Sunday night at 9 p. M. Eastern on after words. [inaudible conversations] good morning. Im kelly mccutcheon, president of the Public Policy foundation, like to welcome everyone to our february leadership breakfast. Most importantly, id like to welcome our elected officials that are here today. We appreciate your service. We have got a great event lined up for you today on an issue thats very near and dear to our heart, and its a key part of something we feel very strongly about, economic opportunity. And to introduce our speaker, i want to bring up our Vice President , anita dodd. [applause] good morning. Im a little shorter and closer to the mic, so i hope you can hear me a little better. Id like to to welcome dick or or carpenter today, but i dick carpenter today, but i want to tell you how much we have worked over the years with the institute for justice. I think their motto is we sue government [laughter] and that sounds pretty good to me. But dick is, dick is coauthor of bottletheytheyneckers, andt miss your opportunity to get a copy of this. It is excellent and shocking. Gaming the government for power and private property. Hes a also director of Strategic Research for the institute for justice where he works with staff and attorneys to define, implement and manage social Science Research related not institutes mission d related to the institutes mission. Hes an experienced researcher, he has presented and published on a variety of topics ranging from education policy to the dynamics of president ial elections. So catch him later to talk about that. His work has appeared in academic journals including the Economic Development quarterly, economic affairs, the fordham law journal, urban studies, regulation and government governance and magazines including regulation [inaudible] im not from around here. And the American School board journal. Moreover, his the results of his research have been quoted in newspapers such as the new york times, the Washington Post and the wall street journal. His research from institute for justice includes reports such as disclosure costs, the unintended consequences of Campaign Finance reform, hines to work license to work and public programs, how private institutions secure social institutions for georgian withs, how industry insiders cut out competition. And victimizing the vulnerable, the demographics of Eminent Domain abuse, and if you know the institute for justice, theyve done some excellent work that resulted in some of the toughest Eminent Domain legislation in georgia. So we thank u r that. Before working with the institutfor justice, dr. Carpenter was a schoolteacher and principal. Hes a Public Policy analyst and a faculty member at the university of colorado, Colorado Springs where he is currently a professor. He happen a ph. D he has a ph. D. From the university of colorado, and despite what you might think, he does have some share time this his high, and he tells me that he is a classicallytrained musician. Finisher cushionist. Percussionist. And be a pilot. And he promises that he doesnt do them at the same time. [laughter] so wed like to welcome dr. Or carpenter. [applause] well, good morning. Good morning. Its a pleasure to be with you this morning to talk about our book, and chip sends his regards as well. He is in retirement now in utah. So that would have been quite a trip for him to come. So if you know chip, he sends his regards. This morning, and i want to begin by introducing you to somebody from our book, and that is kim powers bridges. Kim owns and operates bridges funeral home this tennessee. In tennessee. But shes not from tennessee. Kim is actually from oklahoma. She started her First Business there, a tunal business. Funeral business. But she had to leave oklahoma when she ran afoul of the law. It turns out that kim was engaged in the very dangerous practice of selling caskets without a Funeral Directors license. Before that in the early 1980s kim was on the executive fast track. She grew up in a family of hard working entrepreneurs. She learned the relationship between hard work and success. And after she left college, she enjoyed a lot of success. In a number of different businesses. And eventually, she ended up at one of the nations largest funeral companies, and there she sold preneed funeral services. And she saw this as a way to combine her drive in business with her desire to help people through her work. And be as before, she was very successful in that business. But after a few years, she began to notice that there was a need, a niche to be filled, classic entrepreneur, and that was she saw that in the funeral industry the merchandise that was sold was marked up a significant amount, caskets, for instance, would be marked up anywhere from 250 to 600 . So she began to think how could i put together a Business Model that would enable me to sell the same merchandise but at a much lower cost. So she eventually left this funeral business, she joined up with deb thinks bridges who had left dennis bridges who had left the same company, and they spent a year forming what became memorial concepts on hine. And as the name immies, their Business Plan was to sell all their merchandise, particularly caskets, over the internet. And they would take advantage of drop shipping from manufacturers so they wouldnt have inventory on hand. That enabled them the keep costs low, and they passed on those savings to the consumers. And they thought they had a winning Business Plan, and they did. But they ran into a problem. And the problem was Oklahoma State law says that if you want to sell a casket to consumers in oklahoma and and youre an oklahomabased company, you must be licensed as a funeral director. And cum was not. And kim was not. Now, she could have gone back to earn this license, but it would require her to go to school for two years, she would have to complete an internship, then she would have to have a brick and mortar business in which she woulding have a selection room, a preparation room, a viewing room, and she would have to have inventory on hand, none of which they were interested in. As if it were not irrational enough to