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Chandler Moody
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I've lived in New Orleans my whole life, so I've seen firsthand the effects of global environmental changes. In the last century the number of destructive hurricanes in the Atlantic and Gulf per year has more than doubled. It used to be that North America would see about 3 hurricanes a year. Today, it's an average of 8. As this article explains, if we continue living the way we do today, global temperature change is predicted to increase to 3 and 4 degrees Celsius. Hurricane destructive potential is highly correlated with water temperatures. It affects how strong the storm gets- increased rainfall and faster winds. Rising sea levels will further compound the risks, especially for New Orleans. The article says the rates of sea level rise are the highest for 6,000 years and are expected to rise .5m by 2100. Rising sea levels are a particular threat to New Orleans since it's below sea level. The city is already surrounded by man-made levees on all sides. The solution can't be to keep raising the levees higher and higher, year by year. On their own, the levees along the Mississippi River have done tons of damage to the environment. Something that was touched on in the paper that also relates to this is the effect of rising sea levels on other ecosystems. The intrusion of salt water into the coastal bayous in South Louisiana kills the unique ecosystem. With the levees on the Mississippi, the rich sediment isn't able to distribute and the land erodes. Maps in America show Louisiana as a boot, but in actuality, the coast of Louisiana doesn't look like that today. In the book "Bayou Farewell" by Mike Tidwell I remember he wrote that every minute Louisiana loses a football-sized amount of land. This will only worsen with global warming and the effects of sea level rise. Additionally, without coastal wetlands as a buffer to the land, hurricanes will hit even harder. Even after the devastation of katrina not much has changed to implement environmental policy in its wake. The hard part is that the benefits to implementing environmental policy will be in the future, yet the costs will would be felt now.
I’m covering the Eichergreen and Mody “Interest Rates in the North and Capital Flows to the South.” I’m going to first say that I’m not a finance person, so a lot of this paper was hard for me to understand. The purpose of this paper is to find economic evidence regarding interest rates as a determinant of capital flow to emerging markets. The model uses data for primary market spreads of all developing-country bonds issued from 1991-1996. For reference, Latin America had the largest fixed-rate market and East Asia had the largest floating-rate market, where interest rate is variable over the duration of debt obligation. By using launch spreads as their data, the paper highlights how only the credit-worthiest borrowers come to market when global financial conditions tighten. Measures of creditworthiness used included external debt relative to GNP, international reserves relative to GDP, debt service relative to exports, and the variance of the export growth rate. As many other people have noted, it is important to look at both supply and demand side. As we talked about last class, the S curve (savers) and the D curve (borrowers) show where the interest rate lies. This means that the borrower’s decision is as important as the international investors’ side. When rates in the US increase, it is shown to have a negative effect on Latin American borrowers because the demand from international investors decreases. This is just one example of how changing interest rates affect international markets.
Professor Casey’s paper, as most Sam and Callie both noted, highlights a relationship between environmental policy and development. Often times, it seems like preserving natural capital can be left out of development economics. I liked this paper because it shows how practices that are sustainable can be financially beneficial as well, and the two can work together. Sure, it’s nice to know that your practices (whether it be farming or something more industrial) are helping the environment so that you feel like a good person, but this isn’t enough to motivate a lot of people/businesses. This paper provides evidence that a practice that is environmentally friendly can also have financial benefits. Relating to agroforestry, it cites increasing species diversity, reforestation, reducing use of chemicals on farms, and improving soil fertility as nonfinancial effects. But on top of these, there were financial effects that included more intensive use of the available land, reduction in time between cash flows, and sharing of costly resources among multiple outputs. This paper then questions why, given all of these business, farmers do not choose agroforestry. According to the paper, the problem lies in the weight (or lack of weight) that the subsistence farmers give to the evidence. So it doesn’t matter so much what the evidence says but whether the farmer expects that he will be able to reap these benefits (based on an assessment of his own knowledge of trees, education level, exposure to agroforestry, etc). We’ve talked in class before about how people act based on their expectations. This came up when discussing urban migration and the idea that people move to cities if they expect to get a job there. An individual’s expectations can clearly play an important role in the efficiency of an economy. As shown in the empirical results of this paper, the lack of weight that a farmer places on evidence can cause economic inefficiency. One last thing I wanted to note was the variable EXPOSE, which identifies those who have been exposed to agroforestry through a forestry-development program. If exposure can increase human capital and thus increase W, it seems likely that agroforestry might be a self-growing cycle once it is started. It seems like once one farmer is exposed to the practices, his starts doing agroforestry, and then his neighbor joins in and so on.
