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Nicholas Tierney Watson
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I think that there are two big takeaways from this report. One of those is best exemplified by these two quotes, “Shocks and stresses related to climate change can undermine poverty reduction and push new groups into poverty” and “The impacts of climate change will often be most severely felt by poor and socially excluded groups, whose capacity to adapt to both rapid- and slow-onset climate change is more limited”. Inherently, climate change is a global problem. I’ve always understood that climate change affects various regions and people differently, but I never considered the implications that climate change would have on poverty. The negative effects of climate change not only disproportionally affect the poor, but they also appear to cement people in poverty. What might be even scarier than that is that according to this report if we heat up by 4C there is serious doubt about whether or not we can end poverty? That would have PROFOUND effects on global mental health. Where is humanity supposed to derive hope from, when for the vast majority of the world, literally can’t have a better future. The large majority of the world would be hopeless. I think the second take away, comes from the first couple of pages. If you read it carefully, you can find out that this report was created as a briefing report of the world’s leaders before the Paris Climate Accords. I don’t know enough about the Paris Climate Accords to make any real judgment about its efficacy, but at the minimum it was something. With a report as comprehensive, reputable and terrifying as this, how could any political leader ignore it or just flat out not believe in climate change?
Toggle Commented Dec 5, 2019 on Last Blog Post for the Year at Jolly Green General
From the results of “DO CONDITIONAL CASH TRANSFERS IMPROVE ECONOMIC OUTCOMES IN THE NEXT GENERATION? EVIDENCE FROM MEXICO”, it appears that the conditional cash transfer system in Mexico has positive and significant impacts of economic outcomes, through a multitude of metrics. Beyond the potency that the program has, what I found most interesting was this line in the paper, “Individuals 11 and under in 1997 are fully exposed, while those 15 and over are unexposed, and those aged 12-14 are partially exposed. As described in Section 3.2, estimations of equations (1) and (2) omit the partially exposed group, while event study estimations of equation (3) use all 13 birth cohorts.”. Their identification strategy to find the long-term results were super interesting. What I find most interesting about this identification strategy, and resulting study of the different birth cohorts, is the partly exposed group. The partly exposed group, in some ways, can be used to analyze the marginal effects of being part of the program for one additional year. Obviously this program works, and it works well, but I can imagine it must cost a lot of money. What I’m really trying to get at is where does the greatest economic return occur relative to the cost of the program. If we could look at the marginal returns to the conditional cash program in Mexico, through the partly exposed birth cohort, we could optimize the program, where marginal costs equal marginal benefits. If there was any excess money being spent on the program, and I’m not saying that there is, but the Mexican government could restructure the program to gain efficiency or spend the money elsewhere, on other poverty alleviating programs. I would be interested to see the marginal benefits of the program as you spent more time in it relative to the marginal costs of being it in it another year.
Toggle Commented Nov 21, 2019 on Next Week at Jolly Green General
While the evidence is not totally conclusive or aligned with the literature on the topic, it appears that interest rates and credit opportunities in industrialized countries have an important effect on emerging markets. I find something concerning about this finding. If highly industrialized “money center” countries definitely know that their money markets have direct and significant effects on emerging markets, these countries can abuse this. While Dependency Theory does not have a robust body of work, I think that this kind of leverage might fall into that category of research. If “money center” countries can control growth and capital flows in emerging markets, who is not to say that they will limit credit in these counties for financial or political reasons. What I find maybe more concerning is what Eichengreen and Mody write at the end of the paper, “tendency for relatively poor credit risks to drop out of the market in periods of relatively high U.S. rates”. Due to higher rates, and maybe suddenly higher rates, in the US, the people with the highest credit risk, aka incredibly poor people, fall out of the credit market. At the end of this, all are the interconnectivity of our financial markets a good thing? Is it ethical? Is it fair? How can we use this increased understanding of capital flows to help aid in sustainable development? Does the US have an obligation to change rates to help emerging markets grow, and credit spread?
Toggle Commented Nov 14, 2019 on For Thursday's Discussion at Jolly Green General
Both papers can be highlighted by this quote from Sachs and Malaney’s, “But economic development alone is not enough”. There have been incredible attainments made in alleviating malaria and HIV/AIDS, but the issues still widely persist in poor countries. Moreover, there obviously hasn’t been enough spending on Malaria and HIV/AIDS, because they both still persist in higher-income countries. Economic Development isn’t enough to rectify public health concerns, something that Sen captured before this paper on Sachs and Malaney’s paper on Malaria was written. There is an endogenous relationship between investments in public health (with future gains made to human capital acquisition) and economic development. Despite the endogeneity, these papers support the health before wealth philosophy, when looking at investments in health as both a means and end.
