John Locke Update / Research Newsletter

Appeals court refuses to bail out cronyism for agent training

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One of the most consistent findings in economic research is that occupational licensing restricts the supply of service providers in the licensed field and thereby drives up prices. The earnings premium to licensed providers is one reason why members of a profession generally favor state licensure.

The system of occupational licensing is a notorious form of cronyism. Milton Friedman compared it with a return to the medieval guild system, and Friedman is the one who wrote that

The overthrow of the medieval guild system was an indispensable early step in the rise of freedom in the Western world.

Which was the first sentence in Friedman’s chapter on occupational licensure, in his landmark work Capitalism and Freedom. The implication is that the return of a guild system happens to the detriment of freedom, and subsequent research bears that out. A discussion of all this and occupational licensure as Carolina Cronyism can be found in my report "Guild By Association."

There I write how others who benefit from licensure include trade schools that provide the training mandated under state licensing requirements. That brings me to this passage:

In North Carolina, there are two competing providers of training — pre-licensure as well as continuing education — for bail bondsmen, the nonprofit North Carolina Bail Agents Association and the for-profit North Carolina Bail Academy. In the closing moments of the 2011-12 legislative session, Senate Bill 738, originally titled "Liability Insurance Required for ABC Permits," was gutted and replaced with language granting a training monopoly for bail bondsmen to the N.C. Bail Agents Association. It passed the House and was approved the next day in the Senate by concurrence. Curiously, the legislator who inserted the bail bondsmen training language has not been identified.

The Rockford-Cohen Group, parent organization of the N.C. Bail Academy, which would be put out of business by the bill, filed suit and won an injunction in Superior Court. "The court cannot find any factual, logical, or reasonable basis that [the law] serves any other purpose other than to eliminate all current and future competition for the benefit of a private corporation or association in violation of the North Carolina Constitution," wrote Wake County Superior Court Judge Donald Stephens in blocking implementation of the law. The case is ongoing.

The case took another step this week, a step away from cronyism. As reported by Michael Lowrey in Carolina Journal today, a three-judge panel of the N.C. Court of Appeals upheld the injunction against the training monopoly.

Lowrey noted that because the ruling was unanimous, the N.C. Supreme Court is not obligated to hear the case should the Bail Agents Association appeal.

As for who proposed the unconstitutional training monopoly in the first place, well, that is still somewhat of a mystery. Lowrey writes,

The exact origin of the provision is uncertain, though two senior legislative leaders one are closely linked to the association. Sen. Tom Apodaca, R-Henderson, owns a bail bonding company and is former president of the N.C. Bail Agents Association. Rep. Justin Burr, R-Stanly, is a bail bondsman and his father is the association’s current president.

A constitutional recognition of the invisible … mind

That notwithstanding, the North Carolina Constitution’s ban on monopolies contains one of my favorite phrases: "Perpetuities and monopolies are contrary to the genius of a free state and shall not be allowed."

So here’s to a judicial nod to that genius. May there be many more, and from the other branches as well.

Click here for the Rights & Regulation Update archive.

 

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As Director of Regulatory Studies at the John Locke Foundation, Jon gets into the weeds in all kinds of policy areas, including electricity, occupational licensing, hydraulic… ...

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