Minimax regret and the job search

        

The minimax regret theory explains why my roommate searched for a job this fall even though he had a good standing job offer. My roommate—call him John—loved the company at which he interned. They offered to hire him after he graduates. When he came back this fall, John had to decide whether or not to recruit at different companies in hopes of getting a job at a company he liked even more than his summer offer. John’s choices were C1) recruit or C2) don’t recruit. His potential states were S1) Could get a better job and 2) Could not get a better job.

Since John didn’t discount options by their probabilities, he thought that the benefit of a potential new job outweighed the cost of recruiting (including writing cover letters, tinkering with his resume, etc). John basically held out for a ‘unicorn’ job, one that he would absolutely love and which he wouldn’t be able to get without choosing to interview. The regret table below shows that someone choosing to live by the minimax regret theory would choose to recruit, just like John.

	Could not get a better job	Could get a better job
Recruits	Cost of recruiting	0
Does not recruit	0	Benefit of a new job - cost of recruiting

My Shiny Teeth and Stigler

Would you trust someone who isn’t a dentist to whiten your teeth? Don’t worry—you likely won’t ever have to make this decision, because in 14 states only dentists can legally perform teeth-whitening services. Those who offer these services without a license will get fined, or even worse, charged with a felony (see: Connecticut). This is good, right? I personally wouldn’t want to pay good money to have some unqualified schmuck to ruin my pearly whites.

However, the real reason that teeth-whitening is licensed is that dentists were upset about losing customers to non-dentists who opened businesses in shopping malls and spas that charged less money ($100-150 as opposed to$300-700) for the same teeth-whitening services. Those dentists eventually persuaded their state dental-licensing boards to add teeth-whitening to the definition of the practice of dentistry. Including the 14 states that license teeth-whitening, 25 states have ordered non-dentist teeth whitening businesses to shut down. Add the seeming harmlessness of teeth-whitening products already regulated by the FDA, and it is seems that licensing teeth-whitening is less about protecting consumers and more about restricting competition and allowing dentists to retain a monopoly on teeth-whitening. Stigler would say that dentists “captured” government regulations designed for their benefit. Also, because dentists deal with the public at large, the costs that licensing imposes on any one person is small, giving people no real incentive to fight the licensure.

In 2015, the Supreme Court ruled that the North Carolina State Board of Dental Examiners had overstepped in barring non-dentists from performing teeth whitening. But the issue of occupational licensing extends far beyond the dental industry. It is estimated that occupational licensing costs the U.S. around 3 million jobs and $203 billion a year.

Why Unions Can Be Just As Bad As Big Business

The last few days in class we've been talking about how big businesses will often seek regulation that benefits their industry in the name of the "public interest." It's easy to criticize the much maligned (and often deservedly so) investment banks for doing so after the 2008 crash, but what's much harder is to see this behavior in industries we actually believe are seeking regulation and policy in our -- and our childrens' -- interests.

Betsy DeVos was one of President Trump's most controversial nominee picks. Vice President Pence had to break the 50-50 tie in the Senate to push her confirmation through, meaning she was confirmed literally by the smallest margin possible. Contrary to most of what's been written about her, DeVos isn't an enemy of public education or children ... she's an enemy of the teachers' unions. She's interested in exploring charter schools and vouchers, policies that create school choice (read competition/eliminating barriers to entry) for those who cannot afford private school and currently largely don't have a choice in where their kids go to school. What DeVos really wants is to take the power to decide the quality of our children's education away from unions and give it to parents to improve the quality of education. Whether her policies will achieve that goal is another story, but her intentions are generally good.

So why is she so controversial? Well, the two largest teachers' unions are the 3rd and 8th largest contributors to liberal organizations (candidates, super PACs, etc). To give some perspective, Goldman Sachs is #20. Most of us think these organizations fight strictly for things pretty much all of us agree with -- higher wages for teachers, etc. While they do fight for these things, they're also fighting for freedom from accountability, as we saw when President Obama's Education Secretary John King Jr. was accused of "destroying what it means to teach" by the National Education Association (#3 on list mentioned above) for advocating for using test scores as a measure of performance. Or sometimes even fighting for tax-payer funded plastic surgery at the expense of other teachers losing their jobs. But somehow we have conflated the interests of teachers' unions with the interests of the public ... which is exactly what they want, and what Stigler said they would try to do. Check out this article from the American Federation of Teachers, AKA #8 on the list of donors mentioned above, to see it for yourself: Why Teachers Unions Are Good For Teachers -- And The Public. Any large group seeking to influence governmental policy and regulation should be viewed skeptically, regardless of what they say their intentions are.