Team Production and Gift Exchange

When I think of team production with gift exchange I think of small businesses with one boss over a handful of employees. The employees each do their own unique job tasks and collaborate with one another in order for the business to run while the boss supervises and manages. It's clear that, in a small business model such as this, the boss is higher up on the hierarchy and most commonly receives a larger portion of the business's overall profits and distributes agreed upon wages to his/her employees. Even though the boss is receiving more money, it doesn't necessarily mean he/she is working harder than his/her employees, though. Similar to Jonathan Haidt's example of two children getting different amounts of marbles, the boss may get a higher payout simply because he is in the position to.

On a regular basis a business will make money, the boss will pay due wages to his employees, pocket a more generous share of the income for him/herself, and then reallocate the remainder of the money to other expenses to resupply or help the company grow. The employees are on set wages so as long as their marginal cost is less than their marginal benefit the boss is happy and the business will expand. However, perhaps on a given pay period the boss calculates that the business's revenue is substantially larger than it's previous periods. The boss could keep this information a secret, because it may be unobservable data to the employees, and just increase the amount of money he/she keeps from him/herself or increase the amount of money that goes into capital for the company. Another option would perhaps be an example of gift exchange in the form of a pay bonus.

Instead of selfishly increasing his/her own income, the boss could gift some of that money to one or multiple employees in the form of a bonus. The boss's allocation of who to give the bonus money to could have multiple possibilities. Perhaps the boss gives all of the employees an equal sum to reward their work as a collective group. If all of the employees got the same bonus it's possible that this gift would increase everyone's motivation to do good work for the business in order to receive the same results. However, the problem with this approach may be that it was really only the increased efforts of one or two employees that resulted in the business's increased financial success. If this were the case, the employees that did their job as they always have would be rewarded for doing nothing more than what they already have been doing.

In this hypothetical, but not too unrealistic, situation the employees that put in extra effort might feel like they are being gipped. From a "fairness" perspective it's not unreasonable for the employees who worked harder to desire a larger bonus than their teammates who hadn't worked as hard. What's interesting is that the harder working employees would most likely be more satisfied to have earned a larger bonus than their teammates even if that meant they were getting a sum equal to or less than the amount they were given. To put it in numbers, if the boss gave every employee in the company an extra $1,000 regardless of how hard they worked then the ones that worked harder would feel cheated. However if the boss gave the employees that worked harder an extra $800 and the ones that didn't work as hard an extra $100, then the ones that worked harder would most likely feel satisfied even though they would be getting less money.

Another interesting idea that I'm proposing is that there would be less animosity between the employees if the boss didn't give out any bonuses compared to giving all the employees an equal bonus. The extra income the business made is potentially unobservable data and the boss didn't have to share the fact that they had made more than before. The employees would have been paid their regular wages and continued to work as usual. In addition, the harder working employees most likely weren't working harder than everyone else as a result of economic motivation. After all, they weren't promised more money if they worked harder and therefore they didn't work harder than their teammates to make more money. Their motivation to take it upon themselves to put in the effort to increase the productions of the business most likely stemmed intrinsically. Implementing a gift exchange in the form of economic motivation may have negative results by diminishing this intrinsic motivation to work hard as explained in "The Power of Altruism".

The reason that the monkey who received the cucumber as opposed to the grape felt angry and that the child who received only one marble as opposed to three felt entitled to one of his teammate's marbles is because they believed they completed the same task and therefore deserved the same reward.  In my example, a similar psychology in economics is taking place. If putting in the same effort and doing an equal task as someone else nets you the same reward, then putting in more effort and doing more than someone else should, theoretically, net you more than that person. As related to in "The Power of Altruism" gift exchange, though sometimes it may seem harmless or positive, may result in worse outcomes in team production.

Managing Income Risk

Even at a young age kids are asked what they want to be when they grow up. However, for many it only really becomes a source of stress in the teen years when we start to understand how the world operates from a basic economic perspective. We are then faced with the issue of choosing an occupation that could potentially follow and define us for the rest of our lives. Not only do many people worry about choosing a specific path, but many also worry about choosing between jobs that would make them happy and jobs that would make them the most money. While some are fortunate for these two priorities to align it's quite commonplace for people to give up on their dreams to pursue more financially stable and less risky occupations.

My brother graduated from the University of Iowa majoring in Human Physiology due to his natural love of taking care of people. His plan was to go to graduate school after his undergrad completion, however he figured his experience in healthcare and school performance weren't adequate enough to be accepted into many graduate programs so he decided he would go back home and work for some years before pursuing his advanced degree. Unfortunately, an undergraduate degree in Human Physiology paired with his lack of work experience and relatively weaker grade point average led him to an extremely difficult job search.

