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After finishing this paper, the topics that stuck with me the most were the new, experimental mechanisms of managing savings accounts and credit systems in these developing countries. For example, the results showing that giving micro-borrowers a grace period before beginning to repay their loan benefitted them in the long run was encouraging for the future of small businesses. However, I was especially interested in the psychographic test developed to help determine to whom to offer microcredit. This was an incredibly resourceful way of solving the issue of a lack of tangible collateral available in poorer nations. This idea, if it gains traction and becomes a widely acceptable way of facilitating loans in developing countries, could have a plethora of interesting applications. As far as I can tell from this article, this psychographic test concept has only been tested at the microcredit level, but it begs the question about whether the same strength of results would be seen if the test were given for larger loans. If this test becomes accepted as a legitimate way of conducting business, could it make financial markets more competitive and less reliant on collateral? I think that the experimental nature of this test could open doors and lead financial companies to begin using developing nations as a testing ground for other outside-the-box practices. The consequences of these new strategies failing at a micro level are minuscule for a large company, but the discovery of successful programs like this could lead to revolutionary new practices. This testing strategy also could be beneficial to everyone involved; the company gets a low-stakes testing ground for new ideas, and developing nations would have access to much needed credit.
I found this paper to be much more difficult to understand than many other papers we have read this semester, as I am not terribly well-versed in the details of international finance. I was able to understand most aspects of the regression analysis used in this paper, but there were also portions that left me confused. However, the over-arching argument of this paper is an important one, and I think it ties back with many other themes we have seen throughout our study of the development literature. One of these themes is the necessity to evaluate the needs of each developing country independently of others, especially when they are in different regions. This paper discussed in depth the different responses of issuers of securities in East Asian and Latin American countries, and how differently they responded to the external stimuli of American fiscal policy. This paper presents an often overlooked aspect of development, which is the role of financial markets. It is made clear that the development of emerging economies, especially in terms of foreign investment, are dependent on the interest rates and financial conditions of fully developed industrial nations. This seems like another kind of poverty trap, as the supply of foreign investment is often out of the control of the developing nations. This begs the questions of whether the financial institutions of developed nations need to consider the needs of developing countries when determining monetary policy actions. While there is no clear solution, I think this reading emphasizes the importance of developing legitimate financing institutions in developing countries, if even just on the micro level, to try to give developing economies a certain degree of independence from the monetary policies of developed nations.
Toggle Commented Nov 18, 2021 on ... at Jolly Green General
The results of this paper seem to be reassuring but not necessarily surprising. The clearest result of these studies is that there are social rates of return on investment that are higher than the private benefits, which has been proven in the literature time and time again. However, the one thing that I could not help but thinking while reading this article is that it seems that we have only scratched the surface in measuring the accurate rates of return on education investment. There are a few areas where it seems that measurement could be improved. For example, throughout much of this paper, the author discusses schooling in different countries as if it is a uniform good, but the quality of schooling can vary greatly and has a massive impact on return on investment. I believe that some measure for the quality of schooling as well as attendance by students needs to be included in order to have a comprehensive understanding of education’s returns. Additionally, the author provides an example of the difficulty of measuring the number of lives saved by improved sanitation conditions that came from a woman who received a higher level of education. This value seems incredibly difficult to track, and if we were able to calculate the number of lives, how would we put a value on that to determine the positive social benefit of schooling? While research needs to continue about the benefits of education, it seems that the literature is in agreement on the existence of private and social benefits of education, and now the focus needs to transition to the mechanisms for determining how to measure the value of returns and proposed subsidies for education.
