0:27:45 Everybody wants to see that, nurse.
0:27:49 My goal here is not to write a book that says this is what should be licensed.
0:27:50 This is what shouldn’t be.
0:27:55 But I did want to provide some guideposts for how you would make that determination.
0:28:00 You write that professional licensing is, quote, an especially onerous form of regulation
0:28:06 erecting high financial and educational barriers and that it therefore has a big effect on,
0:28:10 quote, equality, public health, the economy and the American dream.
0:28:11 So that’s a lot.
0:28:13 Oh, I can defend it all.
0:28:16 Let’s start with the American dream.
0:28:18 Home ownership used to be the American dream.
0:28:20 That used to be the way that you knew you’d made it.
0:28:24 I think there’s a way in which a professional license has taken over that role.
0:28:29 That’s how you know you really are accepted in the society if you have the state imprimatur
0:28:31 on the work that you do.
0:28:35 You see this a lot in the discourse of people who are trying to get new licenses.
0:28:37 They say, our work is important.
0:28:39 Our work is dangerous.
0:28:40 Our work is valuable.
0:28:42 And we don’t have a license.
0:28:44 We should have that kind of status.
0:28:45 Okay.
0:28:48 So that’s how licensing hurts the American dream.
0:28:52 How about the other categories, the economy, public health, equality?
0:28:57 It impacts the economy because it is the most important regulatory institution we have in
0:28:58 labor.
0:29:04 There’s more people who are subject to professional licensing than are in unions and are affected
0:29:10 by the minimum wage combined, 20% of the American workforce, tens of millions of workers.
0:29:14 So we know that it raises prices and creates scarcity.
0:29:17 We spend more on health care than any other country.
0:29:22 I don’t want to oversimplify health care economics, but there is an element of a supply
0:29:27 and demand problem where prices go up because supply is so low.
0:29:31 Another way of saying the same thing is that it is very expensive to go to medical school.
0:29:36 It’s such a huge investment to get into the profession, and that creates a small number
0:29:39 of practitioners and then prices go up.
0:29:45 It’s a big problem for equality because you have to have typically a clean criminal record
0:29:46 to get over this barrier.
0:29:50 You have to have money to pay for a school.
0:29:55 You also have to be able to take a year or three out of the labor force to go to school.
0:29:56 So what does this do?
0:30:00 It kind of gives a leg up to people who already have a leg up in life.
0:30:03 So it exacerbates inequality, essentially.
0:30:04 Exactly.
0:30:09 I think the place you see this most is with people with criminal histories because the
0:30:12 one thing you need when you get out of prison is a job.
0:30:16 That is probably the single most important determinant for how the rest of your life
0:30:17 will go.
0:30:24 In a system where a huge chunk of jobs are licensed, you have to overcome the idea that
0:30:26 you’ve got a ding on your criminal record.
0:30:31 There’s no real nexus between the idea that you committed a crime and this licensed profession
0:30:32 that you’re doing.
0:30:37 I saw a dental assistant get a really hard time about her criminal record in front of
0:30:38 the dental board.
0:30:42 It’s very unclear to me what her driver’s license charges had to do with being a dental
0:30:43 assistant.
0:30:51 But advocates of licensing argue that licensing can help raise wages for lower education or
0:30:57 low income workers, especially minorities, by providing a better path to economic sustainability
0:31:00 because they are in a licensed profession.
0:31:02 How much sympathy do you have for that argument?
0:31:03 Not a lot.
0:31:07 The reason why those wages are higher and the reason why there’s this path is because
0:31:10 of the people who are left out of it.
0:31:13 That’s the source of the benefit.
0:31:18 It’s not enough to say that this particular minority group or this particular disadvantaged
0:31:22 set of people get a particular benefit out of licensing if the way that they’re getting
0:31:26 that benefit is by excluding other members from that same group.
0:31:31 Taking all licensed professions in the US, which ones do you think clearly don’t need
0:31:32 licensing?
0:31:39 Well, I think the hair professions are not right for professional licensing.
0:31:44 I’m laughing only because there aren’t that many people in the world making the arguments
0:31:48 that you’re making today about the licensing racket, but it seems that every person that
0:31:52 does make the argument uses hair cutting and hair styling as an example.
0:31:53 Why is that?
0:31:58 The reason why hair is such an attractive example is because it’s just so extreme.
0:32:01 It takes more classroom hours than to go to law school.
0:32:02 No.
0:32:03 Come on.
0:32:04 Yeah, 1,500 hours.
0:32:05 I’ve done the math.
0:32:06 My students, I teach at a law school.
0:32:09 My students have to be in class for 1,200 hours.
0:32:13 What happens during 1,500 hours of hair styling training?
0:32:15 What happens during that time?
0:32:16 Is it just an apprenticeship, essentially?
0:32:20 There’s a fair amount of books studying, which is actually a big problem because a lot of
0:32:27 people who want to cut hair aren’t capable of or interested in the book-based exam studying
0:32:29 that comes along with the professional system.
0:32:34 A lot of people don’t go to hair school because they think that they won’t succeed, even though
0:32:42 they could be perfectly capable hair cutters.
0:32:46 In many of the occupations that Ellen’sworth looked into, there were English-only written
0:32:50 tests that worked to exclude non-native speakers.
0:32:55 And while tests and training are designed to improve the quality of services offered
0:33:01 by a profession, the evidence is mixed to put it generously.
0:33:06 During her research, Ellen’sworth found that licensing boards put far more energy into enforcing
0:33:10 their own requirements than protecting the public.
0:33:14 Consider the board in Tennessee that licenses alarm systems contractors.
0:33:19 Ellen’sworth found them, quote, “ten times more likely to take action in a case alleging
0:33:25 unlicensed practice than one complaining about service quality or safety.”
0:33:27 And then there are the licensing turf wars.
0:33:30 This is a major source of power for the boards.
0:33:35 In many states, including in Tennessee, nurse practitioners, for example, must be supervised
0:33:37 by physicians.
0:33:42 And the terms of that supervision are set by the boards, and they decide how many nurses
0:33:47 you can supervise, what kind of intensity the supervision is.
0:33:50 This is a huge problem for access to care.
0:33:55 Nurse practitioners can do a ton of medical care that we really desperately need in this
0:33:58 country, especially primary care.
0:34:03 And if we were to allow them to practice to the full extent of their training, we would
0:34:06 have a lot more provision of that care.
0:34:09 Doctors take the attitude that if you want to practice medicine, go to medical school.
0:34:13 What’s a little funny about this is they will say, “It’s really important that the public
0:34:15 get the highest possible quality care.
0:34:17 We don’t want to cut any corners.
0:34:21 We don’t want to send anyone to a nurse practitioner if a doctor could have done a better job.”
0:34:26 They’ll say that in that instance, and then turn around in the disciplinary side and say,
0:34:30 “Well, any doctor is better than no doctor, and so I’m going to let this guy keep his
0:34:33 license so he can go on to work at a prison.”
0:34:38 Let this guy keep his license in part because there just aren’t enough doctors to go around.
0:34:39 Exactly.
0:34:44 But isn’t the licensing board or the AMA responsible for the supply of doctors?
0:34:45 Exactly.
0:34:50 So on the one side, it’s like we need to have the highest possible standards, which of course
0:34:52 create shortages.
0:34:56 Turf wars are a big part of that, and the failure to use nurse practitioners and physician
0:34:59 assistants to their maximum level is a big part of that.
0:35:02 Then they turn around with the scarcity and say, “Well, now we have scarcity, so we have
0:35:06 to let this doctor that’s at best questionable stay in the profession.”
0:35:07 Yeah.
0:35:10 It’s a little bit like being the firefighters who set the fire in order to put the fire out
0:35:12 to prove your value.
0:35:13 Yes.
0:35:14 Yes, it is.
0:35:18 Talk about how licensing affected the medical response to COVID.
0:35:24 Early in COVID, we had this severe shortage, especially of nurses, but of all medical professionals.
0:35:27 That made for a higher death rate.
0:35:31 It brought the whole system to its knees and burnt out a lot of medical professionals who
0:35:34 then left the profession.
0:35:39 I think that’s a big part of the story because licensing holds down the number of practitioners.
0:35:44 Part of the solution was, “Okay, well, we got here because we have state by state licensure.
0:35:46 Let’s just get rid of that for now.
0:35:47 If you have a license anywhere, you can travel.”
0:35:49 Let’s seem to work at first.
0:35:51 All these people signed up for it.
0:35:55 They tried to come to New York, but the regulatory apparatus of these boards is so small and so
0:35:59 underfunded that they just couldn’t actually process all these people.
0:36:05 The more we talk, the more it seems that states are ceding a lot of regulatory power to these
0:36:06 boards.
0:36:11 It reminds me of an argument made by a political scientist I know about how Congress has ceded
0:36:16 a lot of its legislative authority to the executive branch because it’s so time-consuming
0:36:18 to make legislation.
0:36:22 They pass on things and let the president sign an executive order, then it might get
0:36:26 turned over after the next election, but at least they got something done.
0:36:33 It feels here like states and state regulators would like these professions to be capably
0:36:38 regulated, but because it’s so difficult, time-consuming, confusing, etc., they delegate
0:36:41 that responsibility to these boards.
0:36:42 Is that unfair?
0:36:43 Is that about right?
0:36:45 That’s exactly right.
0:36:50 It’s even worse than the delegation between legislature and the executive because all
0:36:53 the regulation by these boards is paid for by the licensing fee.
0:36:56 It’s actually kind of free to the legislature.
0:36:59 For example, art therapists are now licensed in Tennessee.
0:37:02 The fiscal report on it is going to come back zero, which they love.
0:37:08 My point is you kind of get what you pay for, but it is a huge capitulation to the profession.
0:37:13 You might call it a dereliction of duty.
0:37:17 As I said earlier, Allen’sworth is one of a relatively small number of academics who
0:37:21 have looked into occupational and professional licensing.
0:37:25 One of the most prominent is Morris Kleiner, an economist at the University of Minnesota,
0:37:29 whose work has inspired and influenced Allen’sworth.
0:37:33 Kleiner found that professional licensing adds a 10 percent premium to the price of
0:37:39 these services, representing an estimated $250 billion in annual cost to consumers.
0:37:44 The economists Peter Blair and Bobby Chung found that licensing reduces the number of
0:37:49 providers in a given profession by 17 to 27 percent.
0:37:54 And none of this is taking into account the immeasurable but massive costs of mishandled
0:37:59 allegations of sexual abuse, improper prescribing and so on.
0:38:02 After the break, how about some solutions?
0:38:03 I’m Stephen Dubner.
0:38:18 This is Freakonomics Radio, we’ll be right back.