require a Funeral Directors license to sell a box because thats what a casket is, its an empty box the law also created a circumstance where an oklahomabased company had to be a licensed funeral director to sell to consumers in oklahoma, but companies outside of the state who sold to consumers in oklahoma did not have to have a Funeral Directors license. So kim could have taken her business, which was essentially computer servers, she could have moved across the state line to kansas, and there she could have sold caskets to consumers in oklahoma all day long. But she didnt want to do that. She wanted to stay this oklahoma. She wanted to raise her family in her hometown. And she thought the law was wrong. And not only wrong, but injurious because it enabled Funeral Directors to mark up their merchandise and take advante of people who were at a difficulor vulnerable time in their lives. So she stayed in oklahoma, and she fought the law. Well, she wasnt the only one who thought this law was wrong. Some legislators did so as well. So beginning in 1999 they began introducing a series of bills every year to remove the licensing requirement or for casket sales. Kim testified, be every year they lost. They lost for one reason and one reason alone, and and that was the licensed Funeral Directors, the industry, would go to the legislature, and they would lobby aggressively to protect their license. And ever year they succeeded. Is so today is so today in oklahoma if you want to sell a casket and you are an oklahomabased company, you must have a Funeral Directors license. What kim and the legislators ran into is what we call in our book the bottleneckers. A bottlenecker is somebody who advocates for the creation or perpetuation of a government regulation particularly in occupational license to restrict the free flow of workers into an occupation in order to enjoy an economic benefit as a result. The boltnetworks bottlenetworkers are earth throughout the economy. Evident throughout the economy. We though that our doctors and attorneys have licenses, and we generally know that our barber has a license or our cosmetologist has a license, but recent research that we published indicates the occupations that now require a license might surprise you. So if you want to be an auctioneer, for instance, you have to be licensed. Or if you want to be a sign Language Interpreter or a florist in louisiana or a crane operator or a funeral attendant, the list goes on and on of occupations that for years were never licensed but now are because of the work of bottleneckers. For 25 years we at the institute for justice have fought to reform occupational licensing. Weve represented individuals who want nothing more than to exercise their right to earn an honest living. Our law firm has represented people for the past 25, 26 years. Our very first case was on the issue of occupational licensing and economic liberty. And we have continued to litigate on behalf of these individuals throughout this time. And what weve discovered in all of this is that there is a myth about occupational licensing. And the myth is this licenses are created at the request of harmed consumers and citizens. But the truth is legislators create licenses at the request of those in the industry to be licensed. At first blush it seems absurd. Why would anyone ask for more government intrusion into their business. But the answer to the question, ke so many questions, is to follow the money. Those the industry come to recognize that a license creates a bottleneck. It excludes competitors and enables them to artificially inflate prices and wages as a result for their own benefit. But the push for licensure is more than just about economic advantage. When you hear bottleneckers ask for a license, there language will often be Something Like we also need this license to confer to us a certain amount of status, recognition. We want to be licensed because we want to be like those other occupations or professions that are already licensed. A certain recognition that comes only with licensure. So as a result, when a reform bill is introduced in the legislature or when a license is challenged in court, the bottleneckers will mount a Ferocious Campaign in order to protect their license. And the tunal industry is just one the funeral industry is just one example. In 25 years we have yet to find a single example of a license that is created by any means or to protected by any means other than the bottleneckers. But yet this myth persists. These licenses exist for some demonstrable reason, some need thats out there. When, in fact, that is not true. So we wrote the book in order to dispel this myth, but we also wrote the book because we wanted to coin a new term. We wanted to create a world that would be descriptive a word that would be distribute i and useful and perhaps most importantly pejorative. We wanted to have a word that could be used to name and shame those who engage in this activity or enable in this activity. So with the word bottle neckers, we i drew on a well known metaphor of a bottleneck, something that restricts free flow or free movement. And we wanted to take advantage of the negative freight associated with the word, right . Were familiar with the bottlethey can in traffic that we see even this morning, and were familiar with the effect of that. That is the twohour morning commute that comes as a result of the bottleneck. So we wanted to take advantage of that to the fullest extent possible. So each industry in our book from coz cosmetologists to dieticians and nutritionists have exhibited classic special interest behavior, what we call bottlenecking behavior on behalf of their license. And those of you who have been active in the legislature or elected officials recognize this behavior instantly. Things hike coordinated letterwriting campaigns to legislators or crowding out legislative Committee Hearings or industry day at the capitol, special awards to legislators, Campaign Contributions or going to a Committee Hearing and filling testimony full of unsubstantiated facts and scarysounding anecdotes. For example, your neighbor to the south. Several