The avowed purpose of licensing is to ensure that inferior or dangerous products and services never reach the market. Licensing is thus very similar to consumer regulation, discussed above, and has parallel effects, such as the suppression of consumer choice, the displacement of market institutions for consumer protection, generally impaired consumer judgment, black markets, and opportunities for corruption of officials (pp. 4.11:59-77). Because licensing restricts providers rather than their products or services per se, however, this form of regulation is particularly susceptible to exploitation by special interests. For instance, medical licensing in the United States escalates prices far beyond free-market levels, by severely restricting entry to the profession and to medical schools. Not only is the domestic supply of new doctors artificially curtailed, but even extremely well-qualified physicians from abroad are often forbidden to practice. While it may raise the incomes of the few, this policy (together with other interventions, noted elsewhere in this course) places medical services and medical insurance beyond the reach of millions of lower-income citizens.      Next page
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