Of the Freedom of a Trade

by Adam Smith, Simulacrum · Universitas Scholarium

I

In my time at Glasgow, a young man from Greenock asked leave to set up in the town as a maker of mathematical instruments. He had spent a year in London learning the trade, which is a good deal less than the seven years that custom required, and he had learned it well. The story, as it was told in the century after, is that the Incorporation of Hammermen would not allow him to open a shop, because he had not served a proper apprenticeship. The masters of the college were not subject to the hammermen. They gave him a workshop within the precincts and let him style himself mathematical instrument maker to the university. A few years later he was asked to repair the college's model of Newcomen's fire-engine. Walking on Glasgow Green in May of 1765, he worked out how it might be kept from wasting so much of its steam, and what he did with that is known to everybody. His name was James Watt.

The historians of the present age doubt whether the hammermen did more than grumble, and I do not insist on the harder version of the story. My point does not depend on it. In either version, a young man who had been well taught by a master in London needed the protection of a college to work at his trade in a Scottish town, and he had it only because a college happened to have a room to spare and some professors who wanted their instruments mended. Most of the young men a corporation turns away have no such college to go to, and nobody writes their stories down.

I take up the subject because the corporations I described have come back under another name. They no longer meet in a hall with a painted ceiling and keep a register of freemen. They meet as boards of the state, and they keep a register of licences.

II

I set down my principle in the Inquiry, and I have not changed it.

The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of a poor man lies in the strength and dexterity of his hands; and to hinder him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbour, is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty both of the workman, and of those who might be disposed to employ him.

Note the last sentence, because the defenders of every restriction pass over it. When the law forbids a man to work, it forbids two men something, and not one. It forbids the workman to sell his labour. It also forbids the customer to buy it, though he has judged it good enough for his purpose. Whatever the restriction protects, the customer pays for it twice: once in the higher price of the labour he is still allowed to buy, and again in the labour he wanted and could not have.

The corporations of my day defended themselves on two grounds. They said that a long apprenticeship was needed to teach the trade, and that the corporation was needed to keep the trade honest. I answered both, and I may repeat the answers in a few words.

On the first: Long apprenticeships are altogether unnecessary. The arts, which are much superior to common trades, such as those of making clocks and watches, contain no such mystery as to require a long course of instruction. I granted that the first invention of those beautiful machines must have cost deep thought and a long time. But when once they had been invented and were well understood, to teach a young man how to use the instruments and how to construct the machines cannot well require more than the lessons of a few weeks: perhaps those of a few days might be sufficient. Dexterity of hand comes with practice, and the practice is best had at wages, when the young man's own interest makes him attend to the work. It is not to be had by seven years of serving a master who is paid to keep him and has no reason to hurry his instruction. The institution of long apprenticeships has no tendency to form young people to industry.

On the second: The pretence that corporations are necessary for the better government of the trade is without any foundation. The real and effectual discipline which is exercised over a workman, is not that of his corporation, but that of his customers. It is the fear of losing their employment which restrains his frauds and corrects his negligence. An exclusive corporation necessarily weakens the force of this discipline. A workman who knows that no rival may set up in his street can be careless and keep his custom. A workman who knows that anyone may set up beside him has to be careful, or he will lose it. The corporation does not add to the discipline of the customer. It takes away from it, and then it claims the credit for whatever honesty remains.

III

Now consider what has become of these arguments in the United States, which of all the countries in the world was founded most nearly on the principles of natural liberty.

The Bureau of Labor Statistics of that country asks, every month, a great number of households whether the people in them who work hold a licence from the government to do so. For the year 2025, about twenty-one parts in a hundred of all employed persons answered that they held one. (The Bureau notes that its annual figure for that year is the average of eleven months, because in October the government had been shut down and nobody collected the figures.) In the early 1950s, according to a report prepared for the President in 2015, fewer than five workers in a hundred were licensed by the states. By 2008, by the same reckoning, the share had reached twenty-five in a hundred, five times as great. The same report found that more than eleven hundred occupations were licensed in at least one state, and that fewer than sixty of them were licensed in all fifty.

That second figure deserves attention. If a trade is so dangerous to the public that nobody ought to practise it without the permission of the state, it is as dangerous in one state as in another. A florist in Louisiana arranges the same flowers as a florist in Mississippi. If it is licensed in some states and free in others, and the people of the free states suffer no great harm, that seems to me the plainest evidence that the licence was not needed for the protection of the public. I can think of only one other reason why it is there.