Toggle Commented Nov 7, 2019 on 3 readings for next week at Jolly Green General
This essay really seems like a response to the failings and assumptions of the Lewis Two Sector Model. Shultz’s main issue is how the government creates incentive structures or in his words “incentives are greatly distorted in many low-income countries”. Governments are creating incentive structures that encourage migration to urban areas and “modernization”, taking away from the potential productivity in the agricultural sector. Granted, this makes sense, if you assume the marginal product of labor on farms is 0. This is where I think Shultz makes his most important point about how underrated the quality of human agents is. Even if the marginal product of labor of agricultural laborers is 0, that is when, more often than not, they have limited access to education and good health. There is so much potential productivity that is lost when we leave farmers in poor health and poorly educated. For example, in India, through investments made to educating farmers, and giving farmers good health, there for longer life, productivity on farms went up. The gains made through investments in human capital can also be seen through the generational gains made through land grant institutions in the USA. What I had never thought about before, and what underpins the importance of investments made to human capital, is that, for the most part, human capital accumulation is migratable across industries. Land that is best suited for farming will really only be used for agriculture, but a generally educated person is flexible and nimble in an economy and can be useful in a myriad of industries.
Toggle Commented Oct 30, 2019 on Blog Post for Next Thursday at Jolly Green General
It’s no surprise that Duflo won the Nobel Prize this past year. This was an absolutely fantastic paper, and I’m more surprised she didn’t win one sooner. (Maybe that’s indicative of an issue of gender bias at large in the field of economics.) Duflo’s main argument that there is a bidirectional relationship between female empowerment and economic development. Her argument comes straight from the literature, but it is predicated on a very “senian” idea of economic development. In Duflo’s paper, female empowerment is both a means and an end of economic development. Where Duflo departs from Sen, is in her exploration of whether or not economic development in and of itself will bring about gender equality. Duflo finds that economic development, while it does enhance the status and autonomy of women, is lacking in its ability to create true gender equality. Duflo spends the back half of her paper on a myriad of policies that could bring about gender equality, which was very interesting, but I think the most interesting part of this paper is captured in a single sentence. On page 1063 Duflo writes, “Thus, policies that explicitly favor women need to be justified, not just in terms of being necessary to bring about gender equality, but in terms of gender equality itself being desirable and worth the cost it implies”. There are certain costs to implementing policies that aim to create gender equality, like political quotas, that have short run costs to those who are the privileged group in this society. Men are the ones in power, and in a sense they have the most to lose (at least in the short run) from polices that are aimed at promoting gender equality. I think that Duflo captures the incredible uphill battle that women have to fight to gain increased autonomy in that one quote above. With any policy that detracts from male privilege, those who are trying to implement that policy, not only have to try and prove that equality is good in and of itself, but it also is worth the costs it brings. When that cost comes directly to those in charge it’s easy to see why gains to gender equality has come so slowly, and must be continuously defended on both ideological and pragmatic/economic grounds.
The paper “Growth Strategies” by Dani Rodrik focuses and really drove home the point that Growth strategies all have the same end goal, but the journey to those end goals is largely dependent on initial, local political, cultural and institutional conditions. There really isn’t no “size fits all” or perfect, fully integrated development strategy. I think Rodrik says it best with, “There is no unique correspondence between the functions that good institutions perform and the form that such institutions take”, so long as they deliver on the higher-order economic principles that they should. I think that this paper aims and encourages flexibility when rolling out an economic policy aimed at development. Rodrik notes that almost all long-term, high-end growth comes when there are ordinary economic goals, such as protection of property rights, contract enforcement, market-based competition, that are achieved through sound institutions with unorthodox policies. The Washington Censuses is founded on sound economic logic, even with the additions made to it, the Washington Consensus is in no way comprehensive or without it’s basic external and internal assumptions. It lacks a certain flexibility, and without that flexibility or knowledge of initial conditions, it is a lacking development strategy. I think that the most interesting part of this paper isn’t within the two main points made by Rodrik. I think that the most interesting part of this paper is in the use of the Martian Metaphor. It reminded me a lot of the Rawls’ use of the Veil of Ignorance or the Fetus in Space idea when trying to get objectively at ideas that are inherently political or biased. If the Martian looks objectively at the Washington Consensus, it saw how the polices from it were slapped on some countries ineffectively. It seems to me that Rodrik, through his use of the Martian metaphor, is trying to get at the fact that we all, including economists, but especially policymakers, carry certain biases and expectations to certain policies. Rodrik says it best saying, “reality has been unkind to our expectations. If Latin America was booming today and China and India were stagnating, we would have an easier time fitting the world to our policy framework. Instead, we are straining to explain why unorthodox, two-track, gradualist reform paths have done so much better than sure-fire adoption of the standard package”. We should all try to step away from our personal biases, especially the people who implement policy, and be more flexible by letting sound, empirical data show us what to do.
