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The World Bank’s report on climate change summarized, with a litany of facts and frightening predictions, why climate change is one of, if not the most, important issues facing our nation and the world right now. However, as much as I believe every country on our planet should be taking every action within their means to mitigate this issue, the reasons against doing so make perfect sense. In my Environmental Ethics course last winter, we discussed an interesting reason for inaction towards climate change I had never heard or thought of before: human beings, from an evolutionary perspective, are hard-wired to react to and care about immediate threats to their survival (hence the time-discounting factor we have in economics), and so when faced with a threat like climate change, which we can’t readably see, and who’s consequences will not fully be felt for decades, we are not inclined by nature to deal with it, even after reading all the data in a report like the World Bank’s. Also, for industries like big oil that have billions of dollars at stake, and massive political clout because of this money, unless they have to feel the true costs of their negative externalities, it doesn’t make sense for them to want to give up profits for the benefit of the planet, especially when the eventual consequences of their actions are going to be hurting those in poor developing countries much more than them. Thus, we see what has been mentioned in a few previous comments, which is that people aren’t going to take action unless they believe it will help them personally. And, even though the future costs of climate change will be tremendous, capitalists in the US aren’t having to deal with those costs now, and so do not want to take action. I actually experienced this principle in action recently. Keurig machines are awful for the environment because every individual plastic cup ends up in a landfill; indeed, the creator of the Keurig, who is incredibly wealthy because of it, has said he regrets producing it because of the extent of its negative environmental impact. My fraternity house has a Keurig machine, and although we have a coffee machine with a pot, the default method for making coffee for most of this year has been the Keurig. Partly out of laziness and partly because we have some very conservative members of our fraternity that don’t believe in climate change, explaining the environmental impact of the Keurig did little to reduce its use. However, when it was explained that the Keurig is incredibly cost-ineffective compared to making pots of coffee, and that the money our fraternity saved from ditching the Keurig and switching to pots of coffee could be used to buy other things, members finally curbed their Keurig usage—because the costs of the Keurig were affecting them personally. The only realistic way to get the “early, cooperative international actions” prescribed at the end of the report is to find a way to implement policies and structures that make corporations and individuals alike pay the full environmental costs of their decisions, using models that err on the side of overestimation, as I have a feeling that, as mentioned, many models under-predict things such as major tipping points and compounded effects.
I enjoyed this paper. Like some of those who have already posted, I always assumed, especially after seeing the simple trade model in intro microeconomics, that free trade is unequivocally beneficial for a country. Today’s class and this paper provided important insights into how there are a lot of issues that need to be considered when deciding on trade policy. Although I found the explanations of the econometric procedures used to be dense, and was not able to get much meaning out of the way they accounted for certain variables, overall the conclusions reached were all interesting and logical. For instance, it makes perfect sense that without a certain threshold of cheap credit availability being met, trade liberalization will not help the poor, as much of our discussion this semester has shown the important benefits of credit access for those in developing countries. Other points brought up during our course this semester came into play in this article. Each factor mentioned that could undermine the positive effects of liberalization reminded me of the O-Ring theory—for example, the way ineffective competition policy was shown to prevent benefits to the poor. When the paper noted that there may be barriers to mobility for the poor, I thought of how switching professions would be a very risky undertaking for someone in a developing country, and the fact that the stakes are so high could be one of these barriers. Looking into countries which have experienced great success from trade liberalization, it seems that a common theme is these nations liberalized their trade slowly, protecting industries during the transitional period to ensure they would be able to compete in the global marketplace. These countries’ experiences are congruent with the findings in this paper that proper adaptation of markets is necessary for the poor to benefit from liberalization. My final thought on the paper is that even if trade liberalization has ambiguous on effects on poverty, there may be benefits from liberalization that aren’t directly economic, such as the introduction of progressive ideas and ideologies that would be worth considering as a facet of trade policy.
Toggle Commented Nov 30, 2016 on Reading for Thursday at Jolly Green General
I believe my primary take away from the microfinance article can be summed up in the quote “Microcredit is an opportunity that different people will take advantage of in different ways—whether because of disposition or circumstances.” As the authors trace through the latest findings on microfinance, it seems as though every randomized or non-randomized trial or study has the potential to yield different results based off of slight nuances in the way the trial was executed. And, depending on the nuances in the product or credit plan offered, a wide range of results can occur that can leave a reader (like me) unsure of what, if any, fundamental guarantees there are to what works in microfinance. I am currently enrolled in statistics, and a lot of what we do in the course relies on assumptions just like economics; and, we spend a considerable amount of time figuring out ways to try and correct for error resulting from these assumptions. Similar to our inability to achieve perfection in statistics class, the studies on microfinance conducted in microfinance in developing countries are going to be highly susceptible to error, and any one of the individual findings in this article could be quite off from the true nature of things. With this in mind though, I did notice that the plans that worked the most definitively in this article were the simplest, most logical ones. For instance, commitment savings, which are useful as a result of people’s lack of self-control (or their social network’s lack of self-control), remind me of a book I had when I was a kid, where a toad has his friend, a frog, put his cookie jar on top of a shelf he can’t reach, so that he won’t eat the cookies right away. Another simple plan that was shown to work in this article was simply giving the rudimentary “rule of thumb” accounting education, as opposed to the more complex rules which presumably inundated the entrepreneurs with too much information. Finally, people generally respond to incentives, and the implementation of fingerprinting for paprika farmers to receive a loan was a very simple, and interesting, use of incentives to lower default rates, as the fingerprints created accountability for credit-worthiness.
