Opportunism: An Ethical Issue

In class we discussed some of the reasons people do, or do not act opportunistically. In this post I would like to focus mostly on the ethical factors that drive peoples decisions. The only personal example I can think of occurred during my high school job at my home towns local pool. It was a mind numbing job, sitting at a cash register checking all the residents with pool passes and charging those who didn't about five dollars a person to enter. It was an outdated pool so there was no real register, just a box with a lock and a sheet of paper the cashier would use to tally all of the customers. On top of that there was only one manager and no cameras to monitor anything a cashier was doing. Although an outdated pool, it still managed to draw in a decent crowd of residents and non residents alike. During a single day there would be upwards of five hundred dollars in the register. A large amount of money in the eyes of high school student who was making minimum wage.

The reason I had this job was because one of my friends, we'll call him Adam for the sake of privacy, worked there and recommended applying because it was an easy job. After working a couple shifts it became apparent that Adam was taking money from the register and altering the tally sheet to cover his tracks. At first, I saw this as a golden opportunity to possibly double the money I was making for the summer. I would have untaxed, straight to pocket cash and almost no chance of getting caught. In the end, I couldn't bring myself to take any money. All the funds from the pool went back to the village I lived in and would negatively impact any recreational activities it funded. Anything from little league sports to the various art clubs it sponsored. How could I take money away from the same activities I grew up participating in?

Besides making choices to act based on ethical views, humans find other ways to not jump at every opportunity that presents itself. In class we discussed being a "good citizen" and how that can affect peoples decisions. I think the fact that acting opportunistically can be unethical and the fact that society idolizes the "good citizen" both amount to the same thing. Most people will decide not to act if that act is frowned upon by the majority. Another reason is that people believe patience is a virtue and that if you wait good things will happen. This reason to not act opportunistically is very different from the other two in my opinion. I see this as more of an excuse than a reason not to act. One could argue that waiting is foolish and that action is the only way to make something of oneself. 

Merging Organizations and Transaction Costs

This past summer I was a research analyst intern at Superior Manufacturing Group or SMG. SMG is a family owned business that manufactures premium, rubber floor matting and other various rubber products. My primary job was to do competitive price reviews and assist their marketing team but I was hired at a very special time for SMG. I was lucky enough to witness first hand a private equity firm acquire Superior Manufacturing.

Whilst experiencing the entire process I was required to avidly research Audax, the private equity company, as well as learn about the benefits of acquiring other firms. Essentially, Audax seeks out companies with high potential but ones that either don't have the funds to get to the next level or are mismanaged. Audax will then buy out these firms and implement a system that will cause the acquired firm to appreciate in value. In the end, Audax can reap the benefits of the newly managed firm or sell it for more than they initially paid.

Clearly, both parties are benefiting from this transaction. The owners of SMG are getting paid top dollar for their company, granted they negotiate well, and Audax is adding a high potential company to their portfolio. There are potential negatives to this transaction. If Audax realizes that a company they are acquiring is seriously mismanaged then some workers will be laid off and replaced. There is also potential for the company that is being acquired to not be completely honest with Audax, in an attempt to get offered a higher price. Complications such as this create an elongated due diligence period and waste time for both parties.

Organizations interacting with one another deal with transaction costs at all times. Ultimately, both sides  aim to minimize these transaction costs in a way that both parties receive benefits. However, transactions costs can be found in more than just business settings. Any expenses incurred while reaching a deal or agreement can be defined as a transaction cost. This can occur in all facets of life and is a key term within economics.

Donald Patinkin Bio and Impact

 

Pictured above is Donald Patinkin, an Israeli and American monetary economist. Born in Chicago in the early 1920s, Patinkin was raised by Russian Jewish immigrants. Patinkin attended the University of Chicago where he received his PH.D and later taught at the University of Chicago as well as the University of Illinois. He wrote some of the most influential books regarding monetary macroeconomics in the 1950's and 60's. His work traversed the roles of money and value, and was widely valued as the most advanced literature in this time period on those subjects. Being that I am currently studying intermediate macroeconomics coupled with economics 490, I am excited to learn more about the studies he so heavily influenced.

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