Toggle Commented Nov 11, 2021 on For Friday's Discussion at Jolly Green General
This paper by Esther Duflo does a fantastic job of demonstrating the massive range of impacts that gender equality can have on a country in any stage of development. However, the one topic that I found most interesting was the involvement of women in politics, as this is an area that needs improvement in developing and developed countries alike. Duflo discusses some “top-down” approaches that have had promising results when tried, such as establishing a quota for women in parliamentary positions. The main question that I kept asking myself while reading these sections of this paper was regarding how we go about getting these top-down policies passed through current legislatures. Duflo states that it will be necessary to take policy actions that benefit women at the cost of men in the short run. However, these very men that will often have to bear this short-run cost are the ones disproportionately making policy. How do we get people in power to look beyond the short run issues to focus on long run benefits? In this discussion, I see striking similarities to issues of passing climate change policy in the US. For example, imposing a tax on carbon is empirically proven to be beneficial in the long run, but because it involves a “tax” that some voter bases may not like, it poses an obstacle for re-election for politicians. For this reason, some politicians are unwilling to look beyond short-run obstacles that would have negative impacts on their political careers for the long-run benefits of their community. The same could be said for male politicians who would be largely unwilling to implement a quota for women in Congress, as it would be their spots in Congress that are being threatened. Due to this predicament, bottom-up approaches, such as closing the education gap, seem to be the most feasible way of combating the gender gap in politics. But bottom-up approaches have been in action for some time now, and the fact that we still have a gap in political representation may indicate the need for broader, sweeping reforms from the top-down. I would be very curious to hear more about the gender quota case study from India mentioned by Duflo in this paper, especially regarding how they were able to get that quota policy passed in the first place.
Toggle Commented Oct 28, 2021 on For Friday's Discussion at Jolly Green General
While reading papers like this one can be demoralizing, they are necessary to emphasize the urgency of the situation we find ourselves in. The wide range of ways in which daily life can be impacted by climate change shows that the economic costs of inaction in the long run far outweigh any temporary costs of action. There is clear evidence for a need for change in economic policy, but I would make the argument that broader, political change is just as necessary as economic change. There is overwhelming data to support the implementation of a carbon tax in the United States, but many politicians oppose such a move. I believe that the reason for this is due to the immediate revulsion that many voters have when they hear the word “tax.” This may largely be an educational problem, as there are many times, including this one, where a tax on bads can alleviate taxes on goods to ultimately save ordinary consumers money. However, “raising taxes” is one of the fastest ways for a politician to lost support of his or her constituency. As long as politicians are constantly striving to appease a voter base rather than make substantive change, we will struggle to implement a carbon tax. My proposed political change would be to have single term limits with longer terms placed on most politicians, as this would alleviate pressures to appease voter bases and wealthy lobbying groups. However, change this drastic is unlikely to occur in the short run. The short run economic solution that I think could be the next best step would be the re-implementation of a cap-and-trade system. This would essentially set a limit on pollution and allow corporations to buy and sell the limited rights to pollute. This kind of policy would likely stand a better chance of passing as it avoids the negative connotation of a “tax”. Such a policy has even been put in place under a conservative, Republican administration (George W. Bush) in the past, so it could serve as a valuable way to bypass the resistance that comes from imposing any form of new tax, even if the new tax is supported by data.
Toggle Commented Oct 20, 2021 on For Friday's Discussion at Jolly Green General
I think one of the first questions that comes to mind after reading about the rapid developmental success of South Korea is whether or not the South Korean formula can be replicated. This article shows how many different factors contributed to South Korea’s rapid development, but I tend to agree with the scholars mentioned briefly in the final section that emphasize the importance of American foreign aid. Unlike the circumstances of many foreign aid cases today, the U.S. had strong incentives for making sure that South Korean society prospered, largely for socio-political reasons. The brunt of South Korea’s development took place in the Cold War, as the two world powers, the U.S. and the Soviet Union, ideologically divided the Korean Peninsula. Both North and South Korea were close to economic blank slates (though there was a bit more preexisting industry in the north), and Korea functioned almost as an ideological battleground between capitalism and communism. The United States needed to demonstrate the superiority of our system to the rest of the world to avoid more communist transitions, so we were eager to offer aid to South Korea. This aid came in both direct and indirect forms, through direct foreign aid that contributed greatly to South Korean GNP, as well as indirect aid through development advice from a team of American advisors and education of South Korean youths in American universities. Many of the policies that made South Korea so prosperous in the long run (especially investment in education and dispersal of technological knowledge) were bankrolled by American investment. Other reforms, like land reform, were crucial and independent of any U.S. aid, but it seems that the initial agricultural industry of South Korea would not have been sufficient to fund the reforms that propelled South Korea to sharp upward mobility. The vital importance of U.S. aid to the South Korean project makes it difficult to discern whether a similar path of development would be possible without a “big brother” figure like the United States. And without the political fuel of the Cold War, would a wealthy, developed nation like the United States have the motivation to help a struggling nation to this same degree?
