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