It took my brother eight months after his graduation date to find a steady job in his field. In addition, he only got his job after applying to an incredible number of other jobs and going through many interviews. Hearing bad news after bad news was extremely difficult for my brother and he began to wonder if he should've went into a less "risky" field that would've net him a more clear cut job with only an undergraduate degree such as engineering. In those jobless eight months my brother stayed at home with my parents and struggled emotionally as he felt like he was just taking up space and resources and wasn't able to grow himself financially. However, with encouragement and perseverance my brother was finally able to find a job and now feels as confident as ever. He bought his first car in September of 2016 which was his first ever large personal financial expenditure.

While I was already an Economics major before my brother graduated and struggled with the job market his experiences after graduating undergrad definitely effect the decisions I make now with regards to minimizing my own income-risk. I've come to the understanding that Economics is a very broad field and figuring out what I want to do and what I'm able to do with a degree in Economics is very crucial to me having a less difficult time in the job market when I graduate. My brother described how he always felt extremely inexperienced when applying for jobs so currently I am trying to build my resume with useful work experience. In addition, I'm trying to keep my grade point average as high as possible on the chance that it becomes a deciding factor as to whether I get a job or not in the future.

Paying off college debt is a very prominent topic in today's culture where a college degree seems to be a necessity to a high paying job. However, paying off loans can be extremely difficult if you can't find a job with the degree you've spent so much money on. By gaining work experience and connections, raising my grade point average, and developing social skills here at college I'm trying to decrease the risk of not being able to find a job once I graduate. Personally, I'm not an avid risk taker and therefore most of my actions in college are geared towards preparing me for the future financially. Aside from a few slip ups such as procrastination or activities relieving stress I don't make many choices that "seem good in the here and now" unless it both benefits me now and will benefit me later.  

In summary, I'm very frightened by risk and uncertainty. I'm currently trying to make use of every opportunity that is offered here at the University of Illinois at Urbana-Champaign such that when I graduate I will be faced with less uncertainty in the job market and have less income-risks. While other students may not live out their college life in the same way I personally find this to be the most beneficial use of this four year window in my life.

Blog Post Reflections

After briefly reading over my previous blog posts thus far I've come to a conclusion that they do have small "themes" or similarities that tie them to me as a writer more so than to each other. Due to the nature of the prompts  my blog posts are generally about my own experiences. However, within those experiences I try to implement a level of relatability so that readers who are unfamiliar with the topics I write about can still pull my underlying messages out of the text. For example in my blog post entitled "Opportunism" I write about my Track and Field teammate who gave up winning a race to support a rival. While many people may not understand what it's like to compete in a Track and Field event, everyone can imagine what it's like to make a difficult sacrifice. In my blog post "Experience with Organizations and Transaction Costs" I talk about my employment as a Student Patrol Officer. Even though I explained my trainings, duties, and potential situations on the job I don't expect anyone to empathize with student patrol officers. However, I'm sure most people know what it's like to prepare for high pressure situations.

I'm sure there are ways to connect my blog posts to course themes. I believe simply answering the prompts without thinking about how it relates to the course may be rather redundant. With that being said, I do think some prompts felt more difficult to connect to the class than others when I was first given the prompt. In particular the post about opportunism. While I do still feel like I gave an example of opportunism in my post, after dissecting the purpose of talking about opportunism in the following class I realize that I perhaps could have used an example more relatable to the economic of organizations. I didn't give answers to the questions "How can we prevent opportunism?" or "What might be a reason to be and not to be opportunistic?" which are very important topics in economics with regards to opportunism.

I do believe my posts have evolved and will continue to evolve. Initially I felt like I was just answering the prompts and trying to make connections to the course after seeing what I came up with. However, now I see that I should be thinking about both the prompt and how it relates to the course together when writing my posts. Before even writing my posts I've been taking the time to brainstorm and think about how the prompt can be connected to the course. This way my posts don't stray away from what the course is trying to teach.

I would like to see more prompts with no subliminal "correct" answer so that we as students may strengthen our own personal interpretation skills. Being able to think and write without worrying about our grades being penalized as a result of a subjective "correct" answer can sometimes restrict a student's thought bubble. Being afraid of being wrong or of being unsure if Professor Arvan will agree objectively with what I want to write about are extremely limiting feelings. Personally, I really enjoyed the "Illinibucks" prompt because it allowed for relatively open interpretations while still keeping the topic and questions confined. All students were given the same abstract questions, yet our posts were still relatively unique which I enjoyed. In addition, I found myself reading more of other people's posts about "Illinbucks" more so than the other prompts. This is because everyone answered the same questions under the same specific topic of Illinibucks so I was able to compare and contrast other people's opinions easily as opposed to people telling long stories that I generally can't relate to. Having the same topic to write about allows students to communicate different ideas of the same topic easier.