Course Review

I enjoyed the overall structure of the course and the way that it was taught. I personally thought that this course was very informative and insightful, particularly in a way that I thought I could apply in future situations such as my career. More specifically, I thought that the online blog posts and the excel homework made me keep up to date with all my coursework in the class. I felt like the blog posts in the class provided a good review of the class session for the week because it required us to summarize and apply the content that we learned in the classroom to our blog posts. I also thought that the excel homework problems were a good reinforcement of the information provided in the textbook.

In addition, I thought that most of the content that was covered in this course was relatively new for me. Most of the excel topics that were covered such as transfer pricing and insurance was definitely doable in terms of the amount of math involved, but was novel in the sense that I had never seen these types of models before. I am sure I will encounter these similar types of topics in future economics classes that I take at this University. I am also considering into going into financial consulting in the future so I know that I will most likely encounter these topics again.

One critique that I had for the course was the content of the textbook. I felt like the content of the textbook was very dry and that I learned the material better when it was explained in class through the powerpoints or through the excel homework. Nevertheless, I did feel that the textbook was very thorough in explaining various subject matters in detail. I consulted the textbook numerous times especially for topics that I had trouble understanding.

Another thing that I had difficulty with in this course was the format of the exams. I felt that the exams were just the excel homework and this is where some people had trouble. I thought that there was a lot more material covered in the class lectures that could have been on the exams. Furthermore, it was easy to lose a lot of points on the exam if one question was answered incorrectly.

Overall, I would definitely recommend this course to anyone. This was a tremendously helpful course that I will hopefully reflect back on and utilize the knowledge gained in this classroom for my future endeavors. 

Reputation in an Organization

Reputations in organizations are extremely valued. Having a certain reputation can make or break an organization, consumers have the tendency to place more value on a product if the company making the product has a good reputation. This type of reputation can come in many forms. Walmart has a reputation for providing items at bulk pricing to consumers. Microsoft has a reputation for making products for business use such as through Microsoft Office and the Windows operating system. In particular, one company that I have found to be especially interesting is Apple. The reputation that Apple has developed in the past 20 years is incredible to see. Essentially, Apple has developed the reputation to be technologically innovative and to provide products to the consumer that is aesthetically pleasing. Furthermore, Apple has developed a reputation for providing good support for its consumers. For these reasons, Apple has established such a large following in the consumer market. Thousands of consumers wait in lines for new releases of Apple products every year. The reputation that Apple has developed brings the company loyalty in its customers. I have personally seen people buy a certain Apple product on the market simply because of the brand, rather than another item that might be cheaper or meet their personal satisfaction better.

One of Apple’s more innovative products was the release of the iPod in 2001. This was one of the products that Apple revolutionized the music industry. Consumers were able to have an mp3 player that wasn’t based off of flash storage. Consumers were able to store thousands of songs on a device and be able to integrate this device with the iTunes software developed by Apple. In this way, Apple developed the reputation for being innovative in the music industry. Consumers associated the music market with the iPod brand. Apple also developed a reputation for being “cool” amongst the younger generation. Furthermore, the utilization of advertisements with flashy visuals and catchy music helped uphold this reputation of being “cool”. I personally remember how popular iPod were when I was growing up. All my friends that had iPods when they first came out became very popular because everybody wanted to see the device in action. Furthermore, Apple has maintained the reputation of being technologically innovative (even though it might not be), by releasing a newer version of the product every year. Typically, there are a few improvements with the product such as an updated version of the iPod. In recent years we have seen how the iPod has improved every year and even by coming out with other versions of the iPod such as the iPod Nano and iPod Touch.

Apple also has a reputation of having good support. Usually support through the genius bar is supplemented by someone that is competent enough to try to fix a situation. This is quite contrary to other businesses where you are directed to speak to someone who might not even be based in the United States in order to provide troubleshooting. The reputation of Apple is obviously also very apparent in way the stock value has risen dramatically in the past few decades. Apple may have the reputation of being innovative, and it does this best by creating products that are consumer friendly while also attracting the tech savvy as well. 

