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While reading the summary from the World Bank, I found my mind jumping back to our class on Tuesday and further to our initial discussions about poverty and development. An idea from Tuesday's class that really stuck with me was that we're all free riders to varying extents. While we do pay the market price for fossil fuels, we don't internalize the social costs but rather share them. So it also is on a global scale. Those most adversely affected by the externalities introduced by the burning of fossil fuels are ethnic minorities, the poor, women and children, and otherwise marginalized members of society. Relatively wealthy groups can more easily adapt to climate change. So it appears that the the developed world is not only using the most fossil fuels but is also less likely to incur future costs. We're free riding at the expense of the developing world which doesn't even get to enjoy most benefits of fuel. Further, I thought of a few things we discussed earlier in the term that can slow development: poor access to resources & weak infrastructure. Now I see that the two are linked to climate change; marginalized communities that would otherwise be developed are now avoided because the climate makes them more dangerous for more dense populations, limiting the establishment of infrastructure and improvement for the community to grow.
Someone more familiar with finance and economic history than I would have had an easier time with this paper. In addition to some math jargon, I was unfamiliar with some of the phenomena that Eichengreen and Mody alluded to as references. I was able to figure out some of them, and was fascinated by the impact that US interest rates have on the availability of capital in developing nations. While I'd never considered this, it's rather intuitive and leads one to ask why this isn't a more widely-known economic idea. As the authors point out, more traditional elements of economic development and globalization are typically linked to an improved fiscal climate in developing countries.These elements of development are useful and necessary, but also incomplete; they fail to account for demand for credit in developing countries. As a result, often too much credit enters a market without the institutions to use it and vice versa. This oversight leads to a misunderstanding of what factors actually influence the availability of credit. Moreover, because investment is often imprecise (as Wilson pointed out) there are further failures to provide credit in the right amounts to the right countries.
Casey's paper raises a curious and frustrating issue: why aren't more farmers adopting agroforestry (and other new, potentially beneficial agricultural practices)? It's evident to students, economists, and many residents of the developed world that such practices are highly beneficial not only to the farmers but also society in general - they are sustainable, more productive, and environmentally friendly. Yet fewer farmers than expected adopt agroforesty in their own farms. Casey links this to human capital which could increase certainty among farmer re: agroforestry. The question then becomes how to improve human capital and incent more farmers to incorporate agroforestry into their practices. I was fascinated by the findings of the paper, although some seemed to contradict one another. It was curious to me how larger farms and lower incomes seem to overlap. This would imply to me low efficiency and low level of education by extension. Apart from the other findings, number 6 makes sense to me; lower opportunity cost of switching, less to lose. However it intuitively clashes with some of the other characteristics of adopting farmers.
Toggle Commented Nov 6, 2014 on Econ 280 for Thursday at Jolly Green General
In Schulz's speech I was interested in several different points. First was the mention of entrepreneurship as a vital skill found in farmers. I'd never associated farmers with entrepreneurial tendencies, but Schulz makes a compelling case. After all, being in such a low-margin industry demands precision and innovation, It surprised me even more to learn that this entrepreneurship is often squashed by governments that don't provide proper incentives to the agricultural sector. I wonder how one would go about changing the negative attitude that governments seem to have toward agriculture. Further, what sort of incentives are required to make technological investment a wise move for farmers? How should a government go about incenting entrepreneurship from its farmers? Second, after reading this piece, I've begun to think how this different perception of the individual worker could add complexity to the Solow Growth model (this would take a better economist than I). As it functions currently, amount of capital is the only thing that effects a worker's productivity. Schulz's speech introduces elements of education, health, and skilled workers. This would provide a much more detailed picture of productivity per capita but would turn model on its head because of the increasing marginal returns of improved health and education.
Toggle Commented Oct 30, 2014 on Econ 280 for Thursday at Jolly Green General
Reading Krugman's paper, I was quickly reminded by a paper written by political scientist Giovanni Sartori, who argued the inverse relationship in social science between a theory's (or a model's) explanatory power and empirical validity. That is, as we attempt to describe real-world phenomena with more generalizations and universals, we can more easily explain these phenomena and infer greater insights. In order to gain these general insights however, we must distance ourselves from concrete, empirical evidence, resulting in the theory being invalid in some specific cases. On the other hand, if we craft a model supported strongly by empirical evidence, it will in all likelihood explain specific cases accurately. However, because the model focuses heavily on observation and specificity, it becomes more difficult to infer useful insights. Krugman echos Sartori in an economics-specific context, the assumption necessary in modeling serving as an analogue to the generalization I mention above. Each assumption a model requires removes nuance and connection to the real world. Models are of course useful - they allow us to explain, assuming certain conditions, real-world phenomena and to extract useful conclusions. Even better, if it's a good model, it can be applied with great breadth. I think they have their place; I'm actually of the opinion that generalized models are an effective and practical way of advancing the thought in a social science field. We only need to keep the assumptions in the front of our minds and recognize that sometimes the assumptions don't hold and - in that case - the model needs to go.
Between the two economic goals studied in this paper (igniting growth and sustaining growth), Rodrik offers little in terms of certainty. While the latter goal can be achieved well with reliance on neo-classical economic principles, data show that these same principles are not similarly effective for achieving the former. It seemed intuitive to me that long-term economic growth would rely on second-order principles (institutions and standards which ostensibly hold in developed countries); it is on these principles after all, that first-world economies rely in part for the success of their economies. Not so intuitive however, was Rodrik's demonstration of how Washington Consensus strategies do not seem correlated with the kick-starting of economic growth. Indeed, in the case of Southeast Asia, growth was tremendous despite the lack of several key elements of Washington Consensus strategy. Rodrik does not suggest, however, that the strategies which effected this growth would work for other developing countries. Rather, he contends, over and over again, that each case requires its own study and application of guiding principles, such as those found in the Washington Consensus. This was a refreshing departure from other readings I've had in economics (admittedly, it's not a long list of readings) in which the authors insist on rigid rules and principles. Not being especially inclined towards broad, hyper-macro level data and theories, I was pleased to read Rodrik's argument which is, while inconvenient for theorists, more realistic about the nature of development and growth.
Toggle Commented Oct 2, 2014 on ECON 280 Paper at Jolly Green General
I'm intrigued by Juan's post concerning males' inability to surrender power to women, that is, to accept true inequality between the sexes. It seems like this is born of a nearly biological insecurity in men. Indeed, it is easy to find instances in our own society of men feeling threatened by intelligent and capable women in many fields. This insecurity might explain in part, as Samantha mentioned, how despite our own country's tremendous level of economic development, there still exists gender inequality. Heavily male institutions such as business (finance in particular) and major politics tend to scoff at women seeking positions of power and influence, due at least in part to this insecurity. Moreover, I wonder to what extent this resistance to accepting gender equality might be connected the Fernandez piece that Duflo mentions, which argues that when men have fewer children, they focus less on maintaining their power in the household and more on protecting their children. How then, could policy or economic conditions shift men's focus away from a power struggle with women?
Toggle Commented Sep 25, 2014 on ECON 280 paper #2 at Jolly Green General
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