0:38:23 Rebecca Allen’sworth’s main argument is that occupational licensing inflicts all sorts of
0:38:27 costs on the American workforce and on consumers.
0:38:31 She thinks that many occupations should not require licensing at all.
0:38:36 But how about medicine and law and the other professions where she thinks licensing does
0:38:37 make sense?
0:38:41 I asked her in those cases, how should it be done differently?
0:38:45 It should be bureaucratic, it should actually be governmental, it should be overseen better
0:38:50 by the legislature and it should be made up of deciders that are not on Monday working
0:38:55 at a licensing board and then on Tuesday through Friday working in that profession where they
0:38:58 stand to gain the most from this bad regulation.
0:39:04 You do talk about federal licensing or eliminating boards entirely in favor of state agencies.
0:39:06 What do you see as the trade-offs involved?
0:39:10 I want to see more governmental involvement in these boards.
0:39:12 There’s two ways you could do this.
0:39:15 One would be to have the board be advisory to a decision maker.
0:39:22 This is basically how we do burial services, which is people who can cremate bodies and
0:39:24 who operate graveyards.
0:39:29 There’s a bureaucrat who’s in charge of that program and you see much more reasonable regulation
0:39:35 there than you do for funeral directors, which has a board dominated by funeral directors.
0:39:39 You could vest the decision-making power in a full-time regulator or you could make the
0:39:44 boards more or less the way they are now but change their composition so that only a minority
0:39:47 of members of the board are from that profession.
0:39:51 If we did that, I’d like to see the other seats go not to randos, which is the way we
0:39:57 do it now, but rather people who have a stake in that profession from some other perspective,
0:40:03 you know, patient advocates or even I daresay a professor who has some academic understanding
0:40:04 of the problem.
0:40:07 But what about the upsides of licensing?
0:40:12 I know that you say that the priorities of licensing boards should be protecting the consumer
0:40:14 and you argue that they just don’t do a very good job of that.
0:40:20 On the other hand, if I hire, let’s say, an electrician, don’t I take a lot of comfort
0:40:25 in knowing that they’ve spent a fair amount of time on education and training and compliance?
0:40:30 That’s the argument for licensure and there’s a lot of work where we can’t reduce it to
0:40:31 a code, right?
0:40:35 We can’t say that this is how you diagnose cancer.
0:40:39 You can’t put it in a rule that you can easily apply and that’s where we need a license.
0:40:43 We say you have to go to school, you have to pass this test, you have to stay up to date
0:40:47 and we just hope that if you do all those things that you’ll develop the professional
0:40:51 judgment where you can make those difficult decisions.
0:40:53 Electrician, I don’t know, it’s kind of on the line.
0:40:57 We do have building codes, we do have rules about what goes where and I’m open to the
0:41:02 idea that those are sufficient, that there’s things you can and can’t do with electricity
0:41:07 and maybe you don’t have to have elaborate education and judgment or maybe you do and
0:41:11 I’m wrong about electricians but that’s the point, going to childcare.
0:41:16 At my kid’s daycare, the people working there were not licensed but of course they had background
0:41:21 checks and they were subject to rules like you put babies to sleep on their back.
0:41:24 When you feed them, they have to be sitting in a high chair to avoid asphyxiation.
0:41:29 Those are reasonable, good rules that we should make people follow when they’re taking care
0:41:35 of children that protect the public without that real expense of the license.
0:41:42 You mentioned so many cases of sexual abuse in the medical sphere as a reason for discipline.
0:41:47 It makes me wonder if a lot of these occupations, you are essentially putting yourself in a position
0:41:50 of trust or vulnerability with another person.
0:41:56 I wonder if a lot of the licensing is meant to just prevent or to diminish the possibility
0:42:02 of that kind of sexual abuse or bad power dynamics or am I being too generous toward
0:42:05 these licensing bodies?
0:42:08 Too generous, these arguments are made.
0:42:13 On the other hand, I have something in my basement, I believe some critter, so I called
0:42:15 a trapper, which apparently is a thing.
0:42:19 He came to my house and we were alone and he’s not licensed.
0:42:20 He was lovely.
0:42:23 That’s just one way of saying that there’s all kinds of strangers that I led into my
0:42:27 house to help me take care of stuff all the time.
0:42:28 Some subset of them are licensed.
0:42:32 Now that I know what boards are doing, I know that they’re not taking care to make sure that
0:42:37 that person isn’t scummy or scary, and then the big example is babysitters.
0:42:43 You could not imagine a more vulnerable job as somebody who’s going to wash your child.
0:42:48 It is a job for which we want to hire somebody we trust and we do, but it is not necessary
0:42:52 for the government to say you can or cannot be alone with a child.
0:42:55 It’s something that we handle through other means.
0:42:57 You’re in favor of babysitters not being licensed.
0:42:58 Of course.
0:42:59 It would never work.
0:43:04 It would raise prices so high for something that already is a crippling expense.
0:43:08 It would also exclude a big part of the labor force because it’d be hard to get a license
0:43:09 if you’re 13.
0:43:10 Yeah.
0:43:13 I don’t know what the cutoff would be for the babysitter license.
0:43:17 When you mention babysitters, it makes me wonder, what about having children becoming
0:43:18 a parent?
0:43:21 Does it strike you as odd that cutting hair requires a license in all that training, but
0:43:26 that becoming a parent, you just need a set of reproductive organs that are working.
0:43:27 There’s no barriers.
0:43:31 There’s no exhibit of competence or financial soundness or anything.
0:43:35 I’ve only thought about this in my personal life, not in my professional life.
0:43:41 I do often feel unqualified for the job that I have of raising my two kids.
0:43:43 Would a licensing procedure have helped?
0:43:46 Would a mandatory training session have helped?
0:43:51 If everyone of us is really honest, we know that we would not get a parenting license and
0:43:53 we would have it taken away if we did.
0:43:55 Screw ups are just too frequent.
0:44:00 Maybe the point here is like, there’s other ways to protect people from bad things happening
0:44:06 than licenses, but you can always make some kind of theoretical argument that this license
0:44:11 is going to help one patient or this license is going to help prevent this one problem
0:44:12 that happened once.
0:44:16 When there isn’t a good organized argument on the other side, which often there isn’t
0:44:21 in these state debates, they just figure it’s a win-win.
0:44:25 The public gets something, the profession gets something, and it costs the state nothing.
0:44:29 Where do you see this kind of professional licensing and regulation done well?
0:44:32 Not in any single state.
0:44:37 The most positive example is the way that medicine is regulated in the UK, where they
0:44:42 have more of a separation between the regulatory side and the disciplinary side.
0:44:46 Both bodies are not dominated by physicians.
0:44:48 There’s physician input, but it’s not dominated.
0:44:50 Other voices at the table.
0:44:54 They have something there called the medical professional tribunal service, and how does
0:44:55 that work?
0:44:59 Typically, when you get a panel to hear your case, you have three people, usually one of
0:45:01 them is a physician.
0:45:05 One’s a lawyer, and then the third, the statute doesn’t say what they have to be doing, but
0:45:13 all of them are paid a salary to actually do this regulating work and have training,
0:45:17 guidelines, and expertise that American boards don’t have.
0:45:23 There’s no plea bargaining, so everything is all out in the open, and there’s more oversight
0:45:26 within the legislative body.
0:45:27 That sounds promising.
0:45:29 It also sounds like it could take forever.
0:45:36 I did, with a colleague, look at about five years worth of cases from the UK and Tennessee,
0:45:39 and I don’t remember thinking that the UK ones go any slower.
0:45:41 The American system is quite slow.
0:45:42 What about outcomes?
0:45:49 Is that system more likely to produce effective monitoring of professionals, including discipline?
0:45:55 Yeah. We did a head-to-head comparison between doctors in America and in the UK engaged in
0:46:02 inappropriate sex with patients and overprescribing, and we found a really big difference in how
0:46:07 many were struck from the registry, which is the term in the UK for losing your license
0:46:08 than in Tennessee.
0:46:10 It would seem that, yes, the outcomes are different.
0:46:15 However, remember, they have socialized medicine, they have the NHS, it’s really apples and
0:46:17 oranges.
0:46:22 We can’t say confidently that the process is what leads to this different outcome, but
0:46:25 we see a better process and we see more reasonable outcomes.
0:46:28 You can connect those dots.
0:46:35 Telemedicine spiked during COVID, but there was also a state-based medical licensing issue
0:46:42 there, which is you could only treat a patient, even electronically, in your own state.
0:46:46 This is something we talked about recently on the show with Zika Manual.
0:46:51 He said we just need to get to the next level, to national licensure, but states are jealous
0:46:52 of their turf.
0:46:57 Do you see that as a viable solution in a case like that, national licensure?
0:46:58 In theory, yes, of course.
0:47:02 There’s not materially different needs of a patient in one state versus another state.
0:47:08 It would make moving between states and not just electronically but physically much easier.
0:47:13 It would also create a single thing for us to study so that we could understand how this
0:47:16 system works rather than doing it state by state.
0:47:18 In practice, there’s two problems with it.
0:47:22 One, if we did that, it would be a race to the bottom.
0:47:27 We would get the requirements of the most onerous state because, as you said, no state is going
0:47:29 to give up what they’ve got.
0:47:33 There’s a physician’s compact, which is like an agreement among states to recognize each
0:47:35 other’s licenses.
0:47:41 The terms of that compact are essentially the most onerous state.
0:47:44 I worry if we did a national license that it would be particularly onerous.
0:47:49 The other reason why it won’t happen is because of the AMA or the ABA or whatever profession
0:47:55 we’re talking about is going to fight tooth and nail to maintain the state by state system.
0:47:56 Because why?
0:47:57 What’s in it for them?
0:48:01 It’s easier for them to capture these smaller boards.
0:48:07 I think also the full ability to practice between states increases competition.
0:48:12 If you can just phone a doctor in Ohio from Tennessee, that’s going to create a lot more
0:48:15 competition for physicians in Tennessee.
0:48:17 What’s wrong with competition?
0:48:18 Economists love competition.
0:48:21 Some governments proclaim to love competition.
0:48:26 It creates better quality and cost for most consumers.
0:48:29 In what way am I totally wrong when I say that?
0:48:32 Well, I’m an antitrust professor, so I also love competition.
0:48:35 But competition doesn’t solve all problems.
0:48:39 That’s where I think the licensing board really has a role to play and regulation has a role
0:48:41 to play in many professions.
0:48:45 It’s not all about just what the customer wants when it comes to the professions.
0:48:47 It’s also not clear what they’re getting.
0:48:50 There’s an information asymmetry for which a license can really help.
0:48:56 The other point is competition is not going to solve problems like opioid over prescribing.