Reputation in my Family

One environment where I developed a personal reputation is with my family at home. I feel strongly pressured to develop a certain persona based off of my reputation at home. In particular, I have to uphold a very responsible reputation in regards to my parents and I have to assume a loving brotherly type of reputation when I am around my younger sisters. I would typically say that my reputation with my family is very respectable. I try to appease my parents by being the right type of role model for my little sisters.  

I have developed my reputation through my years of experience with my family members. My family members, especially my parents have steadily learned to trust me and to let me assume more responsibilities. In particular, I felt as if my parents were a big motivator in my life. They would help me set specific goals and help me set out to achieve them. These goals might include academic goals or career development goals such as getting a job. As I learned to meet these goals, I have developed a reputation of being reliable and a responsible person to my parents.

Furthermore, my reputation amongst my little sisters is hopefully one that they can be proud of. I personally want to be the role model that my little sisters can look up to and strive to be. On a personal level, I have worked especially hard in developing my reputation as a person that does the right thing, although this can be difficult at times. Whenever I am around my sisters I try to stress to them that being a good person is such an extremely important goal to strive for in life. I know that my parents will push my little sisters to become successful academically, so I try to push them in other areas such as being involved in the community and taking on extracurricular activities in school.

In addition to assuming moral responsibilities, I have worked hard to become a role model for my sisters through my achievements. I have accomplished this by doing well academically in school and starting to become financially responsible for myself. My current goals involve graduating from the University of Illinois with a high GPA and to immediately start working after college. Hopefully, by accomplishing my current goals, I will build on my reputation of being a role model for my little sisters. I want to eventually become a mentor for them for whatever life goals they are set to accomplish by sharing with them my personal experiences on various subject matters.

What I have described so far is for the most part accurate, but there are many instances where my reputation amongst my family members have deteriorated because of my actions. It is very difficult to maintain a good image for my parents and more importantly my little sisters at sometimes, particularly at my age. I feel like I am at the age in which many people participate in activities that would be inappropriate in the eyes of my parents or for my little sisters to see. One example is going to social events with my friends. Although I am 22 years old, and can legally drink I still think that there are many negative connotations associated with participating in such an activity. There have been many instances where my parents have seen me drinking. Although they don’t necessary care, they always tell me to be responsible with my actions. For these reasons, I try to keep my social activities away from my parents and my little sisters especially. In particular, there have been instances where I choose to go out with friends rather than stay at home and participate in more family activities. 

Triangle Principle Agent Relationship

I have personally experienced the triangle relationship between the principal agent problems in my previous employment. In particular, I had summer job in which I worked as a cashier at a local convenience store. This was a job in which I assumed a lot more responsibility that I had initially thought. I worked primarily night shifts, which meant that I had to essentially run the entire store by myself. Since there was only one worker in the store during this shift, I had to assume the responsibilities of running the store as well as taking care of the customers. Essentially, I experienced the principal agent problem with trying to be an agent to my boss as well as the customers. There was a clear distinction between what specific customers wanted and the expectations from my boss.

More specifically, I acted as an agent between my boss and the customers. My boss would leave me specific set of instructions each night such as managing inventory, stocking the store, paper work, or clean up. The main concern of my boss was to keep the store running at all times and to make sure that everything goes smoothly. Often times I would have to take inventory for current products and then make orders electronically for various items. For example, I would have to take inventory of alcohol products and make a purchase for those items that would potentially run out that week. Since we carried a variety of products from food, alcohol, to cigarettes we had to constantly keep inventory managed in order to make the store run smoothly. Since the convenience store that I worked at was a franchise, there was one main distributor that the store purchased from. There were incentives to purchase specific items and sell them in the store such as for promotional purchases. These were the items that my boss would incentivize me to sell. Certain contracts gave special discounts for the sale of certain products so these were the products that my boss would tell me to try and entice the customers to sell.

