Licensing began with medicine and law; now it extends to 20 percent of the U.S. workforce, including hair stylists and auctioneers. In a new book, the legal scholar Rebecca Allensworth calls licensing boards “a thicket of self-dealing and ineptitude” and says they keep bad workers in their jobs and good ones out — while failing to protect the public. SOURCES:Rebecca Allensworth, professor of law at Vanderbilt University. RESOURCES:"The Licensing Racket: How We Decide Who Is Allowed to Work, and Why It Goes Wrong" by Rebecca Allensworth (2025)."Licensed to Pill," by Rebecca Allensworth (The New York Review of Books, 2020)."Licensing Occupations: Ensuring Quality or Restricting Competition?" by Morris Kleiner (W.E. Upjohn Institute for Employment Research, 2006)."How Much of Barrier to Entry is Occupational Licensing?" by Peter Blair and Bobby Chung (British Journal of Industrial Relations, 2019). EXTRAS:"Is Ozempic as Magical as It Sounds?" by Freakonomics Radio (2024).
Chapter 1: What is the relationship between licensing and professional fields?
What does a hairdresser have in common with a lawyer? How about an interior designer and a doctor, an auctioneer and a funeral director? These are not jokes. I'm sorry. I wish they were. What these jobs all have in common is that they require a professional license, which is administered by a licensing board that is often made up of other doctors and funeral directors and hairdressers.
This may not be something you've ever thought about, and I wouldn't blame you. It's one of those things a friend of mine calls a MIGO topic. MIGO standing for my eyes glaze over. But when you think about how our economy works, these labor licensing rules are pretty important.
It is the most important regulatory institution we have in labor.
Rebecca Allensworth is a law professor at Vanderbilt University, and she's written a book about professional licensing. We Americans like to think of our economy as open and dynamic. Allensworth shows that in many ways it's not, and that these licensing boards help too many bad actors stay in their professions and keep too many good ones out.
And that's why she called her book The Licensing Racket.
Professional licensing is too onerous for certain professions. And it just makes the barriers too high. It keeps people out. And the investment in what you're getting for that regulation is not worth it. And then for the professions that are left, medicine, nursing, law, now we need something like a licensing board. Only what we have is terrible.
By the way, a working title for the book was Bored to Death.
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Chapter 2: How do professional licensing boards operate?
B-O-A-R-D, presumably.
Yeah. So it had three problems. One, it was dorky wordplay. Two, there was this problem that maybe I was over claiming by talking about death in the title of a book about licensing. And then the other one, of course, being that it sounded like the book was going to be boring. But the over claiming point, you know, I do think that it's dangerous.
Literally, in the sense that there's a lot of doctors and lawyers out there who are just plain dangerous. And we give them a lot of trust and a lot of power as professionals.
Around 20% of the American workforce is subject to professional licensing. The system is sanctioned by state governments across the country, and it has been expanding like crazy. Today, in an episode of the Freakonomics Radio Book Club, how much licensing is too much? And where has this system gone especially wrong?
80% have a history of major discipline, often for overprescribing, for malpractice, for sex with patients.
The racket is real. The solution? That's the hard part. But we'll get into all that starting now.
This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner.
At Vanderbilt Law School, Rebecca Allensworth teaches contracts and antitrust law. Those are pretty standard law school topics. But when she was starting out, she got obsessed with a topic that very few legal scholars, really few scholars from any discipline, have studied closely, professional licensing boards. Let's start by defining some terms.
A licensing board is a regulatory body that's ostensibly part of the state that decides who can enter a profession, what qualifications they're supposed to have, and then also whether somebody has done something that deserves a revocation of their license or a restriction on their license. It's created by a state statute. But these boards are mostly made up of members of the profession.
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Chapter 3: What are the criticisms of licensing boards?
And that's how Rebecca Allensworth came to understand how the licensing system works. As she describes it, the path to licensing usually starts small. Members of a profession, often backed by a professional association, will approach a state legislature with a proposal for licensure.
These proposals, known as practice acts, set the scope and entry requirements and ethics rules for a given profession. Once a profession secures its initial licensing law, it gains control of the regulatory board that oversees it. Today, there are around 300 licensed professions in the U.S. regulated by around 2000 licensing boards across the country. How did all this get started?
Some of the first licensees were physicians.
Licensing started out with medicine in the late 19th century, and it was limited to the learned professions so-called until about the 70s. Since then, it's just been a straight line up, the number of licensed professions and the people covered by professional licenses. This idea of belonging and meaning and prestige plays a big role because people started to look around and say, our work matters.
Our work is just as important as this licensed profession. Therefore, we need to make sure that we get a licensing law for ourselves. I'll give you an example. Right about the time that people were starting to confront the idea of alcoholism in the 70s and 80s, there became a shortage of therapists that could help you overcome your addiction. And so AA became a big thing.
Then these AA group leaders wanted to have a little bit more training and professionalism. They wanted to become therapists themselves. And so there was a new profession called Alcohol and Drug Abuse Counselors. The idea was that it was going to be a relatively easy license to get and it was going to increase access to care.
Over the years, this profession looks around and says, what we do is just as important as any other therapist. In some ways, it's even more important. Overdose risk is really high. This is life or death. We need the same level of licensure.
