from the building-the-foundation dept
In my initial piece on professional organizations like the AMA and the Bar, I laid out the general case for thinking of these groups as unions, whose primary purpose is to protect the interest of their members. The basic argument is that these organizations preserve high barriers to entry for their professions for the purpose of keeping profits high for their existing members. The organizations are able to do this because they’ve been granted the right to regulate their own industry, so that their rules are, for all purposes, laws. This is an issue and a problem because as an economy, we’re spending more and more on legal and medical services, which means that efforts to reduce our expenses in these areas are bound to intensify. The upshot is that these efforts will be in direct contradiction with the interests of doctors and lawyers, which, in turn, will mobilize their professional organizations. As I stated at the outset, this itself isn’t a particularly new argument, though the urgency of these matters is not something that’s been discussed very much. In the mean time, it would be a good idea to briefly touch on some of the established thought on the subject.
As mentioned last time, one of the chief agitators on this issue was Milton Friedman. In his seminal book Capitalism & Freedom, he devoted a whole chapter to occupational licensure, in which he wrote:
A story about lawyers will perhaps illustrate the point. At a meeting of lawyers at which problems of admission were being discussed, a colleague of mine, arguing against restrictive admission standards, used an analogy from the automobile industry. Would it not, he said, be absurd if the automobile industry were to argue that no one should drive a low quality car and therefore that no automobile manufacturer should be permitted to produce a car that did not come up to the Cadillac standard. One member of the audience rose and approved the analogy, saying that, of course, the country cannot afford any thing but Cadillac lawyers! This tends to be the professional attitude. The members look solely at technical standards of performance, and argue in effect that we must have only first-rate physicians even if this means that some people get no medical service — though of course they never put it that way. Nonetheless, the view that people should get only the “optimum” medical service always lead to a restrictive policy, a policy that keeps down the number of physicians. I would not, of course, want to argue that this is the only force at work, but only that this kind of consideration leads many well-meaning physicians to go along with policies that they would reject out-of-hand if they did not have this kind of comforting rationalization.
The analogy to Cadillacs is a good one because it anticipates the natural rebuttal to all of these concerns, which is that these groups look out for the public interest by ensuring that members of their trade are all highly skilled. But if you carry this logic over to cars, and say that nobody should drive unless they can afford a Cadillac (or whatever the safest car is deemed to be), you’d soon realize that the practical effect is to cut a lot of buyers out of the market. Either that or you’d wind up with the situation we have today, whereby people don’t have the luxury of opting out of the market, and so (due to the supply & demand imbalance) the price of professional services spirals up enormously. Since Friedman, other economists have explored the same issue and have concluded that these groups are primarily in the business of reducing competition, not protecting the public good.
Criticisms of these groups isn’t, however, limited strictly to academic arguments made by economists. Later on in the series we’ll dive into more specifics, but there a number of complaints, from a variety of perspectives, about the power that these groups wield. To take a simple example, doctors weren’t always the gatekeepers to medicine, and in many developed countries (in Europe, for example), they still aren’t. In the US, however, the AMA has fought hard to ensure that doctors stand between patients and pills, even when a drug is deemed to be safe enough for over-the-counter distribution. This system, which is ostensibly for the benefit of patients, has the practical effect of making drugs much less affordable. As for the Bar, even many lawyers recognize problems with the way it operates. The practice of state-by-state exams, for example, has the effect of reducing the mobility of lawyers, since they can’t easily practice in any state. Also, by demanding that lawyers are well-versed in a wide variety of legal subjects, the Bar prevents the emergence of legal “technicians”, narrowly-trained professionals that could offer cut-rate legal services in areas specific to their training. While you do have medical technicians and paralegals, they’re only there to support a doctor or a lawyer, and are rarely in a position to offer services to patients directly.
So clearly there’s nothing in itself novel about criticizing these groups. There have been a lot of theoretical and practical complaints leveled against them, and the above examples only scratch the service. The coming posts in this series will drill down deeper into how these groups actually operate, the practical effects of their actions and, importantly, why this is not just a matter of theoretical concern.
