from Capitalism and Freedom by Milton Friedman - Chapter IX: Occupational Licensure Licensure...

goes still farther in the direction of trenching upon the rights of individuals to enter into voluntary contracts... The main argument that is relevant to a liberal is the existence of neighbourhood effects. The simplest and most obvious example is the incompetent physician who produces an epidemic. Insofar as he harms only his patient, that is simply a question of voluntary contract and exchange between the patient and his physician. On this score, there is no ground for intervention, However, it can be argued that if the physician treats his patient badly, he may unleash an epidemic that will cause harm to third parties who are not involved in the immediate transaction. In such a case, it is conceivable that everybody, including even the potential patient and physician, would be willing to submit to the restriction of the practice of medicine to competent people in order to prevent such epidemics from occurring. In practice, the major argument given for licensure by its proponents is not this one, which has some appeal to a liberal, but rather a strictly paternalistic argument that has little or no appeal. Individuals, it is said, are incapable of choosing their own servants adequately, their own physician or plumber or barber. In order for a man to choose a physician intelligently, he would have to be a physician himself. Most of us, it is said, are therefore incompetent and we must be protected against our own ignorance. This amounts to saying that we in our capacity as voters must protect ourselves in our capacity as consumers against our own ignorance, by seeing to it that people are not served by incompetent physicians or plumbers or barbers. There are also strong social costs to be set against any of these advantages. The most obvious social cost is that any one of these measures, whether it be registration, certification, or licensure, almost inevitably becomes a tool in the hands of a special producer group to obtain a monopoly position at the expense of the rest of the public. .. The people who are most concerned with any such arrangement, who will press most for its enforcement and be the most concerned with its administration, will be the people in the particular occupation or trade involved. ...Once licensure is attained, the people who might develop an interest

in undermining the regulations are kept from exerting their influence. They dont get a license, must therefore go into other occupations, and will lose interest. The result is invariably control over entry by members of the occupation itself and hence the establishment of a monopoly position. In the first place, licensure is the key to the control that the medical profession can exercise over the number of physicians... The American Medical Association is perhaps the strongest trade union in the US. The essence of the power of a trade union is its power to restrict the number who may engage in a particular occupation. The AMA...is a trade union that can limit the number of people who can enter. How can it do this? The essential control is at the stage of admission to medical school. ... In order for a medical school to get and stay on its list of approved schools it has to meet the standards of the Council. Why does the Councils approval matter so much? If it abuses its power, why dont unapproved medical schools arise? The answer is that in almost every state in the US, a person must be licensed to practice medicine, and to get the license, he must be a graduate of an approved school. In almost every state, the list of approved schools is identical with the list of schools approved by the Council on Medical Education and Hospitals of the AMA. Control over admission to medical school and later licensure enables the profession to limit entry in two ways., The obvious one is simply by turning down many applicants. The less obvious, but probably far more important one, is by establishing standards for admission and licensure that make entry so difficult as to discourage young people fro ever trying to get admission. ...It is the provision about graduation from approved schools that is the most important source of professional control over entry. The profession has used this control to limit numbers. Even when...people explicitly comment on the desirability of limiting numbers to raise incomes they will always justify the policy on the grounds that if too many people are let in, this will lower their incomes so that they will be driven to resort to unethical practices in order to earn a proper income. The only way, they argue, in which ethical practices can be maintained is by keeping people at a standard of income which is adequate to the merits and needs of the medical profession.

It is extraordinary that leaders of medicine should proclaim publicly that they and their colleagues must be paid to be ethical. And if it were so, I doubt that the price would have any limit. There seems little correlation between poverty and honesty. In ordinary times, the rationalisation for restriction is different. It is that the members of the medical profession want to raise what they regard as the standards of quality of the profession. ...Quality is only a rationalisation and the the underlying reason for restriction. The power of the AMA has been used to limit numbers in ways that cannot possibly have any connection whatsoever with quality. The simplest example is their recommendation to various states that citizenship be made a requirement for the practice of medicine. Licensure is the key to its ability to restrict technological and organisational changes in the way medicine is conducted. The AMA has been consistently against the practice of group medicine, and against prepaid medical plans. These methods of practice may have good features and bad features, but they are technological innovations that people ought to be free to try out if they wish. There is no basis for saying conclusively that the optimum technical method of organising medical practice is practice by an independent physician. Maybe it is group practice, maybe it is by corporations. One ought to have a system under which all varieties can be tried. The AMA has resisted such attempts...because licensure has indirectly given it control of admission to practice in hospitals. ...In order for a physician to get admission to practice in an approved hospital, he must generally be approved by his medical association or by the hospital board. Why cant unapproved hospitals be set up>? Because under present economic conditions, in order for a hospital to operate it must have a supply of interns. Under most state licensure laws, candidates must have some internship experience to be admitted to practice, and internship must be in an approved hospital. ...If the number of physicians is less than it otherwise would be, and if they are all

fully occupied, as they generally are, this means that there is a smaller total of medical practice by trained physicians-fewer medical man-hours of practice, as it were. The alternative is untrained practice by somebody; it may and in part must be by people who have no professional qualifications at all. ...If medical practice is to be limited to licensed practitioners, it is necessary to define what medical practice is... Under the interpretation of the statues forbidding unauthorised practice of medicine, many things are restricted to licensed physicians that could perfectly well be done by technicians, and other skilled d people who do not have a Cadillac medical training. Trained physicians devote a considerable part of their time to things that might well be done by others. The result is to reduce drastically the amount of medical care. The relevant average quality of medical care, if one can at all conceive of the concept, cannot be obtained by simply averaging the quality of care that is given; that would be like judging the effectiveness of a medical treatment by considering only the survivors; one must also allow for the fact that the restrictions reduce the amount of care. The result may well be that the average level of competence in a meaningful sense has been reduced by the restrictions There are many different routes to knowledge and learning and the effect of restricting the practice of what is called medicine and defining it as we tend to do ito a particular group...is certain to reduce the amount of experimentation that goes on and hence to reduce the rate of growth of knowledge in the area.