Toggle Commented Oct 2, 2019 on Rodrik article for Thursday at Jolly Green General
I think Krugman raises a really interesting point about the evolution of economics and the introduction of economic modeling as the primary way of exploring and understanding the economic phenomena. In my mind, Krugman in this piece is exploring how over time, with the introduction and reliance on economic modeling, the study of economics has lost some of what it started with. The way I see it is that Economic Modeling is a whole new language that we created in the 1950s, and we are continuing to develop as we primarily use it to describe the complex economic systems that we, ourselves, created. Just like trying to translate English into German, what happens when we try to translate and understand what is going on in these complex economic systems into simpler models? Inherently, something is lost in that translation. Krugman notes the importance of modeling in the study of economics, but also address its limitations. I had never really thought before about the true limitations of modeling. It had never occurred to me that, through the production of these models, while I was gaining insight into some kind of economic phenomena, some aspect of that system the model was describing had been lost. With the increasing focus on building models to understand aspects of economics, what are we losing in the process? If we lose more than we gain from using economic modeling, how do we get back what we lost in the process? Krugman never shies away from the importance of economic modeling, but his understanding of the limitations of them is key. Models can’t explain the world, but they certainly can help us understand it.
Toggle Commented Sep 26, 2019 on Reading for next Thursday at Jolly Green General
I think that it is fantastic that we have identified certain avenues or polices that countries can adopt in order to develop quickly. The most important appears to be the diversification and industrialization of markets within a country, the relative openness of the economy and incentivizing foreign investments. These strategies work well but seem to only work well when there is a lack of institutional barriers. Institutional barriers, such as corruption and protectionist policies, limit the TFP and therefore make the positive policy strategies unachievable or null. In my mind, if you want to develop quickly and positively, with respect to GDP per capita, you need to remove institutional barriers quickly and adapt to a global market. My question, or rather concern, is one that isn’t addressed in the paper, is about the costs of the switch to positive institutions and the resulting economic development. What exactly are the costs, long term, and short term, of such a rapid shift in policy or government and the huge growth that many of these “miracle” developing countries experienced? One of the major costs that Wang, Wong, and Yip fail to address are the environmental and cultural costs of rapid development and globalization and I would love to hear more about them.
One thing really stood out to me in this paper, and fully cemented the difference between the study of Economics and Development Economics. In this study, the extremely poor spent between 1% and 8% of their daily income on commodities, such as tobacco and alcohol. To add on to that, the average extremely poor family spent a median amount of 10% of their annual budget on festivals and weddings. At first, these findings shocked me. If I was living on 1 dollar a day I would spend every cent on food and nothing else, just trying to survive. These statistics, especially in the face of the fact that most of these extremely poor and poor families are malnourished and hungry, flew in the face of how I sometimes conceptualize the lives of the impoverished. In a global sense, the extremely poor and poor families exist half a world away from me. The only real way I can view the experience of the globally extreme poor is through the lens of my economics courses and sometimes the front page of National Geographic. Often times, it is easy for me to get lost in the mental game of trying to min-max every cent that extremely poor families make when I read statistics about poor families spending money on commodities. In my mind, at the core of this mental game trying to min-max consumption is the difference between true Economics and Developmental Economics. The obvious answer to a pure economist, (and I understand that I’m exaggerating this), is that those poor families should stop spending their money on detrimental vices and useless festivals, and start eating more. Especially, when malnourishment in early developmental years for children leads to serious cognitive setbacks. A Developmental Economist looks at it from a different angle, an angle that incorporates more than just GDP per capita into a person’s well-being. Developmental Economists understand that spending money on commodities and traditional festivities is important to “taking part in the life of the community” and self-esteem. Living, and being well, is about far more than just meeting the required caloric intake for the day. I appreciate the more holistic view of economic well-being that Developmental Economists bring to the field and the way that it tries to empower people when compared to neoclassical economics.
Toggle Commented Sep 11, 2019 on Readings for next week at Jolly Green General
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Sep 11, 2019