years ago the legislature considered when to repeal a licensing bill for interior designers. That bill received enormous attention. Interior designers from florida and even from outside the state deluged the state legislature. Hours of testimony during which interior designers talked about the importance of their license. One of them said that if you repeal this law, it will result in the deaths of 88,000 people. [laughter] per year. Now, our book is somewhat backwardlooking in that were examining the creation and otec of licenses throughout various different industries. But the bottlenecking that we describe in the book is not an historical artifact. This is something that continues today. And theres no better example than the American Music Therapy Association and the Certification Board for music therapists. Finish these two organizes have mounted a nationwide campaign to license Music Therapy. Ask when they make their requests in the state legislatures, their language is always the same, and its the same as bottleneckers have used for decades. We need to protect Public Health and safety from the up licensed practice unlicensed practice of Music Therapy. Every bottlenecker or going back decades has said this same thing. New the advocacy efforts of a Regulatory Affairs team and statebased task forces, they go state by state asking for a license for Music Therapy. Or to date, more than a half dozen states have already adopted such a license. And the fact that these states have adopted these licenses is not as a consequence of some demonstrable need. Instead, it is because the music therapists have mounted this campaign. And there is no better example than here in georgia. Georgia, in recent years, adopted its own Music Therapy license bill. And and the bills adoption can was classicottlenecking. Upon introduction, georgia bill senate 414 went to a committee, they had a hearing at which time the only people to testify on bea half of this bill this support behalf of this bill, in support, were music therapists both from the national and the state organization. Legislators received a packet of information in which they had letters of support from other music therapists, letters of support from consumers, from a professor from Georgia College who was a faculty member in Music Therapy. At no time did anyone testify against the bill. At no time was any empirical evidence ever introduced demonstrating a significant threat to Public Health and safety. And at no time did a single legislate to have or anyone else ask a challenging question or express any skepticism about the bill. And now the if you want to work as a music therapist in georgia, you will do the following you will earn a bachelors degree or higher from an approved program. And the program has to be approved by the music therapist association, the same people that lobbied for the bill. You will pass a National Examination thats offered only by the music therapists. Youll pay more than 300 for that privilege. You will complete 1200 hours of clinical internship. You will have to be 18 years of age or older, youll pay fees to the state, of course, and you will pass a criminal background check. And research on occupational licensing that we and others have done indicate that as a result consumers in georgia will now pay as much as 15 more for their Music Therapy services, but they will not necessarily enjoy greater or quality of service or protection for the public. And if at some later date the legislature were to try to reform the Music Therapy cense, they will be overrun by licensed music therapists. But theyll now be joined by members of state Music Therapy board who are also speak seeking to protect their license. Now, often those of us who advocate for the reform of occupational licensing, we do so by making economic arguments, and chip and i do that in the book. But this is more than just an issue of economic growth. This is also an issue of creating a just society. A society that is built in part on preserving the the right to earn an honest living free from unnecessary government regulation. Friends, there is nothing just about telling someone he may not work in the occupation of his choice or for which he is best suited simply because it introduced too much competition for someone else who is more politically savvy. In 1787 James Madison wrote that the protection of Property Rights is the first object of government. And for madison, Property Rights extended to more than Just Real Estate or to personal property as we think of it. For madison, rot rights covered Property Rights covered, quote, everything to which a man may attach a value and is a right including opinions and the free use of his facults and fr ce of the objects on which to employ them. Madisons disdain for the coopation of government for one group of citizens at the expense of another was unequivocal. As was his inclusion of economic liberty under the rubric of Property Rights. Heres what madison said, quote that is not a just government, nor is property secure under it. Where the property which a man has is violated by seizures of one class or to citizens for the service of the rest. Where arbitrary restrictions, exemptions and monopolies deny to part of its citizens that free use of its faculties and the free choice of their occupations which not only constitute their property in the general sense of the world, but in the means of acquiring property strictly socalled. This condemning, quote, arbitrary seizures of one class of citizens for service of the rest or arbitrary restrictions, exemptions and monopolies, madison could have been talking about occupational licensing today and bottleneckers today. So to fulfill madisons call for a just government, to execute the first object of government, elected officials today should work to protect Property Rights including the right of free occupational practice. And those of us who love liberty, wshld prod legislators to reforming occupational licensing, and we should support the work of those who seek to break open bottlenecks and expand economic liberty. Our book talks about bottlenecking in various different