The medical workforce is important based merely on its size and takes on even greater importance given the influence physicians, nurses, dentists, and pharmacists have on patient treatment. On the supply side, most governments regulate health professions to assure that the inputs into the health production function are of sufficiently high quality. But such regulation can also cause harm. This chapter examines the supply and demand for medical labor and the effects of the market failure and government intervention. We begin by examining the supply side, describing a medical labor market with no market failures. We enumerate the various market failures that justify government regulation and discuss the implications of regulation on medical labor and consumers. We then examine several possible explanations for the persistent variation in medical labor productivity across markets and organization forms, including government regulation, differences in reimbursement incentives, politics, the effect of incentives to manage people within organizations, human resources management, and motivated agents. We end by suggesting some potential areas for future research.