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William Chapman
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The world presented in the World Bank report was a depressing one to read about but was no different than what many news articles and scientists have been saying for years. Because the effects of climate change are not immediate and not as acutely felt in rich countries like the US, many people either deny climate change is an issue or simply do not understand the massive ramifications it will have on human existence. From a moral standpoint, climate change is extremely troubling as well. The people that will likely be most affected are not the same ones who are causing the issue in the first place. The vast majority of carbon emissions come out of the developed world as well as China and India. This report shows that many of the people who will take the brunt of the impacts are in poorer developing countries. A farmer in Ghana is not exactly releasing a lot of greenhouse gasses. I recently found a website that lets you put in your consumption, traveling and living arrangements and it estimates the number of Earths it would take in order to support your lifestyle if everyone on earth lived the same way. For example, the site estimates that it would take over six earths to support my lifestyle. This just shows again how unequal the situation is globally. Not only is it unequal for people living right now but for people who have not been born yet. There are people who will be born 100 years from now who will have had no part in causing climate change but will have to deal with the results.
Toggle Commented Dec 4, 2019 on Last Blog Post for the Year at Jolly Green General
In her paper “Does Aid reduce poverty,” Juliana Yael Milovich uses a very unique identification strategy in order to identify causality between aid and poverty reduction. I do not know how Ms. Milovich was able to come up with this idea but comparing her approach to the literature provided, showed the strong advantage of this approach. This approach helped deal with endogeneity and reverse causality by taking advantage of the United States’ attempt to influence other countries with aid money to no one’s surprise given the recent events in Ukraine. I have already found the arguments against aid to feel a little thin. While maybe there is some sort of truth that providing too much aid would disincentivize productivity in some circumstances but not for the people living in the situations that many of the poorest living in developing countries find themselves. That argument makes more sense for a situation more like Saudi Arabia where they have thrown oil money at their citizens to keep them happy with the government. This spending is not to placate citizens to keep them from rebelling but to help provide for their basic needs of food, health, and education. For example, building a well that provides clean drinking water directly helps alleviate poverty at least to some extent, even if it does not necessarily lead to measurable economic growth. Previous studies may not have been fully capturing this improvement by only looking at income. Milovich’s findings were certainly helped by her ingenious identification strategy but also by incorporating the MDGs and the broader poverty measures.
Toggle Commented Nov 19, 2019 on Next Week at Jolly Green General
While reading the paper I immediately thought of the trilemma. This is the idea that a country can only have two of: Independent monetary policy, free flow of capital, a fixed exchange rate. Until the end of the Breton-Woods agreement ended in the 1970s most countries in the world chose to peg their currency to the US dollar which was subsequently pegged to gold allowing a relatively fixed exchange rate and forced countries to choose between allowing free flow of capital or using independent monetary policy. Early in the 20th century cross border capital flows were smaller, and this was easier to manage as the modern issues with hot money were not as prevalent. Since Breton-Woods is over, developing countries with economies relatively small now have to make the choice themselves for how they are going to protect their economies. The paper discusses the potential capital flows related to treasury rates but we have also seen in recent years that investors look to the foreign equity markets and bet foreign currencies beyond the debt capital markets. I find the decision that these developing nations have to face very interesting. Many countries have found that they cannot responsibly use their own currency without risking large scale inflation and have pegged themselves to the dollar. This however leaves them vulnerable to interest rate fluctuations if they use monetary policy in an attempt to improve the economy or leaves them with their hands tied in the case of a recession. Additionally, they currency is still vulnerable to fluctuations between the peg and other currencies. This works well for the EU since exchange rate fluctuations are typically small but can be dangerous for smaller nations. Nations could also choose to control capital flows, but this would be a very dangerous idea except in extreme circumstances. We have spoken over and over about the necessity of capital in order to produce economic development and most nations should not try to limit capital if at all possible. Unfortunately, there are these unintended consequences which can undermine the effectiveness of providing capital to these counties. Foreign investors both public and private need to remain conscious of exchange rate implications and countries need to understand when too much capital is too much and consider slowing down the inflows.