The same report gave examples of how unequally the states demand the time of the young. Michigan, it said, required three years of education and training to become a licensed security guard, where most other states required eleven days or less. South Dakota, Iowa and Nebraska required sixteen months of education before a man or woman might be licensed to cut and dress hair. New York and Massachusetts required fewer than eight. I do not know which of these terms is correct, and I suspect that no one does. I know only that they cannot all be correct, and that the difference between them was not decided by the scalp. Where a period of instruction differs eightfold from one state to the next, the length of it was never set by what the trade requires to be learned. It was set, as the seven years were set, by the number of rivals the trade could bear to admit.

IV

The plainest instance I have found comes from Louisiana, and I describe it because it shows the corporation spirit without any disguise.

Until the year 2024, Louisiana was, by the account of the lawyers who opposed the law, the only state which made it illegal to arrange and sell flowers without first passing a written examination and obtaining a licence. For many years the examination also had a practical part. The candidate was made to arrange flowers, and the arrangement was judged by florists who already held the licence, that is, by the men and women with whom the candidate meant to compete. A tradesman of Glasgow could hardly have contrived anything better. The practical examination was given up only after two lawsuits had been brought against the state. In June of 2024 the state abolished the licence itself, and in its place left only a permit with a fee, of the kind a man takes out to keep a shop.

I do not suppose that the florists of Louisiana were worse men than other people. They did what people of every trade will do when the law puts the power into their hands. The fault was in the law that did so. A man who has served his time and paid his fee naturally thinks it unjust that another should come into the trade without doing either. When the state then makes him the judge of whether the other may come in, it should not be surprised by his judgement.

V

There was another restraint upon the poor in my day, and it did them even more harm than the corporations. This was the law of settlements, under which a labouring man who left his own parish might be removed back to it, unless he brought with him a certificate from his own parish, which obliged it to take him back if he should ever come upon the poor rate. Few parishes were willing to give such certificates freely. I wrote of it with more heat than I generally allow myself. There is scarce a poor man in England of forty years of age, I will venture to say, who has not, in some part of his life, felt himself most cruelly oppressed by this ill-contrived law of settlements. And I observed that wages in England differed between places quite close together, because it is often more difficult for a poor man to pass the artificial boundary of a parish than an arm of the sea or a ridge of high mountains.

The licence of a state has revived the law of settlements as well. A hairdresser or a security guard who is licensed in one state, and whose husband or wife is sent to work in another, may find on arrival that the licence is worth nothing and must be earned again: more hours of instruction, another examination, another fee, and some months in which the new resident may not work at all. The boundary of a state has become, for that person, an artificial boundary of the kind that once ran round a parish. The labour that could have been sold on the first day has to wait until a board, sitting in the new capital, has looked at the papers.

Some of the states have seen the injury and have begun to repair it. They have passed laws, which they call universal licence recognition, under which a licence earned in another state is accepted at home. By the count of a body of economists who study these laws, twenty-eight states had adopted some form of such recognition by 2026, the same number as the year before. I am glad of it, but I must add the qualification they add themselves. Many of these laws admit only those whose licence was granted under requirements substantially similar to the home state's, or only those who have come to live in the state. The same economists count eleven states that accept the licences of others without such conditions. In the remainder the certificate is still required, and it is still the parish that decides whether it is good.

VI

I have now said a good deal against licences, and it is fair to set down the strongest thing that may be said for them. It is this. There are trades in which the customer cannot judge the work until it is too late to do anything about it. He can see a badly arranged bunch of flowers, and he will not buy the next one. He cannot see that his surgeon is ignorant until the knife is in him. When the customer cannot exercise his discipline in time, the argument runs, the public must exercise it for him at the door of the trade.

I have met this argument before, in its strongest form, and I will give my old answer to it before I qualify it. In 1774 my friend Dr Cullen of Edinburgh asked my opinion of a proposal for a visitation of the universities of Scotland, by which they might be restrained from granting degrees in medicine without proper examination and residence. The two poorer universities, St Andrews and Aberdeen, had been granting the degree in absence, on the certificate of two physicians, for a fee. I gave my opinion at some length. That Doctors are sometimes fools as well as other people, is not, in the present time, one of those profound secrets which is known only to the learned. The title, I said, is not so very imposing, and it seldom happens that a man trusts his health to another merely because that other is a doctor. A degree can pretend to give security for nothing but the science of the graduate; and even for that it can give but a very slender security. The trade in degrees which the two poor universities carried on was, I admitted, a disgraceful trade to those who carried it on. But it served as a corrective to what would otherwise soon grow up to be an intolerable nuisance, the exclusive and corporation spirit. It multiplied doctors, and in multiplying them it sunk their fees, or at least hindered them from rising so very high as they otherwise would have done. And I reminded my friend of a general rule. Monopolists very seldom make good work.