On the other spectrum, I would deal with customers on a daily basis. Often times these customers were my regulars. I would build a relationship with these certain people that would come in on a regular basis. These were the type of people that would stop in and would take the time to talk to me. In addition, these customers would often times give me their input on specific products that they would like to see in the store. For example one particular brand of cigars would sell very fast whereas others would sit on the counter for months at a time. When I would try to communicate to my boss these suggestions, there would be a mix of attitudes. While my boss sometimes respected my input, there were other times in which they would simply be ignored because of the protocol of the franchise. There was definitely a conflict between what certain products consumers demanded and the choice of products that my boss made from a higher up position in this organization. The main issues that arose because of this triangular principal agent problem came from asymmetric information between the various principals. There is a discrepancy between what consumers demand and the information about various contracts and promotions. While I looked to satisfy the party of my boss, I sometimes felt pressured to agree with my customers. I would definitely try to actively sell the products that had a promotion. It became difficult at times trying to explain to my customers why my manager wouldn’t take the advice of multiple customers.

Group Settings

Working in a group setting brings to mind many conflicting attitudes. Specifically, there are those time in which I have personally strived very well in a team setting. When everything just works right, there is great communication, attitude, and a sense of accomplishment when everything is said and done. On the other hand, there have been quite a few experiences in which I have experienced a group setting utterly failed. These bad experiences are usually plagued with inefficient communication and an overall inhibited sense of morale for the team.

In one of my recent school projects, I had to meet with a partner in order to prepare a presentation for the class. This was a very pleasant experience because I was able to work with someone that was able to communicate effectively with me and have the same incentive to do well in the course. We decided to meet in the library a week before our presentation. We had both previously prepared for our meeting beforehand so we were able to utilize our research into producing a presentation. This saved us a lot of time because we committed our effort to preparing for our meeting. Furthermore, we were both motivated to do well on the project. Everything just seemed to work so smoothly because it was on a subject that we were both passionate about. I attribute this success to having matching personalities. There are just some people that you seem to click with even from the beginning.

I’ve also had experiences where things did not work so smoothly. One of these experiences that come to mind is when I had a group project in one of my classes last semester. This was a group project in which there were 3 other members including me. This experience was disastrous in the sense that nothing was accomplished. We had previously exchanged emails and were trying to arrange for a group meeting sometime before the group project. It seemed as if communication was a huge issue because it was such a hassle to effectively even agree to a meeting. Once we decided upon a time and place, 2 of the group members decided not to show up. We eventually had to complete this project the day before it was due. There was no sense of morale or team spirit in the group because 2 of the other members were gone. The attitudes that prevailed the members of the group that showed up was that the distribution of tasks in the group was unfair. This was a very stressful experience that has personally taught me how a group setting can be more detrimental than helpful. Being prepared to deal with unexpected situations such as a group member not showing up is an important characteristic of any group setting. The cliques that formed in this situation were the people that actively contributed to the project and those that did not. There was a clear distinction between people that cared about the project and the people that didn’t.

Procedural Fairness in Team and Individual Settings.

This was a very insightful piece that analyzed the wealth distribution using behavioral psychology as an example to explain a specific phenomenon. I personally believe that this article touches on important topics such as “procedural fairness” which I found to be incredibly interesting. The psychological aspect of examining how someone receives wealth affects the distribution of this wealth was in particular something that did not occur to me before. I have personally experienced this phenomenon of procedural fairness when it comes to working with in a group environment. The concept of team vs. individual production as we discussed in class can be applied in the same experiment.

One example that shows this is when working in a group environment compared to an individual environment in a school setting. When working in a group, all the members of the group must contribute their effort in order for a final grade to be determined for the entire group. For these reasons, group members will often insist that every group member contribute an equal amount of work. If someone if slacking it would not be fair for that person to get a higher grade because the other people in the group were able to contribute on his behalf. On the other hand, individual work in a school setting corresponds with the effort that the person puts into the assignment or studying for a test irrelevant of other people. The procedural setting of working in a group or studying for a test by yourself corresponds with the distribution of wealth or in this case grades.

