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Davis Turner
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The Eichengreen and Mody article attempts to explain the underlying missing link between capital flows from developed to developing countries. The capital flows of developing countries are guided by external actors (developed countries). The interest rate and treasury yields correlates to the amount of capital flows interring a country. The relationship between US interest rates and supply and demand responses in developing countries should be considered when discussing/implementing monetary policy. High US interest rates correlate to decreasing capital flows in developing countries. Knowing that international bonds and their rates could potentially constrain the economic conditions of the poor in other countries should be taken into account when considering international economic policies. In recent news, the Fed has discussed raising interest rates as early as December. After an increase in US hiring and a decrease of the unemployment rate to 5% this October conditions for a rate hike look more probable. From the Fed’s perspective avoiding the interest raise displays a lack of confidence in the economy. In addition, the Fed stands to gain previously ignored gains that have already been incorporated into the current economy. As rates are currently closing in on zero due to the recession the impact on the raise in rights will be felt domestically and abroad. More than likely the rate hike will be slow, but depending on economic conditions the rate could drop to near zero marks again. One must question the uncertainty of fed rates and their impacts on emerging markets. http://www.wsj.com/articles/fed-minutes-december-could-well-be-time-for-rate-hike-1447873643
Toggle Commented Nov 19, 2015 on ECON 280 for Thursday at Jolly Green General
The Turn Down the Heat report for the World Bank displayed the alarming effects and aftermaths of a world 4°C Warmer. Regions with higher economic development will have higher “economic, institutional, scientific, and technical capacity to cope and adapt.” The impacts of a world 4°C warmer creates a further divide between developed and developing regions. Developed regions will focus on the shifting environmental and social changes, while developing regions will attempt but face severe disparity to combat their immediate needs due to lack of production and cascade effects. Ultimately due to the interconnectedness of the world rising temperatures will displace even developed countries. The decrease in growth and potential growth of regions remains correlated with rising temperatures. As these concerns are clearly present recently China has been burning 17% more coal than previously thought. In addition, India’s expected economic expansion will result in “9bn megatonnes by the end of the next decade.” India’s aggressive expansion of industry and energy production will lift an estimated 300 million out of poverty. An economic and moral question is raised should a country peruse economic growth increasing carbon emissions/pollutants if the effects lift the poor immediately? Or should the country avoid economic growth, delaying the lifting of the poor in the aims to prevent the conditions/contributions that will lead to a warmer climate? In India’s case its focus remains on uplifting the poor in lieu of increasing carbon emissions. http://www.theguardian.com/world/2015/nov/11/india-could-push-world-into-climate-change-danger-zone-warn-scientists http://www.environmentalleader.com/2015/11/10/chinas-underestimated-carbon-emissions-what-does-it-mean-for-climate-action/
Toggle Commented Nov 12, 2015 on ECON 280 for next Thursday at Jolly Green General
I found the insight review article on “The economic and social burden of malaria” very informative. The correlation between poverty and malaria seem to feed off each other as the causality runs both ways. The direct and indirect cost of malaria is severe. From disrupting household income to disrupting things on the macro level such as trade, FDI, GNP, and tourism. As these cost are almost impossible to fully measure they have dramatic social consequences. Such as increase fertility rates, which can lead to divestment in women’s education and foster gender inequality. Malaria and other diseases constrain the economies and the lives it effects. In order to improve the conditions, economies affected by malaria should be stimulated and a large focus should be placed on health and education. I was shocked to read that the programs to end malaria are underfunded, as the benefits from ending malaria would outweigh the cost when one considers the spillover effects. Briefly the article mentioned malaria as a colonization barrier as colonizers were restricted in their movement into Africa due to the disease. Industrialization and improvements in technology gave colonizers in the 19th century the ability to penetrate Africa under the veil of imperialism. Malaria as a buffer ultimately succumbed to improvements in technology and health. Yet for hundreds of years the access to these improvements have been neglected in regions that colonizers needed them the most.