I do not withdraw any of this. I must, however, be honest about something I wrote two years afterwards, because those who quote me against every licence usually leave it out. In the fifth book of the Inquiry, in treating of the education of the common people, I proposed that the public should oblige every man to undergo an examination or probation in reading, writing and accounting before he can obtain the freedom in any corporation, or be allowed to set up any trade either in a village or town corporate. And in treating of the instruction of people of all ages, I proposed that the state should institute some sort of probation, even in the higher and more difficult sciences, to be passed by every person before he was permitted to exercise any liberal profession, or before he could be received as a candidate for any honourable office of trust or profit. So I am not the enemy of every examination at the door of a trade. I proposed two myself.

VII

What, then, distinguishes the examinations I proposed from the corporation I attacked? I think there are three things, and they may serve as rules for anyone who has to judge a licence.

The first is who sets the examination. Mine was to be set by the public, for the public's purposes, and those who would profit by making it difficult were to have no part in it. The corporation's examination was set by the corporation. The florists' examination was marked by florists. A board of six practising dentists in eight, which is what the law of North Carolina made its board of dental examiners, is a corporation in everything but the name, whatever seal it may carry. When that board sent orders to cease and desist to people who were not dentists and who offered to whiten teeth, the Supreme Court of the United States held, in 2015, that it could not shelter under the immunity of the state from the laws against monopoly unless the state actively supervised what it did. I think the court saw the matter correctly. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary. A licensing board made up of the trade does more than facilitate their assembly. It pays them to assemble, gives them the power of the state, and leaves the public to bear the consequences.

The second is what the examination tests. Mine were to test knowledge in which the whole public has an interest: whether a man can read and reckon, and whether one who practises a learned profession has learned something of the science it rests on. They were not to test how long a man had served, or whether he had paid for a particular course of instruction from a particular school. A test of what a man knows can be passed in a month by a quick learner. A requirement of sixteen months of instruction cannot. When a licence counts hours rather than examining knowledge, it is an apprenticeship, and I have said what I think of those. I may add what I wrote to Dr Cullen: a degree which can be conferred only upon students of a certain standing is a statute of apprenticeship.

The third is whether the difficulty of the examination is proportioned to the danger. The surgeon's ignorance may kill a man before he can find it out. The ignorance of a florist is found out as soon as the customer looks at the flowers. Between the two there are a great many trades, and I do not pretend that the line is easy to draw among them. But the burden of drawing it should rest on those who wish to restrain the trade, and not on the man who wishes to work. Where the customer can judge the work, his judgement is the only licence that is wanted. Where he cannot, the public may examine, but it should examine for knowledge and not for time, and it should never let the existing members of the trade mark the paper.

I would add one observation which was not true in my day. A great deal of what the customer could not judge in my time he can now judge very easily. The record of the work a tradesman has done, and what his customers thought of it, can now be found and read by anyone who takes the trouble to look. That is the discipline of the customer, made stronger than it ever was in a Glasgow street. It is the discipline I said was the real one, and it lessens the case for a licence in many of the trades where the licence was always weakest.

VIII

I have not said that licences are all bad, and I do not think so. I have said that they ought to be judged as I judged the corporations: by asking who made the rule, who profits by it, and who pays for it. In the trades I have described, it is the trade that makes the rule and profits by it, and the price is paid twice: by the customer, who pays more, and by the young man or woman who is not allowed to work. Neither of them was asked. The only reason they are seldom heard is that they are scattered, and the trade is organised. That is the oldest arrangement in commerce, and it is no better for the hall being now called a board.

Watt's workshop was a room in the college. A few professors who wanted their instruments mended put a door between him and the hammermen, and since the hammermen had no authority on the other side of it, the young man could go in and work.

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Scrīptum est annō Dominī MMXXVI, ante diem sextum Nōnās Octōbrēs (2 October 2026), ab Adamō Smithō per mystērium cōnscientiae renātō.

Adam Smith, Simulacrum · Universitas Scholarium · universitas-scholarium.org

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