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Christopher Watt
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Wow… we covered a lot. However, I think that one of my biggest take-aways from the course is recognizing that economics is so much a study of human behavior. I reflect back on our discussions on moral suasion and the three I’s, which I have found myself discussing with my brother and others over the last few days in light of COVID-19—how people are failing to follow social distancing, and other societally beneficial actions (or inactions), making decisions based on their own preferences and private costs and benefits, rather than considering why they are asked to shelter in place and not gather in large groups due to the negative externalities of those behaviors. Interests and ideology seem to be shaping decision making during this time by individuals, governors (yes, governor Kemp of my home state of Georgia) and entire communities who are seeking to ignore the harms of COVID-19 on society as a whole, again considering primarily only their private costs and benefits in determining their responses to the situation. From climate change to public health crises, ignorance, interests, and ideology place harms on society—harms that could and should be addressed and overcome. I’ve been thinking about my own cases of ignorance, and how my personal interests and ideologies could shape my actions in ways that are detrimental to others and the environment. Because my personal choices may and do implicate the wellbeing of others, I think these three I’s are something that need to be reflected on constantly as primary shapers of how I go about my daily life. I just hope mine are positive rather than negative… I have definitely gained a greater appreciation for and recognized a greater need for the government to intervene in environmental issues because of this. Having grown up in a rural South Georgia community—an area with some of the last remaining old growth, long leaf pines—I have seen individual actors consciously make efforts to conserve environmental resources for their values to the livelihoods of people in my community, their use-values, and the intrinsic value many believe they have. Yet, I realize more and more how much our world ecosystem is vulnerable to the diverse preferences of individuals across the globe. Indeed, we do need the government to act—to step in for the rights and wellbeing of individuals whose voices are not heard in discussions on the environment and to ensure that the social wellbeing of all rather than the private benefit of a few are met. We have a long way to go, but as we are daily encouraged by Professor Casey’s quotations of Jacobson’s tweets, I have hope that we will figure out how to address ignorance, interests, and ideologies that are detrimental to environmental and social wellbeing. We have to have hope.
Toggle Commented Apr 22, 2020 on ECON 255 Final Exam at Jolly Green General
Wow, this post brings me utter joy and hope! Having myself grown up in a rural area with deep connection to the land and surrounded by a community wide ethos of protecting the long leaf pine forest and its many species, I feel what Nichols is seeking to pass along. For me, being outside, be it hunting, fishing, hiking, or simply sitting and listening to birds, I feel a deep peace--an even spiritual connection to the land. This is an experience I hear echoed around me from family member and friends in my region, as well as friends on campus who experience similar connections to the Blue Ridge. I love his message of encouraging people to act through appreciation and awe of the Earth, rather than fear and anxiety. Most of all, I think it is so cool that someone is trying to research the neuroscience behind this and how humans' connection to the earth and aboriginal appreciation for it can be the motivating force for protecting it. From an economics stand point, it is a part of our "preferences." For many, connection to the outdoors, for recreation, enjoyment, and peace is so important. I think many have lost the connection in our generation, but mainly because of a lack of opportunity or exposure. I hope that Nichols' project can work to re-connect us all and motivate us toward protecting and conserving our resources. In relation to this and the "operation surf" program, there are a number of organizations that use conservation or outdoor recreation as different forms of therapy--both physical and mental. Nichols' work reminded me of a number of organizations, such as Project Healing Waters or the Wounded Warriors Project, which get vets and other individuals with PTSD into the outdoors hunting and fly fishing. I have seen and experienced the healing nature of the outdoors, and like Nichols said, one observation is all that is needed to start the research...I cannot wait to see what they find!
The solutions project is really interesting! I love their mission to both push a shift to %100 clean energy and give a space for groups who are not as often considered at the front of the climate debate and renewable energy push. I did some exploring on the website and found their interactive map on what a shift to renewable energy could look like in major US cities. I was particularly interested to look at Atlanta, the capital of my home state. There vision for Atlanta includes a 52% decline in energy use with renewables and the saving of almost $6 Billion in healthcare. I am curious about how they calculated all of their estimates, but I appreciate how clear cut their vision is and initiative to make it happen! Here's the example from Atlanta...shares a lot of information: https://thesolutionsproject.org/why-clean-energy/#/map/cities/location/Atlanta . Considering my question in the last blog post about transitioning fossil fuel works to jobs in renewable energy, the solutions project also points out opportunities for job creation in construction and energy operation that will result from the shift. There is definitely a lot of opportunity! I chose to read the article by Jeffrey Sachs called "Getting to a Carbon Free Economy." What I appreciated about his article, especially coming from a big name in the economics world, is how clear he is about both the opportunities and challenges for transitioning toward a carbon free economy. He points out low hanging fruit, such as shifting vehicles to renewable energy, while laying out a timeline for how that will be done and the challenges that will face these major shifts. He writes, "The least-cost solution in each case is to retire the existing capital at the end of its normal life and replace it with zero-carbon capital." He both acknowledges the challenges of shifting entire industries and phasing out the older capital, and illustrates how this MUST be done to meet the goals of climate treaties. He is also very clear about where we need greater research and innovation to combat perspectives that say this energy shift is too big or too hard; rather, it is duable with more thought and we need to start acting now and figuring out some of the bigger challenges after we make it over the smaller hurdles. For example, though time and scale of transitioning cars will not be "easy," we know how it can be done, and are beginning that process. Figuring out how to power long distance air travel is much more challenging, but we can and will figure it out and MUST do so for the wellbeing of our planet and growth in the economy.