Toggle Commented Nov 14, 2016 on Readings for this week at Jolly Green General
The main feature I noticed while reading both “The Economics of Being Poor” and “The Economic and Social Burden of Malaria” was that many of the points the authors made dealt with interdependent effects of variables and factors on one another, and spill-over effects from one event happening or a policy being implemented. For example, in “The Economic and Social Burden of Malaria,” Sachs and Malaney discuss how higher incidences of malaria cause higher fertility rates, as a form of hedging bets against a high likelihood of one’s children dying, which in turn leads to less human capital investments in women, because they are going to be spending so much of their time in pregnancy and raising infants. This simple chain of events ends in sub-optimal levels of human capital, and thus is very detrimental to the economy—a prime example of a snowballing of negative influences. What I also interpret this to mean, however, is that these spill-over effects can work in a positive direction as well, and being able to substantially mitigate malaria in tropical regions, or being able to improve the quality of just some sub-set of workers in a country, could cause very significant improvements in multiple facets of a developing country’s economy. After reading the piece on malaria, I wanted to look into ways in which this epidemic can be stopped. Although ecologists seem to categorically agree that eliminating mosquitos altogether is not particularly feasible, and would be harmful to ecosystems where mosquitos are a large source of food, it may be possible just to eradicate a few dozen or so of the species in the Anopheles genus, which contains most of the malaria-carrying mosquito species. Also, the piece mentioned at the end how there is not nearly as much investment in reducing malaria as there should be; and, although the government and altruistic agencies definitely have a role to play in this, I think private drug companies are in the best position to undergo R&D for curing or mitigating malaria. In my health economics course last year, we looked at how drug companies generally invest their R&D into producing drugs that will help those with a high ability to pay, and thus don’t generally work on creating drugs that will cure diseases like malaria in developing countries. However, if a system could be developed to help incentivize these drug companies otherwise, major developments could definitely be made in helping developing countries with their medical issues, which in the long-run will be beneficial for everyone. My final note is on the first sentence in “The Economics of Being Poor:” “…if we knew the economics of being poor, we would know much of the economics that really matters.” I think this statement puts effectively into words a lot of what we have talked about in class. Just as we would for a Western European country, or for the US, when looking at developing countries we simply take the economic models that we have—the abstractions of complex systems, using nearly infinite assumptions—and try and apply them the best we can given the circumstances. Any given developing country isn’t necessarily “different” from developed ones—we have to keep in mind developed countries were developing at one point.
Toggle Commented Nov 2, 2016 on Readings for Thursday at Jolly Green General
I formed three primary thoughts while reading Duflo’s piece. First, Duflo describes Deaton’s method for indirectly estimating whether girls are given less to eat than boys as “ingenious,” and notes that he only finds differences in particularly harsh or extreme circumstances. However, I felt like his method could have been subject to a couple sources of error that would distort these results: One, a family may take away food from older daughters to give to the baby without reducing “adult goods”; or, two, it seems fairly likely that a family would treat all babies similarly, regardless of gender, just because they are babies, but then discriminate based on the child’s gender as he or she gets older (which would not be reflected in Deaton’s method). My second thought while reading the piece was a strong visceral discomfort towards the way women are treated in some of the anecdotes. Although it is not an economist’s job to deeply discuss morality, and admitting the author commented that “this inequality…is repulsive in its own right,” I couldn’t help but feel like looking at these issues from a strictly economic standpoint tends to fail to address the broad, fundamentally flawed views towards women by men that are in play in these situations. Obviously it isn’t completely fair for anyone in our class to moralize towards people whose circumstances we can’t even fathom; but, even as a pro-choice individual, considering the advertisement “better pay Rs 500 now than Rs 50,000 later” just feels very wrong to me. Finally, while reading Duflo’s piece I found the fact that boys in a lower-caste actually have worse educational and vocational attainments than girls because they are confined to learning Marathi rather than English very interesting. It was a little reminiscent of what is happening with lower income students in our country right now: boys are continuing to fall behind girls in educational attainments in part because they are confined by societal prescriptions for masculinity—prescriptions that do not encourage studying.
