"I never worry about my milk being rancid in the US. Why is that? [Implication: because the state's health inspectors keep us from harm, and thus a state is needed.] … What is your solution to the problem?" (Denise Hood Mollaesmail)
This is really just a variant of Who Will Build The Roads, but this response was put so well (by Michael Matalucci) that I grabbed it for this page:
Let's take a simple example. Suppose there were no health inspectors to make sure that restaurants were serving "safe" food and using safe handling practices. If you opened a restaurant and didn't practice safe food handling practices, and your customers became ill, how long do you think you would stay in business? It would be in your own best interest to make sure that your customers didn't get sick from your food.
But now, let's take it to the next level. Your restaurant has been open for a while, and you have gained an excellent reputation in the community for serving good, safe food, at a reasonable cost. But, you get sloppy. You start overlooking little things. Maybe you are so busy that you forgot to wipe down the board you just cut raw chicken on before you started cutting lettuce on it. Oops. Accidents happen. And when accidents happen, businesses get sued. Most, if not all businesses carry liability insurance in case there is an accident. The insurance company covers, with cash, any liabilities your business incurs. So therefore, it is in you insurance companies best interest that you practice safe food handling. In fact, they might send their own inspectors to your restaurant. If their inspectors make a mistake, they can be fired. This is in contrast to government inspectors who can't be fired, and a government that can't be sued (in most cases).
So, who do think would be more reliable? An unaccountable bureaucrat backed by an institution with no vested interest, or an employee that can be held accountable, who is backed by a company that has a direct vested interest?
When you look at it in this light, you will see that the government is merely doing the job that the insurance companies should be doing, and to make matters worse, it's at taxpayers expense (and as a nearly unaccountable monopoly: your one vote doesn't let you change anything of note in the bureaucracies; but as a consumer in a free market, your "vote" is absolute).
And, as a consumer, you have every right to demand to see proof of liability insurance coverage before making a purchase. Then you can make an informed choice.
Voluntary means, such as the incentives for farmers and retailers to keep customers, voluntary accreditation (such as Underwriter Labs, Good Housekeeping, and Consumers Union), professional and consumer organizations, and word of mouth, are better at protecting people from shoddy products than compulsory licensure. [HB]
Also see:
Harming Our Health by Mary Ruwart. How and why medical licensure is counter-productive.
How Government Solved the Health Care Crisis, by Roderick T. Long.
Medical Insurance that worked - until government "fixed" it.