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The literature review in this paper was very interesting. I feel that on some level there is this idea that all people need to get out of poverty is money, which of course we know is not true. In this same way, the idea that economic growth decreases poverty seems logical. However, I am surprised to see in this paper that growth was used as a proxy for poverty. It seems to take quite some time for the literature to get past this idea, but we know that there are corrupt and authoritarian governments that may grow the economy and never let the profits reach the people, especially not the poor. What I find concerning is how important being a member of the UNSC is to receiving aid. For each additional year sitting on the council, a country receives approximately $21M more in aid from the US. It seems that UN should be working to help all countries to alleviate poverty and develop at all times and not just “when its their turn” or there’s an emergency. A bit of a side note but I really appreciated the way Milovich walked through the statistical analysis and results. The empirical analyses and estimation strategies are my favorite part of economics, so I appreciate how clearly, he explained his methodology. I like how he explained all the potential endogeny with the error term and the independent variables to explain why he ran a two stage least squares regression analysis. This is perhaps not the most relevant take away for the purpose of our class discussion, but interesting and appreciated, nonetheless.
Toggle Commented Nov 13, 2020 on Last Post of the Year at Jolly Green General
What I understood of this paper, I found to be very interesting. We spend a lot of time talking about what countries can do themselves to assist in the development process and alleviate poverty. However, we haven't discussed the possibilities for developed countries to help very much beyond throwing money at the developing world. The idea that developed countries can help by just adjusting their interest rates, which is a relatively low effort is promising. Of course there are implications for the domestic economy as well, but compared to sending in military troops just to help "keep the peace" and "bring democracy" to developed countries as a thinly veiled form of colonialism sounds more expensive and like more work. The findings indicate that high US interest rates lead to borrowers with poor credit to drop out of the market specifically in Latin America. This is unsurprising due to the earlier finding that countries with lower credit rating residuals are more willing to come to market for higher interest rates, which is also intuitive. I am really looking forward to combing through the finer details of this paper tomorrow.
Toggle Commented Nov 5, 2020 on For Friday's Discussion at Jolly Green General
I found it particularly refreshing to read about an actual program that we have long term data for, and therefore, actual results. In a lot of ways, the concept of conditional cash transfers seems simple: give people the incentive to do things that will benefit them, their children, and society/the economy. However, as we have talked about in class, many people have the (wrong) belief that people are poor because they are lazy or dumb. The reality is the lack of opportunity and the inability to invest in themselves. The most important result to me is the increase in labor market participation by women. The increase can be attributed nearly in full to "increases in paid work." This, of course, seems like it should be obvious that money talks, but so many women were not participating in the labor market because they weren't able to earn enough to be worthwhile to them. Meanwhile, there is little impact on participation or wage for men, which only show how large the discrepancy was to begin with. Overall, the program serves as a great jumping off point for similar programs to mimic and improve upon. From a policy perspective, the results are clear and should promote more spending.
Toggle Commented Oct 29, 2020 on For Friday's Discussion at Jolly Green General
The productivity of humans and technology has always been intertwined. However, this paper really highlights that the growth of technology has increased the supply of jobs that require higher education. The fact that the demand for highly skilled labor has grown faster than the supply despite the rapid increase in education across many countries is astonishing to me. However, this is good because the issue of lag when people are performing their own cost benefit analysis of their education is addressed in part. Of course, the specifics of what sectors these jobs are in and what degrees are being acquired may not be well matched as the surplus of lawyers and shortage of health workers demonstrate. However, the trainability of the highly educated still allow them to land jobs that they may not be explicitly qualified for nonetheless. I appreciate how this paper just came out and stated that education level is not the only, or even the most important, indicator of productivity. I think there is an inherent air of superiority in the world of higher education, where people believe that just because on paper they are “more qualified” for a job (and by that they mean they have a longer resumé), then they are the “best” candidate. This does not only happen between various education levels, but also within one level. The idea that an Ivy Leaguer, who holds the same degree as someone who attends a state school, is somehow a significantly superior candidate. Humans and the institution of education are more complex than that, and some of these “measures of success” are more arbitrary that our society wants to admit.
