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Jack Masterson
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We have talked a lot in this class about how one of the major challenges developing countries face is a lack of access to capital. Most of our discussions have been at the individual level but the importance is still there at the country level. Lending to a corporation or someone is investing, they expect to earn a return on the money they put up. A lot of the lending and access to capital measures we have discussed previously are still about making money for the person but there is some charitable aspect that makes the decision to lend or not solely financial. I think this article does a good job of looking at lending and debt markets without the charitable aspect because at the end of the day most of the lending done is strictly for profit. One thing I took away from this article is that yes, developing countries do have access to capital but not in the same way that an industrial country does. Their ability to either issue debt or the spreads on their debt are so tied to the industrial countries that they have very little power. With that in mind I also had the same thought as Andrew, wondering what is going to happen when the Fed likely rises rates by the end of the year. We are in a period now where as the largest industrial country our yields can't go much lower and if the findings of this article are true then from here on out it is either going to discourage developing countries from issuing debt or if they do the rates will be far less attractive. While I don't think that foreign capital flows will dry up, the papers findings make it seem as thought that could be a logical conclusion.
Toggle Commented Nov 18, 2015 on ECON 280 for Thursday at Jolly Green General
I agree with several of the comments above that it is so hard to believe that there are people out there who dispute the validity of climate change. In my chemistry class we are talking about climate change and our professor has likened it to a cancer diagnosis, the person receiving it doesn't want to believe the majority that say they have it and are willing to trust the one out of 100 who say it isn't true. There are however others that admit it is a problem but argue that the effects aren't that great. I think this article does a great job of illustrating how devastating a temperature rise can be and especially how some areas, the poorest for the most part, are going to be hit the hardest. The warming for instance is supposed to lead to a larger increase in temperatures in the middle east, north africa, and the Mediterranean which are all reasons that are already under a great deal of stress today. I think it is interesting that such a problem can have far greater impacts that just environmental but could also lead to increased political instability and social unrest in these regions. Another thing that seems so hard to grasp is that global warming which is causing sea levels to rise and water to make up a greater portion of our environment will also lead to water scarcity issues in much of the world. Living in this country we take access to water for granted it with rising temperatures on the way it is really important to figure out ways to utilize the water we have on the planet.
Toggle Commented Nov 11, 2015 on ECON 280 for next Thursday at Jolly Green General
One of the things that I found interesting from the Sachs article on Malaria was the affect that the disease has on the savings rate. I found this to be especially fitting given our recent study of the solow growth model and had never really thought about the impact that a single disease could have on the savings rate. It makes complete sense that the disease would have a directly negative impact on the human capital of a country because it limits peoples schooling but I had never thought that a disease could limit the physical capital a country has. As sachs says, "The evidence suggests that malaria decreases household savings as families areforced to hire labour to compensate for days lost to morbidity." This would shift the SY curve down and result in a lower level of capital per capita which I would imagine only intensifies the problem and creates a sort of never ending cycle.
Toggle Commented Nov 4, 2015 on econ 280 for Thursday at Jolly Green General
One thing about the article that I did not expecting before I read it was that it in a way almost discredited all development econ study and policy done at not just the country level. While the article talks about ideas and strategies like the Washington consensus that apply to countries as a whole its main assertion was that every country is different and there is no cookie cutter way to go about implementing policy. I agree with that line of reasoning and it is something I have been thinking a lot about in my Econ 398 seminar about health in developing countries. It seems as though often times the policies that are introduced are so broad that there is in fact no way they could work in every country which Rodrik does a nice job of explaining here. The quote from the article that I think best sums up the article as a whole and specifically address this point is, "The policy packages associated with growth accelerations-- and particularly the elements therein that are nonstandard-- tend to vary considerably from country to country." For one to be a development economist and to have any insight into policy you must in a sense narrow your focus to a singular country or a small region to really be able to know where to focus and address resources. We can see this specialization play out in some cases even just between Professor Casey and Professor Silwal who both are development economists but each has narrowed their focus to a specific region of the world. Overall I thought this article did a nice job of using real world country comparisons to show how development and economic policy is something that is very individual to a country.
Often time we hear about how many people in the world live on less than $2 a day but are given no context as to what that means and where these poor people are directing their resources. I thought this article did a great job of explaining all of the different choices that poor people make when it comes to resource allocation and how they go about functioning with so little capital. The article was so detailed in so many aspects of their lives that it almost makes it hard to think of all of the pieces together and really get a feel for the article as a whole and thus I think it is easier to discuss individual questions they addresses. As several people have mentioned above I too was shocked that people didn't allocate their money to maximize calories and instead spent a fair amount on vices and forms of entertainment. I would have always thought that the reason that people went hungry was because they were simply unable to acquire the food needed and not that they chose to buy tobacco, alcohol and have parades while sacrificing quantity of food. I thought the section at the end did a great job of addressing the questions brought up in the piece but the one reasoning I didn't exactly follow was why they didn't eat more. The authors propose that it could be the extra food would not do much because they would ultimately become weak from sickness. While it is true that eating more would not magically prevent them from any future disease it seems as though a healthy diet could help to some degree either mitigate the effects of sickness of help limit the likelihood one would become sick. The other example was that the poor don't have the self control to spend on food and not on vices and entertainment which seems to make more intuitive sense. It is easy for someone like me to say that the person with not much to eat should have no other desires and spend only on food. The information on education was also interesting to me. In 398 we have been talking a lot about the relationship between health, education, and development and how it is vital for a developing economy to emphasize education as it has positive externalities. From the date we can see that most poor people don't spend money on their children's education and they are unable to determine the quality of the education their children are receiving which is more of a reason for governments and NGO's to place a greater emphasis on education in developing countries because the people themselves aren't allocating their own personal resources to it.
The first thing I thought of when I read the article was how it related in some ways to the article we read for class on Tuesday called "Behavioural development economics: A new approach to policy interventions." Much of that article talked about how previous versions of the World Development Report had ignored these three main principles because they were not traditional economic models saying, "Economists have long known that people are rarely as coherent, unbiased, foresighted, selfish, or fixed in their preferences as standard economic models make them out to be." Even though the three principles mentioned are all intuitive they were not included in policy decisions because they did not fit into conventional economic modes. This reminded me exactly of what Krugman mentions in his paper about how Hirschman and his high development theory were not taken seriously or even considered in academic circles for a long time because they "were having hard time expressing their ideas in the kind of tightly specified models that were increasingly becoming the unique language of discourse of economic analysis." While I understand Krugman's criticisms of Hirschman and his decision to break from mainstream economics I don't think that it detracts from the ideas he had. I really liked the idea that it would take economies of scale for the modernization to produce modernization and I am not really sure how a underdeveloped country would be able to modernize on a large scale all at once.
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Sep 16, 2015