Furthermore, this article strikes an interesting point when the author states that “The compression went into reverse in the 1980s, and since then, inequality has risen to levels approaching those of 1929.” This fact alone shows the resulting implications of our current societal approach towards wealth distribution. It is simply not working. The author proceeds to further insist that democrats focus more on more ways to achieve a more balanced wealth distribution by focusing on the procedural fairness as discussed above. Some ideas that crossed my head when reading this article was just about ways in which this can be accomplished. The people is trying to achieve this wealth distribution by offering incentives for people to take on this approach without opposition for giving out handouts.

I personally believe that one way to solve the problem of unequal wealth distribution is to promote economic equality by putting more emphasis on the work culture. If we value the workers on the edge then there would be less opposition for fairer distributions of income. The notion that managers and CEOs should make millions of dollars based off of commissions or performance should be less idealized. If there is more cooperation and involvement from both the higher ups and the workers that constitute the majority of the production and other operations, then people could see how to divide income more evenly. This type of attitude is very prevalent in Japan, in which managers do not make substantially more than the workers at a company. 

Transfer Pricing "Illinibucks"

The notion of “illinibucks” in theory sounds like an interesting concept but in actually would be difficult to implement in my opinion. Our current process utilizes a system in which we prioritize by a first come first serve basis, by seniority, or different colleges of study. I believe that our current system is fair because we place emphasis on taking the initiative such as waiting in line. The implementation of illinibucks would seem to promote greater utility but would be hard to carry out because I believe that there would be many conflicting attitudes towards this type of system. For example, one problem illinibucks would create would be to make it unfair towards people that are very active and involved. These are people that register for their classes at their earliest convenience or arrive ahead of time in order to wait in a line. These people would be at a disadvantage because they would have the same priority as someone that would normally not take the initiative to do these things.

Furthermore, illinibucks would make it incredibly difficult for upperclassmen to for major specific people to select the classes that they need to take. Under our current system, we place priority for people that need to take these classes. If everybody had illinibucks, anybody would be able to have an early selection for a class that they hypothetically would not need. The benefits to illinibucks would be create more efficiency when it comes to consumer decisions. Consumers would be smarter about dedicating their resources by using illinibucks. They would have to consider what specific things they value such as waiting for a class or waiting in line for a football ticket. Lines would invariably be smaller or more well-organized because consumers would not spend unnecessary illinibucks for things that they don’t need.

If I were given the opportunity to use illinibucks I would utilize my illinibucks primarily for important things such as school. I would make sure to allocate my illinibucks to selecting classes or meeting with my academic advisors first before I would use them for extracurricular such as buying tickets to sporting events. I could see potentially problems arising from the process of allocating illinibucks. Would students be given the same amount of illinibucks per semester? Could students buy more illinibucks if they needed them? Problems could arise because people could see some injustices from people being able to afford to buy more illinibucks. How would the school deal with students that don’t have the money to buy additional illinibucks? Would they get less priority for important things such as selecting classes? The transfer pricing of illinibucks would create many issues depending on if the administered price was either too low or too high. As mentioned before, if the administered price was too high then students that are unable to buy these illinibucks would be at a disadvantage. If prices were administered too low, then consumers could see problems arising from too many people having priority over others. These would create longer lines and consumers would see the illinibucks as being useless because people would be able to afford more of them. 

Managing Financial Risk after Graduation

The risk of financial security, being independent, and being able to provide a living for oneself is definitely an area of great importance for many college students. As an economics major, I am still faced with the constant pressures of handling this type of future graduation risk because of the way that I’ve seen my friends deal with the current job market right now. Many of my friends that have graduated have managed this risk quite well and are doing very well for themselves financial. In addition, I have also seen some of my friends unable to find a job after they have graduated because of the dynamics of the labor market in their particular field of study. Personal experience has taught me that I need to develop the skills in order to make myself marketable in the labor force. For these reasons, I’ve taken the necessary actions in order to minimize the risk of financial security such as being smart with my money and actively seeking the work experience that I need to find a job after graduation. This is something that I value greatly because I am currently in debt with my student loans and I know that I have to be responsible for this money by being able to provide an income for myself.

I am currently unemployed so being frugal with my money has always been a topic of great concern. I track my personal finances every day and make sure that I do not spend excess amounts of money on things that I don’t need. Furthermore, I would consider myself to be a fairly competent shopper. Essentially, I don’t spend any money where I don’t need to. One example of how I am frugal with my money is the fact that I rarely eat out. I typically buy my groceries in bulk and look for specials.