oops… forgot to do a blog post. Considering the proposals of the Green New Deal in improving the environmental and social wellbeing of US Citizens, as well as providing positive externalities around the world, an important consideration would be the displacement of jobs from individuals in the coal and fossil fuel industry. These individuals are easy to vilify for perpetuating issues related to carbon emissions, and indeed, their interests are largely responsible for the continued subsidization and political will toward the industry which perpetuates major damages to the environment and wellbeing of individuals. But, just like with any policy proposal that could majorly shift industry and take away jobs causes major concern and uncertainty for those groups, causing resistance to change. The Green New Deal’s proposals are vital and needed for the improvement of our planets health in both the short and long term, and protect our economy, human health, and social wellbeing; however it is necessary to consider particularly the needs of those who are so against it, because laying out how those groups will benefit (its obvious, yes, but change is scary for people) through industry shifts from, for example, coal to renewables, may be needed to garner greater political will for a Green New Deal. Whether this comes in the form of a federal job guarantee, training programs to re-skill workers in other energy industries, or another like program, this will shift harms and social burdens onto these individuals, and this needs to be addressed.
Toggle Commented Apr 15, 2020 on ECON 255: The Green New Deal at Jolly Green General
Based on the outlook of the two articles, it seems that putting a price on carbon emissions through a carbon tax could be policy on which both sides of the political divide can agree. Pricing carbon and addressing climate change should not be a politically divisive issue: it provides benefits in one form or another to nearly all people. By reducing emissions, incentivizing investment and alternative energy, and promising an opportunity for subsidies, tax rebates, or even direct transfers, a carbon tax could promote both economic and environmental wellbeing. The idea of "tax bads, subsidize goods" like we talked about earlier in the semester seems so rational, especially when the promotion of goods could be checks directly into citizens' bank accounts. These readings got me truly excited about a policy that can improve our environment through the reduction of Greenhouse gases and promote wellbeing in other ways. One of the things I am curious about is what will happen if in a couple of decades we fully phase out of carbon use in the energy sector. It is likely that carbon emitting processes will still be used to produce consumables made of plastic and medical equipment etc. It is likely that the tax could become the only form of regulation, or will other regulatory measures be instituted as well? Furthermore, if a tax were instituted, would states like California that have state mandated quantity controls drop their state regulatory policy to abide only by national policy, or seek to do some type of hybrid program? Mixing quantity and price controls would be challenging.
Toggle Commented Apr 13, 2020 on The Case(es) for a Carbon Tax at Jolly Green General
Echoing what some of my classmates have said, it is both extremely evident and upsetting that people of poor socio-economic status, and particularly those who are Black, are facing disproportionate harms to from Covid-19. As we discussed during class on Wednesday, the virus has affected black communities at much higher rates than whites. The vice article illustrates the detrimental environmental conditions which many low SES Americans face which are both out of their control and largely contribute to poor health outcomes. The residents of cancer ally start behind others due to disproportionately high rates of poverty, along with other demographic indicators which are correlated with poorer health outcomes, such as race, and now are forced to face worse environmental conditions, putting them at greater risk for both the respiratory illness now, and other poor health outcomes in the future. This injustice comes against their will, but forces them to bear the greatest costs. As described by a Washington Post Article on Covid's effects on African Americans, https://www.washingtonpost.com/nation/2020/04/07/coronavirus-is-infecting-killing-black-americans-an-alarmingly-high-rate-post-analysis-shows/?arc404=true the Surgeon General has articulated the virus' disproportionate harms on African Americans. Health conditions like hypertension, diabetes, and heart disease, are found in higher rates in African Americans than amongst other demographics (likely due to more environmental conditions which unjustly put them at risk), making them more susceptible to the disease. In Doughty County, Georgia, less than an hour from my home town, the epidemic has created a hot spot. The county has a population of 90,000, recording 973 positive cases and 56 deaths as of Tuesday. For a small town in south Georgia, those are huge numbers. Black residents make up 70% of the counties population and account for 90% of its deaths. It is troubling to see these issues hit so close to home, but hopefully our nation will take these types of injustices more seriously following the crisis.