Toggle Commented Nov 6, 2014 on Econ 280 for Thursday at Jolly Green General
In his speech Schultz notes a study done by Usher, in which he determined the amount of utility that people get from increased life expectancy. He found that the additional utility from each year added to life expectancy increases the value of personal income. It makes sense, for both poor and wealthy people, that having a longer life span would make someone want to make more money during their lives. This indicates that improving health should push people to pursue education, knowing that education would give them greater incomes in their future. While we have discussed the health increases education in the way that it improves school attendance, this point by Shultz is one that I don’t think we’ve discussed yet. Longer life spans provide additional incentive to get more education as an investment in future earnings. They increase human capital in this way, by improving the quality of each worker. This connects directly to the malaria story. Getting rid of malaria can improve the quality of each worker (and thus productivity) by increasing life spans. Increasing life spans are interesting to me because our health depreciates over time and at an increasing rate later in life. So increasing life span has diminishing marginal returns. An extra five years to a 90 year old is less valuable than to a 20 year old. Similarly, the utility gained in increasing life expectancy would be much greater for a person in an LDC whose current life expectancy is lower than a person in an HDC whose current life expectancy is higher. I would be interested to know what factors Usher used to determine the utility a person gets from an added year of life.
Toggle Commented Oct 30, 2014 on Econ 280 for Thursday at Jolly Green General
Like Callie, Udry's comparison of the income effect and the substitution effect stood out to me in this paper. It had never occurred to me before that increased wages could lead to increased child labor, however, after reading this paper I see that it makes sense. The higher wage a child can make working, the greater the opportunity cost of attending school. This paradox of raising wages correlating to increased child labor reminded me of the paradox of decreasing unemployment in cities that we talked about on Tuesday. If more jobs are created in cities to decrease unemployment, this can act to increase the rate of unemployment because for every one person that gets a job, 3 people move to the city thinking that they also will be able to get a job. These examples of paradoxes are a reminder that although we might predict a solution to a problem, it's important to look at the real outcomes and see what actually happens. This is something that Duflo would agree with, as it relates to her empirical economic research. The paper presented subsidies for school attendance, especially the Opportunidades program in Mexico, as the most promising solution to ending child labor. I was very interested in reading Juan's comment above about the negative side effects of the program- poor families have more children in order to receive more subsidies, trouble makers go to school and disrupt the other students' studies, and the government can't regulate who actually attends. Reading these comments from Juan, it seems like Udry oversimplified the solution in his paper by not addressing the downfalls of the program. As a whole, I thought the paper focused too much on explaining the patterns of child labor and not explaining solutions in depth. He spent a lot of time explaining patterns of child labor, some of which was pretty obvious. That child labor is a vicious cycle causing a "poverty trap" is not a very difficult concept to understand, and I would've liked if the author spent more time on his last section about policy solutions. Finally, something in this paper reminded me of a paper my Health Economics in Developing Countries class read with Professor Blunch. The paper was not related to child labor, but it was related to education and a cost benefit analysis of education in developing countries, which I think relates to the cost-benefit analysis of education in this paper. Udry mentions in his paper that keeping children in school ultimately benefits their health because they are more educated. In the paper we read in Professor Blunch's course last year, it did a CBA of night classes for women in Africa. The benefits of a short, night class far outweighed the cost. Benefits included better education and health for the woman as well as her children. Costs were extremely low since the women did not forgo any work to go to the classes, because they were at night. Because Udry talks about agricultural child labors, it seems like night classes or school could be an option, since more farm work is done in the daylight. This, however would not eradicate the problem of child labor and the dangerous conditions or harms it can have on the child. This is a more emotional side of the argument which Udry seems to stay away from in his analysis.
Toggle Commented Oct 23, 2014 on 280 Paper for Thursday at Jolly Green General
I think one of the most important points that Kruger makes is that we need to always recognize underlying assumptions. We ought to approach any conclusion drawn from a model and see what has been omitted. Looking out for underlying assumptions is something that we did with Solow Growth model. Key assumptions here included the assumption that capital is subject to diminishing returns and that labor and capital are substitutable. While simplified models are useful, it’s crucial to be aware of their limitations. The power of simplification comes with recognizing what is being left out. I personally love models and think that they’re an aspect of economics that contributes to why I prefer it to other social sciences. I like the concrete-ness that they provide in understanding theories. Kruger’s story of Africa in the evolution of map making in the 20th century stands to support his argument that sometimes the less we know (or evaluate), the more we can know. Narrowing vision and using more simple models can be logical. It’s a paradox that I think he argues well, and in the end I agree with him.
