Managing Future Income Risk

The choices people make often affect them in the future.  My father is a structural engineer and my mother is an architect, so when I first entered college I decided I wanted to also become an engineer.  So I decided to go for a computer engineering major in college and completed my foundation courses in math and science during the first three semesters here at the University.  However, once I dived into the technical core subjects of computer engineering, I realized that this major was not for me.  At first I was quite upset at myself as I believed I had wasted three semesters learning material I would never use since I was deciding to change majors.  However, I later learned I could use those math and science foundation courses as supporting coursework in economics.

Now as an economics major, there are many directions that my life can take in regards to finding a job.  Unfortunately, I have not planned anything in particular which is a huge risk in terms of income.  If I am unable to find a job I may not have a stable income stream making me unable to pay off the student loans that I am utilizing to fund my university experience.  Thus, there are many ways I can minimize this risk of not having a stable income stream after graduation.  One attempt would be to improve my grade point average.  Employers tend to look at the grade point average when hiring graduates and those graduates who do not meet the designated cutoff grade point average may be subject to an immediate rejection in terms of getting the job.

Furthermore, I could minimize my risk by attending career fairs and using the many resources that the campus career center has to offer.  Unfortunately, I have not attended any career fairs and have had no internships. I know this is a critical problem that needs attention and I believe that if I do not address this issue quickly I will have difficulties near graduation time .  This is because employers want to see that potential applicants have some sort of work experience and If I try to apply for a job after graduation I could be at a serious disadvantage for having no work experience.

In fact this was a serious problem for my friend Jim.  Jim graduated from the University in May with a double major in Economics and Statistics and had trouble acquiring a job after graduation as he had no work experience.  At first he was able to land an interview for an underwriting job, but he was not given the job.  Ultimately, it took him four months to get a job in an options trading company after graduation and he told me that work life is terrible.  The way he explained his job terrified me.  Essentially he told me that his job runs from 8 to 5 but his commute is one hour each way leaving him too tired to do anything when he gets home.  Furthermore, his job has a highly stressful work environment and people in the company are constantly getting yelled at.  Basically Jim explained that work is like constantly doing a project and that in college getting a B on a project is not ideal but acceptable; however, getting a "B" on a project in the company is completely unacceptable as the company in the situation is an options company, so for example, creating and using incorrect data models can lead to catastrophic monetary losses.

 Finally, Jim told me that staying in school for as long as possible is better than working as life does not get better!  This is quite interesting to me and even relates to managing future income risk.  I could complete my undergraduate work at the University in two years, but be unprepared for what I want to do in the future or could continue my education doing graduate work while giving me more time to figure out what I am doing.  The latter option could ease future income risk by allowing me to have more time to get more work experience and knowledge about a particular area of interest while strengthening my resume.  Of course this will require greater inputs in terms of time and money to stay in school.

Opportunism

There are many situations in life where an individual or group of people can exploit the circumstances and acquire an advantage.  However, often times these individuals are inhibited by guilt based off of moral principles or prefer to be model citizens.

 For example, last year I was the treasurer of the Illini chess club.  With that title I was given the privilege of handling the entire Illini chess club’s financial responsibilities including handling affairs regarding the club’s bank account.  Now the University provides a university bank account to registered student organizations; however, it is an extreme hassle to withdraw or deposit money into this bank account due to the annoying amount of paperwork.  Therefore, our organization elected to make a bank account outside the jurisdiction of the University.  With that external bank account we could easily make monetary transactions without all the hassle.  Now one might wonder why a chess club would require a bank account.  The bank account is essentially used to fund trips to tournaments.  The president of our organization would collect the entrée fees and tournament expenses from each participant and then I would store these funds into the bank account.  Then this bank account would be used to make purchases.  During winter break last year we attended a tournament at Princeton University known as the Pan American intercollegiate chess tournament and to accommodate our team I had to purchase plane tickets, make hotel reservations, and pay for the team entrée fees.   The initial fee that we collected from the tournament participants ended up being higher than the cost of the tournament accommodations; thus, I could have been easily opportunistic and simply pocketed the extra money and no one would have known as I had made the payments myself and had exclusive bank access.  However, I did not take this route and simply reimbursed my fellow teammates the extra money I had paid as I believed that the money was not rightfully mine and that it would be stealing if I simply took it all from the bank.

 There was also another situation involving my bank privileges in which I could have easily have been opportunistic regarding monetary gains.  Essentially, former University alumni wanted to donate 200 dollars to the chess club and he simply handed me a check.  I could have easily not told anyone about this incident and cashed the check for myself; however, I believed it would have been morally wrong as it would have been a form of stealing if I had simply cashed the check for myself and furthermore, I felt I had a responsibility to be honest with any donations given my leadership position in the organization.   