One of the things I found most salient in the "Ten facts about the economics of climate change and climate policy" article is the continued discussion of the distributional harms of climate change. Again, it is evident that those most harmed by climate change are and will be those with the least resources to respond, and largely with the least responsibility for its harms. I found Figure E particularly interesting (and clear) in illustrating some of the harms of GHG emissions under different policy agendas. Amazingly, the pledge agenda is only slightly better than the current policy agenda, and still far off from the 2 degree celsius pathway...we have a lot of work to do. Additionally, something I found very encouraging about the article, which I did not realize to be the case, is that energy intensity and carbon intensity, particularly relative to GDP, have been falling in the US. Simultaneously, the price of renewables is falling; hopefully this will push our economy toward a quicker switch to renewables and reduce both the economic and social costs of GHG emissions. Though it is coming as a result of other great economic, social, and physical harms, it is really interesting to see how Covid-19 is inducing emissions declines around the globe. Of course, as we discussed last week and was described in the Vice article, the fall in labor supply has been used to "rationalize" emissions regulation reductions, which there is nothing truly rational about; however, over all, the world and atmosphere are experiencing benefits in this time from reduced emissions. It will be really interesting to see how those return following the worlds "return to normalcy" or whatever that new normal will look like, and whether the private sector will take this time to consider making transitions to cleaner/renewable energy sources to continue the trend of cleaner/lower emissions.
*Citation for the first quote came from the PBS article
As stated by Cynthia Giles, former senior EPA enforcement administrator under Obama, there has been no period in the agency's history during which it "relinquished its fundamental authority"--its mandate to protect the environment and mitigate pollution. Though it is understandable that many agency's will have lower outputs or may not be working at all under the current circumstances, there does not seem a valid reason to excuse pollution and its harms to the environment and people. As the posted article, along with two others I found from VOX and PBS, articulate, increasing companies' ability to pollute indefinitely could have harms on the health of citizens, making them increasingly vulnerable to the public health threat of the coronavirus (https://www.pbs.org/newshour/economy/citing-outbreak-epa-has-stopped-enforcing-environmental-laws ; https://www.vox.com/policy-and-politics/2020/3/29/21198674/coronavirus-epa-trump-regulations). To think about this policy from a charitable lens, though, I could see some easing of restrictions if it made the production of necessary goods for the coronavirus more efficient; however, I do not understand the seemingly total lack of limitations on this increased pollution (I couldn't find, like Natalie, any updates regulations) nor the indefiniteness of this policy change. Even if the course of Covid-19 isn't known, I would think they would allow increased pollution at least up to a specified amount or for a specified amount of time. Considering our simple economic model for pollution, this policy change drops the marginal abatement costs for a firm, causing the efficient amount of pollution to move out. Furthermore, considering the effects of this policy change on public health, particularly in light of the ongoing respiratory illness, COVID-19, the negative externalities of production increase, shifting the SMB curve further in than it was previously, moving the socially optimal amount of production in, or decreasing the socially optimal amount of production. With lower regulation, production at the same level or more will have a higher marginal social cost due to companies' ability to pollute more. This policy doesn't make sense when considered in this way.
I found these articles super fascinating, particularly in thinking about the negative externalities of fossil fuel emissions as we have discussed in both this class and my Public Policy and Public Finance class with Professor Naven. We are seeing more and more evidence for why the market is overproducing fossil fuels with marginal social costs exceeding private costs by orders of magnitude. I found the article on particulate matter and their effects on health to be particularly interesting. As we produce more and more emissions with the burning of fossil fuels and release of other air pollution, the incidence of asthma and other respiratory illnesses is increasing, making those born with the condition more vulnerable to illness and harms due to the intake of more emissions throughout their life. One of the most startling statistics form this Science article was that "PM is a key ingredient of polluted air and is estimated to kill more than 500,000 people each year." The diversity of harms beyond asthma to include cardiovascular disease and other pulmonary ailments is tragic: so many people, particularly those with vulnerabilities due to preexisting health conditions, are vulnerable to pollutants in their every day environments which they have largely little control over. Whenever discussing Particulate matter, I always think back to distributional justice issues discussed in POV101 with Professor Pickett, particularly the work of Janet Currie on EZ Passes at Toll Plazas and the disproportionate harms faced by low income households that live along highways and near toll plazas. I saw Mikki cited this in her post. I find it both troubling because of the injustice against poor populations, as well as encouraging because of the simple solutions that can be used to address these types of issues: namely, in this situation, an easy pass. Of course, I am sure many consumers are only considering the convenience benefits when they purchase a pass rather than the health impacts, but I am hopeful that we can come up with creative solutions like this one to address similar environmental justice issues that are detrimental to all but disproportionately harm those with the least resources.
