Specialization and Regulation: The Rise of Professionals and the Emergence of Occupational Licensing Regulation

Marc Law and Sukkoo Kim

The Journal of Economic History, 2005, vol. 65, issue 3, 723-756

Abstract: During the Progressive Era, advances in knowledge and specialization led to the emergence of modern-day professions. This growth in professions was accompanied by the adoption of occupational licensing regulation. In this article we explore the origins and effects of occupational licensing regulation during this period. Although most studies argue that occupational licensing regulation is adopted to restrict entry and reduce competition, the evidence from the Progressive Era suggests that regulation arose to improve markets as specialization and advances in knowledge made it increasingly difficult for consumers to judge the quality of professional services.Not long ago, the Governor of a midwestern state was approached by representatives of a particular trade anxious to enlist the Governor's support in securing passage of legislation to license their trade.“Governor,” the men said, “passage of this licensing act will ensure that only qualified people will practice this occupation; it will eliminate charlatans, incompetents or frauds; and it will thereby protect the safety and welfare of the people of this state.”The governor, from long experience, was somewhat skeptical. “Gentlemen,” he asked, “are you concerned with advancing the health, safety and welfare of the people under the police powers of the state, or are you primarily interested in creating a monopoly situation to eliminate competition and raise prices?”The spokesman for the occupational group smiled and said, “Governor, we're interested in a little of each.”Council of State GovernmentsCouncil of State Governments, Occupational Licensin g, p. 1.

Date: 2005
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