0:48:59 That’s a case of giving the patient what they want.
0:49:04 How do you think your argument intersects with the new Trump administration?
0:49:10 Especially Trump himself, but mostly Elon Musk, vowed to shrink the federal government.
0:49:14 Is it possible that a so-called department of government efficiency will start pushing
0:49:17 things in the direction that you would like on the state level?
0:49:22 Well, you spent six years writing a book about this example of governmental inefficiency.
0:49:23 You get excited.
0:49:26 It’s like, “Finally, my time is coming.”
0:49:31 And it turns out that what’s underneath that is just more self-dealing.
0:49:36 It’s almost the opposite message that I’m trying to give, which is that it’s the bureaucrats
0:49:37 who know what they’re doing.
0:49:41 Yes, we need to cut through the red tape, but it’s the self-dealers and the members of the
0:49:44 profession that have created that red tape.
0:49:50 So you’re saying that the Musk-Trump version of efficiency just means unregulated versus
0:49:51 capable regulation?
0:49:57 Maybe or maybe it means unregulated when it suits Musk and regulated when it suits Musk.
0:49:59 That’s what I saw at the boards.
0:50:02 When you give somebody power over their own regulation, they’re going to be hands-off
0:50:05 when it suits them and they’re going to be hands-on when it suits them.
0:50:08 So I’m all for cutting red tape.
0:50:10 The question is, how do we cut it?
0:50:16 And I think we cannot trust people who have their own self-interest.
0:50:20 So my profession, journalism, does not require a license?
0:50:21 Oh, yes.
0:50:23 This is one of my favorite examples.
0:50:26 The legal case, obviously, is slam dunk, right?
0:50:30 You could not have a license for a journalist because of the First Amendment.
0:50:33 Maybe there are some people who are calling themselves journalists out there that we don’t
0:50:34 want doing it.
0:50:35 Oh, there are.
0:50:36 I can vouch for that.
0:50:42 At the same time, there’s systems for figuring out who are the most qualified journalists.
0:50:49 There’s journalism school, obviously who you’re employed by is a big signal of how qualified
0:50:50 you are.
0:50:54 I’m not here to defend the marketplace of ideas that we have right now in a full-throated
0:50:55 way.
0:51:01 But it’s an example of a profession that is prestigious, important, and has its own kind
0:51:06 of regulatory or at least sorting mechanism without licensing.
0:51:10 I do not think we want the government coming in and saying, “This is journalism and this
0:51:11 is not.”
0:51:14 By the way, I myself have benefited from this.
0:51:18 I’m not a journalist, but I acted like a journalist.
0:51:26 Okay, so for all the reporting you did, all the board meetings you sat in on, the conversations
0:51:32 you had, and the legal scholarship you added on top of all that, and then writing the book
0:51:37 itself, do you think your work will have any significant effect?
0:51:39 I do.
0:51:44 There’s state legislation that can maybe not solve this problem, but that can help.
0:51:46 I think that there’s some interest in that.
0:51:51 There’s a lot of headwinds from the professions, obviously, but I’m hopeful that maybe something
0:51:52 can shake loose.
0:51:56 At the very least, I think people should know what they’re up against when they’re trying
0:51:59 to get a license or when they feel locked out of a profession, or just when they’re
0:52:04 a consumer of professional services, assuming that the license is on the wall, then this
0:52:05 is fine.
0:52:10 I think that it’ll have an impact, hopefully, on everyday people who maybe think about their
0:52:15 licensed professionals a little bit differently.
0:52:19 I’d like to thank Rebecca Allensworth for helping me think about licensed professionals
0:52:21 a little bit differently.
0:52:24 This is a subject I’ve been interested in for a long time, but I was always looking
0:52:28 for the right opportunity, the right person, really, to explain it.
0:52:32 I appreciate how much legwork and brainwork Allensworth put into it.
0:52:35 Again, her book is called The Licensing Racket.
0:52:38 I’d love to hear your thoughts on this topic.
0:52:42 Our email is radio@freakonomics.com.
0:52:45 Coming up next time on the show…
0:52:53 Rats do something to traumatize you, and I hate rats.
0:52:59 The brown rat, also known as ratus nervegicus, is one of the most reviled animals in the
0:53:00 world.
0:53:01 Why?
0:53:08 Rats are known for their ability to exploit and thrive where humans are densest.
0:53:12 It doesn’t help that they supposedly killed off half of Europe in the Black Death, so
0:53:17 most people respond to rats with disgust, fear, even anger.
0:53:22 But not everyone, they’re, in some sense, our natural city partner.
0:53:24 I certainly have a reverence for them.
0:53:26 They’re sweet and they’re smart.
0:53:29 They make great pets, honestly.
0:53:31 And that thing about the Black Death?
0:53:34 That’s the one that most people think are the right one.
0:53:35 They are wrong.
0:53:37 Very clearly, they are wrong.
0:53:41 And just wait until you hear the backstory of the film, Ratatouille.
0:53:45 Can I just say, Ratatouille is an idea, as a story, it’s an allegory.
0:53:51 We have made a three-part series that we’re thinking about calling “Sympathy for the Rat.”
0:53:53 That starts next time on the show.
0:53:55 Until then, take care of yourself.
0:53:57 And if you can, someone else too.
0:54:00 Freakonomics Radio is produced by Stitcher and Renbud Radio.
0:54:03 You can find our entire archive on any podcast app.
0:54:08 It’s also at Freakonomics.com, where we publish transcripts and show notes.
0:54:11 This episode was produced by Theo Jacobs.
0:54:15 The Freakonomics Radio network staff also includes Alina Coleman, Augusta Chapman, Dalvin Abouaji,
0:54:20 Eleanor Osborn, Ellen Frankman, Elsa Hernandez, Gabriel Roth, Greg Rippin, Jasmine Klinger,
0:54:25 Jeremy Johnston, John Schnarrs, Morgan Levy, Neil Coruth, Sarah Lilly, and Zach Lipinski.
0:54:31 Our theme song is “Mr. Fortune” by the Hitchhikers, and our composer is Luis Guerra.
0:54:34 As always, thank you for listening.
0:54:35 Say the name of your book.
0:54:37 The Licensing Racket?
0:54:38 How we regulate…
0:54:39 Sorry, okay.
0:54:40 It’s a long subtitle.
0:54:41 I’m gonna have to do that one again.
0:54:42 Okay.
0:54:43 The Licensing Racket?
0:54:44 All right.
0:54:45 One more time.
0:54:46 The Licensing Racket?
0:54:49 How we decide who is allowed to work and how it goes wrong.
0:54:51 I’ve got it as why it goes wrong.
0:54:52 I know.
0:54:53 I know.
0:54:54 Yep.
0:54:55 Take four.
0:54:58 You would think that I would come here prepared to say the name of my book.
0:55:11 The Freakonomics Radio Network, the hidden side of everything.
0:55:13 (upbeat music)
0:55:16 you
0:00:11 in Los Angeles on February 13th.
0:00:17 I will be joined on stage by Ari Emanuel, the CEO of Endeavor, and RJ Cutler, the documentary
0:00:23 filmmaker who made the recent Martha Stewart doc, as well as films on Billy Eilish, Elton
0:00:27 John, and coming soon, the Dodgers Yankees World Series.
0:00:30 I think it’s going to be an amazing night, at least on paper it is, you never know what
0:00:34 happens with a live show, and that’s part of the fun.
0:00:35 So I hope you’ll join us.
0:00:41 Tickets at Freakonomics.com/LiveShows, one word, get them fast, only a few left.
0:00:46 February 13th in LA, produced in partnership with LAist and SiriusXM.
0:00:54 I’ll see you there.
0:00:58 What does a hairdresser have in common with a lawyer?
0:01:06 How about an interior designer, and a doctor, an auctioneer, and a funeral director?
0:01:10 These are not jokes, I’m sorry, I wish they were.
0:01:14 What these jobs all have in common is that they require a professional license, which
0:01:19 is administered by a licensing board that is often made up of other doctors and funeral
0:01:22 directors and hairdressers.
0:01:26 This may not be something you’ve ever thought about, and I wouldn’t blame you.
0:01:30 It’s one of those things a friend of mine calls a meagotopic, meagot standing for it,
0:01:32 my eyes glaze over.
0:01:39 But when you think about how our economy works, these labor licensing rules are pretty important.
0:01:44 It is the most important regulatory institution we have in labor.
0:01:48 Rebecca Allensworth is a law professor at Vanderbilt University, and she’s written a
0:01:51 book about professional licensing.
0:01:56 The Americans like to think of our economy as open and dynamic.
0:02:02 Allensworth shows that in many ways it’s not, and that these licensing boards help too many
0:02:07 bad actors stay in their professions and keep too many good ones out.
0:02:11 And that’s why she called her book The Licensing Racket.
0:02:16 Professional licensing is too onerous for certain professions, and it just makes the barriers
0:02:22 too high, it keeps people out, and the investment in what you’re getting for that regulation
0:02:24 is not worth it.
0:02:30 And then, for the professions that are left, medicine, nursing, law, now we need something
0:02:31 like a licensing board.
0:02:34 Only what we have is terrible.
0:02:37 By the way, a working title for the book was “Board to Death.”
0:02:38 [laughter]
0:02:39 BOARD, presumably.
0:02:40 Yeah.
0:02:42 So, it had three problems.
0:02:44 One, it was dorky word play.
0:02:49 Two, there was this problem that maybe I was over-claiming by talking about death in the
0:02:51 title of a book about licensing.
0:02:54 And then the other one, of course, being that it sounded like the book was going to be boring.
0:03:00 But the over-claiming point, you know, I do think that it’s dangerous, literally, in
0:03:05 the sense that there’s a lot of doctors and lawyers out there who are just plain dangerous.
0:03:12 And we give them a lot of trust and a lot of power as professionals.
0:03:16 And 20 percent of the American workforce is subject to professional licensing.
0:03:21 The system is sanctioned by state governments across the country, and it has been expanding
0:03:22 like crazy.
0:03:28 Today, in an episode of the Freakonomics Radio Book Club, how much licensing is too much?
0:03:32 And where has this system gone especially wrong?
0:03:39 80 percent have a history of major discipline, often for over-prescribing, for malpractice,
0:03:41 for sex with patients.
0:03:43 The racket is real.
0:04:00 The solution, that’s the hard part, but we’ll get into all that starting now.
0:04:06 This is Freakonomics Radio, the podcast that explores the hidden side of everything with
0:04:17 your host, Stephen Dubner.
0:04:22 At Vanderbilt Law School, Rebecca Allensworth teaches contracts and antitrust law.
