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Andrew Head
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The authors begin by noting why the debate over capital flows between industrial and developing countries is important--it has "profound implications for advisability of widespread capital account liberalization versus the retention of controls on capital inflows." As opposed to previous studies, Eichengreen and Mody use aggregated data to paint a clearer picture of the effect of U.S. Treasury yields on the availability of financial capital in developing countries. The authors find that higher U.S. Treasury yields dampen international investors' demand for both fixed-rate Latin American debt and floating-rate East Asian debt. What does all of this mean? That the ability of developing countries to raise debt in the capital markets is not only dependent on internal creditworthiness, but also on external factors determined in the international financial markets that are out of the control of the developing nations trying to issue bonds. I can't help but wonder what will happen over the next year or two as the Federal Reserve starts to raise interest rates--will international investors start sending financial capital to the U.S. over developing nations?
Toggle Commented Nov 18, 2015 on ECON 280 for Thursday at Jolly Green General
The World Bank's report is the type of literature that needs to be circulated on a mass scale. It brings to light many of the consequences of rapid climate change, and urges us to collectively consider the price of inaction. I think one of the most interesting consequences discussed which is especially relevant today is the mass dislocation that climate change may cause. We're already seeing (for more general economic and political reasons) that impoverished people will go to great lengths for opportunity, and developed nations are largely unprepared for this exogenous shock. To Mr. Trump's demise, it seems like a wall and widespread forced deportation are not sustainable solutions to this global migration. With climate change, people would have no choice but to leave their home regions, and there needs to be strategy in place for how these millions of impoverished people can be integrated into an existing economy. The issue is not solely an economic one. The merging of various cultures could cause geopolitical unrest in regions with religious and ethnic tensions. Self-inflicted economic destruction via armed conflict would be adding insult to the various injuries the global economy would suffer upon the arrival of a 4-degree warmer world.
Toggle Commented Nov 11, 2015 on ECON 280 for next Thursday at Jolly Green General
I'd like to home in on the portion of Schultz's speech that noted the reason "governments tend to introduce distortions that discriminate against agriculture is that internal politics generally favor the urban population at the expense of rural people." He goes on to presciently mention the occasional "green revolution," which he says briefly brings agriculture into relevance within the political-economic sphere. I wonder if today's "green revolution" is any different. There seems to be a genuine change in sentiment among middle and upper-middle class American consumers (I wonder if the same holds true for China) that traditional agricultural channels are not providing the same level of nutrition as locally-sourced products. There is significant alteration to fruits and vegetables in order to transport/store them in American grocery stores, and there seems to be a significant backlash against this (e.g. Whole Foods customers). Again, this could be a fad, but it's one that I'm certainly on board with and hope it brings newfound integrity to the U.S. governance of agriculture.
Toggle Commented Nov 4, 2015 on econ 280 for Thursday at Jolly Green General
My reaction to Rodrik's first assertion in the paper was, "that doesn't really seem like an extraordinary insight." He essentially argues that although there are higher-order goals and achievements that most high-growth economies have in common, they have arrived through different institutional pathways that are tailored to the specificity of any given nation. He provides an excellent analysis of various economies and the national institutions that changed over time to spur and maintain high growth rates. However, I was not surprised to hear that there was considerable variation even within a specific region such as East Asia. These nations' institutions are all serving unique populations and economies. To suggest that any country can do items 1-10 and undoubtedly maintain high growth rates as a result seems culturally naive.
I would first like to point out how taken aback I was by the fact that such large portions of the global population live on 1-to-2 USD per day, accounting for purchase parity. It truly is hard to envision how there is room for discretionary spending outside of food, particularly when supporting such relatively large families. The point I'd like to discuss is on p. 12, when the authors discuss the lack of specialization among poor families across the globe. Specialized skills are not sought out, as people may move from job to job to pick up income wherever they can. Many of those in agriculture do not do it to the point of making a full living. Although development economics is often discussed within the framework of large structural investments supporting education, infrastructure and other critical features of a developed economy, perhaps programs that mirrored technical colleges in the U.S. could be beneficial. Learning the specialized craft of being a mechanic or tailor could be the small catalyst that significantly increases someone's earning potential. It is important to note, however, that this could be a risky endeavor. There would be a significant opportunity cost should the individual find limited demand in the market for her specialized skill set.
Krugman's point about early development economists being pushed to the side early on due to a lack of traditional models struck me as ironic given the volume of model weaknesses Krugman would go on to describe in the article. That being said, he ultimately argues that they are the best available option in illustrating a given economic concept, and for this reason should continue to be heavily utilized in the social sciences. I think economic models will only continue to improve over time for two primary reasons. First, as neuroeconomics, and more broadly, behavioral economics continue to develop, economists will be able to identify more patterns and themes in "irrational" human thought which can hopefully be incorporated into mathematical models. Second, as technology improves and more data can be gathered about economic agents and their decisions, economists will be able to more thoroughly work through assumptions of the traditional models that guide economic thought today.
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Sep 16, 2015