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Michael Hegar
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As I read this report I was reminded of the climate section from an Environmental Studies class I took last year. In the class we talked about many of the issues discussed in this report about the impact of rising global temperature on the environment and the lasting, irreversible effects it would have on the planet. Reading this with a people oriented perspective, I found myself thinking how unfair it was that developed nations ruined the world for everyone. Temperatures in already hot places are going to rise as a result. Farmers will have to deal with drought and arid soil. This will be devastating in developing nations as many people grow food for sustenance. Poorer countries without A/C will suffer from even more heat related deaths. Part of me wants to be angry at the greedy, consumer-driven world I live in that has screwed up the earth, but I am a part of the problem. I have a car that pollutes and feeds into the problem. I am not actively trying to fix the problem. And this is part of the problem. Apathy. If we remain apathetic about this issue, the bleak predictions scientists have made will come to pass.
In microeconomics, we were taught that when there is trading, as a whole everyone ends up better off. The simple two country/two goods model was a starting point but we live in a world that is much more complicated and countries produce multiple goods. The article "Does Trade Reduce Poverty? A View from Africa" shows that trade may make countries better off. However, a developing country may not have its poverty levels reduced because of trade. Theoretically there should be more jobs being created in new sectors but unskilled labor cannot easily transition into a skilled or semi-skilled labor market. The static approach to free-trade argues that if there is trade, the abundant resource should increase. In the case of developing countries their abundant resource is unskilled labor and according to the static free trade theory: the poor should be better off because they have more jobs available. Yet the theory meets a road block when it is applied to the real world in that there are barriers to entry in markets and jobs do not always flow to unskilled labor markets in developing countries. A dynamic approach in theory also would work to alleviate poverty in developing nations through a economic growth derived from free trade which leads to sustained growth. Free trade in theory would encourage investment and entrepreneurship. Again the theory does provide insight but the real world is still full of more challenges. From this paper, I think trade is another thing where it depends. Policy has shown to be effective and the type of leadership in place also plays a role in whether or not and to what extent trade can reduce poverty levels. Having developing countries become more open to the idea of globalization and free trade can help their countries become more advanced. It is what they do with the gains from trade that will determine how the poverty level will be effected. Incentivizing the investment of gains from trade in health and education could be one way policy could help ensure that trade positively impacts reducing a countries poverty levels.
Toggle Commented Nov 29, 2016 on Reading for Thursday at Jolly Green General
In the "Latest Findings from Randomized Evaluations of Microfinance" article I found the grace period for micro-loans interesting. If borrowers are able to invest 100% of the loan they have an increased chance of making greater strides in growing their business. That is not so say that a grace period that allows 100% of investment is always the answer and studies show that even with a grace period some borrowers still default on their loan. That is why it is important to make sure those who are given micro-loans are serious about using the loan to improve their business as a way to improve their lives. I am not very interested in accounting or finance but the idea of microfinancing and evaluating borrowers reminded me of Bus 217, Managerial Finance. We looked at businesses and how to evaluate their stock price and volatility in order to make informed investments. Similarly, if micro-lenders had a more formalized process for vetting potential entrepreneurs to invest in, they could properly invest in the ones that would have the most success and be able to pay back the loan. The microfinance industry is still fairly new and it will (hopefully) continue to improve. Filling the "missing middle" with "small, formal firms" would be a good starting place.
Toggle Commented Nov 14, 2016 on Readings for this week at Jolly Green General
Thinking of our discussion on population from Tuesday, Schultz line that said, "My approach to population quality is to treat quality as a scarce resource...." This idea that the quality of a population is a scarce resource is a new way too look at this issue. Better population quality is a means to the end of more freedom. For instance if women's agency is increased, they will have fewer kids, they will take better care of everyone in the house hold. Thus raising population quality. In "The economic and social burden of malaria" one idea that really struck me was the link between economic prosperity and malaria. The example given was countries of Spain, Portugal, and Greece. In the 1940s these countries were high risk zones for contracting malaria. But in the 50s they solved the problem and as a result their economies and tourist industries boomed. This might not be the case for every country if malaria is eliminated but that does not necessarily mean solving the malaria problem is not a good thing in and of itself. Malaria is still a link between high death rates, both directly and indirectly (by way of receiving contaminated blood transfusions and developing HIV and/or AIDS.) Malaria also prevents the movement of human capital and the movement of markets to regions where malaria is prevalent. So often I take for granted the things I have. I live in America and even though the country has its problems, I still don't have to worry about malaria. The Nobel Prize Lecture got me thinking about how much I don't know about how the poor think and make decisions. I can study it and think about it as much as I want but at the end of the day I am not the one faced with the decisions, i.e. in their shoes.
