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Caroline Florence
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John Quiggan’s “The World is Enough” reminded me of why I decided to be an Economics and Environmental Studies double major. I am passionate about the idea that sustainable policies do not have to be at the expense of economic growth, but can instead create economic growth. It is a common misperception that sustainability and economic growth contradict each other, but this is not the case. While transitioning from coal to renewable energy would call for a major economic transformation, it is technologically and economically possible. As we have seen in this class, ideas and technology are major drivers of growth. It is frustrating that politicians continuously support policies that are not sustainable and simultaneously impede economic growth. Why do we subsidize the coal industry when renewable energy could create greater economic growth and would create positive externalities? Why is there a law in Virginia that limits the amount of renewable energy universities can produce on campus when they could create growth for the renewable energy sector? Solving the issue of anthropogenic climate change seems so simple, but humans are not entirely rational. To make matter worse, we have a president telling people that windmills slaughter bald eagles and solar panels cause electricity outages when it is cloudy outside. We live in a world where people are willing to lie and withhold information in order to serve their own interests. For some reason, I remain optimistic that someday we will see the light. The technology is out there; we just have to be willing to restructure the way we live. We have to change the way we think and talk about sustainability, then maybe we can make the necessary changes.
Toggle Commented Dec 4, 2019 on Last Blog Post for the Year at Jolly Green General
In “Does Aid Reduce Poverty?”, Juliana Yael Milovich attempts to determine whether aid lowers income poverty and the multidimensional poverty index by observing how long a country has been a member of the United Nations Security Council. The study finds that, on average, a 1% increase in US aid from 1946 to 1999 results in a .61% decrease in MPI between 2001 and 2014. Although I think this is a really interesting and important study, we need to be careful in how we interpret the results. The paper looks at aid generally, but it does not look into what specific programs the aid helped support. With a program as big as the UNSC, it can be hard to discern what works and what doesn’t. It is possible that certain aspects of aid played a major role in reducing poverty while other programs were less successful. For example, perhaps returns to education were low because people were not healthy enough to go to school. The political institutions and stability of a country is another likely contributor to aid’s success or failure. I think it would be interesting to look into the impacts of specific programs within the UNSC to see what is really making an impact. Although I think this study is a good place to start in determining whether or not aid reduces poverty, there is still a lot of work to be done before we can determine if aid works. We need a lot more research before we can determine the best way to alleviate global poverty.
Toggle Commented Nov 20, 2019 on Next Week at Jolly Green General
“Interest Rates in the North and Capital Flows to the South: Is there a Missing Link?” by Eichengreen and Mody explains how raised interest rates in developed countries have a negative impact on capital flows in developing countries. I found this article confusing, and though I think these are important findings, I was not able to fully comprehend the study. What I took from the article is the importance of realizing the impact the US economy has on the global economy. When the Federal Reserve makes decisions about whether to raise or lower interest rates, this affects not just the US economy, but economies in Latin America. It also made me realize that countries in Latin America do not have full control over their capital flows. This makes economic development especially challenging and can lead to a “trap.” It is difficult for developing economies to sustain growth when they are heavily influenced by foreign economies. Does the Fed think about this when making decision, or is their primary concern the US economy? Is there a way for the US to raise interest rates without negatively impacting foreign economies? I feel that we have some sort of responsibility to mitigate any negative impact we may have on developing economies. Since this article was last revised in 1998, I am curious as to how relevant it still is today. What impact did the most recent decrease in interest rates have on Latin American countries? Although there may be a temporary positive impact in Latin America, what will be the long-term impact?