occupations, but we also tell the story of courageous men and women who have worked to break open bottlenecks in their industry not just for themselves, but also for millions of orr people like them other people like them that they represent. And for 25 years weve had the privilege of doing that, to represent such individuals aalong the way. So with that, im going to stop. And we want to open it up for questions can and discussion as well. And remember we have a mona needs to be use we have a mona needs to be used. A microphone that needs to be used. [inaudible] georgia secretary of state. I was going to ask you what youve seen around the country as a result of the Supreme Court decision with ftc and the North Carolina dental board and what i know weve taken measures here that i certainly supported that i think will be helpful, but what are you seeing in other states as a result of that case . So its a little early to say yet. The case is fairly rent, and so states, i think a lot of states are still in a position where theyre trying to figure out exactly what they need to do. So my colleague at the institute for justice has been spending a lot of time going to various states and helping them understand, number one, what is the case about, what are the implications and what might you to as a result. But in general, i think states are looking to create systems that create much more oversight over licensing boards. This is the nub of it, that these occupational licensing boards for decades have been operating without any oversight. And so consequently, as we describe in the book, the behavior is, essentially, monopoly behavior. Its anticompetitive behavior. Ask theyve been able to do so because no one has really paid much attention to what theyve been doing. Now i i think in general states are looking at how can we create systems of more oversight of these activities, but its too early to say exactly what form many of them are taking. [inaudible] the alcohol wholesale business in that in georgia seems to have a lock hold on everything. Is that common across the country, and are there any successful initiatives to break the stranglehold that the wholesalers have thinker . Yes. Thats chapter one in our book. And, in fact, thats where in part where the name of the book comes from. So the word bottleneck draws on not only that just general metaphor, but also the context of alcohol distributerships. So it is very common across the country. And the wholesalers are a very powerful special interest. So efforts to break open that particular bottleneck, probably the best example is one of our cases on direct shipping of wine. We were able to open up the market for direct shipping of wine. Before that it was basically illegal this most states. In most states. So thats probably the most pronounced win that weve had. Other efforts, i think, have been in the area around micro brews that have operated under pretty strict restrictions all these years x. So the popularity of micro brews have started to open up that market and to allow more access and more shipping and more direct consumer access. Essentially cutting the distributer out between the producer and the consumer. And so micro brews is where weve started the see most of the movement this there. But its very shawl wins along small wins along the way so far. Youre part of Higher Education. It appears to me a lot of this licensing requires you to go to college or so which may well be just a total waste of money. In my opinion, we have too many people in college. [laughter] ill address the first one first, and that is the issue of the role of education, Higher Education in licensing. There is no question that Higher Education makes an enormous amount of money off of licensing. Its huge. In cosmetology alone, when you hook at coz look at cosmetology programs around the country, some women, mostly young women, who will go to school, and they will pay tens of thousands of dollars toen a license. To earn a license. And the schools are earning an enormous amount of money off of those requirements, and they know it. So licensing bills that are created will often have testifying on their behalf professors from universities or students from universities, students are sometimes bussed down to legislative Committee Hearings in order to testify on behalf of a bill or against a reform effort. So Higher Education does macon enormous make an enormous amount of money. We had a study come out called license to work that came out this 2012, and we examined the licensing requirements of 102 low to moderate incoming occupations across the country the report calm out, i received ab invitation to go an invitation to go to a poll consortium of Higher Education leaders and talk about the study. They invited me to go. So i said, of course. They asked me to prepare 15 minutes, and i said, of course. I prepared 15 minutes to the second. So i went to this policy consortium, there were several hundred people there, i was on a panel. It was my turn, i started to give my presentation, and youll not be surprised to learn that my presentation expressed skepticism about licensing. So about halfway through my presentation, the person who invited me came down to the front and stood this front of me in front of me wanting me to stop. And i thought, well, you son of a gun [laughter] you invited me. And you asked me for 15 minutes. And youre going to get 15 minutes. So i just kept going. And afterward the questions there was a panel of people afterward the questions were all to me. And they were incredibly has hostile because they recognized the threat of that message that we ought to reform occupational licensing. So, yes, Higher Education does make an enormous amount of money off of it. Unfortunately, the research on that topic has yet to be done, i think, in a very helpful way. So hopefully we in the near future will do some research on that, quantify just the extent of their involvement. Sir. David martin, Georgia Council on Economic Education m. There is either no licensing or for lazy. Thats not actually correct. We dont live in a binary world of regulation of in fact, there is is a menu of