I agree with Bennet’s post that Rodrik’s belief that there’s no magic bullet to solve economic development all the time for every situation echoes some of what Duflo talked about in her paper that we read last week. Clinical trials have entered the world of economics for precisely this reason- so that we can say with some level of certainty whether a policy is effective or not as compared to a control group. So far nobody has mentioned the two quotes at the very beginning of the piece, so I wanted to talk about them. I found these two quotes to be a great starting point for Rodrik’s paper. The contradiction between the two quotes made me intrigued as to where the paper would go. The first quote from Harberger, an American economist, are the words of a man who believes that implementing policy is a surefire way to see economic development. He is basically saying that it’s no coincidence that more developed nations are succeeding economically and less developed nations are not. He believes that economic growth can be achieved strictly by following the policy suggestions from professionals. From this quote, he’s insinuating that the less developed countries have not succeeded because they have not enacted these policies. This quote is from 1985. As we talked about last class, theories on growth and development are constantly evolving. This first quote from Harberger expresses a Neoclassical view. His 1985 mindset can be contrasted, it seems, with his own later beliefs. Rodrick quotes him again right after saying that “When you get right down to business, there aren’t too many policies that we can say with certainty positively affect growth.” This is from 2003. This type of theory is in line with something Rodrik and Duflo would agree with today. Popular theories today seem to be echoing the idea that we ought to have a more practical approach to making growth happen. While something like the Solow model is an extremely powerful tool, there is no standard package for growth. As Rodrik points out, the key is that brilliant economic principles do not always translate to successful policy recommendations. While his paper makes a strong case for discarding “the rule of thumb,” it doesn’t provide an exact solution, but that’s something I really liked about it. As a side note, I also really liked how he laid out his ideas in this paper. It was very logical to follow his thinking from “what we know that (possibly) aint so” to “back to the real world.”
Toggle Commented Oct 1, 2014 on ECON 280 Paper at Jolly Green General
One thing I wanted to add that connects the paper from last week to this week’s Duflo paper is recent research on how stress affects men and women differently. Last week, we discussed that while the absolute poor do not necessarily feel unhappiness, they acutely feel stress. The stress of being poor in a developing country can cause individuals to make decisions that we may not consider economically rational. Connecting the aspect of stress with some of the ideas presented in the Duflo paper on women’s empowerment is a study done recently to examine how stress affects men and women differently. What I found really interesting is that the study found that stress increases empathy in women, while stress decreases empathy in men. Stressed males become more self-centered, yet for women the exact opposite is true. In this study, women under stress became prosocial. Without trying not to apply causation in a case of correlation, I think it is at least worth considering if this heightened empathy under stress could be an explanation for why women in poverty make choices that positively affect family outcomes. If women are wired to become more empathetic under stress, this could be one explanation for why women in poverty were better at controlling family resources (income) than men. On page 1067 it says, “Evidence suggests that, compared to income or assets in the hands of men, income or assets in the hands of women is associated with larger improvements in child health, and larger expenditure share of household nutrients, health, and housing.” This is just one example given when arguing that women’s empowerment will stimulate economic development. Based on the recent study on the different coping mechanisms of men and women when it comes to stress, it would support this idea that giving women in absolute poverty more decision-making power in the family may lead to development. While men in poverty may feel stressed and become self-centered, as the study suggests, women in poverty may feel stressed and empathize with others in her family, thus making choices that benefit the most people.
Toggle Commented Sep 24, 2014 on ECON 280 paper #2 at Jolly Green General
I appreciated how Banerjee and Duflo took a microeconomic approach to looking at poverty in developing countries. By examining the behaviors of the poor, I felt like I gained a sense of their values and how these may be similar or dissimilar to the values of a rich person. One way of deducing what the poor value is by looking at where they spend the little money that they have. As many people in the class have pointed out, this research shows that the poor spent money on things we might not consider necessities, like festivals, alcohol, or television. I think the point here is that poor people get bored too. Perhaps they value happiness as much as they value education or health. It’s easy to say as an outsider who isn’t poor that the poor people in a developing country would be making a much better investment by spending their money on their dosa business or spending the money to send their child to private school. However, we cannot term their choices as irrational because we are not living on $1 a day- something we briefly talked about the first day of class. A person in a developing country also faces obstacles in infrastructure that seem to encourage what we may call “irrational decisions” on their part. But I think we have to consider the question of would anyone who’s “rational” invest the little money they have in health care if it turns out that the so-called doctors is not qualified at all? No, because that would be irrational. This highlights an issue that poor people in developing countries are accustomed to not being able to trust anyone. Without trust, it would be irrational to save your money in an unreliable bank, pay for private school with an absentee teacher, or invest in health care when the doctors are not qualified. I think the interesting thing that Duflo and Banerjee are pointing out here is that when the poor in developing countries do not have adequate infrastructure in place they may be making the more rational choice in choosing to be happy in spite of their circumstances, like buying sugar instead of rice. It is ultimately more irrational to save up your money to pay for healthcare from a fake doctor than it is to spend your $1/day on sugar.
Toggle Commented Sep 17, 2014 on 280 reading for Thursday at Jolly Green General
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Sep 17, 2014