0:04:27 Those are pretty standard law school topics, but when she was starting out, she got obsessed
0:04:33 with a topic that very few legal scholars, really few scholars from any discipline, have
0:04:34 studied closely.
0:04:36 Professional licensing boards.
0:04:39 Let’s start by defining some terms.
0:04:44 A licensing board is a regulatory body that’s ostensibly part of the state that decides
0:04:49 who can enter a profession, what qualifications they’re supposed to have, and then also whether
0:04:54 somebody has done something that deserves a revocation of their license or a restriction
0:04:55 on their license.
0:05:01 It’s created by a state statute, but these boards are mostly made up of members of the
0:05:02 profession.
0:05:07 People who are working full-time as doctors, respiratory therapists, hairdressers, take
0:05:12 a couple days off a year to serve on this board and moonlight as their own regulators.
0:05:13 Okay.
0:05:15 So that’s what a licensing board is.
0:05:16 What is it not?
0:05:19 Well, it’s not really a governmental agency.
0:05:24 I don’t think that it’s made up of people who have the public good in mind.
0:05:30 They may think they do, but it really is more like a professional association, a group of
0:05:35 like-minded professionals who are looking out for the interests of the profession.
0:05:39 Early on in her research, Allensworth did what you would expect a legal scholar to do.
0:05:43 She read everything she could find about professional licensing.
0:05:47 She sifted through legal databases to try to understand first the broad strokes of the
0:05:50 system and then the nuances.
0:05:55 She checked out the economics literature on licensing, and she worked all of this into
0:05:58 a critique that she was starting to build.
0:06:00 Before long, her work was being cited by the Supreme Court.
0:06:05 She was invited to speak in Congress and in the Obama White House.
0:06:09 At this point, her critique was legalistic and theoretical.
0:06:14 She’d never actually attended a meeting of a licensing board, but when she did that,
0:06:16 the obsession deepened.
0:06:18 I went to the first licensing board and I was so shocked.
0:06:22 I have a friend who’s a journalist, and I was like, “Someone should write an investigative
0:06:24 journalism piece about this.”
0:06:29 I kind of meant her, and then as I was saying it out loud, I was like, “Yes, someone.
0:06:31 Maybe like me.”
0:06:35 Allensworth wound up embedding herself for four years in the licensing system of Tennessee
0:06:37 where she lives.
0:06:39 She attended many board meetings.
0:06:44 She interviewed more than 180 people covering 28 professions.
0:06:48 She started writing some journalism on the subject, and now she has published her book,
0:06:54 The Licensing Racket, How We Decide Who Is Allowed to Work and Why It Goes Wrong.
0:06:58 The minute you start reading, you can see why she wanted to call the book “Board to
0:06:59 Death.”
0:07:01 It’s so time-consuming.
0:07:02 Sitting there, you don’t know what you’re going to find.
0:07:04 You have to sift through all of it.
0:07:05 You have to make these relationships.
0:07:09 You have to spend enough hours in that room that the people on the board know who you
0:07:10 are.
0:07:14 They know you’re going to put in the time to understand what they do, and then you have
0:07:17 to say yes to everything.
0:07:19 You have to talk to everyone.
0:07:23 And that’s how Rebecca Allensworth came to understand how the licensing system works.
0:07:27 As she describes it, the path to licensing usually starts small.
0:07:32 Members of a profession, often backed by a professional association, will approach a
0:07:36 state legislature with a proposal for licensure.
0:07:42 These proposals, known as practice acts, set the scope and entry requirements and ethics
0:07:44 rules for a given profession.
0:07:50 Once a profession secures its initial licensing law, it gains control of the regulatory board
0:07:51 that oversees it.
0:07:59 Today, there are around 300 licensed professions in the U.S. regulated by around 2,000 licensing
0:08:00 boards across the country.
0:08:03 How did all this get started?
0:08:06 Some of the first licensees were physicians.
0:08:11 Licensing started out with medicine in the late 19th century, and it was limited to the
0:08:14 learned professions so-called.
0:08:19 Until about the ’70s, since then it’s just been a straight line up the number of licensed
0:08:23 professions and the people covered by professional licenses.
0:08:28 This idea of belonging and meaning and prestige plays a big role because people started to
0:08:31 look around and say, “Our work matters.
0:08:34 Our work is just as important as this licensed profession.
0:08:38 Therefore, we need to make sure that we get a licensing law for ourselves.”
0:08:42 I’ll give you an example, right about the time that people were starting to confront
0:08:48 the idea of alcoholism in the ’70s and ’80s, there became a shortage of therapists that
0:08:53 could help you overcome your addiction, and so AA became a big thing.
0:08:58 Then these AA group leaders wanted to have a little bit more training and professionalism.
0:09:02 They wanted to become therapists themselves, and so there was a new profession called alcohol
0:09:04 and drug abuse counselors.
0:09:07 The idea was that it was going to be a relatively easy license to get, and it was going to increase
0:09:10 access to care.
0:09:14 Over the years, this profession looks around and says, “What we do is just as important
0:09:15 as any other therapist.
0:09:17 In some ways, it’s even more important.
0:09:18 Overdose risk is really high.
0:09:20 This is life or death.
0:09:22 We need the same level of licensure.”
0:09:28 It just got ratcheted up to now to where it takes more hours of practice to be an alcohol
0:09:34 and drug abuse counselor, like internship type hours, than it does to become a physician.
0:09:35 Okay.
0:09:39 All the licensed professions you write about have boards, and earlier you said that the
0:09:41 board situation is terrible.
0:09:43 Why is it terrible?
0:09:48 Because of self-regulation because it’s dominated by members of the profession that may want
0:09:53 to look out for the public, but are much more seasoned in looking out for the profession.
0:09:57 The policing and disciplinary functions are just not performed well.
0:10:00 Yes, but also the red tape.
0:10:04 These boards are responsible not only for disciplining and policing their professions,
0:10:08 but also deciding how high are those barriers to entry, who’s going to get over it, whose
0:10:12 criminal record is too bad, and they take it too far.
0:10:16 And then in the disciplinary side, they abandon public protection.
0:10:19 Here’s a sentence from the book “Jacket” that I particularly love.
0:10:24 “When Rebecca Allensworth began attending board meetings, she discovered a thicket of
0:10:27 self-dealing and ineptitude.”
0:10:29 The self-dealing we can get to later.
0:10:31 Let me hear a favorite example of ineptitude.
0:10:37 The failure of medical boards to be able to tell when somebody is lying to them may be
0:10:40 one of the most inept things I had to watch.
0:10:44 So it’s really interesting reading about all the reasons for that and all the ways in which
0:10:48 a licensing board, even if well-intentioned, is underpowered.
0:10:52 That would seem to be most prominent in medical boards, right?
0:10:54 It’s also a problem in law.
0:10:57 The argument is you have to know the profession, you have to know everything about it to regulate
0:10:59 it, and that’s the expertise they’re looking for.
0:11:03 But then they miss what I would say is even more important expertise, which is the regulatory
0:11:05 expertise.
0:11:10 You write that licensing boards, quote, “combine the most dangerous features of a professional
0:11:14 association,” and I have to say, I’d never really thought about professional associations
0:11:15 as dangerous before.
0:11:20 And the government agency, boards have all the interests and incentives of a private
0:11:24 club and the police power of the state to back them up.
0:11:27 When I first read that, I was sure that you were overstating your case.
0:11:30 By the time I finished your book, I was pretty certain that you weren’t.
0:11:38 But if I read that out of context, I might take you for some kind of deep state conspiracist.
0:11:43 Maybe you are, but can you give me a sense of why you’ve got such a harsh indictment
0:11:44 in that sentence?
0:11:48 First of all, I actually love the deep state, and that’s what I want to bring to licensing.
0:11:51 I want the bureaucrats doing this.
0:11:56 The problem with the way licensing is done is that full-time employees of the state are
0:11:57 given no power.
0:12:02 A lot of the forehead slapping that I saw when I watched these boards regulate was done
0:12:06 by lawyers and staff of the board who knew better than the members of the board.
0:12:12 And as far as it being dangerous, what I mean there is nobody’s watching, nobody’s sitting
0:12:16 in on these board meetings, nobody really knows what’s going on, and everyone assumes,
0:12:20 “Hey, my doctor has a license, my real estate agent has a license.
0:12:22 There must be something going on there.”
0:12:23 There’s more than that.
0:12:27 You may have a license, but there’s a lot that can be buried within a valid license
0:12:30 that is still not very good for consumers.
0:12:31 Exactly.
0:12:36 The very first board meeting I went to was about a doctor who had traded drugs for sex
0:12:38 with 11 of his patients.
0:12:42 And most of that hearing, which was the hearing in which he got his license back, was about
0:12:49 how they could impose this chaperone requirement, but not alert the patients, not tip them off
0:12:52 to the idea that there was anything wrong.
0:12:58 So there’s a lot of cover-up power that a license can give, which makes it really dangerous.
0:13:01 And in that case, who were the members of the board?
0:13:06 Did they have any relationship with the person whose license was being considered?
0:13:10 Well, no, and that’s part of why I resist the word “corruption” when I talk about
0:13:11 this problem.
0:13:16 None of the members of the board knew him personally, had any connection to him, had
0:13:19 any stake, really, in him getting his license back.
0:13:26 On the other hand, most of them were physicians, and most of them saw this person as having
0:13:27 started out somewhat like them.
0:13:30 Sure, he definitely made some very different choices.
0:13:32 He lost his way.
0:13:38 He had three different kinds of addiction, and that is something that especially physicians
0:13:45 are likely to see as having a lot of explanatory power, as capable of being rehabilitated.
0:13:47 And it’s all about second chances.
0:13:53 You cite many examples of professionals who face discipline from their licensing board,
0:13:57 but then they encounter, as you put it, a system full of second, third, and even fifth
0:13:58 chances.
0:14:05 And you write that a lot of these regulatory failures come from the most legitimate professions,
0:14:07 you call them, like medicine.
0:14:09 Talk about the Michael Lopalia story.
0:14:12 His was a story of many, many chances.
0:14:17 Lopalia was using his license to deal drugs and to make money.
0:14:21 He got in the crosshairs of the licensing board over that first incident.
0:14:24 They came to his house and they found a whole bunch of drugs that he wasn’t supposed to
0:14:28 have, some for fun, some maybe he’s selling.
0:14:29 So they put him on probation.
0:14:34 But then while he was on probation, because he had lost his DEA number, which allows him
0:14:42 to prescribe these more high dose opioids, he starts trading in Suboxone, which Suboxone,
0:14:46 even though it’s used to treat addiction, can also be abused and also has a large street
0:14:48 value.
0:14:54 So he does this, he gets caught for it while he’s already on probation with the board.
