Occupations: A Hierarchy of Regulatory Options

In July 2015, the Obama administration released a first of-its-kind report from any White House: a study on occupational licensing. The report gained significant attention because of the novelty of its subject for a White House report, but also for its rather skeptical view of licensing.

For many years, the Institute for Justice, the Cato Institute, state policy think tanks, and others have worked to reform licensing laws that amount to little more than a government permission slip to work. But in recent years, the issue finally caught fire among Republican and Democrat policymakers, culminating in the White House report. After reviewing the costs and benefits of licensing—with the former far outweighing the latter—the report offered a series of recommendations for how states should reform their occupational licensing policies and policymaking.

The most significant of those recommendations, and likely the most realistic to implement, is a menu of regulatory options that are less onerous than licensing, including “certification (whether private or government-administered), registration, bonding and insurance, and inspection, among others.” The value and utility of such a menu is that it provides legislators a range of regulatory options between either no licensing or full licensing. This article builds upon that idea by including several private governance options that can realize the public benefits intended by regulation without imposing costs that come with full licensure or other forms of restrictive regulation.

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