This paper’s methodology of taking a closer look at each individual developing country is a highly effective way of considering development, as each country has specific problems that need to be addressed in order to make more freedoms available to its citizens. However, this method of thinking about development can also be overwhelming, as it opens the door to the wide range of possibilities that could be inhibiting the economic and social progress of a country. One specific issue that plagues many developing countries that this paper presents is corruption, which I think is often overlooked in the conversations about development. Perhaps this is because corruption does not directly involve food shortages, clean drinking water, health issues, or other typical issues that come to mind when examining the progress of a developing nation. Corruption can stifle economic growth, and it points to a frequently overlooked step of development, which is the creation of strong legal institutions. Corruptions can and will continue in developing nations unless there are systems put in place that are both able and willing to prosecute corruption and cannot be bribed. However, systems like these do not frequently occur organically. The World Bank has recently addressed the issue of corruption in developing nations, and they emphasize the need of reforms to build stronger institutions with greater degrees of transparency in the short run. Hopefully, these institutions can help foster the long run solution of changing the culture of each nation against corruption, so that bribery and robbery of potential investments in human capital are no longer the norm. https://www.worldbank.org/en/topic/governance/brief/anti-corruption
Toggle Commented Sep 30, 2021 on For Friday's Discussion at Jolly Green General
While this reading poses some interesting points about the evolution of development economics, many of the author’s main points have relevance in the broader scope of studying economics in general. The author spends a great deal of time discussing models and the role that they play in our study of economics, and I think that his argument here is one of the more critical takeaways from this reading. Hirschman is presented at one extreme on the spectrum of modeling – he refused to try to formalize his idea through a mathematical or graphical model. On the other hand, the author also mentions individuals in the field who give far too much credence to models. The vast majority of economic models require massive concessions about what is or is not true in the form of assumptions in order for us to be able to poise the situation in a more understandable way. I think the author’s point of using models as metaphors hits the nail right on the head about the role models should play. They are a helpful way of representing market functions and other economic phenomena, but they are helpful only as long as one remembers that they are just a tool to make the phenomena more easily explainable. Usually, the systems that we attempt to understand are far more complicated than we could graphically or mathematically represent. This internal controversy around modeling in economics reminds me of a speech by political strategist George Kennan I read for another class, “The truth is sometimes a poor competitor in the market place of ideas – complicated, unsatisfying, full of dilemmas, always vulnerable to misinterpretation and abuse.” While the original context of this quote had nothing to do with economic modeling, I think it applies here. It would be far easier to either accept the models we use as fact or to reject them outright due to the unrealistic assumptions they call for, but neither of these gets us closest to the truth. These models are a valuable asset in the field of economics, but only as long as they are taken with a grain of salt.
Toggle Commented Sep 23, 2021 on Krugman for Friday at Jolly Green General
I admire many of the points made by Sachs in this article, and even though they came into existence in a different structure than he suggested, Sachs seemed to foreshadow the Sustainable Development Goals that went on to be adopted by the United Nations in 2015. The increased emphasis on environmental concerns is absolutely necessary, as the burden of climate change often falls disproportionately on the shoulders of those already in poverty. However, I do have one primary concern about the information Sachs presented in this article. My concern is not with the content of the Sustainable Development Goals themselves, but rather the way that compliance with the goals will be enforced. This paper mentioned several times that promises of development assistance from wealthier countries under the Millennium Development Goals often were not upheld. Even when legally binding commitments are made, which are thought of as “the gold standard of international diplomacy,” Sachs points out that they are not carried out because of a lack of effective enforcement mechanisms. Perhaps this suggests that while the Millennium Development Goals needed revamping, so do our methods of international diplomacy. This new set of goals will only be as successful and effective as the degree of cooperation by each participating country, and if there is no difference in enforcement mechanisms since the implementation of the Millennium Development Goals, I unfortunately do not see how the Sustainable Development Goals can be expected to be more well adhered to. Free riding would be incredibly easy for many countries, especially those that are already more developed and thus may not treat the SDGs with the same degree of urgency. Similarly to how the Sustainable Development Goals themselves adopt a holistic strategy of developing low-income nations, our implementation of these goals also needs to have a more broad strategy, including a revision of enforcement mechanisms for legally binding commitments by nations. Whether incentives for cooperation include more severe economic sanctions or some other strategy, I believe that the effectiveness of the SDGs will depend on developing enforcement policies that make adhering to the SDGs the more economically viable decision.