Toggle Commented Nov 2, 2016 on Readings for Thursday at Jolly Green General
In Esther Duflo's "Women Empowerment and Economic Development" she touches on points that Sen mentioned in chapter 8 of "Development as Freedom." Mainly that improving women's status in developing societies by giving them freedoms is a catalyst for causing economic change for the country. More free women lead to better home care for children and lower fertility rates. One thing that really stood out to me is the disadvantage girls/women have their whole lives in developing countries. In America we are still not completely equitable but girls largely have the same opportunities as boys. To have society stacked against you since you were in your mother's womb is a stark reality girls in many developing countries live with. It will take more than just policy to overcome a barrier like this that is so embedded in some societies. It will take people changing their mind and fundamental beliefs about gender roles in society.
Toggle Commented Oct 19, 2016 on Reading for Thursday at Jolly Green General
Rodrik's "Growth Strategies" brought up some concerning points. Growth can be hard to start but it is even harder to maintain. I never thought about the point he brought up about what causes growth in one country won't necessarily work in another. "A key idea is that institutional arrangements that prove successful in one country create both positive and negative spillovers for other countries." But as I read about this it made more and more sense. Different cultural, institutional and so many other factors differ from one country to the next. He used the example of Gorbachev trying to mimic a growth strategy that worked in China but was ineffective in the Soviet Union. Like Matt said in his post and Professor Casey often says in class: "it depends." There is no right answer for every country to start to grow and maintain growth. Rather it is a combination of different strategy, circumstances, institutions and policy.
Toggle Commented Oct 5, 2016 on Reading for Thursday at Jolly Green General
"The Fall and Rise of Development Economics" brings some interesting points to light. I've only scratched the surface of economics in my academic career and I never really thought about what life was like before the models were made. Simplifying complex ideas into manageable models is incredible useful. It can also be incredible difficult. I liked Krugman analogy about the Norwegian scientists discovering what folk wisdom told them all along. As economists we must be careful not to let our view narrow so much. Focusing in on an important part of development is not bad. But when we get caught up with the process of making a model and only focus on certain variables, we can miss the big picture. For me I think of things in terms of sports. Krugman's concluding remarks remind me of my dad. He never played basketball but he has an understanding of how the game works. In high school he would often point out things that I might have missed on the court. "Look for the folk wisdom on clouds -- ideas that come from people who do not write formal models but may have rich insights." In sports and in economics we cannot have a narrow focus solely on what we do. We need someone in a different field (or a coach) to help us see the big picture sometimes.
In Chapter 2 of Development as Freedom, Sen talks about "freedom being a means" as opposed to an end. That is something that I had to reread to make sure i fully understood what he was talking about. Freedom of any kind helps all freedom. Developing freedoms for people or reducing unfreedoms. One example of a freedom creating more freedoms is found on pages 40-41. Amartya Sen gives the example of reducing mortality rates leads to lower birth rates. This allows for more focus to be put on education and literacy rates rise among children and women. All this from policy that allowed for better health care. I remember learning about Thomas Malthus model for population birth and death rates in macro and was reminded of that model when I read this. The theory can show what should happen but only policy can make a lasting difference and cause change.
"The Economic Lives of the Poor" shows that there is more to poverty than just money. I found it really interesting how closely related many things are to poverty. Normally I would not associate being poor or extremely poor with education, but as "The Economic Lives of the Poor" points out, poor families in other countries may have to decide between sending their kids to school or to work for extra income. Parents have to sacrifice their kids' potential to have a better future so that the whole family can eat today. This creates a cycle in which the poor remain poor because they have to work at a young age instead of learn. Another thing in this essay that I hadn't thought about before was the fact that impoverished people might only move temporarily for work. I have heard about poor people moving so they can send money back home or even commuting over long distances for each day. It makes sense from a social point of view why the poor do not migrate for longer periods of time. Moving sucks and moving to a different region or country is even harder. The poor forgo the opportunity cost of getting paid more because being close to their social circle, community, and family is more important to them. The following bit from the essay says a lot about the values of the poor and extremely poor: "The ultimate reason seems to be that making more money is not a huge priority, or at least not a large enough priority to experience several months of living alone and often sleeping on the ground somewhere in or around the work premises." It comes down to priorities. The poor have to make choices about how much to eat, their kids education, where the work, and whether or not they save. These are not easy choices to make.
Toggle Commented Sep 14, 2016 on ECON 280 Reading for Thursday at Jolly Green General
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Sep 14, 2016