Licensing laws, and similar regulations, are a product of the progressive era which began around 1913. These laws are meant to protect society as a whole, and individuals in particular. A careful study of these laws will demonstrate that they have produced far more negative effects than positive effects. This is explained in great detail in the Mises Institute article The Deception behind Government Licensing Laws
The primary justification for these licensing laws and regulations is:
One of the favorite arguments for licensing laws and other types of quality standards is that governments must “protect” consumers by insuring that workers and businesses sell goods and services of the highest quality.
There is one great flaw in that argument:
The answer, of course, is that “quality” is a highly elastic and relative term and is decided by the consumers in their free actions in the marketplace. The consumers decide according to their own tastes and interests, and particularly according to the price they wish to pay for the service.
Individuals are far better than a government bureaucracy, especially a gargantuan one at the federal level, at determining what constitutes a quality product. Word of mouth and other forms of reviews by actual customers is a far better way of regulating the quality of products. When potential customers hear that a product is no good or harmful then they won’t buy it resulting in the company losing money and possibly going out of business.
Licensing laws most always limit competition which is why they are championed by established large businesses. That is why they spend so much money lobbying for them.
How much these requirements are designed to “protect” the health of the public, and how much to restrict competition, may be gauged from the fact that giving medical advice free without a license is rarely a legal offense. Only the sale of medical advice requires a license. Since someone may be injured as much, if not more, by free medical advice than by purchased advice, the major purpose of the regulation is clearly to restrict competition rather than to safeguard the public
Regulations meant to ensure quality products quite often stifle innovation.
Other quality standards in production have an even more injurious effect. They impose governmental definitions of products and require businesses to hew to the specifications laid down by these definitions. Thus, the government defines “bread” as being of a certain composition. This is supposed to be a safeguard against “adulteration,” but in fact it prohibits improvement. If the government defines a product in a certain way, it prohibits change.
Regulations imposed by government bureaucracies stifle private sector innovation for the following reason:
A change, to be accepted by consumers, has to be an improvement, either absolutely or in the form of a lower price. Yet it may take a long time, if not forever, to persuade the government bureaucracy to change the requirements. In the meantime, competition is injured, and technological improvements are blocked.
Licensing laws make it difficult for individuals to find jobs in a particular field. Take hair dressers for instance. It takes a lot of schooling to become a hair dresser, approximately 1500 hours.. Is it all necessary? The same holds true for many fields.
Here is the proper free market solution to low quality or harmful products and services:
In the free economy, there would be ample means to obtain redress for direct injuries or fraudulent “adulteration.” No system of government “standards” or army of administrative inspectors is necessary. If a man is sold adulterated food, then clearly the seller has committed fraud, violating his contract to sell the food. Thus, if A sells B breakfast food, and it turns out to be straw, A has committed an illegal act of fraud by telling B he is selling him food while actually selling straw. This is punishable in the courts under “libertarian law,” i.e., the legal code of the free society that would prohibit all invasions of persons and property.
Licensing laws and government regulations have affected me personally in a very negative way. For the past several years I have been attempting to raise money to open a nano brewery. I have created and perfected a large number of recipes that rival the best craft breweries. Because of government interference the start up costs for this type of brewery is many times higher than what they should be. The approval process for opening a brewery is about one year. The beginning step is establishing a location before you begin the licensing procedure. That means you have to rent or buy a location, before you begin the paperwork. That is a whole year you have to pay rent when you are not taking in any money, and there is a good chance you could get turned down at the end. Before federal government regulation put a stop to this, many started a brewery in their kitchen, then opened an actual brewery after they sold enough beer to afford this. Because of the nature of beer it is a product that it is virtually impossible to make someone sick if you brew bad quality beer. It is very expensive to outfit a startup brewery to meet federal standards, standards imposed by bureaucrats rather than brewers, There was no need for this change except to limit competition.