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Christopher Watt
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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.
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.
Reading The Economic Lives of the Poor stimulates a number of questions about the choices that those experiencing the most extreme poverty around the world make, as well as their motivations for making them. I imagine many are confused as to why individuals experiencing such harsh circumstances make choices that seem counter to their health and well-being by diverting funds away from basic needs to purchase entertainment or pay for foods that offer lower calories. Furthermore, I am fascinated that the poorest among us do not experience very low levels of self-reported happiness according to Banerjee and Duflo. These observations combine to make me think about what these individuals value and how they seek to live. It seems that in such dire circumstances, they would choose to focus on basic needs rather than rituals and celebrations; that prioritizing their health would be vital to living. However, living and being a human involves so much more than just surviving. Yes, many of their choices and income must revolve around that goal. But just like people in more affluent circumstances, living requires much more than sustenance. They may not all live what people in more developed countries consider to be “the good life,” but in choosing to spend on entertainment and celebrations, or experiences of religious, cultural, and recreational relevance, as well as living in community and taking care of others, they make decisions that they feel improve well-being, which correlate to Sen’s capabilities; ideas of personal freedom, entertainment, and enjoyment. They find happiness despite their circumstances. These bring dignity and purpose to life beyond simply trying to survive. I fear that criticizing them for not allocating enough funds toward basic needs is dehumanizing and lacks consideration for what “human well-being” fully consists of. The paper also caused me to think about how little access the poor have to legitimate financial institutions such as banks and loan agencies even though they likely need them most of all. Because of their financial status, lenders are reluctant to offer loans. I would be interested in talking about microloan programs and organizations in class as I know little about them but am aware that they are used in poor areas to support development. Furthermore, as this paper was published in 2006, I am curious about changes in some of these statistics over the past 13 years. Have there been improvements around the world in the poverty rate and many of its indicators? Do these individuals now have greater access to formal financial institutions?
Toggle Commented Sep 11, 2019 on Readings for next week at Jolly Green General
Christopher Watt is now following The Typepad Team
Sep 11, 2019