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Occupations: A Hierarchy of Regulatory Options

September 28, 2016

This essay, authored by University of Michigan-Flint professor of strategy, innovation, and public policy Thomas Hemphill and Institute for Justice director of strategic research Dick M. Carpenter II, examines the current state of occupational regulation.

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This essay, authored by University of Michigan-Flint professor of strategy, innovation, and public policy Thomas Hemphill and Institute for Justice director of strategic research Dick M. Carpenter II, examines the current state of occupational regulation and proposes an alternative “hierarchy” of regulatory approaches for balancing consumer protection by government and cost-benefit trade-offs for consumers and licensees.

Hemphill and Carpenter write that the current regulatory structure is inflexible and incentivizes heavy-handed government interference in two primary ways.

“First, legislators feel compelled to act,” Hemphill and Carpenter wrote. “They are not, after all, elected on a promise to do nothing. Second and relatedly, legislators will continue to opt for licensure unless given a more attractive alternative than simple inaction. Most occupations, of course, operate just fine with no government intervention, but from time to time a case may be made for some form of regulation. With only two options, a license will likely be created, even if the cost of the intervention outweighs the benefit to public safety.

The proposed hierarchy proposes a schedule of options, starting with a hands-off “market competition” default option and ending with government licensure of occupations.

Hemphill and Carpenter write that their hierarchy would give more flexibility to regulators, ultimately providing more benefit to consumers.

“Ideally, policymakers would use this hierarchy to produce regulations that are proportionate to demonstrable need. The process for doing so would identify the problem before the solution, quantify the risks, seek solutions that get as close to the problem as possible, focus on the outcome (with a specific focus on prioritizing public safety),use regulation only when necessary, keep things simple, and check for unintended consequences.”

Author
Thomas A. Hemphill is a Professor of Strategy, Innovation and Public Policy in the School of Management, University of Michigan-Flint.
thomashe@umflint.edu