Toggle Commented Nov 13, 2019 on For Thursday's Discussion at Jolly Green General
Both articles emphasized the importance of investing in health to improve human capital. I thought that Baranov and Kohler in “The Impact of AIDS Treatment on Savings and Human Capital Investment in Malawi” made a particularly interesting point: life expectancy plays an important role in economic growth and influences decisions in savings and investments. I thought it was really fascinating that the authors used the introduction of AIDS treatment in Malawi as an exogenous shock that allowed them to observe how savings and investments in human capital changed. This was a really clever mechanism to determine whether these kinds of treatments actually work. I find it surprising that distance to an ART facility plays such a big role in changes in investments in human capital, even though people near and far both had access to the program. I would think that it would be worth the inconvenience to get AIDS treatment, but when transportation costs are high, this is not the case. It is sad that distance alone is a reason to compromise health and life expectancy. This study provides evidence of the success of policies aimed at improving health in developing countries. This study found numerous positive spillover effects of AIDS treatment, such as increased savings and investments, increased schooling, mental health improvements, and a reduction of orphaned children. These effects could be even greater if people were better able to access ART facilities. The ART program and programs like it that aim to improve health in developing countries could provide tremendous economic growth. This paper made me hopeful that these kinds of programs are worth investing in. I hope that others look to the success of this program and try to mimic it in other countries.
Toggle Commented Nov 6, 2019 on 3 readings for next week at Jolly Green General
In “The Economics of Being Poor,” Theodore Shultz argues that in economics, land is often overrated while the quality of the people is underrated. Shultz emphasizes the importance of investing in people and their knowledge, particularly in the agricultural sector, where much of the world’s poor reside. I find this argument compelling and relevant. Last year, I took a class called Ecology of Place where we visited farms in Lexington and learned about agriculture in the Rockbridge area. As Shultz explains, the farmers we talked to were innovative and responsive to incentives. I think that if we invest more in farmers and create the right incentives, they will be able to further innovate. In particular, I think we need to start incentivizing farmers in both the US and developing countries to adopt sustainable farming practices such as no-till farming. Carbon farming improves soil quality while drawing carbon from the atmosphere into the soil. We could incentivize farmers to adopt these practices by creating a compensation system or by educating farmers of the benefits to the soil. We can improve the “quality” of farmers by having them address the issue of climate change in addition to food production. I think it is unfortunate that governments often exploit poor farmers and gear policy toward improving urban populations. Farmers are major contributors to our economies and should be treated as such. We should start to view farmers and innovators who have the potential to help solve the problem of climate change. The agricultural industry represents a major opportunity and I think it is time for governments around the world to see this.
Toggle Commented Oct 30, 2019 on Blog Post for Next Thursday at Jolly Green General
When I think of women’s empowerment, I often think about the women’s march in DC or the suffragist movement, where women protested for their right to have a voice in politics. However, Esther Duflo’s “Women Empowerment and Economic Development” made me think of alternative, market based approaches, to female empowerment and inclusion. Duflo finds ways to increase women’s labor force participation without requiring a cultural shift in people’s view towards the role of women. For example, China and Mexico’s economic growth led to a rise in factory work suitable for women, opening the opportunity for more women to participate in the labor force. India’s entry in the global economy also provided opportunity for investment in women’s education. In Mumbai primary and secondary schools, parents can choose for their kids to be educated in either English or the local language. The liberalization of India’s economy caused the service industry to grow, creating jobs like telemarketing, which opened the market to women. Girls were more likely than boys to choose English education because boys had traditionally chosen the local language as part of the caste system. These policies improve the overall economy while uplifting women at the same time. What is the best course of action for bringing about women’s empowerment? Should women be the catalysts of the movement? Or should we use subtle market policies that gradually lead to the inclusion of women in the labor force? I think that in some circumstances, policy approaches might be the best first steps in empower women, but I think that at some point, a cultural shift in mindset is necessary to achieve true equality.
“Growth Strategies” by Dani Rodrik emphasizes that there is no single policy approach that will solve the world’s development problems. If there was, alleviating world poverty would be a lot easier. This made me think about how important it is to understand a place’s culture, history, size, government, and economic makeup before making policy prescriptions. China was a great example of this. Instead of following the Washington Consensus, China took a different approach and was very successful. They used non-standard practices to produce tremendous growth. Although a country cannot experience major growth without some sort of adherence to what Rodrik refers to as “high-order principles of sound economic governance,” there are many different ways of getting to this. I think that we sometimes simplify policy solutions because they make logical sense in the neoclassical framework. In reality, the world is a lot more complicated and what works for one place might not work for another. I thought it was particularly interesting that Rodrik referred to reform as an “art” of choosing from “a potentially infinite menu of institutional designs.” I do think that neoclassical models give us useful insight about economics, but certain conditions must be met for these ideas to work. Before choosing a policy, it is important to look at the potential ceteris paribus violations that place might make a policy less effective in that place. Moving forward, I hope policymakers become more focused on this idea and less focused on results of a model.
