It doesn't take an expert to tell you a government-imposed cartel is bad. Or does it?

October 2007

It doesn’t take an expert to tell you a government-imposed cartel is bad.
Or does it?

By Clark Neily

Nearly alone among the states, Maryland demands that anyone who owns a funeral home be a fully licensed funeral director.  This is like saying you have to be a licensed pilot to own an airline.

IJ Pioneers Educate “Public Choice Theory” As Cutting-Edge Tool

Besides the fact that the rest of the country seems to get along fine allowing “outside” ownership of funeral homes, the idea that Maryland’s law might not be entirely public-spirited is further confirmed by the exceptions the law allows.  For example, spouses and executors of a deceased funeral directors estate may own funeral homes even though they have no training or experience.  Or, if you happen to have about $250,000 to burn, you can try to buy one of 58 specially grandfathered corporate funeral homes from its current owner, much like a taxi medallion in New York City.

Of course, it is no mystery what this law is really about.  By erecting protectionist barriers to entry into the funeral industry, Maryland increases profits for state-licensed morticians at the expense of consumers and would-be competitors.  This dynamic—a demonstration of “public choice theory”—exists in nearly every IJ economic liberty case.  It is particularly blatant in the Maryland funeral home case, and, as such, provides a great chance to tell a court the story of public choice economics through our litigation in hopes of striking down this nakedly protectionist scheme.

Enter George Mason University Law School Professor Todd Zywicki.



George Mason law professor Todd Zywicki shares his thoughts on public choice theory with participants at this year’s IJ law student conference. Zywicki also aided IJ’s battle against Maryland’s funeral home cartel by serving as an expert.

We knew Todd had first-hand knowledge about this issue because in 2004, as head of the Federal Trade Commission’s free-market-oriented Office of Policy Planning, he signed a letter expressing the FTC’s view that the elimination of Maryland’s funeral home ownership restrictions would benefit consumers by promoting competition.  We also knew Todd as a first-rate mind and one of the leading authorities on public choice theory among legal academics.  So we approached him about the possibility of serving as an expert witness in the case, where his role would be to evaluate the law and explain whether it appeared genuinely public-spirited, as the state’s lawyers argued, or more consistent with the special-interest-promoting predictions of public choice theory, as we claimed.

Plowing through several thick binders of pleadings, depositions and discovery materials, Todd quickly sized up Maryland’s law and described it as “an effort to create governmentally imposed barriers to entry in the funeral home industry and thereby to transfer wealth to a discrete, well-organized interest group at the expense of consumers of funeral home services and the public at large.”  From there, Todd went through the law and the record evidence, showing point by point how Maryland’s funeral home ownership law tracked perfectly the insights of public choice economics.  This included demonstrating how special interests influence legislatures and “capture” regulatory agencies to promote their own anti-competitive interests in the guise of consumer protection and public welfare laws that are anything but.

Todd’s expert report, which we submitted to the U.S. District Court for the District of Maryland in support of our pending summary judgment motion, is the most powerful explanation of public choice economics we have ever seen in litigation.  It provided us with tremendous support for the argument, which we make in all of our economic liberty cases, that the kind of blind, unquestioning deference to economic regulations that is currently in vogue among so many judges is not only constitutionally suspect, but intellectually and factually unjustifiable as well.  This effort is yet another example of IJ’s cutting-edge litigation tactics that break the mold of how such cases are advanced in the courts of law.

With Professor Zywicki’s expertise, the Institute for Justice will help this court and other courts across the nation better understand the vital role they play as a check on abusive and self-serving government power.

Clark Neily is an IJ senior attorney. 



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