Toggle Commented Oct 19, 2016 on Reading for Thursday at Jolly Green General
As evidenced by the consensus of almost every comment so far, Rodrick’s appeal to reason—specifically through his call for flexibility in policy creation—is extremely well argued and logical. As also noted by Cara (and perhaps others I didn’t notice), I formed a lot of connections between Rodrick’s arguments and those made in the piece we read last week about models. Yes, models are helpful, but only if we acknowledge the multitude of assumptions they make and apply them accordingly. The same can be said not only for neoclassical economic prescriptions for trade liberalization, privatization of land, etc.; but also for all of the relevant policy issues at the forefront of modern political debates. Rodrick submits “even for…relatively uncontroversial policy, it has proved difficult to generate unambiguous evidence,” which is the perfect way of articulating the reality that nearly everything (except maybe particle physics) is a shade of gray, and the best way to optimize economic policy is to develop it context. I think if politicians and policy makers kept in mind Rodrick’s idea of “non-standard practices in the service of sound economic principles,” they could come together a little more, and employ a little more case-by-case innovation, in making policies, as opposed to the rigid dogmatism that characterizes policy suggestions by our modern political parties. As a side note, I found this article recently I think is very relevant to our course. The author’s primary position is that as a result of modern capitalism, our society is riddled with people working 40-50 hour weeks at essentially meaningless positions, a meaninglessness that is fundamentally detrimental to our society. It seems to me that, if the author’s statements ring true, economic growth in modern capitalism has actually produced unfreedom for its citizens in the form of arbitrary, non-productive jobs, or a sort of perverse anti-development (reminiscient of the protagonist from Richard Yates’ Revolutionary Road). Would be interested on your insights @Professor Casey—here is the link
Toggle Commented Oct 5, 2016 on Reading for Thursday at Jolly Green General
While reading “The Rise and Fall of Development Economics,” I very much enjoyed Krugman’s insights on the use of modeling in economics. Since taking introductory microeconomics I have been fairly cynical of the effectiveness of economic models due to the number of assumptions that they make; however, I thought Fultz’s dish-pan experiment was a powerful analogy to include to illuminate how extremely simple models can be effective. Even quantum mechanics—the author’s example of a completely describable field, and (I believe) the most fundamental of scientific endeavors—is non-deterministic, with inherent uncertainty in measuring a particle’s location and momentum at any given time, but it is still highly valuable in making predictions about the world. Moreover, in defense of the trend towards models over metaphors, it seems as though because economics is so inextricably bound to politics, it makes sense for economists to demand quantified, formalized ideas in order to avoid obfuscation by the researchers’ biases and ideologies. In addition to formulating these thoughts on metaphors and models, I also noted that one assumption, made by Rosenstein-Rodan in his model of transferring those with 0 marginal product of labor in agricultural or rural jobs to the modern sector, reminded me of the article we read for the first week of class, “The Economic Lives of the Poor.” In the “Economic Lives of the Poor” we saw that many people living in developing countries make what economics would deem inefficient decisions, such as buying sugar even though it lacks nutrients, simply because they want to, and don’t necessarily think about optimizing their long-term outcomes. It seems like something similar could occur in transferring workers from the agricultural to the modern sector: even though these workers might earn a higher wage in the modern sector, there are non-monetary costs associated with moving, and I think cultural influences, family obligations, resistance to change, etc. would deter many from making this switch, thus compromising one of the main assumptions of the Big Push model. Like I said, though, I am definitely sold on the models.
As I was reading “The Economic Lives of the Poor,” I seemed to subconsciously divide the challenges faced by those beneath the poverty line into two categories: challenges that are products of systems that are so inherently flawed that it doesn’t appear feasible to tackle them head-on in the near future; and challenges that, while perhaps equally as detrimental, might be fixed a little more easily. Indeed, I think that fixing just a couple of the easier problems would make the others more manageable. With this in mind, I was very much struck by the conclusion posited in the final paragraph that a large incendiary for under-achievement in earning money is a psychological one—a reluctance to acknowledge how truly inadequate the standard of living is. If this is the case, then what is needed for these people living off less than $1 or $2 a day is a paradigm shift, a way of altering their incentives so that they become more motivated to earn money. I don’t think anyone can blame the impoverished for not making the “best” use of their income when buying alcohol, tobacco, etc: I, and I’m sure others, frequently find myself spending money inefficiently or on trivial, fleeting pleasures—it is human nature to discount long-term time scales in decision making. What it seems we can do, however, is encourage the indigent to want to rise above their circumstances through more secure banking and insurance systems, and programs that can help them incubate their potential. We can also find ways to provide loans to ambitious entrepreneurs who otherwise lack the means to raise capital. This will lead to increased specialization and a snowballing of other economic benefits. Although this study noted a myriad of systemic issues in developing countries, I feel as though my aforementioned suggestions would be easy places to start getting things fixed.
Toggle Commented Sep 14, 2016 on ECON 280 Reading for Thursday at Jolly Green General
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Sep 13, 2016