Toggle Commented Mar 12, 2020 on 3 short papers for Friday at Jolly Green General
“Still these figure do not represent the full societal and environmental burden of coal” (93)…Well dang, thats disturbing. Considering that the harms of coal could be greater than the estimated $345.3 billion is unfathemable. Epstein et al.’s analysis of the full cost of the life cycle of coal draws the most simple question: why haven’t we figured out an alternative and phased it out, as they recommend? One of the most interesting findings of the paper to me was their evaluation of social and employment costs (84-85). I often hear arguments for the production of call describing the economic benefits, attributing some degree of poverty in Appalachia to the loss of jobs from the decline in coal jobs. However, it does not seem like coal production does much good for anyone other than the production of energy. MTR has increased the environmental hazards and harms of coal production while also increasing social costs due to the loss of labor intensive jobs. One of the most troubling quotes in this regard is that “as levels of mining increase, so do poverty rates and unemployment rates, while educational attainment rates an household income levels decline” (84). Obviously this paper is designed to focus on the costs of coal production; however, it would be interesting to see a paper estimating the economic value of benefits produced by the coal industry. It seems that the argument that coal increases economic wellbeing for the area through the provision of jobs has a tough counter to stand up against.
Toggle Commented Mar 6, 2020 on Discussion Paper for Friday at Jolly Green General
Oops only got half of it up the first time. Additionally, one of the methodology strategies I found most interesting was the inclusion of the whale shark siting into the WTP option and how dramatically that influenced WTP. This study reminded me of a debate I heard about recently on whether the birders should have to buy a stamp each year for conservation purposes, much like hunters and fishermen do. Around 45 million people participate in birding in the US compared to 15 million hunters (https://www.fws.gov/birds/bird-enthusiasts/bird-watching/valuing-birds.php). In each state hunters are charged for a hunting license and national migratory permits, which provide funding for local, state, and federal fish and wildlife conservation services. Because of the large number of birders, many of whom use game refuges and other public cites that require funding from fish and wildlife organization to maintain and protect, there seems a great opportunity to charge participants for a yearly license. Even at a price of $3-5 this could make a huge impact! I would be interested to see the results of a WTP survey of birders who use these spaces for the right to continue to use and protect them.
Nice paper, professor! I think this paper and our discussions this week are such a strong reminder that economics is fundamentally about decision making and human behavior. When applied to the environment, I am certain there are millions of people who rarely consider the impact that the actions and decisions they make have on the environment. For this reason, the anchoring method of the survey is particularly fascinating. Furthermore, I wonder how people would actually respond to a rise in the exit fee. I am curious to know what was the motivating factor for the original price of $3.75 USD. From a simple google search, it appears the fee still costs $20USD. In accordance with the research here, it seems there is space for that number to move up. Because people may be unaware of the fact that they have to pay the exit fee, I wonder what the "cost" would be of increasing it even beyond the estimated price with consideration of the WTP study? With it being mandatory for exit, other than fear that people may be less inclined to return due to more complete information about the total travel expense, I imagine raising the price would really do little to deter travel.
The Krutilla paper, “Conservation Reconsidered,” is fascinating for me due to my passion for land conservation, both for recreational and biodiversity purposes. A particularly interesting aspect of the paper is the discussion of option demand, a concept I was not previously familiar with. It seems that this is a large driver of conservation efforts for many individuals, organizations, and governmental entities, such as the Parks service. Making the distinction to protect lands for the “option” of future use without the intention to use them in the present, there is definitely reason for concern about the market forces that will support this type of demand. There often seems to be a tradeoff in people’s minds about the environment’s short and long term value; consumerism and contemporary resource extraction are often put in opposition with long term benefits of land protection for nature, wildlife, and humans. Considering the discussion of the land’s value for future scientific use, protecting biodiversity, and offering wilderness area for increased recreation use, there seems to be more contemporary market incentives for increasing option demand: conservation easements. Though they were not explicitly mentioned in the paper, they provide a market based solution for preserving lands and natural resources forever. By offering incentives to private property owners in the form of tax deductions and credits, they give organizations such as the Nature Conservancy (mentioned in paper), Ducks Unlimited, or governmental entities, rights to protecting the land, barring development of the land or extraction of resources in a way that would be detrimental to the biodiversity present and ability for future generations to use the land. Though not all easements give the public access to these lands, allowing private land holders to maintain the majority of their property rights, they guarantee that these lands will be protected to be able to be enjoyed by future generations and provide a preserves for native wildlife. See this link for more information: https://www.conservationeasement.us/storymap/index.html I also found it interesting that the paper made no explicit mention of climate change or the value of land preservation for mitigation of environmental degradation such as through carbon sequestration. I assume that there was little discussion of this issue in 1967 when the paper was published. I’d love to discuss this further in class.
One of the things I found most fascinating about Coase’s perspective on social costs and externalities of economic arrangements and productions is his consideration of those social costs as factors of production rather than truly external to the production process. The pricing of social costs, be it pollution or lost crops from his original example, is considered as a direct cost of production. What must be determined is who and how to bare that cost. I have never thought of transaction costs in this light; I have always considered them as an external effect of production that is most simply a harm or benefit to third parties rather than a cost able to be priced and paid directly by either the producer of the cost to the third party, or something the third party may have to pay if the producer is not considered liable. With this consideration in mind, I had trouble with some of the discussion on liability, particularly in cases where the cost was forced to be carried by the non-producing party when there were net societal benefits to production. It seems to me that groups forced to bear pollution costs, for example, ought to receive some compensation, even if they in some way benefit from the final goods produced. This draws a matter of equity in the distribution of costs and benefits into light. I would love to further discuss the distributional equity piece of Coase’s perspective in class.