Toggle Commented Nov 13, 2019 on For Thursday's Discussion at Jolly Green General
Malaria sometimes feels like a tired subject. It is a disease that we have as humans been fighting for centuries and yet have still not gotten close to irradiating the disease. The potential effect on the birth rate I found particularly fascinating. Knowing that there is a high likely hood of your child dying young would lead a rational mother to spend less time and resources on the child until the child reaches an age where he or she is likely to survive long-term. As terrible as it sounds, it is also reasonable for the family to give birth to potential replacements since they know that it is likely that the child will die before they do. This is just not something that we in the United States have to experience on a regular basis. A child dying here does happen, but it is considered a tragedy and an anomaly rather than a sad but expected part of everyday life. This leads to the quantity over quality of child-rearing in the affected countries and is likely a large part of what is holding them back from creating more human capital. We have talked a lot about nutrition and health when looking at development and these issues strike me as similar but on a much larger and more deadly scale as the worms preventing students from attending school. Children cannot attend school and then become productive members of society if they are sickly or even die before reaching school age. Even as education rises, at least in years attended, this sickness and fear would certainly impact the quality of learning achieved by the children. When looking at the maps showing the areas with a high risk of malaria infection over time, I noticed that the ‘Asian tigers’ were either never at risk or were no longer at risk as they began their long economic expansions. Japan Korea and most of China were no longer at risk in 1994 according to the map. In contrast, most of Africa and South America still were. This may have been a factor in the divergent growths of the developing economies of the three regions.
Toggle Commented Nov 6, 2019 on 3 readings for next week at Jolly Green General
In his essay “The Economics of Being Poor,” Theodore W. Schultz talks about the importance of population quality or human capital for improving the lot for the poor. I agree with him that it is not enough to simply give people more land or resources. At the same time, it is not enough to just give the population more human capital, whether that be through education or health care or even freedom. These inputs need to be able to complement each other. Schultz does not really put forward many solutions to this problem of ‘population quality.’ Schultz says that governments give poor incentives that hold back farm productivity, but I do not buy his argument that simply providing opportunities for more entrepreneurship would work much better. Schultz does not put forward any examples of his model and I cannot think of any in the more recent past. The advancements these farmers and countries can make have in large parts already been made. There are technologies from seeds to fertilizers to harvesting equipment that could provide massive efficiency benefits to farmers in developing countries. I recently read an article stating that a strand of rice with enriched vitamin A has been developed for decades but some developing countries have not yet allowed this strain of rice to be grown in their countries. This has possibly cost millions of lives. Technologies such as these allow governments an opportunity to provide good and helpful incentives through distributing these technologies with low or zero upfront cost and then collect a return on investment through the increase in population productivity.
Toggle Commented Oct 30, 2019 on Blog Post for Next Thursday at Jolly Green General
It made me somewhat uncomfortable to think about the argument for gender equality based on improving development outcomes. It seems logical that having more than 50 percent of the population as true participants in society would improve economic outcome but that should not be the reason that women achieve equality. Societies, both developing and developed, should give equal rights to everyone because we are all human. However, since that seems unlikely to happen it is fortunate that researchers like Ester Duflo have studied both the positive effects of treating women equally and what societal changes lead to more gender equality. I also found the decisions made by females in power, and how they prioritized different problems, to be both interesting and potentially broadly insightful. It was not necessarily that women were better or prioritized more important things, even though they did seem to do that. By having women in the political process, important needs were addressed that previously were not in any way prioritized. Connections can be made here to the needs of representation here in the United States. If different groups are not represented in our law-making process then their needs may go unnoticed, much less prioritized. I also think it will be interesting to continue looking at the potential long-term impacts of the closing primary education gap. Hopefully, this increased education will empower women in these developing countries to fight for more rights. Gaps still exist, however, especially as education progresses. If these results that show the benefits of equal rights for women can be convincing then maybe more opportunities will exist for women’s continued education, which is now more possible then it had been in the past as more and more girls receive some basic level of schooling.