Toggle Commented Oct 22, 2020 on For Friday's Discussion at Jolly Green General
The most interesting part of Duflo’s paper to me was the implications about the potential negative impacts economically and socially where young boys may actually see investment in their education decline with the empowerment of women or that certain public projects which are still important may be less valued by female leadership. While I have previously heard about the potentially benefits of educating, financing, and putting women into power, I had not considered the expense. Now, he goes on to suggest that these expenses may be negligible in the long run, but I think it is important from an ethical standpoint to consider that as a society, we should be trying to reach Pareto optimal solutions where no one is made worse off. Furthermore, I am frequently surprised by the inefficiency by which individuals operate. Perhaps, I should stop being surprised that stubbornness and power dynamics outweigh logic, but the situation in many African countries, where resources are not properly allocated is still surprising. Giving equal resources to women’s plots in the family would benefit everyone as a whole, so I can only conclude that the social norms create men who are more self-possessed than even self-interested. The fact that self-interest cannot even drive movements towards equality is most concerning to me. I have taken enough economics courses that, as much as we may want it to be true, people are not rational, but I did believe that people are at least selfish from a consumption standpoint. If we cannot motivate men to value their own consumption capabilities through increasing their production, I am uncertain how we can make real lasting social change. My only hope is by having government enforced equality, such as leadership quotas. Hopefully, we will see attitudes changes like that in India where bias against female leadership was reduced.
Toggle Commented Oct 8, 2020 on Duflo for Friday at Jolly Green General
The World Bank’s report on climate change was quite honestly not as moving as I expected. Perhaps, I have been overexposed to content surrounding climate change where little surprises me anymore. However, so much of the focus was placed on the severity of a 4 degree increase, which, while definitely possible given the current trajectory of greenhouse gas emissions and fossil fuel usage, still seems far off. I would have liked to see more focus on the 2 degree warming and also the already occurring changes. However, one of the few changes emphasized with a 2 degree increase is the decline in crop yield. I find this to be the most concerning given that many of the poorest populations rely on subsistence farming. Not to mention the strain on food prices that would impact the lower class the most all over the world – not just developing countries. The article by Quiggin gets in the more interesting and potentially enlightening part of climate change – how to realistically mitigate it and not hurt the poor. He points out that we already have the existing technology to make big changes which to me seems like the biggest hurdle – without the tech there is no substitution. However, changing people’s minds and practices may actually be the bigger problem. People don’t want to give up their gas-guzzling “cool” cars or start walking to work especially Americans, which we have witnessed throughout the pandemic with mask wearing.
Toggle Commented Sep 24, 2020 on Readings for Friday at Jolly Green General
The story of South Korea’s economic take off is an unusual one at best, but it still highlights the common reforms that development economics suggests are key: education, income distribution, and most importantly the role of institutions. As Sachs would have put it, “good governance” plays a key role in the growth of an economy. Seth clearly demonstrates how important curbing corruption was in the Korean economy. The 1960s military regime is the one to straighten out and incentivize the chaebŏls. This surprisingly uncorrupt relationship between the government and the top corporate executives encouraged growth in terms of the whole economy and not just their pockets. What struck me most interesting about these chaebŏls is that they are family empires, and many of their business still stand as huge firms today such as Samsung and LG. No matter how much the economy improved, the big money of today is still part of the wealthy few prior to industrialization and the economic boom. It is later acknowledge that the relationship between the government and business tycoons broke down somewhat in the 1990s during the democratization. The uncontrollable growth and increased corruption lead to a slowing in the “transition into a modern, First World country,” which drives how the importance of good governance. Furthermore, the growth policies heavily rely on basic principles of economics: profit-maximizing firms and rational consumers. The system of preferential loans and duty exemptions for chaebŏls who assist the government successfully grows the competitive market in Korea. It is unsurprising though that companies would act in their best financial interest. What is more surprising is how the government offering little in the form of social welfare actual improved savings rates. Perhaps the higher education levels of the citizens impact their rational decision making or cultural and traditional differences to Western economies. The final thought I had upon reading was similar to my question after reading last week’s paper: how important is it for a developing country to have a highly developed country, such as Japan, in close proximity for both modelling purposes as well as technology and capital gain? I once again wonder if there is a significant radial pattern of development around developed countries.