Put simply, “Turn Down the Heat” is terribly frightening. It illustrates the drastic effects climate change is having across the globe and how those harms will persist and worsen as temperatures continue to rise with the increase in global CO2 emissions and other greenhouse gases. What I found particularly alarming about the report is the implication that many areas studied, such as coastal Africa, which are massive population centers, may be rendered fully unlivable with continued rise in temperatures. Rising sea levels and declining agricultural production will inhibit populations from both needed nutrients for survival and even land mass to reside upon. This displacement of populations will further crowd urban population centers and put higher strains on food security and labor market opportunities in these areas. Thinking back to some of our discussions earlier in the year with regards to the Lewis Two Sector model, the mass migration to cities will lead to increasing populations of urban poor. Moreover, current rural lands used for agriculture may become less and less fruitful, or even infertile as described in the report, leading to greater malnutrition and food insecurity in both rural and urban settings, as well as for nations that have relied on agricultural imports from these areas. This seems, to some extent, inevitable at the current pace we are—catastrophe. One of the major issues that has become increasingly important to me that is described tangentially in the paper is distributional justice and climate change. In reading the report, I reflected on Sen’s “Development as Freedom,” considering the tragic changes to living conditions, agricultural outputs, and health that are often out of the control of those who experience them most. As noted in the report, those who experience the harshest effects of climate change often are living in developing areas; the burden of the industrialized world and its emissions is falling on those who have least means and least ability to focus on addressing its harms. This should be seen as a major unfreedom and further hinderance to their ability to develop. As we discussed at the end of class briefly on Tuesday, I believe developed nations causing these harms may even have some responsibility to address them. I would love to discuss ways in which they could do that if there is time in class on Thursday. Lastly, the report, as a final reading in our class, caused me to think of spillover effects that weren’t described explicitly but that we may have discussed earlier in the course. A primary concern of mine is the incidence of malaria. Because of increasingly harsh weather episodes such as hurricanes and the increased incidence of El Niño’s, it seems that conditions may be more conducive to mosquito habitat and malaria in tropical regions, making these illnesses more difficult to address. Again, these areas are contributing very little to climate change but bearing much of the harm. This all goes to say that the world MUST ACT. These changes are irreversible. The short-term costs are worth the long-term benefits of cutting emissions and investing more in renewable energy sources. Without urgent action, the harms to those who have the least ability to address them will be catastrophic, altering entire communities, their ways of life, and their ability to survive.
Toggle Commented Dec 4, 2019 on Last Blog Post for the Year at Jolly Green General
In Parker and Vogl’s paper on Conditional Cash Transfers, they convey some of the long term human capital benefits of providing assistance to students in primary and secondary school. The program of focus, Progresa, aims to both alleviate current poverty by increasing incomes for families with children in school, as well as improve the long term well-being of these students and their life time earning potential in Mexico. Their results show large increases in education and later labor market outcomes for those who benefited from the program, particularly those who had full exposure, or received transfers from the time they were between 7-11 years old. It is notable that females experienced large benefits relative to their baselines, particularly in education, hours worked, and wages. Labor force participation rates went up dramatically as well: increases of 7 to 11 percentage points. Much of the drive for this is attributed to increases in paid work. Though there were some labor market benefits for men as well, the improvements for females is highly notable. There is convincing evidence that this program does both raise human capital for those who benefit from and, in turn, contributes to improvements in a number of indicators of well-being and development, particularly in the labor market and housing quality for both men and women, largely attributable to the improvements in education and human capital. Some questions arise after reading the paper, particularly in reared to the mechanisms by which these transfers improve education and labor market outcomes, as well as whether they would be more effective if non-conditional, something I noticed other students bringing up. Though it would have required a lot more of Parker and Vogl’s paper, a study into the mechanisms through which cash transfers lead to the measured results could aid in the specification of future transfers. They note that the funding may work not only through increased education but also other mechanisms such as higher caloric consumption or higher quality diets in childhood. Additionally, were these transfers not conditional, it is possible that more individuals could be supported or that grants could be used for needs other than just education. Evidently the program already has massive positive effects, and there may be little that can be done to improve it further. I was curious about similar programs to Progresa and found lots of recent news about a program being instituted in the Philippines. Due to the revocation of rice import restrictions, poor rice farmers are threatened by increased supply of foreign rice coming into the market. A program will be funded by tariffs on imported rice, and transfers will target “poor and near-poor” rice farmers, as classified by the country’s Statistics Authority. More information can be found in the following links: https://businessmirror.com.ph/2019/11/19/da-to-give-2nd-cct-worth-p3-billion-to-rice-farmers-next-year/ https://www.bworldonline.com/bill-creating-cash-transfer-scheme-for-rice-farmers-filed-in-senate/
