When I lecture in the field of political economics, I often discuss an important clause in the supposed rulebook of the US Constitution called the “Full Faith and Credit” clause, specifically found in Article Four, Section One.
It reads:
Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State.
The idea was that a legal document issued by one State – something like today’s drivers’ licenses -- would be recognized as legal in every state. That’s why you can drive over state borders and/or rent cars when flying to states other then your own.
But, as perspicacious readers no doubt realize, this Constitutional mandate isn’t uniformly abided by most states.
Which is why a bill that awaits the signature of Arizona Governor Doug Ducey (R) is so noteworthy and important.
As Eric Boehm reports for Reason, Ducey is expected next week to sign a law that will be the first in the nation to recognize out-of-state professional licenses.
We've heard too many stories of licensed, experienced professionals denied the opportunity to work upon moving to Arizona… With this first-in-the-nation reform, Arizonans who have recently moved here will be able to put their skills to work faster and without all the red tape.
Absolutely right. And consumers will reap the benefits.
As I have mentioned previously at MRCTV, licensing laws are known in economics as “artificial barriers to entry” that protect those who are already in the business from new competition, allowing them to keep prices higher by excluding lower-cost competition. That, in turn, is called “Rent Seeking”, whereby a business seeks to gain profit not from helping the consumer and competing on the free market, but by extracting wealth from the consumer and blocking competition.
Typically, those consumers who are harmed most by licensing are of comparatively low incomes. By keeping costs high, licensing prevents those with limited resources from hiring the newer, lower-priced market entrants.
And, of course, licensing laws also give the states plenty of cash, and give the politicians who play in the government pig pen the power to “shake down” potential market participants, trading political favors to the business people for financial support each election cycle.
The new law stems from a recent battle in Arizona over the state Board of Cosmetology (because, who WOULDN’T expect bureaucrats to tell hair-cutters and stylists how to do business?) investigating students giving free haircuts to the homeless. Seriously. Here’s what Bohem notes:
The bill's passage is the culmination of a fight between reformers and Arizona's licensing boards. Ducey used his State of the State Address in 2017 to call licensing boards "a group of special interest bullies." He's saved his sharpest barbs for the Arizona State Board of Cosmetology, which has investigated students for giving free haircuts to the homeless and defended a rule requiring 1,000 hours of training before letting someone blow-dry hair for money.
Bohem also observes that the bill that awaits Ducey’s signature will not stop the byzantine soviets of State Boards, like that of the Board of Cosmetology, from creating bizarre and unsettling barriers to entry for people to be able to work in numerous fields. It will, however, offer more competition in the form of allowing workers in various fields who have been licensed in other states to have their licenses recognized, as the US Constitution mandates, and as most states refuse to do.
Bohem notes that this problem is pervasive:
This is also a model for other states to follow. Most licenses aren't transferable between states, and research in recent years has shown a link between growing levels of occupational licensing—more than a third of all jobs in the United States are now subject to some form of licensing, up from just one in 10 in 1970—and a decline in workers' mobility.
And this has massive economic ramifications for consumers, because lower-priced service-providers are blocked from entering many fields of endeavor.
Nationwide, workers whose jobs require a state-issued license lose out on between $178 million and $711 million they could have earned by moving to a different state, according to a 2017 paper by Janna Johnson and Morris Kleiner, a pair of labor economists at the University of Minnesota.
And it allows us to grip some important intellectual ammunition about the way the US government selectively enforces very clear provisions of the Constitution. Arizona’s government should not have had to have written a law about this. Workers from other states should not have had to see Arizona write the law in order to work there without interference by the state. The Constitution already forbids such laws from existing.
Likewise, the same principle can be applied to firearms licenses. Despite the fact that the Second Amendment strictly prohibits any government – federal, state, county, or local – from infringing on the right to keep and bear arms, states issue licenses for gun ownership. They should not, but they do. And since they do, those licenses should be recognized in every state. “Full faith and credit,” politicians. You can look it up.
So Arizona’s new law, once signed, will not just offer greater economic opportunity. It will offer anyone willing to learn a profound lesson in how utterly off the rails of the Constitution the US central and state governments are.
Anyone willing to learn…
We’ll see how many that is.