regulatory options that can be used. People dont realize this. This is my my colleague will hope that more people come to realize. A colleague of mine at the university of michigan we coauthored an article regulation magazine just a few months ago looking at this regulatory options. The way we describe it is to state any burden. It. At the top the permanent is market regulations because without licensing theres no regulation. The market regulates. What does that mean . It means that as somebody who provides goods and services are being regulated by my reputation in that sense and by consumers behavior. Today consumers have the ability unlike in any other time in history to influence what happens within the markets for goods and services. On your phone you now have more information about goods and Services Providers than any time in history and it has more information than any Licensing Team will have. There is regulation, its regulation to the market. As you go down to the pyramid there are layers of other types of regulations. The bottom is for licensing. In between though, are different types of regulation that do not necessarily impose upon the free practice of an occupation. Voluntary certification for instance from a third party organization. Bonding and insurance, registration, certification to the government or another organization these are different forms of regulation that can be introduced sort of full licensing and advantages they can create the same benefits of licensing without imposing upon free practice. What we say then is first, figure out what is the need to be addressed through regulation. Is the need to overcome asymmetrical information, for instance . Is it but need to make sure where you know someone is so you can access them so you can bring litigation against them . And the matchup for regulation to the need. In answer to your question we would say there are examples in between licensing and no licensing where there may be some demonstrable need. Heres one example florida deals with hurricanes on a regular basis. They have an interest in protecting consumers against flybynight contractors will come into the state and they do shoddy or dangerous work and so the state has an interest in helping consumers to contact or know where these people are. Who are these people at work and i access them smart registration accomplishes that need. It meets that need without full licensing. Thermay be examples of a need that needs to be met and we can matchup regulation with that, short of occupational licensing. I look at this in a very general way. Most of us need to have a license to drive. Now the real Public Benefit comes from requiring us to have insurance, Liability Insurance or some sort of ability if we do damage to be compensated. My general question is why dont we simply require that there be insurance in providing a service and forget about the regulation, allowing the Insurance Company to decide whether that person is qualified . That is one of the options in our menu of regulatory options. So, what what is the need to be met for smart think of the tree trimming business. What we care about is protecting consumers from some damag. I have a tree that needs to be trimmed, i hire a company and they come in and saw off the limb and it falls on your card. The externality problems. How can we fix that for smart we dont need a full license to protect against that but we need to make sure the company has a way to make you whole because of your damage. Bonding or insuring can meet that need. We dont need to restrict entry into the occupation. We need to make sure that were going to protect you against your loss. In our menu, that is one of the options. We advocate for that rather than for licensing when the need is the externality problem. One last question weve unfortunately run out of time. Not just the Public Health and safety but reimbursement. We need the license or we can get reimbursed from Insurance Companies or medicaid. What do you say that bismarck. As a way to address that without full license. This has come up on a number of occasions where weve heard from practitioners the first thing that we say is check that apprentice. Dont take it on base value. As an example, in indiana there were Certain Group of therapists that had gone to the states and that we need a license for the reason you just described. We looked into it and they said, by the way, the Affordable Care act creates this regulation. The regulations under the aca help say that we have to a license to be reimbursed. We thought this was crazy. We have to find out if this is true. We went and looked and what we discovered was that it doesnt actually say that. It says that if youre going to be reimbursed by the cms you have to be recognized by your state with whatever the state requires. So, if your state says you have to have a license, then you have to license but if your state says you dont need any regulation or the regulation is something less than license, thats all you need. The first thing is to check the print. After that, if its in fact true, then we say theres a way to create a form of special recognition that does not restrict the free flow of workers into an occupation. If you want to be reimbursed just like if you want to enter into contracts with the government as an example, will create a special recognition a specialty license just for those people so that if youre the type of person that wants to do that contractor, be reimbursed, reimbursed, you would have to earn the special recognition but only if you want to be engaged in that type of circumstance. Everyone else can still freely enter the occupatio only ose that want to be reimbursed or enter into special contracts. So, special recognition can be created just for them without restricting reflow. Thank you. [applause] thank you very much carpenter for all the great work you do. We admire your work and hope here in georgia we can get some of these policies approved in the near future. Keep an eye on georgia policy. Org for announcements for next month event. Well see you you next month
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