0:14:55 And then he gets another chance.
0:14:59 He gets his license back, the restrictions that they put him on after that hearing were
0:15:03 basically the same as what they had on the first one.
0:15:04 What does he do after that?
0:15:11 Well, now his prescribing is even more limited, in part because he’s facing a federal indictment
0:15:13 for this same conduct.
0:15:16 So he goes door to door doing COVID tests.
0:15:17 This is high COVID, right?
0:15:20 So he finds people who want a second opinion.
0:15:25 They want a doctor’s note that says, “I don’t have COVID” even after a positive test.
0:15:27 He does that for $50 a piece.
0:15:33 This is just somebody who has used their license not to treat patients, not in the best interest
0:15:35 of patients, but really for their own gain.
0:15:38 His license was ultimately revoked, yes?
0:15:39 That’s right.
0:15:45 So after all this, and after he was sentenced in his federal case to 18 months in prison,
0:15:50 they did revoke his license in an order that gives him another path back to licensure.
0:15:54 Would the revocation have happened if not for the federal criminal charge?
0:15:58 I am sure that it would not have.
0:16:02 And even with the federal criminal charge, it wouldn’t have happened if his story hadn’t
0:16:04 become so public.
0:16:06 And how did the story become so public?
0:16:10 I wrote about it in the New York Review of Books, and it also was featured on an episode
0:16:12 of This American Life.
0:16:16 I think there was a lot of pressure on the board to pull his license at that time.
0:16:22 In a case like that, how much evidence does a board have or seek out?
0:16:28 They’re essentially acting as a court, but in an actual court, the judge and the prosecutors
0:16:33 have a lot more opportunity, it seems, to gather evidence than these licensing boards
0:16:38 do, or maybe not more opportunity, but maybe more incentive, I hate to say.
0:16:40 That’s the big word there, incentive.
0:16:45 I don’t think there’s much legally constraining the evidence that a board could gather and
0:16:46 consider.
0:16:51 The real constraint is resources and incentives.
0:16:56 Resources meaning this is typically a volunteer board where they don’t have all these investigators
0:17:00 going out to look through all these files and talk to witnesses and so on, yes?
0:17:04 Well, they do have investigators, and these would be, in most cases, full-time employees
0:17:06 of the state.
0:17:12 But their salaries are paid through the board, and that’s all through licensing fees.
0:17:16 There’s this conflict of interest where the doctors on the board want to keep fees low
0:17:18 for the rest of the doctors.
0:17:22 Their revealed preferences are that they’re happy with minimalist regulation.
0:17:24 They don’t feel like there’s a real problem here.
0:17:30 It becomes very low information trials, and in some cases, not very adversarial.
0:17:36 What happens when misconduct is bad enough that the criminal justice system gets involved?
0:17:38 What do the licensing boards do then?
0:17:40 Do they feel chastised?
0:17:44 Are they themselves ever subject to penalty?
0:17:46 They’re not subject to penalty.
0:17:52 What I found is that the presence of some sort of criminal proceeding almost froze the
0:17:54 board in its tracks.
0:17:57 I was watching the medical board and the other prescribing boards in Tennessee because doctors
0:17:59 aren’t the only ones that can prescribe.
0:18:01 Who else can prescribe in Tennessee?
0:18:06 Nurse practitioners, physician assistants, some dentists.
0:18:09 So in this one day, there was this big, splashy arrest.
0:18:15 I think they arrested 30 Tennessee professionals for dealing opioids.
0:18:19 This is the federal government, and most of them didn’t have board discipline.
0:18:23 I had been hearing all along that the real problem with discipline is that they just
0:18:24 don’t have the information.
0:18:28 They don’t know who’s screwing up, and they don’t have resources to figure it out.
0:18:33 Well here we have a sudden, very public set of information.
0:18:37 These 30 providers might be ones that you’re going to want to at the very least temporarily
0:18:41 suspend their licenses, which you can do without much process.
0:18:45 And just meeting after meeting, nothing’s happening.
0:18:46 Nothing’s happening.
0:18:47 Meaning they were not called up to the board?
0:18:49 They were not called up.
0:18:50 It was like it never happened.
0:18:52 It was just silence.
0:18:57 So you’re saying if I’m a doctor and I’m selling opioids out of my car trunk and I get charged
0:19:02 and whether I’m convicted or not, you’re saying that then my medical licensing board,
0:19:06 which you would suspect would call me in for discipline or a hearing or something.
0:19:08 They just don’t even call them.
0:19:11 They do eventually, but it didn’t happen for a long time.
0:19:16 I asked about this, and it was like, well, we can’t really proceed against their license
0:19:18 because there’s this Fifth Amendment problem.
0:19:23 If they say anything in their licensing proceeding that’s self-incriminatory, that’ll go in their
0:19:24 criminal thing.
0:19:25 So that’s one problem.
0:19:29 Now, that doesn’t answer the question of why you don’t summarily suspend it on an emergency
0:19:30 basis.
0:19:31 You can do that without their testimony.
0:19:36 And then they’re saying, well, also it’s just an accusation.
0:19:39 And we’re about to have a whole lot more information.
0:19:44 Like there’ll be either a trial or a plea, and then we can act.
0:19:49 We’re talking now a year or two before these cases get resolved.
0:19:51 During which time they’re still seeing patients?
0:19:57 Yes, although the criminal system knows all of this and doesn’t want that to happen.
0:20:01 So the criminal judge is in the position of basically restricting their license, which
0:20:04 is what the board was supposed to be doing.
0:20:11 So now you have a totally inexpert criminal judge or federal judge saying, you can prescribe
0:20:14 this, you can’t prescribe that, which is goofy.
0:20:20 And then in the end, there was a lot more forgiveness even after the conviction than
0:20:21 I expected.
0:20:24 The idea there was, well, let’s not pile on.
0:20:26 Obviously, this doctor’s been through a lot.
0:20:30 They have a criminal conviction, a huge ding on their record.
0:20:36 And they also see how devastating a federal criminal conviction can be on your career.
0:20:37 They don’t want that for themselves.
0:20:40 They think this is punishment enough.
0:20:44 And then there’s this heartbreaking part of it that’s like, and they’ll never practice
0:20:46 on you and me anyway.
0:20:47 What does that mean?
0:20:48 Spell that out.
0:20:54 For board members, I’m giving them the most credit possible without fully realizing they’re
0:20:56 saying they’re not going to be able to take private insurance.
0:20:59 They’re not going to be able to work in the highest end hospitals.
0:21:04 They’re going to be doing things like working in prisons, working for the VA.
0:21:09 And that’s not really the set of patients that I’m super worried about protecting.
0:21:11 Those patients are lucky to get care.
0:21:14 You write about what you call these fallen professionals.
0:21:19 Louisiana is one state you looked at to see what share of physicians working in prisons
0:21:21 have a history of board discipline.
0:21:23 What are the numbers there?
0:21:24 80%.
0:21:25 80%.
0:21:31 Have a history of major discipline, often for overprescribing, for malpractice, for sex
0:21:39 with patients, the lower down in the market you go, the rate of discipline goes up.
0:21:44 In the legal profession, which is your profession, should I assume as with medicine that the
0:21:52 lower you are on the income chain, the more likely you are to have a lawyer who has been
0:21:54 disciplined and you may not even know about it?
0:21:56 We really need more data here.
0:22:00 I would love if my book could inspire more kind of empirical work here.
0:22:06 But what I do know is that as you receive discipline from your bar association, your
0:22:10 likelihood of working at a firm goes down.
0:22:16 And your likelihood of working for yourself and in particular in working in immigration,
0:22:22 injury law, and indigent defense goes up as you receive discipline from your bar.
0:22:26 Those are the three categories of clients that are particularly vulnerable.
0:22:32 You explain in the book how complaints against professional licensees can come from a variety
0:22:33 of sources.
0:22:34 They might come from law enforcement.
0:22:37 They might come from the licensing board’s own investigators.
0:22:42 But one thing that surprised me is that boards rarely hear complaints brought by consumers
0:22:43 or customers.
0:22:44 Why is that?
0:22:51 Why do licensing boards rarely hear directly from the patients of doctors, the clients
0:22:56 of lawyers, I don’t know, maybe someone whose haircut went terribly wrong?
0:23:00 The whole point of a license on a licensing board is the idea that consumers don’t really
0:23:02 know what they’re getting.
0:23:04 Let’s take restaurant food.
0:23:08 Maybe it’s contaminated and not handled properly and you might get sick.
0:23:10 And so we have some regulation for that.
0:23:14 But as far as like what’s tasty, what’s hot, what arrives on time, consumers know what
0:23:16 they’re getting.
0:23:18 Licensing exists because we don’t know what we’re getting from our professionals.
0:23:21 We don’t know what the right legal advice is.
0:23:22 We don’t know if we have cancer.
0:23:23 That’s why we go to the doctor.
0:23:29 But then when it comes to complaints, we rely on customers complaining about their professionals.
0:23:35 And then there’s this other problem, which is that sometimes the bad conduct is stuff
0:23:36 that the customers want.
0:23:38 Like selling opioids.
0:23:43 Selling opioids or getting your lawyer to help you commit a crime.
0:23:48 So it’s a very bad way of figuring out where is the misconduct.
0:23:53 And then the licensing boards figure, well, consumers don’t know what’s good practice,
0:23:55 what’s good medicine, what’s good law.
0:24:00 I think the place where you see this the most is in allegations about sex abuse.
0:24:04 All professionals are very concerned, somebody could make up a story.
0:24:08 And the boards do act as kind of a gatekeeper for complaints like that.
0:24:13 None of this should stop a regulator from actually investigating and seeing whether it’s true.
0:24:18 Or if you get two or three very similar complaints, you might think that that’s a little bit easier
0:24:19 to believe.
0:24:26 Can anyone look up licensing board disciplinary action or investigative action on their lawyer,
0:24:28 doctor, et cetera, et cetera?
0:24:32 In Tennessee, you can look them up and you can see if they’ve had discipline.
0:24:33 You can’t do it nationally.
0:24:37 So somebody could have discipline in another state and you don’t know it.
0:24:41 There’s something called the National Practitioner Data Bank that keeps information about board
0:24:43 actions and malpractice.
0:24:45 That can’t be accessed by the public.
0:24:49 So it’s pretty opaque and it’s especially opaque for lawyers.
0:24:53 Lawyers really don’t want clients finding out about their business.
0:24:56 And how do you feel about that as a lawyer yourself?
0:24:59 As a non-practicing lawyer, I disapprove.
0:25:03 Maybe if I asked my husband, he would say no, no.
0:25:04 Is he a practicing lawyer?