Toggle Commented Oct 2, 2019 on Rodrik article for Thursday at Jolly Green General
In “The Fall and Rise of Development Economics,” Krugman details the history of the development economics field. I think that Krugman makes a really important point in this article; while past theories of development started a conversation about development and are useful under some assumptions, they must be viewed in a more holistic framework. Models cannot, and should not tell the whole story, but that does not mean they are useless. I especially liked the example of Fultz’s dish pan weather model to illustrate this point. Obviously, the earth is not flat and air is not water, but the model was able to show aspects of weather patterns. It is easy to agree that scientific models cannot explain the entire systems but instead show parts, but why can’t we agree on the same for social science models? Models, though not perfectly predictive of the real world, are extremely useful tools for economists. Unfortunately, many discredit models based on their assumptions, particularly if a model does not support one’s political agenda. Though we certainly should pay attention to the limitations of models, we should not dismiss them simply because they contain underlying assumptions that are not always true in the real world. I also agree that it is unfortunate that the “slump” in high development theory may have led to bad economic policy. Though we do not know the outcome that would have occurred if high development theory had not declined, one has to wonder if lives in developing countries could have been improved.
Toggle Commented Sep 25, 2019 on Reading for next Thursday at Jolly Green General
I found Wang, Wong, and Yip’s article about the economies of fast-growing countries and “lagging” countries extremely informative. The article helped me gain a perspective about why some countries are economically prosperous while others are falling behind. I think this is useful information for future policies in developing countries. Reading about the success of pro-market reforms of various countries made me hopeful that there is a way for these lagging countries to grow their economies too. Although these lagging countries face severe institutional barriers, I hope that one day their government cooperate in enacting major change. I found the information on South Korea particularly interesting. Starting in the early 1960s, the South Korean government pursued a growth strategy that shifted their focus to exports and manufacturing. The country also pursued long-term investment in high-tech exports. South Korea is a prime example of how globalization and market-based policies can lead to tremendous economic growth. South Korea’s neighbor, North Korea, could have followed a similar pattern, but this is not what happened. Instead, North Korea’s government oppressed its people and the country’s economy suffered. I also think that China is an interesting example. China made a tremendous progress by opening up its trade policies and is now the number-one exporter in the world. China’s economy has grown significantly, but wages are still extremely low. Has China really made progress if its growth is not benefitting its people? Would China continue to grow if the minimum wage was raised? While this article did a good job of showing the improvements China has made, it is important to remember that this is not the whole story.
In reading “The Economics of the Poor,” I was struck by how different poverty looks around the world. There is no one view of poverty; instead, it differs based on location and individual priorities. When I think of the very poor, I imagine them spending every dollar on the cheapest food they can find in order to survive, but that is not really the case. Just like everyone else, they budget their money in a way that will maximize their happiness. Even if they do not have enough food, many spend on entertainment such as festivals, weddings, and televisions. It is hard to grasp that people would sacrifice their health for entertainment, but upon reflection, I realized that it is only human. It is their money and they can decide how they want to spend it. If that is what allows them to feel fulfilled, I view spending on entertainment as a rational decision. I cannot imagine the stress that must come with living on $1 a day. It would take careful planning to make sure that you have enough food to survive. This article gave me the perspective to understand what kinds of choices the extremely poor are having to make on a daily basis. It also made me think about how difficult it would be to break the cycle of poverty. If you grow up in a household that cannot afford to send you to school or give you enough food, how could you possibly get a job where you earn enough to break out of poverty? These are the things policymakers need to think about. In order to address poverty, we have to find long-term solutions and not just temporary fixes.
Toggle Commented Sep 11, 2019 on Readings for next week at Jolly Green General
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Sep 11, 2019