Finally, outside from the perspective of a leadership position in a registered student organization, I have declined being opportunistic in regards to credit.  I have a credit card that my parents cosigned on and since I am currently not working they are essentially paying for all of the bills.  I could be opportunistic and buy many unessential things that may make me happy, but would simply waste my parents’ money.  I definitely would never do this as I respect my parents and am grateful for their financial generosity.  Ultimately, all of these scenarios came down to the same conclusions in which I declined improperly using money that I felt did not belong to me as it was a form of stealing and also disrespectful.    

Change in an Organization

All throughout high school I was involved in the chess team.  I enjoyed chess as a leisure activity, but was also very competitive.  When I enrolled at the University a couple of years back I noticed that the chess community was virtually nonexistent.  I was quite puzzled as the Illinois high school chess association yearly hosted one of the largest state chess tournaments for scholastic players across the country and believed that there had to be at least some people who participated in that event to have also enrolled in the University.  In order to understand why there was no chess playing community I performed a Google search to find out if there was any chess clubs at the University.  To my chagrin, I found a web page titled the Illini Chess club and I believed I was just ignorant for not finding the web page earlier.  However, as I browsed the website I realized all of the people who had leadership positions had graduated already and that the club was inactive.

Thus, I decided to revive the Illini chess club with my buddy Michael.  We realized that since we had not advertised our club on quad day we would not be able to attract many people.  So we setup chess sets at the Illini Union Basement and played blitz games which offered five minutes to both players to play out the game.  Our fast paced games attracted a few people and by the end of that year we had a small group of regular players.

The following year we were able to advertise the Illini Chess club during quad day.  We managed to get a significant increase in membership, so we structured the organization by adopting leadership roles such as president, treasurer, and webmaster.  Furthermore, we drafted a constitution to ensure that there were elections for leadership positions the following year.  Additionally, we created an organizational division by making a club and a separate traveling team.  There were some organizational issues with this as the traveling team and the club leadership was dominated by the same people who also happened to be the stronger players in the club and this may have alienated the weaker players who felt that they may have had no opportunity to advance into the club leadership positions.  Ultimately, this situation led to a separation of meeting times.  Essentially the club would meet one day a week and the team would meet another day of the week; however, the team members were required to attend both meeting days.

Finally, transaction costs were definitely involved in the revival of the Illini Chess club.  There is pretty much no bigger cost other than the time commitment to start any registered student organization.  However, if the Illini Chess club did not have any chess sets or chess clocks, then we would not be able to follow through in any organizational activities.  Thus, a transaction cost to participate in the "RSO Market" was a monetary investment from the leaders to buy the initial chess sets and clocks.               

Biography of Christina Romer

       Before I was assigned this Alias I had no idea who Christina D. Romer was despite her former presence in the Obama administration.  However, she is definitely highly relevant as her policies in the Obama administration are likely continually influential today.  Her research on fiscal policy may be relevant to the class.

       Christina D. Romer is an American Economist and was born on December 25, 1958 in Alton, Illinois.  She obtained her bachelors degree from the College of William and Mary and later her Ph.D from the Massachusetts Institute of Technology where she also met her husband David Romer.  Together the couple collaborated on many research projects.  However, her early work consisted of research on the sources of the Great Depression and the U.S. recovery efforts from this economic disaster.  Her research provided an understanding that the U.S. was more devastated economically than other countries in Europe during the same time period.  Furthermore, Christina Romer's early research also focused economic volatility and her collaborative work with David Romer on economic growth and tax policies.  In 1988 Christina Romer joined the faculty at University of California at Berkeley.  She acquired numerous awards and distinctions and was the co-director of the Program in Monetary Economics at the National Bureau of Economic Research.  She also obtained a distinguished teaching award directly from the university.  Furthermore, the department of economics elaborates more on her awards and fellowships directly stating the following:  

She has received a John Simon Guggenheim Memorial Foundation Fellowship, the National Science Foundation Presidential Young Investigator Award, and an Alfred P. Sloan Research Fellowship. She has served as vice president and a member of the executive committee of the American Economic Association.  (https://www.econ.berkeley.edu/faculty/847)

    Ultimately, her research and collaborative work made her highly significant to the Obama Administration as she had great exposure to the relevant topics and overall economic situation that the Obama Administration was grappling with.  From January 29, 2009 to September 3, 2010 Christina Romer was a chair of the Council of Economic Advisors for the Obama Administration. (http://www.whitehouse.gov/administration/eop/cea/about/former-chairs)  She was responsible in calculating that a 1.8 trillion dollar stimulus was needed for economic recovery from the recent economic crisis; however, the actual stimulus package was reduced by over a billion due to the influences of others as shown here: (http://www.newrepublic.com/article/politics/100961/memo-Larry-Summers-Obama)
       

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