0:25:05 He is.
0:25:06 He is.
0:25:10 He has shared with me the professional perspective sometimes of like, well, you know, a lot of
0:25:14 people complain about a lot of BS and, you know, I don’t know if I want people knowing
0:25:17 about every complaint against me.
0:25:18 That’s an understandable perspective.
0:25:24 If I just don’t know that we want to have that perspective, have the final say in regulation.
0:25:29 Remember, Rebecca Allensworth believes that the licensing racket, as she calls it, has
0:25:31 two main flaws.
0:25:35 It protects bad actors, which is what we’ve been hearing about so far, but also that it
0:25:40 keeps too many good people out of the occupations they would like to join.
0:25:41 So what does this do?
0:25:44 It kind of gives a leg up to people who already have a leg up in life.
0:25:46 That’s coming up after the break.
0:25:47 I’m Stephen Dubner.
0:25:48 This is Free Economics Radio.
0:26:00 We’ll be right back.
0:26:05 The legal scholar Rebecca Allensworth spent years investigating the power, reach, and
0:26:07 shortcomings of professional licensing boards.
0:26:11 Here’s how she puts it in her book, The Licensing Racket.
0:26:16 When it came to barriers to entry and restrictions on practice, boards went too far.
0:26:21 And it came to disciplining dangerous providers that didn’t go nearly far enough.
0:26:25 Before the break, Allensworth told us about the disciplining problem.
0:26:30 But she argues that the lockout effect of professional licensing is also damaging.
0:26:35 We license way too many professions, so we need to just get rid of licensing for many
0:26:36 professions.
0:26:41 When you look across the labor force in the US, you say that roughly one in five workers
0:26:44 in America do a job that requires a license.
0:26:48 What do you think is the appropriate share of workers?
0:26:50 Should it be a third of that?
0:26:51 Should it be a tenth of that?
0:26:54 I would say a third to a half.
0:26:56 The beauty professions are quite big.
0:27:02 A lot of the housing and trade ones, plumbing and electricians, I think are bigger.
0:27:07 The medical and legal professions, how big are they as a part of the whole workforce?
0:27:08 Really big.
0:27:13 About two thirds of the 20% are in the healthcare professions.
0:27:17 Nurses are totally dwarfed by nurses.
0:27:22 And I think that there’s a significant number of professionals that have to have some sort
0:27:26 of license as a nurse that maybe don’t need to be licensed.
0:27:27 So you’ve got Allens.
0:27:29 I think they should be licensed.
0:27:31 Nurse practitioners, they should be licensed.
0:27:36 But licensed practical nurses is a lot of professions within professions that we lump
0:27:37 in there.
0:27:39 They’d have to change their name, though, wouldn’t they?
0:27:41 They really would, yeah.
0:27:43 Unlicensed practical nurses.
0:27:45 Everybody wants to see that, nurse.
0:27:49 My goal here is not to write a book that says this is what should be licensed.
0:27:50 This is what shouldn’t be.
0:27:55 But I did want to provide some guideposts for how you would make that determination.
0:28:00 You write that professional licensing is, quote, an especially onerous form of regulation
0:28:06 erecting high financial and educational barriers and that it therefore has a big effect on,
0:28:10 quote, equality, public health, the economy and the American dream.
0:28:11 So that’s a lot.
0:28:13 Oh, I can defend it all.
0:28:16 Let’s start with the American dream.
0:28:18 Home ownership used to be the American dream.
0:28:20 That used to be the way that you knew you’d made it.
0:28:24 I think there’s a way in which a professional license has taken over that role.
0:28:29 That’s how you know you really are accepted in the society if you have the state imprimatur
0:28:31 on the work that you do.
0:28:35 You see this a lot in the discourse of people who are trying to get new licenses.
0:28:37 They say, our work is important.
0:28:39 Our work is dangerous.
0:28:40 Our work is valuable.
0:28:42 And we don’t have a license.
0:28:44 We should have that kind of status.
0:28:45 Okay.
0:28:48 So that’s how licensing hurts the American dream.
0:28:52 How about the other categories, the economy, public health, equality?
0:28:57 It impacts the economy because it is the most important regulatory institution we have in
0:28:58 labor.
0:29:04 There’s more people who are subject to professional licensing than are in unions and are affected
0:29:10 by the minimum wage combined, 20% of the American workforce, tens of millions of workers.
0:29:14 So we know that it raises prices and creates scarcity.
0:29:17 We spend more on health care than any other country.
0:29:22 I don’t want to oversimplify health care economics, but there is an element of a supply
0:29:27 and demand problem where prices go up because supply is so low.
0:29:31 Another way of saying the same thing is that it is very expensive to go to medical school.
0:29:36 It’s such a huge investment to get into the profession, and that creates a small number
0:29:39 of practitioners and then prices go up.
0:29:45 It’s a big problem for equality because you have to have typically a clean criminal record
0:29:46 to get over this barrier.
0:29:50 You have to have money to pay for a school.
0:29:55 You also have to be able to take a year or three out of the labor force to go to school.
0:29:56 So what does this do?
0:30:00 It kind of gives a leg up to people who already have a leg up in life.
0:30:03 So it exacerbates inequality, essentially.
0:30:04 Exactly.
0:30:09 I think the place you see this most is with people with criminal histories because the
0:30:12 one thing you need when you get out of prison is a job.
0:30:16 That is probably the single most important determinant for how the rest of your life
0:30:17 will go.
0:30:24 In a system where a huge chunk of jobs are licensed, you have to overcome the idea that
0:30:26 you’ve got a ding on your criminal record.
0:30:31 There’s no real nexus between the idea that you committed a crime and this licensed profession
0:30:32 that you’re doing.
0:30:37 I saw a dental assistant get a really hard time about her criminal record in front of
0:30:38 the dental board.
0:30:42 It’s very unclear to me what her driver’s license charges had to do with being a dental
0:30:43 assistant.
0:30:51 But advocates of licensing argue that licensing can help raise wages for lower education or
0:30:57 low income workers, especially minorities, by providing a better path to economic sustainability
0:31:00 because they are in a licensed profession.
0:31:02 How much sympathy do you have for that argument?
0:31:03 Not a lot.
0:31:07 The reason why those wages are higher and the reason why there’s this path is because
0:31:10 of the people who are left out of it.
0:31:13 That’s the source of the benefit.
0:31:18 It’s not enough to say that this particular minority group or this particular disadvantaged
0:31:22 set of people get a particular benefit out of licensing if the way that they’re getting
0:31:26 that benefit is by excluding other members from that same group.
0:31:31 Taking all licensed professions in the US, which ones do you think clearly don’t need
0:31:32 licensing?
0:31:39 Well, I think the hair professions are not right for professional licensing.
0:31:44 I’m laughing only because there aren’t that many people in the world making the arguments
0:31:48 that you’re making today about the licensing racket, but it seems that every person that
0:31:52 does make the argument uses hair cutting and hair styling as an example.
0:31:53 Why is that?
0:31:58 The reason why hair is such an attractive example is because it’s just so extreme.
0:32:01 It takes more classroom hours than to go to law school.
0:32:02 No.
0:32:03 Come on.
0:32:04 Yeah, 1,500 hours.
0:32:05 I’ve done the math.
0:32:06 My students, I teach at a law school.
0:32:09 My students have to be in class for 1,200 hours.
0:32:13 What happens during 1,500 hours of hair styling training?
0:32:15 What happens during that time?
0:32:16 Is it just an apprenticeship, essentially?
0:32:20 There’s a fair amount of books studying, which is actually a big problem because a lot of
0:32:27 people who want to cut hair aren’t capable of or interested in the book-based exam studying
0:32:29 that comes along with the professional system.
0:32:34 A lot of people don’t go to hair school because they think that they won’t succeed, even though
0:32:42 they could be perfectly capable hair cutters.
0:32:46 In many of the occupations that Ellen’sworth looked into, there were English-only written
0:32:50 tests that worked to exclude non-native speakers.
0:32:55 And while tests and training are designed to improve the quality of services offered
0:33:01 by a profession, the evidence is mixed to put it generously.
0:33:06 During her research, Ellen’sworth found that licensing boards put far more energy into enforcing
0:33:10 their own requirements than protecting the public.
0:33:14 Consider the board in Tennessee that licenses alarm systems contractors.
0:33:19 Ellen’sworth found them, quote, “ten times more likely to take action in a case alleging
0:33:25 unlicensed practice than one complaining about service quality or safety.”
0:33:27 And then there are the licensing turf wars.
0:33:30 This is a major source of power for the boards.
0:33:35 In many states, including in Tennessee, nurse practitioners, for example, must be supervised
0:33:37 by physicians.
0:33:42 And the terms of that supervision are set by the boards, and they decide how many nurses
0:33:47 you can supervise, what kind of intensity the supervision is.
0:33:50 This is a huge problem for access to care.
0:33:55 Nurse practitioners can do a ton of medical care that we really desperately need in this
0:33:58 country, especially primary care.
0:34:03 And if we were to allow them to practice to the full extent of their training, we would
0:34:06 have a lot more provision of that care.
0:34:09 Doctors take the attitude that if you want to practice medicine, go to medical school.
0:34:13 What’s a little funny about this is they will say, “It’s really important that the public
0:34:15 get the highest possible quality care.
0:34:17 We don’t want to cut any corners.
0:34:21 We don’t want to send anyone to a nurse practitioner if a doctor could have done a better job.”
0:34:26 They’ll say that in that instance, and then turn around in the disciplinary side and say,
0:34:30 “Well, any doctor is better than no doctor, and so I’m going to let this guy keep his
0:34:33 license so he can go on to work at a prison.”
0:34:38 Let this guy keep his license in part because there just aren’t enough doctors to go around.
0:34:39 Exactly.
0:34:44 But isn’t the licensing board or the AMA responsible for the supply of doctors?
0:34:45 Exactly.
0:34:50 So on the one side, it’s like we need to have the highest possible standards, which of course
0:34:52 create shortages.
0:34:56 Turf wars are a big part of that, and the failure to use nurse practitioners and physician
0:34:59 assistants to their maximum level is a big part of that.
0:35:02 Then they turn around with the scarcity and say, “Well, now we have scarcity, so we have
0:35:06 to let this doctor that’s at best questionable stay in the profession.”
0:35:07 Yeah.
0:35:10 It’s a little bit like being the firefighters who set the fire in order to put the fire out
0:35:12 to prove your value.
0:35:13 Yes.
0:35:14 Yes, it is.
0:35:18 Talk about how licensing affected the medical response to COVID.
0:35:24 Early in COVID, we had this severe shortage, especially of nurses, but of all medical professionals.
0:35:27 That made for a higher death rate.