Coming into this class, I was so accustomed to hearing the argument of using economics as a cop out for taking any action against environmental issues, especially those involving the climate. The argument I kept hearing would always say something like that measures could absolutely be taken to help the environment, but the economic effects of those actions would be so detrimental that it could change life as we know it. After taking this class, I think the most crucial thing that I have learned is not only that policies that benefit the environment can be put in place without causing this economic catastrophe, but our current state of policy with regards to environmental and natural resource economics is wildly inefficient, and they could lead to actual detrimental economic impacts if things do not change. Too often, people do not take the social cost of pollution, climate change, and other environmental issues into account and only look at the private cost, which is such a small fraction of the picture. Non-sustainable energy inputs such as coal may seem like feasible choices when strictly looking at the private cost and benefit of their extraction and removal, but the truth of our inefficiency quickly becomes apparent when you bring the social cost of coal mining and marginal damage cost to local communities into the equation. Not only are current policies inefficient right now, but they have the capacity to lead to irreparable damages in the long run if nothing changes. It can be difficult to imagine a world where rising sea levels could wipe coastal cities like New Orleans, Charleston, and Norfolk off the map, but that could be where we are heading, and the solution could start with something as simple as putting a price on carbon. I think this class has made be a better citizen by giving me the knowledge to educate others on these issues so that I can help, even if it is in a very small way, to build a populace that is educated on these issues and willing to make the small changes necessary for a great impact on the world.
Toggle Commented Apr 22, 2020 on ECON 255 Final Exam at Jolly Green General
Much of the criticism of the Green New Deal that I have heard and read stems from the fact that the GND is very vague about how it intends to accomplish its goals. The bill itself does not prescribe much concrete policy, but rather it outlines targets that we should base our policy around in the near future. I think it’s odd that those who oppose the Green New Deal use the looseness of its language as a way to combat it and hyperbolize it, because if the GND ever gets passed, this same looseness of language could be a strength for Republicans. As of now, many are exaggerating the policy of the GND as we see in the Federalist blog post to incredible extremes that the actual bill does not remotely suggest, but they can do this because they choose to misinterpret the loose language in that way. However, if the Green New Deal does get passed, Republicans would be able to use this loose language to find some compromises in the ways that we go about achieving our climate goals. The language was left intentionally vague so that we may have flexibility in the future on how to achieve goals such as 100% renewable, zero-emission energy sources that have no clear solution, and the opposition to the GND choose to use this as a way to misconstrue the goals outlined in the bill to those who haven’t read it instead of using vague language as a way to make compromising, bipartisan progress. At this point, policy to combat climate change is inevitable, and Republicans are using this as a way to just push it further down the road instead of prescribing policy that works for both sides of the aisle.