And it just got ratcheted up to now to where it takes more hours of practice to be an alcohol and drug abuse counselor, like internship type hours, than it does to become a physician.
Okay. And all the licensed professions you write about have boards. And earlier you said that the board situation is terrible. Why is it terrible?
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Chapter 4: How do licensing boards handle misconduct and discipline?
So there's a lot of cover-up power that a license can give, which makes it really dangerous.
And in that case, who were the members of the board? Did they have any relationship with the person whose license was being considered?
Well, no, and that's part of why I resist the word corruption when I talk about this problem. None of the members of the board knew him personally, had any connection to him, had any stake, really, in him getting his license back. On the other hand, most of them were physicians, and most of them saw this person as having started out somewhat like them.
Sure, he definitely made some very different choices. He lost his way. He had three different kinds of addiction. And that is something that especially physicians are likely to see as having a lot of explanatory power, as capable of being rehabilitated. And, you know, it's all about second chances.
You cite many examples of professionals who face discipline from their licensing board, but then they encounter, as you put it, a system full of second, third, and even fifth chances. And you write that a lot of these regulatory failures come from the most legitimate professions, you call them, like medicine. Talk about the Michael LaPaglia story.
His was a story of many, many chances. LaPaglia was using his license to deal drugs and to make money. He got in the crosshairs of the licensing board over that first incident. They came to his house and they found a whole bunch of drugs that he wasn't supposed to have, some for fun, some maybe he's selling. So they put him on probation.
But then while he was on probation, because he had lost his DEA number, which allows him to prescribe these more high-dose opioids, he starts trading in suboxone, which suboxone, even though it's used to treat addiction, can also be abused and also has a large street value. So he does this. He gets caught for it while he's already on probation with the board. And then he gets another chance.
He gets his license back. The restrictions that they put him on after that hearing were basically the same as what they had on the first one. What does he do after that? Well, now his prescribing is even more limited, in part because he's facing a federal indictment for this same conduct. So he goes door to door doing COVID tests. This is high COVID, right?
So he finds people who want a second opinion. They want a doctor's note that says, I don't have COVID, even after a positive test. He does that for $50 a piece. This is just somebody who has used their license not to treat patients, not in the best interest of patients, but really for their own gain.
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Chapter 5: What are the challenges faced by licensing boards in legal and medical professions?
What does that mean? Spell that out.
The board members, I'm giving them the most credit possible. Without fully realizing they're saying they're not going to be able to take private insurance. They're not going to be able to work in the highest end hospitals. They're going to be doing things like working in prisons, working for the VA. And that's not really the set of patients that I'm super worried about protecting.
Those patients are lucky to get care.
80%.
80% have a history of major discipline, often for overprescribing, for malpractice, for sex with patients. The lower down in the market you go, the rate of discipline goes up.
In the legal profession, which is your profession, should I assume, as with medicine, that the lower you are on the income chain, the more likely you are to have a lawyer who has been disciplined and you may not even know about it?
We really need more data here. I would love if my book could inspire more kind of empirical work here. But what I do know is that as you receive discipline from your bar association, your likelihood of working at a firm goes down and your likelihood of working for yourself and in particular in working in immigration, injury law and indigent defense decreases.
goes up as you receive discipline from your bar. Those are three categories of clients that are particularly vulnerable.
You explain in the book how complaints against professional licensees can come from a variety of sources. They might come from law enforcement. They might come from the licensing board's own investigators. But one thing that surprised me is that boards rarely hear complaints brought by consumers or customers. Why is that?
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Chapter 6: Can the public access disciplinary records of licensed professionals?
It impacts the economy because it is the most important regulatory institution we have in labor. There's more people who are subject to professional licensing than are in unions and are affected by the minimum wage combined. 20% of the American workforce, tens of millions of workers. Also, we know that it raises prices and creates scarcity. We spend more on healthcare than any other country.
I don't want to oversimplify healthcare economics, but there is an element of a supply and demand problem where prices go up because supply is so low. Another way of saying the same thing is that it is very expensive to go to medical school. It's such a huge investment to get into the profession, and that creates a small number of practitioners, and then prices go up.
It's a big problem for equality because you have to have typically a clean criminal record to get over this barrier. You have to have money to pay for a school. You also have to be able to take a year or three out of the labor force to go to school. So what does this do? It kind of gives a leg up to people who already have a leg up in life.
So it exacerbates inequality essentially.
Exactly. I think the place you see this most is with people with criminal histories, because the one thing you need when you get out of prison is a job. You have to overcome the idea that you've got a ding on your criminal record. There's no real nexus between the idea that you committed a crime and this licensed profession that you're doing.
I saw a dental assistant get a really hard time about her criminal record in front of the dental board. It's very unclear to me what her driver's license charges had to do with being a dental assistant.
But advocates of licensing argue that licensing can help raise wages for lower education or low-income workers, especially minorities, by providing a better path to economic sustainability because they are in a licensed profession. How much sympathy do you have for that argument?
Not a lot. The reason why those wages are higher and the reason why there's this path is because of the people who are left out of it. That's the source of the benefit.
It's not enough to say that this particular minority group or this particular disadvantaged set of people get a particular benefit out of licensing if the way that they're getting that benefit is by excluding other members from that same group.
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