I have been developing my marketability in the labor market by working this past summer. I was involved in a start-up company. This experience gave me a tremendous amount of insight on the daily operations of a business. I believe that working and gaining necessary work experience is very important to managing financial security after I graduate. I have personal seen my neighbor go through the college experience and be unable to find a job once he graduated. This was primarily due to his lack of work experience. Even though he had a degree, many companies are unwilling to hire people if they do not have any prior work experience. My friend essentially had to work as an intern without pay before he was able to find a position with a salary. This experience has taught me to actively seek either employment or an internship before I graduate college. This way I will have the necessary work experience prior to graduating and will make job finding a lot smoother. 

Opportunistic Behavior

Opportunistic behavior is the notion that one party will take advantage of a specific circumstance given the choice in order to benefit their own self interests. This type of behavior may range from a criminal robbing a store at gun point to a company taking advantage of cheap labor in another country in order to produce a product. Although these two circumstances are very different, they both potentially display opportunistic behavior in the sense that one party is promoting their own self-interests with disregard of the consequences whether directly or indirectly on others.

More specifically, a robber would directly harm the store owners and society as a whole in order to expand his economic interests. A company that outsources its production process to a country where there are trade advantages would benefit the company at the expense of its laborers. These are simply general examples of where opportunistic behavior can be clearly seen. In the real world however, opportunistic behavior can be difficult to see because of the lack of information. It’s difficult to often see the true intentions or incentives that drive a certain individual or party. The application of the concept of opportunistic behavior is especially prevalent when it comes to economics in the sense that this type of behavior can be seen as being unethical or immoral. Societal values dictate whether a certain choice is acceptable or not. There is often conflicting values between the self-interests of an individual and what is acceptable, but this is not mutually exclusive. Individuals can pursue their own self-interests without negatively affecting others or by even bettering others as well.

One example in which I have personally experienced the chance of behaving opportunistically was when I was faced with the decision of whether or not to sell my tickets to a concert that I had purchased. I was faced with a dilemma of whether I should go to this show and ultimately decided not to go because my friends could not attend this concert with me. Since this was a sold out show, the demand for tickets was incredibly high. I had seen multiple people asking for these tickets through online media such as facebook and craigslist demanding tickets for above the market price. Ticket scalping is an example of opportunistic behavior in which people sell tickets above the market price for shows that are sold out or with incredibly high demand. It is often looked down upon but not enforced whatsoever through local laws. I had initially bought my ticket for $30 and I advertised my concert ticket to my friends on facebook. I had multiple offers of $100+ from a few of my friends but I ultimately decided to forgo this economic profit by selling it for what I had paid for to one of my close friends.

I decided not to behave opportunistically in order to benefit my self-interests because I looked at the situation as simply helping out my friend. Another reason that I believed that I did not act opportunistically was because I wanted to be seen as an ethical individual. People often look down upon ticket scalpers because their business practice revolves entirely on acting opportunistically in order to promote their economic interests. In the end, my choice to sell my ticket for the base value was definitely worth it in my opinion. My friend was wholeheartedly appreciative of being able to buy my ticket and he later gave me free tickets to another concert.

Organization of a Startup Restaurant

This past summer I was involved in a startup for a restaurant that will be opening up in a few years. This particular restaurant is a family run business and is dedicated to providing health conscious food options for consumers. More specifically, this restaurant is distinctive in the sense that it offers a tremendous variety of foods to meet a niche market. My role in this startup was to help coordinate a business plan and implement it by helping to develop new products that the restaurant would provide, plan, and organize future workers for the restaurant including architects, chefs, and food suppliers. It was a very novel experience and has helped me tremendously by providing the experience that I need to start and run a business.

The structure of the restaurant was based on a hierarchal structure. My co-workers and I would work together in a group in order to do all the research and attend to business meetings in order to implement the business plan. Ultimately, our input was reviewed by the two owners of the restaurant, who would then sign off on our work or provide their input in order to point us in the right direction.