Toggle Commented Apr 15, 2020 on ECON 255: The Green New Deal at Jolly Green General
After reading about the easing off of air pollution regulations by the EPA amidst the COVID-19 pandemic, I wish I could say I was more surprised by the policy. It is incredibly interesting to witness policy like this in contrast to politicians’ statements about how no number of deaths due to this virus is acceptable, and you can’t put a dollar value on a human life. This policy directly contradicts that statement. Putting a hold on air pollution regulation directly leads to an increased risk of contracting COVID-19 for millions, and will undoubtedly result in more deaths, all to make the economic aspect of this pandemic more tolerable for corporations in the short run. This idea led me to think that if there is some kind of dollar value on a person’s life, what is that value? I did not know that such a value existed, and it turns out that it does, and it’s called the Value of Statistical Life (VSL), and the EPA currently feels that it’s around $9.4 million per human life. According to the article below, this value is often used by economists to help understand situations like these. Another way to look at VSL is by asking the question, “How much are we willing to spend to reduce the odds of dying?” While that sounds terrible on the surface level, it disturbingly makes sense, as the flu kills thousands of Americans every year and we never shut down the country because of it like we are now. Over the course of the next several weeks and even months, it will be fascinating to watch the economic policies and aid packages that are introduced to combat the spread of coronavirus and the economic impact of it through the lens of the VSL. The link below does a great job explaining the concept of VSL in to context of COVID-19, and briefly addresses rocky issues in the variation of VSL between people of different age groups and nationalities. https://fivethirtyeight.com/features/what-should-the-government-spend-to-save-a-life/
All three of the articles for tomorrow’s class were incredibly interesting and informative, but the first article evaluating cognitive performance with high levels of air pollution in China particularly caught my attention. The data collected and presented in this article is astonishing, as nearly every single factor and category tested demonstrated a negative relationship between low air quality and test performance in a statistically significant way. The data shown here reminded me of some of the articles about the negative health effects of coal mining communities in Appalachian United States, and this issue is remarkably more concerning because it is on such a massive scale. Given the prevalence of COVID-19 in the news and now our daily lives, it was impossible for me to read this article and not consider the applications of the virus to this situation. In the past few weeks, it has been made relatively well known that the coronavirus has ceased a large portion of production in China, and that lack of production has led to a significant and unprecedented improvement in Chinese air quality. Since this paper discusses how long-term exposure to air pollution has a far worse effect on cognitive performance than short-term exposure, I was curious to see if there could possibly be any long-term benefits of the coronavirus on health with regards to air quality. I looked to see if I could find any evidence that the coronavirus could have some sort of positive effect in this capacity, but what I found was quite the opposite. I came across an article (link below) that discussed how COVID-19 may have some positive effects on air quality in the short-run, but the overall air quality impact will likely be negative in the long-run. In the short-run, manufacturing slows, and pollution decreases as production stalls and less people commute to work or travel by plane, and this will temporarily be beneficial for air quality. However, as prices of petroleum and other energy forms that produce large quantities of carbon emissions become cheaper as the global economy declines, individuals and corporations are likely to invest more in these more common energy sources than cleaner ones, delaying a switch to safer, cleaner sources of energy. https://insideclimatenews.org/news/10032020/coronavirus-climate-change-economy-emissions
Toggle Commented Mar 12, 2020 on 3 short papers for Friday at Jolly Green General
This paper not only confirms that coal mining, and more specifically, mountain top removal, has negative health effects on people living in coal country, but this article reveals that the issues surrounding coal mining are often more expansive than most think. With issues such as increased mortality and morbidity in coal mining communities, water pollution from coal runoff, and widespread destruction of biodiversity, it seems as if we’ve reached a point where it should not be difficult to see that it would be ideal to mine coal less than we currently do. When reading papers like these, one thought that I cannot get out of the back of my mind is that while there are already many existing sources of alternative energy production, they may not be able to economically aid the areas that are hurt by the decrease of coal mining. In a separate article that I found (link provided below), we can see that while solar energy is a viable option to replace some of the energy production in the absence of coal mining, it will be difficult for former coal miners to reap those benefits, especially for coal miners outside of the United States. Coal miners typically are not willing to move from their homes even if the mines get shut down, and many of the areas where coal mining takes place are not suitable for the production of solar or wind energy. After all, coal mining, despite all of the negative side effects that are caused in its extraction, processing, and transportation, is one of the only jobs where you can make close to $70,000 a year without any kind of education beyond a high school diploma. The coal miners themselves are not completely oblivious to many of the negative health effects of coal mining described in this paper, as they live in these conditions their entire lives, but the pay may be worth the risk in their eyes. Until we can solve the problem of finding a sustainable form of energy production that works well in Appalachian America and pays about as well as coal mining does, there will be massive resistance to any kind of change. https://iopscience.iop.org/article/10.1088/1748-9326/ab6c6d
