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Austin Tamayo
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This paper discusses the relationship between interest rates in industrialized economies and cash flows into developing economies. The relationship between the two is explained using the U.S. interest rates and how it affects the demand for foreign investors. The relationship was found to be negative, as U.S. interest rates increase, the demand by foreign investors decreases. Within the conclusion, the authors wrote “Our analysis, which takes this approach to the market for international bonds, confirms that global credit conditions have had an important impact on the market for developing country debt.” What the authors are saying is that the condition of economies that have credit institutions impact the demand for credit in developing countries. This paper reminded me of the article that talked about FDI, and the qualities of an economy that attract FDI. Differing economies have differing qualities, and for that reason, there is not a certain policy that would directly attract FDI. Similarly, there is not a single economic policy that will successfully increase the demand for credit in developing economies.
Toggle Commented Nov 18, 2015 on ECON 280 for Thursday at Jolly Green General
Global warming is clearly a large issue for anyone and everyone living on this planet. This report did a fantastic job of explaining the negative externalities that global warming can create. In the report, some of the negative externalities that could be caused by global warming include: increases in extreme-weather related deaths, reduced crop production, large increases in sea level, etc. The quote that particularly struck me was, “In fact, in a 4°C world climate change seems likely to become the dominant driver of ecosystem shifts, surpassing habitat destruction as the greatest threat to biodiversity”. I was previously unaware of the quantifiable effects that carbon dioxide had on the earth’s atmosphere, but this report, and this quote in particular, has opened my eyes to this issue that so desperately needs to be rectified. The report discussed how the world’s poor would be most affected by global climate change. Many of the world’s poor people reside close to the equator, where global climate change can arguably be felt the most. My concern with this is that the parts of the world that can aid with reducing carbon dioxide emissions the most will not do so until it is too late, mainly because the effects of global warming are not being felt as strongly.
Toggle Commented Nov 11, 2015 on ECON 280 for next Thursday at Jolly Green General
Rodrik presents growth strategies for different developing countries in an understandable manner. He touches on a large number of developing countries around the globe, and explains what kind of economic and political policies were implemented to ignite and sustain economic growth. What I found to be interesting, and what many of my classmates have already alluded to, was the idea of applying unique economic policies to different countries. Professor Casey had a similar discussion in class, about how some economic policy or implementation in a certain situation seems like the obvious choice, when in reality, is not so obvious. An example of this in Rodrik’s paper would be the situation that China faced when facing stagnant growth in the agricultural sector. Simply liberalizing the agricultural market in China would not have been beneficial in the long-run for that sector. However, the plan that was implemented, required farmers to reach a quota, but then allowed free trade of the produce that was made past said quota, incentivizing farmers to grow as much produce as they possibly could. That being said, I think that tackling a country’s economic issue with a common policy is fine, as long as the policy is catered and refined to said country’s circumstance.
Banerjee and Duflo masterfully illustrate the lifestyles of people living in poverty and extreme poverty. The choices that are made on a daily basis by the people in this study were interesting, and at times, mind-boggling. What may seem to be the obvious choice to some in a circumstance is not necessarily chosen by people living in poor economic conditions. This poor decision-making process can be seen in many instances. The instance in which this process is unmistakable is when a choice for more food is presented. It is mentioned that, “the poorest consume on average slightly less than 1400 calories a day”. It is clear that these people are malnourished, but instead of spending a larger portion of their income on high caloric food, spending instead goes towards the non-essentials such as alcohol and tobacco, and forms of entertainment such as a radio, TV, or a festival. The daily savings that are required to purchase a television could, instead, go towards buying more food that they desperately need. A reason that was given as to why they do not purchase more food is that they are certain to fall ill, which would cause them to lose the weight that was put on by the extra food. However, what they fail to realize, is that the malnutrition they are experiencing is heavily contributing to their immune systems inability to fight off infection and disease, only progressing the process further. This decision-making and ignorance is related to the lack of education that the majority of people living in poverty and extreme poverty receive.
The article by Krugman gave an insightful and interesting look into the history of development economics and its accompanying theories. What specifically peaked my interest, and what has already been discussed briefly by my classmates, was the comparison of model-usage in both social and physical sciences. Krugman discusses that models were utilized to describe high complexity systems, and that successful models were used to explain or rationalize something that was previously unknown. Although models are useful in explaining certain phenomena found within the world, Krugman also argues that models should not be the end all be all for validation of academic theories, especially within the subject of development economics. He urges others to “not to let important ideas slip by just because they haven't been formulated your way”, but rather, be open to ideas and theories that can not be necessarily explained through models. Models, Krugman argues, can not accurately describe the entire complex system, but instead must be created with “compromise and judgement”.
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Sep 16, 2015