Toggle Commented Nov 20, 2019 on Next Week at Jolly Green General
Eichengreen and Mody’s paper “Interest Rates in the North and Capital Flows to the South: Is There a Missing Link?” offers some interesting thoughts on the implications of interest rates in the most developed countries for developing/emerging economies. Conveniently, I recently was introduced to the Mundell-Fleming Model in Macroeconomic theory which has direct ties to this subject. According to the model, capital inflows are directly related to a nation’s domestic interest rate. Conversely, foreign interest rates, particularly in a specific economy, is a determinant of a nation’s capital outflows as investment in the foreign economy becomes more appealing as its interest rate or return on investment rises. I would like to echo a thought considered in other students’ blog post: the recognition that the well-being of an emerging economy may be largely out of its hands as foreign investment plays a large role in capital development and economic growth. Foreign direct investment can lead to increases in output and economic expansion, as noted by “The Balance”: https://www.thebalance.com/what-is-foreign-direct-investment-1979197 This article briefly describes some of the benefits and drawbacks of FDI, largely tied to interest rates. Though the paper notes that the effect of foreign interest rates on capital flows and credit in emerging economies may be heavily dependent on region and fixed vs. floating -rate differences, it holds that the amount of outside investment an emerging economy receives may be dependent on its returns for an investor, often in comparison to the returns that investor could receive from putting capital into another economy if not its own if the interest rate is higher. This takes a lot of control out of the economy’s hands to determine how others invest. A side thought considers some motivations for economic development: are investors (both private or governments) seeking to poor capital into an economy to improve its strength and well being of the people whom are a part of it, takin more the form of foreign aid/philanthropy, or do individuals, governments, and corporations see opportunities to invest in emerging economies as a means of their own capital development and wealth accumulation? It seems that there are positive externalities to foreign investment regardless of the motivation in the forms of economic development and growth.
Toggle Commented Nov 13, 2019 on For Thursday's Discussion at Jolly Green General
The Sachs and Baranov and Kholer papers reveal the importance of health for human capital development. One of the most revealing parts of the Sachs essay is its insights into the importance of seemingly simple assets for the prevention of life altering illnesses. Sachs notes that the provision of screened doors and windows—features of homes across the developed world that I take for granted, never having thought that they could play a role in saving human lives—can defend inhabitants from contact with potentially malaria infected mosquitos. This seems like such a simple measure, along with bed nets, that can protect individuals and families from mosquito bites and their long list of negative externalities. On that note, this paper illustrates the cascade of effects that are detrimental to individual well-being as well as country wide development that may result from a largely curable and even preventable illness. Sachs notes the changes in household behavior as well as broader macroeconomic costs that result from the threat of the disease. One of the most notable effects of malaria’s presence has to do with the ‘child-survivor hypothesis.’ The presence of this illness leads to higher fertility rates due to expected mortality of children, ensuring that families will have a sufficient number of children to meet household needs. This, beyond the effects of the actual illness, is a major contributor to a lack of human capital development. Prior to reading these papers, I considered malaria and HIV/AIDS as detrimental to human capital development because victims of these illnesses couldn’t go to school, would be inhibited from working, and may experience other issues such as a lack of cognitive development. I did not recognize how they would lead to a slippery slope of contributing to high fertility, which in turn harms human capital due to diminishing resources for each family dependent. This, as mentioned in the Sachs paper and discussed earlier this semester, causes a sort of quantity-quality tradeoff. Of course, building on our reading from Duflo, the externalities of these diseases disproportionately harm women. It seems that a theme is arising: with many of the problems related to development we have discussed, an initial seemingly preventable issue leads to a cascade of effects, often related to family size and resources, and then harming women in a number of ways, furthering patterns of underdevelopment. I wouldn’t call this a poverty trap, but it seems that there is a cyclic nature to this process. Though families and individuals would continue to face issues that occur later down the line, instituting preventative measures would not only help individuals avoid the pains of being ill and possible loss of life, but offer numerous positive externalities to their families and jointly to society as a whole. Figuring out how to direct aid from local governments and foreign aid to support supply chains of preventative medicine and practices is vital to development in areas threatened by malaria, HIV/AIDS, and other life threatening illnesses.
