Dear Economist

By Soumya Gupta & Avnish Srivastava



Q.

I am a final year undergraduate student of Economics and seem headed for a career in investment banking to pay off my student debt, but theatre is my passion. Should I follow my heart and do theatre even if it seems risky.
Befuddled

Answer:

Aahh… The classical dilemma of making choices under uncertainty. Here you as a consumer have to make a choice to maximize your welfare under conditions of uncertainty. However, here not only does your consumption depend on your choice but so does your endowment. I would suggest you separate the choices you make on your Production possibilities frontier(PPF) and your Indifference Curves(ICs), this would help in maximizing your benefit from your income first and then taking this income as given and maximizing your consumption and hence welfare.
I would draw my PPF between returns from a career in I-Banking and returns from a personally satisfying career in theatre.

x : Returns from Theatre
y: Returns from I banking

I would consider that returns from I-banking, assuming that you already have a job, are certain and will help you pay off your student debt and also live comfortably.

Returns from entering theatre are uncertain, that is you don’t know if you can make it big, also your income will be uncertain on the number of projects you get and taking the probability of success and failure may not suffice for paying of your debt in the short term, however being set off by the fact that it gives you much more welfare benefit as a consumer.

I believe that as a person staring your career, investment is more important so that it can help you grow further in monetary terms.

P.S. Work for a few years in I banking and earn some moolah and use that to pay off your student debt. Once you find that you are in a comfortable state of finances and are short by a few years of sleep, I believe that would be a great time to foray into theatre.