This paper really drove home the idea that there are no one-size-fits-all solutions when it comes to development. Ideas that work on paper or in one country might not work or even have a negative effect in another country. I particularly liked the China example. The Chinese government as it ‘liberalized’ its economy did so slowly and only in certain facets, not the way those who believed in the Washington Consensus would have suggested that they do. This has worked remarkably well, at least from an economic perspective, as China has seen consistently strong growth numbers over the past decades. The other East Asian countries all took different paths that also worked for them, working within the societal framework that they had already built rather than what Western economists told them they should be doing. Hong Kong, however, did closely follow a western model as did the Eastern European countries which for me showed that in some cases the Washington Consensus may actually be right at least for countries with similar institutions, economies, and cultures to the West. The idea that growth in the short term does not necessarily guarantee success in the long term. This causes me to question the Washington Consensus. Completely free markets may galvanize growth in the short run but seems to leave a lot of holes in various needs for long term growth. Just liberalizing markets does nothing to help and may hurt the building of strong institutions, strong homegrown industries and social capital. Once these things are built, however, maybe the Washington Consensus ideas would be helpful to help continue growth into the long term.
Toggle Commented Oct 1, 2019 on Rodrik article for Thursday at Jolly Green General
In the article, Krugman speaks about the downsides of requiring formal models and how this requirement pushed out high development when the ideas may have actually been beneficial to the field. Krugman puts forward a couple of examples from the past where correct ideas were pushed out before finally being proven correct. He mentions maps of the interior of Africa and using clouds to predict weather patterns. This argument seems flawed as there have been many times where traditional or unproven knowledge turned out to be completely wrong. There have been many superstitions over the years, such as magic or divine creation, that have been shown to be to be plain wrong. I believe it sets a dangerous precedent to say that in some cases it is not important to meet the rigors of a particular field. This is not to say I agree that these high development economists should have been exiled from the field. Instead, they should have continued focusing their efforts on finding ways to create models to represent their ideas or scaling their ideas to a more manageable position that could be more easily backed up and then built from there. Ideas should not be immediately dismissed in economics because they cannot be modeled but they should also not be automatically accepted without being put through the same rigors as other theories.
Toggle Commented Sep 25, 2019 on Reading for next Thursday at Jolly Green General
I found it interesting how similar the different strategies pursued by the countries who have found economic success. The Asian countries especially seemed to follow a similar strategy of creating an export-focused economy with a strong manufacturing sector. Some of these countries were then able to pivot into the tech of financials sectors as well using this strong economic base. These countries seem to strongly support the pro-free business approach to development that was popular in the west for decades. It was clear however that this did not work for all of the countries. Some of the South American countries tried to unsuccessfully build manufacturing-based economies using import substitution strategies which backfired significantly. I have to wonder how easy it would be for these sub-Saharan countries to copy this model of the Asian nations who have easy ocean access and large urban labor forces. Many of these countries are focused on agriculture and exporting these crops or other raw materials. I think it would be interesting to see the effects of helping keep more of the value chain for these goods in the nation that originally produces the raw materials and crops to add high paying jobs to the economy.
I found the choices made by the people studied in poor countries in terms of food expenditures to be very perplexing. The data shows that despite most people not consuming enough calories a significant portion of every dollar is not going towards food. Additionally, the money that the poor are putting towards food is not necessarily going to the most cost-effective food on a calorie per dollar basis. After trying to get out of my frame of reference as an American who rarely goes hungry for any significant amount of time this patter began to make more sense. A life where every dollar goes towards feeding oneself is not a life worth living. Even the poor need to find happiness in life and are likely making conscious decisions that it is worth being a little hungrier to bring some joy into their lives rather though weddings or owning a radio. The description of the global poor as essentially small business owners or entrepreneurs was also striking. When I think of the working poor in the United States I think of retail or fast-food workers or potentially day laborers. Very few run a small business but rather tend to work for someone else. The article describes a society where people scrape together their pennies by engaging several different skills such as cooking or sewing while working for themselves. The statistic of three working occupants engaging in an average of seven different occupations was difficult to wrap my head around. In the United States we hear about people working several part-time jobs but this is a smaller portion of the population. Rarely will you see three family members each working 2+ jobs much less is that going to be the average.
Toggle Commented Sep 11, 2019 on Readings for next week at Jolly Green General
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Sep 11, 2019