0:35:31 It brought the whole system to its knees and burnt out a lot of medical professionals who
0:35:34 then left the profession.
0:35:39 I think that’s a big part of the story because licensing holds down the number of practitioners.
0:35:44 Part of the solution was, “Okay, well, we got here because we have state by state licensure.
0:35:46 Let’s just get rid of that for now.
0:35:47 If you have a license anywhere, you can travel.”
0:35:49 Let’s seem to work at first.
0:35:51 All these people signed up for it.
0:35:55 They tried to come to New York, but the regulatory apparatus of these boards is so small and so
0:35:59 underfunded that they just couldn’t actually process all these people.
0:36:05 The more we talk, the more it seems that states are ceding a lot of regulatory power to these
0:36:06 boards.
0:36:11 It reminds me of an argument made by a political scientist I know about how Congress has ceded
0:36:16 a lot of its legislative authority to the executive branch because it’s so time-consuming
0:36:18 to make legislation.
0:36:22 They pass on things and let the president sign an executive order, then it might get
0:36:26 turned over after the next election, but at least they got something done.
0:36:33 It feels here like states and state regulators would like these professions to be capably
0:36:38 regulated, but because it’s so difficult, time-consuming, confusing, etc., they delegate
0:36:41 that responsibility to these boards.
0:36:42 Is that unfair?
0:36:43 Is that about right?
0:36:45 That’s exactly right.
0:36:50 It’s even worse than the delegation between legislature and the executive because all
0:36:53 the regulation by these boards is paid for by the licensing fee.
0:36:56 It’s actually kind of free to the legislature.
0:36:59 For example, art therapists are now licensed in Tennessee.
0:37:02 The fiscal report on it is going to come back zero, which they love.
0:37:08 My point is you kind of get what you pay for, but it is a huge capitulation to the profession.
0:37:13 You might call it a dereliction of duty.
0:37:17 As I said earlier, Allen’sworth is one of a relatively small number of academics who
0:37:21 have looked into occupational and professional licensing.
0:37:25 One of the most prominent is Morris Kleiner, an economist at the University of Minnesota,
0:37:29 whose work has inspired and influenced Allen’sworth.
0:37:33 Kleiner found that professional licensing adds a 10 percent premium to the price of
0:37:39 these services, representing an estimated $250 billion in annual cost to consumers.
0:37:44 The economists Peter Blair and Bobby Chung found that licensing reduces the number of
0:37:49 providers in a given profession by 17 to 27 percent.
0:37:54 And none of this is taking into account the immeasurable but massive costs of mishandled
0:37:59 allegations of sexual abuse, improper prescribing and so on.
0:38:02 After the break, how about some solutions?
0:38:03 I’m Stephen Dubner.
0:38:18 This is Freakonomics Radio, we’ll be right back.
0:38:23 Rebecca Allen’sworth’s main argument is that occupational licensing inflicts all sorts of
0:38:27 costs on the American workforce and on consumers.
0:38:31 She thinks that many occupations should not require licensing at all.
0:38:36 But how about medicine and law and the other professions where she thinks licensing does
0:38:37 make sense?
0:38:41 I asked her in those cases, how should it be done differently?
0:38:45 It should be bureaucratic, it should actually be governmental, it should be overseen better
0:38:50 by the legislature and it should be made up of deciders that are not on Monday working
0:38:55 at a licensing board and then on Tuesday through Friday working in that profession where they
0:38:58 stand to gain the most from this bad regulation.
0:39:04 You do talk about federal licensing or eliminating boards entirely in favor of state agencies.
0:39:06 What do you see as the trade-offs involved?
0:39:10 I want to see more governmental involvement in these boards.
0:39:12 There’s two ways you could do this.
0:39:15 One would be to have the board be advisory to a decision maker.
0:39:22 This is basically how we do burial services, which is people who can cremate bodies and
0:39:24 who operate graveyards.
0:39:29 There’s a bureaucrat who’s in charge of that program and you see much more reasonable regulation
0:39:35 there than you do for funeral directors, which has a board dominated by funeral directors.
0:39:39 You could vest the decision-making power in a full-time regulator or you could make the
0:39:44 boards more or less the way they are now but change their composition so that only a minority
0:39:47 of members of the board are from that profession.
0:39:51 If we did that, I’d like to see the other seats go not to randos, which is the way we
0:39:57 do it now, but rather people who have a stake in that profession from some other perspective,
0:40:03 you know, patient advocates or even I daresay a professor who has some academic understanding
0:40:04 of the problem.
0:40:07 But what about the upsides of licensing?
0:40:12 I know that you say that the priorities of licensing boards should be protecting the consumer
0:40:14 and you argue that they just don’t do a very good job of that.
0:40:20 On the other hand, if I hire, let’s say, an electrician, don’t I take a lot of comfort
0:40:25 in knowing that they’ve spent a fair amount of time on education and training and compliance?
0:40:30 That’s the argument for licensure and there’s a lot of work where we can’t reduce it to
0:40:31 a code, right?
0:40:35 We can’t say that this is how you diagnose cancer.
0:40:39 You can’t put it in a rule that you can easily apply and that’s where we need a license.
0:40:43 We say you have to go to school, you have to pass this test, you have to stay up to date
0:40:47 and we just hope that if you do all those things that you’ll develop the professional
0:40:51 judgment where you can make those difficult decisions.
0:40:53 Electrician, I don’t know, it’s kind of on the line.
0:40:57 We do have building codes, we do have rules about what goes where and I’m open to the
0:41:02 idea that those are sufficient, that there’s things you can and can’t do with electricity
0:41:07 and maybe you don’t have to have elaborate education and judgment or maybe you do and
0:41:11 I’m wrong about electricians but that’s the point, going to childcare.
0:41:16 At my kid’s daycare, the people working there were not licensed but of course they had background
0:41:21 checks and they were subject to rules like you put babies to sleep on their back.
0:41:24 When you feed them, they have to be sitting in a high chair to avoid asphyxiation.
0:41:29 Those are reasonable, good rules that we should make people follow when they’re taking care
0:41:35 of children that protect the public without that real expense of the license.
0:41:42 You mentioned so many cases of sexual abuse in the medical sphere as a reason for discipline.
0:41:47 It makes me wonder if a lot of these occupations, you are essentially putting yourself in a position
0:41:50 of trust or vulnerability with another person.
0:41:56 I wonder if a lot of the licensing is meant to just prevent or to diminish the possibility
0:42:02 of that kind of sexual abuse or bad power dynamics or am I being too generous toward
0:42:05 these licensing bodies?
0:42:08 Too generous, these arguments are made.
0:42:13 On the other hand, I have something in my basement, I believe some critter, so I called
0:42:15 a trapper, which apparently is a thing.
0:42:19 He came to my house and we were alone and he’s not licensed.
0:42:20 He was lovely.
0:42:23 That’s just one way of saying that there’s all kinds of strangers that I led into my
0:42:27 house to help me take care of stuff all the time.
0:42:28 Some subset of them are licensed.
0:42:32 Now that I know what boards are doing, I know that they’re not taking care to make sure that
0:42:37 that person isn’t scummy or scary, and then the big example is babysitters.
0:42:43 You could not imagine a more vulnerable job as somebody who’s going to wash your child.
0:42:48 It is a job for which we want to hire somebody we trust and we do, but it is not necessary
0:42:52 for the government to say you can or cannot be alone with a child.
0:42:55 It’s something that we handle through other means.
0:42:57 You’re in favor of babysitters not being licensed.
0:42:58 Of course.
0:42:59 It would never work.
0:43:04 It would raise prices so high for something that already is a crippling expense.
0:43:08 It would also exclude a big part of the labor force because it’d be hard to get a license
0:43:09 if you’re 13.
0:43:10 Yeah.
0:43:13 I don’t know what the cutoff would be for the babysitter license.
0:43:17 When you mention babysitters, it makes me wonder, what about having children becoming
0:43:18 a parent?
0:43:21 Does it strike you as odd that cutting hair requires a license in all that training, but
0:43:26 that becoming a parent, you just need a set of reproductive organs that are working.
0:43:27 There’s no barriers.
0:43:31 There’s no exhibit of competence or financial soundness or anything.
0:43:35 I’ve only thought about this in my personal life, not in my professional life.
0:43:41 I do often feel unqualified for the job that I have of raising my two kids.
0:43:43 Would a licensing procedure have helped?
0:43:46 Would a mandatory training session have helped?
0:43:51 If everyone of us is really honest, we know that we would not get a parenting license and
0:43:53 we would have it taken away if we did.
0:43:55 Screw ups are just too frequent.
0:44:00 Maybe the point here is like, there’s other ways to protect people from bad things happening
0:44:06 than licenses, but you can always make some kind of theoretical argument that this license
0:44:11 is going to help one patient or this license is going to help prevent this one problem
0:44:12 that happened once.
0:44:16 When there isn’t a good organized argument on the other side, which often there isn’t
0:44:21 in these state debates, they just figure it’s a win-win.
0:44:25 The public gets something, the profession gets something, and it costs the state nothing.
0:44:29 Where do you see this kind of professional licensing and regulation done well?
0:44:32 Not in any single state.
0:44:37 The most positive example is the way that medicine is regulated in the UK, where they
0:44:42 have more of a separation between the regulatory side and the disciplinary side.
0:44:46 Both bodies are not dominated by physicians.
0:44:48 There’s physician input, but it’s not dominated.
0:44:50 Other voices at the table.
0:44:54 They have something there called the medical professional tribunal service, and how does
0:44:55 that work?
0:44:59 Typically, when you get a panel to hear your case, you have three people, usually one of
0:45:01 them is a physician.
0:45:05 One’s a lawyer, and then the third, the statute doesn’t say what they have to be doing, but
0:45:13 all of them are paid a salary to actually do this regulating work and have training,
0:45:17 guidelines, and expertise that American boards don’t have.
0:45:23 There’s no plea bargaining, so everything is all out in the open, and there’s more oversight
0:45:26 within the legislative body.
0:45:27 That sounds promising.
0:45:29 It also sounds like it could take forever.
0:45:36 I did, with a colleague, look at about five years worth of cases from the UK and Tennessee,
0:45:39 and I don’t remember thinking that the UK ones go any slower.
0:45:41 The American system is quite slow.
0:45:42 What about outcomes?
0:45:49 Is that system more likely to produce effective monitoring of professionals, including discipline?
0:45:55 Yeah. We did a head-to-head comparison between doctors in America and in the UK engaged in
0:46:02 inappropriate sex with patients and overprescribing, and we found a really big difference in how
0:46:07 many were struck from the registry, which is the term in the UK for losing your license
0:46:08 than in Tennessee.