Toggle Commented Nov 4, 2015 on econ 280 for Thursday at Jolly Green General
The Gitter and Barham paper brought to surface an interesting point in the discussion of women’s power involving conditional cash transfers. The argument set forth is that women empowerment through cash transfers has a positive correlation to children’s schooling and health care. The caveat was that too much women empowerment through the transfer would lead to a decline in children school enrollment. The assumption based on Basu (2006) concludes, “if women become sufficiently more powerful than men, additional female power may actually result in a decline in school enrollment.” I am unsure if powerful women truly do receive larger benefits from girls not being in school. I do not know if this conclusion is the result of promoting some sort of household equilibrium. The current power household dynamic favors men and the empowerment of women clearly has benefits. The notion that a woman having too much power is a misnomer: we have yet to see what a true household equilibrium looks like. The question becomes where the actually limit for women in terms of power are and are the terms we use to measure that power adequate?
Toggle Commented Oct 21, 2015 on Econ 280 for Tuesday at Jolly Green General
I enjoyed reading this paper regarding growth strategies. I wasn’t surprised to find that Rule-of thump economics has its flaws. Just as there is not a prescription for poverty: the same sentiment goes for growth/development. This paper highlights the triumphs and successes of different growth economic theories and policies. The vast policies and corresponding differences in results show’s just how economic/policy imitation can go awry. Economic policies that want to create growth must focus on the short term and long term. As the big push to stimulate an economy yields to short-term growth, but maintaining and sustaining growth in the long term is even more crucial. In one of the ways this paper views economic growth as “ not the natural order of things,” which shocks because I think there is an immediate assumption that growth in linear given time. There seems to be a crucial need for some type of intervention for developing states and what is prescribed will more than likely never be consistent. One thing for successful economies became clear in the early stages of development: adaptation of existing technologies, and innovation to create new technologies is needed. The economic policies and conditions for growth are complex and depend on several factors, but not solely on empirical data/reasoning. There is a critical need for historic consideration and regional incorporation of identity and practice to “prescribe” growth. The only thing that has remained clear from the paper is that we know just as much about growth as we do about poverty: plenty of room for exploration.
From this paper you can see that the characteristics of developing countries incentivizes the poor and extremely poor to not fully utilize their resources and make the most efficient decisions. The development report gives three principles left out of the standard economic model. The first principle, people think automatically. Fast decision-making can be seen in the paper when the poor are selecting their food. A closer inspection of their food selection reveals insufficient utilization of nutrients per dollar. Developing countries seem to foster impulsive decision-making. The second principle, humans think socially. In the paper this can be seen by the tendencies of poor migrant workers to not stay away from home for too long. The lack in financial institutions and infrastructures in developing countries creates the need for a social credit system, which would make any long work migrations disadvantageous. The third principle, people think with mental models. This can be shown with the reluctance of poor farmers to use fertilizer again after seeing an increase in their crop production after use. The mental model they construct is that the ability to save small sums of money needed for fertilizer doesn’t outweigh the need for immediate consumption. The characteristics of developing countries yield to an increase in these 3 principles for the poor and extremely poor.
I found this article stimulating as it pertained to the practices of standardization and innovation in development. Both innovation and standardization do not always result in a linear progression. Standardization has the ability to create a consistent model for people to follow, but in its attempt to create uniformity caste aside views and customs not accepted by majority. Innovation aims to create a new idea, product, system, and etc. Krugman’s example of the mapping of Africa highlights the blinding effect of innovation. The hubristic nature of a new model or system rejects its predecessor and or cast a shadow. The new standard disregards the simplicity or the distinctness of the old method creating gaps. Ultimately the implementation of innovation or standardization points in the direction of surplus maximization. The positive externalities of these innovations/standardizations in the long run fuel the closing of gaps. Dualism suggests modern markets perform better than traditional markets given the proper scale. Upon consideration, developmental theories such as ISI (import, substitutions, and industrializations) in Central America failed to immediately capitalize on the positive externalities of innovation and standardization. ISI lacked scale, capital, infrastructure, and the inability to timely fill in the gaps of its new system ultimately leading to ISI’s failure.
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Sep 16, 2015