Toggle Commented Mar 5, 2020 on Discussion Paper for Friday at Jolly Green General
While this survey was conducted in a way that could yield many accurate results, there are definitely methods of collecting data that could have led to more precise results, yet they would have been difficult to implement. The survey administered in this study was a stated preference technique, and I believe this study could have benefited from the use of some revealed preference techniques instead. If some hedonic pricing mechanisms were implemented, there could have possibly been tangible economic data to base the future conservation fee on. However, this hedonic pricing mechanism would have involved increasing the conservation fee until tourists began to stop coming to Belize because they were no longer willing to pay the fee, and I’m sure this experiment would have not been permitted by the government of Belize. One other thought I had about this survey is that the timing of the survey’s administration could have led to a discrepancy in results. Some may say that administering the survey as tourists left Belize would have yielded the most accurate results because the details of the environment would still be fresh on the brains of the tourists, allowing them to accurately express their willingness to pay. However, I believe there is a chance that administering the survey right as tourists left Belize may have created a moment of nostalgia and emotional connection to the environment, which could have caused participants to state that their willingness to pay is higher in that moment than it would be when they are considering coming back to Belize.
After reading this article, I believe that everyone who has some basic level of economics should be required to read it as well. I think Krutilla’s writings do an excellent job of outlining the problems that we are facing today with the perfect balance of specificity on the issues without using too much scientific or economic jargon in a mere eleven pages. One particular portion of the paper that I found especially crucial was the part in which Krutilla outlines why a private market has not developed and may not develop for the preservation of the environment and natural resources even if it does create the greatest amount of social benefit. It is too easy to pass off the private market development excuse for the lack of action to prevent further environmental degradation because it has the façade of economic support through distorted view of Adam Smith’s invisible hand idea. However, sticking to this idea that no government intervention whatsoever will solve all of our problems is lazy economics, and Krutilla revealed that this is no new discovery by showing that a presidential commission sixty-five years ago knew our natural resources would deplete without any intervention. Upon reading this, followed by our discussion from class that even many pro-free market economists support intervention, I was reminded of an interview I saw of Milton Friedman several years ago. I did some further research into this, and I discovered that Milton Friedman, the poster child for free market Laissez-faire economics, supported a tax on carbon in an interview in 1979. While many of the other evaluations that he makes on the overall status of climate change would be hotly contested by most today, it is incredible that no government-involved solutions today can get passed when one of the most anti-government intervention economists in recent history supported government intervention in the form of a carbon tax. Here's the link to the Friedman interview if anybody is interested: https://www.youtube.com/watch?v=0YGfwSvLkC0
While I think that Coase makes many strong points and has some insightful observations, I believe that his theory is not necessarily wrong, but would only apply in incredibly specific circumstances. One issue that could arise nowadays with this issue is that the party being harmed by the negative externality may also be benefiting from the production process causing the negative externality, so they may not demand compensation or change. One example of this can be seen in the coal mining communities of Appalachian United States, where the coal mining process can cause considerable damage to the lungs of those working in the mines, but the miners will not object at the risk of losing their job. If the miners lose their job with the local coal company, it could be detrimental to their livelihood, as working in the mines is often the sole occupation available in the area. This means that the miners would rather live with the health consequences of the negative externality of toxic air than risk the coal company struggling in the face of the negative externality. One other issue I noticed about Coase's argument is that it falls victim to drastic oversimplification. While setting up each individual scenario, Coase walks the reader through a long list of assumptions that must be met, yet are rarely ever met in real world applications. One assumption is that the dispute must be between two substantive, material groups that are capable of voicing their dissatisfaction. While this can apply to some issues of environmental degradation, many of these problems are between one private body, whether that be a corporation or otherwise, and a natural resource or landscape that cannot be represented by one individual person, organization, or corporation. For example, when oil drilling in the Gulf of Mexico leads to pollution in local waters, it can be difficult to see the application of Coase's ideas, as no single organization can be responsible for representing the needs of the ocean as a whole.
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Jan 16, 2020