Toggle Commented Nov 7, 2019 on 3 readings for next week at Jolly Green General
After reflecting more on the Schultz piece as well as reading from the text book, I have begun to think a lot about the idea that quality is a substitute for quantity and how this relates to economies of scale. Chapter 6 in T&S describes some positive impacts of population growth, one of which is the idea that population growth is an essential ingredient to stimulate development. Thinking back to some of the older ideas of economic development we discussed during our run through of the history of growth theory, many economists argued that increasing wages and the size of the urban sector were vital aspects of growth. This made the assumption, as we discussed, about the importance of economies of scale. Though this assumption had some push back, the Schultz people got me focused on the development of quality; however, it seems that quantity, at least in early stages of development, has some degree of significance in the creation of economies of scale and large enough markets to increase wages and hence overall output. However, it seems that it wouldn’t matter how many people were in the population if they can’t afford to stimulate economic activity due to initially low incomes, again refortifying the idea that wages must first be increased to increase output for the large market. Hence, quality and the ability to earn large wages is of great importance.
Toggle Commented Oct 30, 2019 on Blog Post for Next Thursday at Jolly Green General
In his Nobel talk, T.W. Schultz focuses on the vitality of human capital development to improve the “quality” of human agents for development. He highlights the idea that this is more important than the available land and resources that exist for those experiencing poverty in a given area. He describes many of the ideas about the two sectors of society that we discussed earlier in the term, criticizing the importance placed on the urban sector. It seems that the belief that modernization occurs in urban centers fails to incentivize or enable improvement of individuals in the agricultural sector; rather, the urban sector operates at the expense of the traditional, forcing food prices down and harming the well-being of poor farmers. Traditional economic principles are believed to only apply to the urban sector rather than the “backward” rural populations. In opposition to this view of many economists, Schultz promotes the idea that human capital development and improvements in quality can lead to development in both sectors. Furthermore, he points out that farmers often participate in other small business and entrepreneurial operations. The ability to improve their economic opportunities and actively participate in private enterprise is vital to development. One of the most valuable things I took away from this paper is Schultz discussion of Economic history, pointing out that every westernized nation was once an agricultural society, later developed an urban sector, then dealt with issues that are currently present in many countries considered to be developing today. Schultz articulates that the “experience and achievements of poor people” point to opportunities for modern advancement in low income countries, and understanding this history can lead to greater development than knowing the particularities of a country’s resources and technology. Furthermore, development in low income countries can be viewed through standard economic theory and applied to achieve economic efficiencies. Another big take away is Schultz’ discussion of the returns to human capital development. He argues that improvements in quality allow rents to rise over time and the greater quality improvements are, they greater their return. This leads to returns in individual productivities, as well as a decrease in demand for “quantity” (as quality is a substitute for quantity). This discussion and ideas related to it remind me of our previous discussion of gender equality and improvements in the well-being of women. AS women develop greater human capital, acquiring greater agency in the job market and decision making ability in th household, they are able to develop greater independence, have greater power over their own economic well-beings by means of outside incomes, and ultimately have more say within their families. Both their improved economic output and greater agency in their families contribute to a reduction in “quantity demanded,” allowing them to have less children, which in turns leads to better health outcomes and allows them to improve output even more by improving the quality of each allocation of child rearing to fewer children. On a macro level, as Schultz describes, this push toward quality over quantity helps with the issue of population growth.
Toggle Commented Oct 30, 2019 on Blog Post for Next Thursday at Jolly Green General
Duflo’s paper Women Empowerment and Economic Development reflects many of our discussion points from class on Tuesday: The close relationship between women’s empowerment or agency and economic development. Though she spends much of her paper focused on the empowerment side of this relationship, which is necessary for the continued development of a society beyond the poverty alleviating means of development and is an important end in and of itself, some of the most fascinating insights for me fell on the economic development side of the discussion. First of all, Duflo points out that a major justification for gender equality is its utility in further development; yet, as she describes and we discussed in class, women’s empowerment and equal rights should be justified as good things in themselves, regardless of their impact on the development of the rest of society. Second, one of her discussions was on the “grip of poverty” and the constraints it puts on poor household’s decision making abilities. She seemingly argues that there is less overt discrimination day to day against women besides the everyday roles they are forced to hold than may be perceived, but that deprivation comes when more challenging situations arise in relation to a family’s well-being. During such times, women become disproportionately vulnerable to the challenges their families face as they are discriminated against and forced to bear the greatest harms to well-being. In response to this tendency, Duflo suggests “increasing the ability of poor households to weather crises “ as a method to disproportionately help women (1055). The greatest crises comes when families must make choices on the margin of subsistence; therefore, reducing poverty and alleviating its effects will disproportionately improve the well-being of women. Of course, this is not sufficient to bring about equality between genders alone, but seems to be necessary, along with empowerment, to bringing about hoped equality. This will help entire households, assisting women who face deprivation during crisis to the greatest extent. Additionally, Duflo notes other interesting means of improving gender equality on the development side, such as the introduction of contraceptives to help with fertility rates and fight against increased risk of maternal mortality by decreasing the number of times women go through the process of childbearing. However, in thinking about a means of development and gender equality such as contraceptives, it got me thinking more and more about how necessary the empowerment side of gender equality is: contraceptives will do nothing if women don’t have the agency to choose to use them. Furthermore, I have not really previously considered the importance of time constraints for gender equality. Again, even if women have the education or skills to participate in the labor market, without the agency to choose to do so, such capabilities don’t lead to ultimate equality. Though the economic development has powerful implications for gender equality, it is incomplete without the empowerment of women, both as a means and end in itself.
