How governments destroy enterprises and the jobs they create is calmly, and infuriatingly, illustrated in this recent video from the Institute for Justice about appalling business licensing in Chicago.
Toward the end, IJ’s voiceover says, “To allow entrepreneurs … to flourish, local governments have to change their approach to licensing business start-ups.”
Rarely do I disagree with the folks at IJ, but that statement accepts licensing as such. We shouldn’t.
Government licensing has more downside than upside. Licensing boards can’t know enough about the industries they license to set the right standards. And there are no “right” standards anyway in a world of infinite gradations of quality and cost for every good and service, not to mention constant change.
The licensing boards frequently get “captured” by the already-licensed, who use it to exclude competition.
Licensing boards are protected monopolies, the only entities allowed to determine who may participate in a given industry. They need not earn their revenue by pleasing customers; taxes fund them. Even if they do a terrible job, they survive.
Government licensing is unnecessary: market forces such as reputation, word-of-mouth, insurance requirements and third-party certification would regulate quality and safety, and produce de facto standards better than those the licensing boards can.
I suspect the folks at IJ agree with me, but they must hold their peace about it and I don’t: we’d be better off with free enterprise—no licensing at all.