The initial process of starting up the restaurant was very political. The paper work required in order to legally establish this restaurant was incredibly arduous. Everything from safety requirements to building codes had to be signed off by a committee in the town. Several attempts were made to submit the proper paperwork for review before the committee was able to grant the right to start building the restaurant. Furthermore, the board of committees were very demanding about having the right referrals from people. This process was denied several times before we were able to hire a lawyer in order to present our submission for this business.

After we obtained the right licenses in order to build the restaurant we had to attend various business meetings in order to hire the people to run the restaurant. The interview process for the chefs were relatively straight forward. We interviewed several chefs and rated them based off their skill and knowledge about health foods, specifically those that were knowledgeable about vegan as well as gluten free cooking. My co-workers and I offered our opinions about each chef and ultimately the owners took this consideration into account when selecting the right chef.

The transaction costs associated with starting up a restaurant were numerous. One of these is the fact that we did not have enough information to make an insightful decision for our suppliers. We were looking into various organic and small time farmers in the local area that we could depend on specifically for our menu items like smoothies and salads. It was very difficult to discern between the quality of certain fruits and vegetables. The organic market is so diverse in the sense that the requirements for a product to be labeled organic is so lenient. It is very difficult to find a quality product that would be cheap enough to still make a profit as an item on the menu. Another transaction cost that I personally experienced was the negotiating that was involved in starting up the restaurant. There would be several rounds of negotiations between the committee in order to get the restaurant approved. Furthermore, there were numerous meetings with the architect in order to design a building that would meet the building code regulations but would also suite the needs of this particular restaurant. We had to bargain for the implementation of separate refrigerators and kitchens in order to prevent the cross contamination of gluten free products.  

Joseph Stiglitz

 Joseph Stiglitz is an influential economist that was born in Gary, Indiana. He attended the Amherst University for his undergraduate studies and then later received his PhD at the Massachusetts Institute of Technology.  He currently is a Professor at the University of Columbia and has had numerous contributions in the field of economics. These include winning the Nobel Peace prize in 2007 for his work in studying asymmetrical information in insurance market, developing the Shapiro-Stiglitz model which explains efficiency wages, as well as working with the United States government under Clinton and the Obama information by serving on the council of economics. Some of the areas of research that he is known for are in efficiency wages in unemployment, income distribution, anti-trust laws, and globalization.

Stiglitz began working with the Clinton administration in 1992 and has served on the council of economics to provide consultation to the United States government. Furthermore, he has worked under the Obama administration to deal with the financial crisis during the financial housing market crisis. He has been noted for criticizing the policies of the Obama administration in regards to the financial recovery plans. In addition to his work in the government, Stiglitz has provided contributions in economics through his research in the efficiency of wages in unemployment even under equilibrium. More specifically, he has developed a model with Shapiro called the Shapiro-Stiglitz model in 1984. This model seeks to explain the structure of unemployment through certain assumptions about human behavior.

His research into insurance led him to win the Nobel Peace prize in 2007. Stiglitz did research into the insurance market and discovered that there were differing levels that buyers and sellers had in the insurance market. In particular people buying insurance typically have more information than the companies that they are buying from. The implications of this particular study resulted in a better understanding of the concept of asymmetrical information. This concept is where one party has more information over another.

While researching about Stiglitz I was particularly interested in his role in the United States government. One of my research interests is being able to develop and understand models on a Macroeconomic level and more specifically on an international level. I did not know any about Stiglitz before this project, and I was pleasantly surprised at how influential his work has been in the fields that I am currently studying. Stiglitz works seems relevant to this course, especially the Shapiro-Stiglitz model when it comes to the structure of businesses and society in order to explain unemployment as well as the productivity and efficiency of a particular market. In the Shapiro-Stiglitz model, he explains that there is market failure because of the structure of our government. Our government implements minimum wage laws that makes the labor market inefficient because this price does not correspond with the equilibrium price of that wage.

Citations

http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2001/stiglitz-bio.html

http://www.econlib.org/library/Enc/bios/Stiglitz.html