0:46:10 It would seem that, yes, the outcomes are different.
0:46:15 However, remember, they have socialized medicine, they have the NHS, it’s really apples and
0:46:17 oranges.
0:46:22 We can’t say confidently that the process is what leads to this different outcome, but
0:46:25 we see a better process and we see more reasonable outcomes.
0:46:28 You can connect those dots.
0:46:35 Telemedicine spiked during COVID, but there was also a state-based medical licensing issue
0:46:42 there, which is you could only treat a patient, even electronically, in your own state.
0:46:46 This is something we talked about recently on the show with Zika Manual.
0:46:51 He said we just need to get to the next level, to national licensure, but states are jealous
0:46:52 of their turf.
0:46:57 Do you see that as a viable solution in a case like that, national licensure?
0:46:58 In theory, yes, of course.
0:47:02 There’s not materially different needs of a patient in one state versus another state.
0:47:08 It would make moving between states and not just electronically but physically much easier.
0:47:13 It would also create a single thing for us to study so that we could understand how this
0:47:16 system works rather than doing it state by state.
0:47:18 In practice, there’s two problems with it.
0:47:22 One, if we did that, it would be a race to the bottom.
0:47:27 We would get the requirements of the most onerous state because, as you said, no state is going
0:47:29 to give up what they’ve got.
0:47:33 There’s a physician’s compact, which is like an agreement among states to recognize each
0:47:35 other’s licenses.
0:47:41 The terms of that compact are essentially the most onerous state.
0:47:44 I worry if we did a national license that it would be particularly onerous.
0:47:49 The other reason why it won’t happen is because of the AMA or the ABA or whatever profession
0:47:55 we’re talking about is going to fight tooth and nail to maintain the state by state system.
0:47:56 Because why?
0:47:57 What’s in it for them?
0:48:01 It’s easier for them to capture these smaller boards.
0:48:07 I think also the full ability to practice between states increases competition.
0:48:12 If you can just phone a doctor in Ohio from Tennessee, that’s going to create a lot more
0:48:15 competition for physicians in Tennessee.
0:48:17 What’s wrong with competition?
0:48:18 Economists love competition.
0:48:21 Some governments proclaim to love competition.
0:48:26 It creates better quality and cost for most consumers.
0:48:29 In what way am I totally wrong when I say that?
0:48:32 Well, I’m an antitrust professor, so I also love competition.
0:48:35 But competition doesn’t solve all problems.
0:48:39 That’s where I think the licensing board really has a role to play and regulation has a role
0:48:41 to play in many professions.
0:48:45 It’s not all about just what the customer wants when it comes to the professions.
0:48:47 It’s also not clear what they’re getting.
0:48:50 There’s an information asymmetry for which a license can really help.
0:48:56 The other point is competition is not going to solve problems like opioid over prescribing.
0:48:59 That’s a case of giving the patient what they want.
0:49:04 How do you think your argument intersects with the new Trump administration?
0:49:10 Especially Trump himself, but mostly Elon Musk, vowed to shrink the federal government.
0:49:14 Is it possible that a so-called department of government efficiency will start pushing
0:49:17 things in the direction that you would like on the state level?
0:49:22 Well, you spent six years writing a book about this example of governmental inefficiency.
0:49:23 You get excited.
0:49:26 It’s like, “Finally, my time is coming.”
0:49:31 And it turns out that what’s underneath that is just more self-dealing.
0:49:36 It’s almost the opposite message that I’m trying to give, which is that it’s the bureaucrats
0:49:37 who know what they’re doing.
0:49:41 Yes, we need to cut through the red tape, but it’s the self-dealers and the members of the
0:49:44 profession that have created that red tape.
0:49:50 So you’re saying that the Musk-Trump version of efficiency just means unregulated versus
0:49:51 capable regulation?
0:49:57 Maybe or maybe it means unregulated when it suits Musk and regulated when it suits Musk.
0:49:59 That’s what I saw at the boards.
0:50:02 When you give somebody power over their own regulation, they’re going to be hands-off
0:50:05 when it suits them and they’re going to be hands-on when it suits them.
0:50:08 So I’m all for cutting red tape.
0:50:10 The question is, how do we cut it?
0:50:16 And I think we cannot trust people who have their own self-interest.
0:50:20 So my profession, journalism, does not require a license?
0:50:21 Oh, yes.
0:50:23 This is one of my favorite examples.
0:50:26 The legal case, obviously, is slam dunk, right?
0:50:30 You could not have a license for a journalist because of the First Amendment.
0:50:33 Maybe there are some people who are calling themselves journalists out there that we don’t
0:50:34 want doing it.
0:50:35 Oh, there are.
0:50:36 I can vouch for that.
0:50:42 At the same time, there’s systems for figuring out who are the most qualified journalists.
0:50:49 There’s journalism school, obviously who you’re employed by is a big signal of how qualified
0:50:50 you are.
0:50:54 I’m not here to defend the marketplace of ideas that we have right now in a full-throated
0:50:55 way.
0:51:01 But it’s an example of a profession that is prestigious, important, and has its own kind
0:51:06 of regulatory or at least sorting mechanism without licensing.
0:51:10 I do not think we want the government coming in and saying, “This is journalism and this
0:51:11 is not.”
0:51:14 By the way, I myself have benefited from this.
0:51:18 I’m not a journalist, but I acted like a journalist.
0:51:26 Okay, so for all the reporting you did, all the board meetings you sat in on, the conversations
0:51:32 you had, and the legal scholarship you added on top of all that, and then writing the book
0:51:37 itself, do you think your work will have any significant effect?
0:51:39 I do.
0:51:44 There’s state legislation that can maybe not solve this problem, but that can help.
0:51:46 I think that there’s some interest in that.
0:51:51 There’s a lot of headwinds from the professions, obviously, but I’m hopeful that maybe something
0:51:52 can shake loose.
0:51:56 At the very least, I think people should know what they’re up against when they’re trying
0:51:59 to get a license or when they feel locked out of a profession, or just when they’re
0:52:04 a consumer of professional services, assuming that the license is on the wall, then this
0:52:05 is fine.
0:52:10 I think that it’ll have an impact, hopefully, on everyday people who maybe think about their
0:52:15 licensed professionals a little bit differently.
0:52:19 I’d like to thank Rebecca Allensworth for helping me think about licensed professionals
0:52:21 a little bit differently.
0:52:24 This is a subject I’ve been interested in for a long time, but I was always looking
0:52:28 for the right opportunity, the right person, really, to explain it.
0:52:32 I appreciate how much legwork and brainwork Allensworth put into it.
0:52:35 Again, her book is called The Licensing Racket.
0:52:38 I’d love to hear your thoughts on this topic.
0:52:42 Our email is radio@freakonomics.com.
0:52:45 Coming up next time on the show…
0:52:53 Rats do something to traumatize you, and I hate rats.
0:52:59 The brown rat, also known as ratus nervegicus, is one of the most reviled animals in the
0:53:00 world.
0:53:01 Why?
0:53:08 Rats are known for their ability to exploit and thrive where humans are densest.
0:53:12 It doesn’t help that they supposedly killed off half of Europe in the Black Death, so
0:53:17 most people respond to rats with disgust, fear, even anger.
0:53:22 But not everyone, they’re, in some sense, our natural city partner.
0:53:24 I certainly have a reverence for them.
0:53:26 They’re sweet and they’re smart.
0:53:29 They make great pets, honestly.
0:53:31 And that thing about the Black Death?
0:53:34 That’s the one that most people think are the right one.
0:53:35 They are wrong.
0:53:37 Very clearly, they are wrong.
0:53:41 And just wait until you hear the backstory of the film, Ratatouille.
0:53:45 Can I just say, Ratatouille is an idea, as a story, it’s an allegory.
0:53:51 We have made a three-part series that we’re thinking about calling “Sympathy for the Rat.”
0:53:53 That starts next time on the show.
0:53:55 Until then, take care of yourself.
0:53:57 And if you can, someone else too.
0:54:00 Freakonomics Radio is produced by Stitcher and Renbud Radio.
0:54:03 You can find our entire archive on any podcast app.
0:54:08 It’s also at Freakonomics.com, where we publish transcripts and show notes.
0:54:11 This episode was produced by Theo Jacobs.
0:54:15 The Freakonomics Radio network staff also includes Alina Coleman, Augusta Chapman, Dalvin Abouaji,
0:54:20 Eleanor Osborn, Ellen Frankman, Elsa Hernandez, Gabriel Roth, Greg Rippin, Jasmine Klinger,
0:54:25 Jeremy Johnston, John Schnarrs, Morgan Levy, Neil Coruth, Sarah Lilly, and Zach Lipinski.
0:54:31 Our theme song is “Mr. Fortune” by the Hitchhikers, and our composer is Luis Guerra.
0:54:34 As always, thank you for listening.
0:54:35 Say the name of your book.
0:54:37 The Licensing Racket?
0:54:38 How we regulate…
0:54:39 Sorry, okay.
0:54:40 It’s a long subtitle.
0:54:41 I’m gonna have to do that one again.
0:54:42 Okay.
0:54:43 The Licensing Racket?
0:54:44 All right.
0:54:45 One more time.
0:54:46 The Licensing Racket?
0:54:49 How we decide who is allowed to work and how it goes wrong.
0:54:51 I’ve got it as why it goes wrong.
0:54:52 I know.
0:54:53 I know.
0:54:54 Yep.
0:54:55 Take four.
0:54:58 You would think that I would come here prepared to say the name of my book.
0:55:11 The Freakonomics Radio Network, the hidden side of everything.
0:55:13 (upbeat music)
0:55:16 you
Licensing began with medicine and law; now it extends to 20 percent of the U.S. workforce, including hair stylists and auctioneers. In a new book, the legal scholar Rebecca Allensworth calls licensing boards “a thicket of self-dealing and ineptitude” and says they keep bad workers in their jobs and good ones out — while failing to protect the public.
- SOURCES:
- Rebecca Allensworth, professor of law at Vanderbilt University.
- RESOURCES:
- “The Licensing Racket: How We Decide Who Is Allowed to Work, and Why It Goes Wrong” by Rebecca Allensworth (2025).
- “Licensed to Pill,” by Rebecca Allensworth (The New York Review of Books, 2020).
- “Licensing Occupations: Ensuring Quality or Restricting Competition?” by Morris Kleiner (W.E. Upjohn Institute for Employment Research, 2006).
- “How Much of Barrier to Entry is Occupational Licensing?” by Peter Blair and Bobby Chung (British Journal of Industrial Relations, 2019).
- EXTRAS:
- “Is Ozempic as Magical as It Sounds?” by Freakonomics Radio (2024).