How Occupational Licensing Can Harm Consumers
Some New York legislators want to pass a bill that would make it illegal for AI chatbots to provide substantive advice that you would typically get from a licensed professional such as a lawyer, doctor, or engineer (https://hooperlundy.com/new-york-proposed-bill-would-ban-ai-chatbots-from-providing-medical-or-legal-advice/). There is some debate about how restrictive this law will actually be, but it still highlights potential downsides of professional licensure. In the United States, you need a license from a state government to practice one of many professions. The licensing boards that decide the licensure requirements are mostly made up of professionals in that field. Requiring minimum standards to practice a profession sounds like a good way to protect consumers from frauds, but Milton and Rose Friedman argue that one trade-off is that labor unions and professional organizations recommend strict licensure requirements which limit the number of practitioners. The Friedmans write that “Licensure is widely used to restrict entry…There is no occupation so remote that an attempt has not been made to restrict its practice by licensure” (p. 239). Making it more difficult to get licensed results in higher wages for professionals and more expensive services for consumers. Walter E. Williams notes that even people who want to be barbers or cosmeticians need schooling and need to pass exams for licensure. He states that “All of these requirements raise the cost of entry, which naturally leads to a smaller number of practitioners…” (p. 60). The higher cost of entry and services discriminates against customers and potential practitioners with low incomes. Licensed professionals would benefit greatly from laws that restrict the ability of AI to provide comparable services at a low cost.
References
Milton Friedman & Rose Friedman (1990). Free to Choose: A Personal Statement. Harcourt, Inc. [originally published in 1979].
Walter E. Williams (2011). Race & Economics: How Much can be Blamed on Discrimination? Hoover Institution Press.