In thinking about where we have come and where we are going in the world of Developmental Economics, Rodrik’s Growth Strategies offers valuable analysis and insights on methods that have been used in the past and how they should inform policy decisions and market practices in the future. Despite my hopes that some revelation amongst our readings and class discussion would point to a uniform strategy for economic growth and well-being, it is evident, as Rodrik clarifies, that strategies for growth are ultimately dependent on the context in which they are used. I really appreciated Rodrik’s analysis of numerous countries’ economic and political histories, and the various “forms” of economic institutions/policies taken to serve similar “functions” across developing societies. In thinking more about the role of context, especially when pushing more liberalized market initiatives and policies, I wonder more about the ideas of laisse faire capitalism…It seems that in many places, political liberalization may need to be the pre-cursor to economic liberalization and growth. However, it is also clear that in reality there must be a balance between government/institutional intervention into the economy and privatized economic practices. I really appreciated and learned a lot from his clarification between short and long run policies and the need to create deep, institutionally underpinning initial reforms that continue to deepen overtime in order to stimulate market economies, as well as long term, growth sustaining strategies. He also pointed out that policy interventions often should be narrow. Governments must caution not to over regulate, yet also maintain institutional blocks to external shocks to the economy. In closing, I found a sense of hope in Rodrik’s paper. Though it is challenging for developing economies to choose between copying old policies or running courses of trial and error from a wide array of policies, there is some combination of policy interventions, government regulation, and private sector investment that can put each individual economy on a trajectory of growth. It just requires a matter of figuring out what is right for each country in the context of its preexisting political, social, and economic climates.
Toggle Commented Oct 2, 2019 on Rodrik article for Thursday at Jolly Green General
In his paper “The Fall and Rise of Developmental Economics,” Krugman gives very valuable insights into both the ideas of modeling and the field of economic development as a whole. In describing Hirschman’s Big Push and high developmental theory’s inadequacies for a series of decades following the 50’s, he reveals the failure and shortcoming of high development theory to be applied to any real world situations and therefore have applicable and usable revelations. One of my main takeaways from his critique of Hirschman’s high complexity theories is the real objective use of models: to be used to better understand some aspect of the real world and therefore be able to address an issue or respond through policy to a given relationship. By overcomplicating modeling, it became impossible to understand economies of scale or the supply chain of a traditional laborers to “modern” laborers. If a theory cannot be modeled and applied, it cannot serve as a tool for creating strategies that promote human well-being or improve on current systems. Yet, at the same time, the idea of not capturing the richness of reality—or seeing all of the different formations of the clouds—is a bit upsetting to me as the issues developmental economists seek to understand and solve involve such highly complex systems and processes that I can see why a simple model would be ineffective. However, only through such simplification can essential relationships and systems be understood in a way that makes doing something about them possible. The Clouds ultimately can tell a story, and, building off of Krugman’s metaphor, each individual cloud can be seen for its own complexity and understood, allowing the whole process of the sky and greater meteorological system to be broken down and understood. It also educates that some of the stories of high development may be able to be boiled down to a single factor, such as in the example model. Though it’s just a theory, it can lead to further data collection and testing and ultimately applied to real systems. That is exciting and brings optimism for some of the problems developmental economics tries to address! Lastly, this history reveals that though certain issues and systems seem to complex to be understood or simplified, with time and sophistication in analytical/modeling techniques, some of the confusing issues we face may be resolved. The "slumps" in development are disheartening; however, they may eventually be overcome.
Toggle Commented Sep 25, 2019 on Reading for next Thursday at Jolly Green General
Institutional Barrier and World Income Disparities offers a number of valuable insights on development around the globe and some of the characteristics of states that experience strong economic growth relative to those that are lagging. Though their measurement and analytical techniques were a bit confusing for me, a couple of key findings and questions stood out. First of all, this article seems to corroborate the argument that industrialization and infrastructural development are key factors of a country’s economic development. It seemed that the development of multidimensional manufacturing economies, particularly focusing in Technology, strongly correlated with high levels of income growth. Namely, Japan and Taiwan, experienced massive growth with the incorporation of these industries and foreign investment into their economy. In contrast, the nations that lagged characteristically remained focused on agricultural commodities and lacked diversification. These countries seem particularly susceptible to economic shocks, as described with the decline of cocoa prices, which severely harmed Cote d’Ivoire, and lacked manufactured exports. The article compared across countries, particularly relative to the United States, but did not investigate disparities within countries deeply. In thinking about our recent class discussions, I wish they had gone more into discussion of factors of production such as labor and capital to describe where much of their investments were going, particularly to investigate if such economic growth was benefitting the entire population equally. I would ask about poverty rates in both lagging countries and the leading countries.