Toggle Commented Sep 17, 2020 on Miracle on the Han for Friday at Jolly Green General
The concept of “valid data” is what struck me the most in this paper. As someone who takes great interest in statistics, I constantly am evaluating the collection and quality of data used in studies. When it comes to more qualitative data, I often find myself mentally invalidating studies where people have to rate on Likert scales or other relational measures. However, this data should still be taken seriously if collected properly even if it is not the most precise measures. It has been my own struggle with the “social science” aspect of economics. Like the high development theorists, I am more likely to trust a theory that I can see the mathematics behind. During my time studying economics, I have learned that there is often a bigger picture that has yes to be formalize din such a way, but it can still be accepted as valid. I appreciate that in economics as pointed out in this paper, that sometimes getting “very close” is in fact close enough. From a policy point of view, one does not need the exact amount needed to fix a problem but rather the ballpark as a starting point for resource allocation. In math, it is crucial to cover all your bases and leave no stone uncovered. The importance and beauty of economics is the importance of understanding the human experience and not just the numbers while figuring out how to quantify that experience.
Toggle Commented Sep 10, 2020 on Krugman for Friday at Jolly Green General
The paper focuses on the helps and hindrances to economic development with regards to income around the world. With the fast-growing economies, what struck me most was the importance of close trade relationships with developed giants. In particular, Japan was mentioned as an important source of information for business structures in South Korea and agricultural technology in Taiwan. The paper acknowledges that this relationship provided crucial benefits during the development of these countries. The question is then raised: what does this mean for the trapped and lagging countries? The paper sites a variety of reasons that each country’s economy has decreased or ceased economic growth. The primary reasons are cited as corruption, poor government monetary and fiscal policy particularly with regards to inflation, and the failure to transition to an industrial society. Most of the lagging or stagnant countries in this study, however, are in Africa or South America. These countries do not have a stable economic giant near by with which to benefit from. In Africa, even the strongest economies are strongly tied with agriculture or natural resources. Very few are experiencing major growth due to technology and industry. I wonder if the rise of even a single country on the continent would display significant spillover effects for the rest. With regards to the South American countries, the question is perhaps more about an example of a stable and just government (relatively speaking of course). Chile despite being labeled as a lagging country, is described as “one of the healthiest economies in Latin America” in the paper. This creates a rather low bar for the region, but Chile did seem to approach its economic problems differently by having free market reform. The disengagement of likely corrupt governments allowed significant changes in exportation and economic livelihood. I wonder if Chile or another Latin American country were to emerge as major economic player and an example would other countries experience reform and growth. How important is proximity and strong economic ties to growth?
Toggle Commented Sep 3, 2020 on Reading for next Friday at Jolly Green General
In the Corporate Social Responsibility course (BUS 180) I took a few years ago with Dean Straughn and Dean Oliver, we discussed the SDGs extensively. I recognize that this article was written prior to the adoption of the goals by the members of the UN in 2015, which makes Sachs’s perspective even more interesting. What struck me the most interesting were the learning moments that he wanted the UN to take away from the shortcomings of the MDGs. The most ironic point was the emphasis on short, memorable goals. If memory serves, there are now 17 SDGs all with concise names and identifiable, simple graphics, but still a less accessible number. However, I do think the quantity assists with the need for more clear targets and indicators. His point stands however, since I cannot successfully name more than a handful of the specific goals. The goals both generally proposed by Sachs and presently in effect are undeniably intertwined. Quality education can not be obtained by all until poverty and gender equality are also addressed. My concern is his lack of prioritization when it comes to the new sustainable development goals. Of course, a developing country should be attempting to address all environmental, economic, and social issues while also being self-reflective, but limited resources in these countries make it nearly impossible to distribute finances in such a way. The question arises then of what issues are greater than others, and who should benefit first. Do we improve the education system and then worry about getting girls into schools? Perhaps, we should get all children into mediocre schooling, but sacrifice a generation’s productive capability? The answers to such questions may lie in other research, but Sachs merely states the potential goals without the focus of logistics. The paper does address the major concern of where financing will come from. While a positive of the MDGs is that they were adopted quickly and easily since they were not specific binding, Sachs admits that “free riding on financial assistance is the norm, not the exception.” The nonbinding and relatively undemanding nature of both sets of goals hinders progress by potentially asking to little of the member states who adopt them. Perhaps financial contributions of countries relative to their GDPs must be mandatory. A fund such as this can also be useful to bypass some of the private institutions that refuse to incorporate sustainability into their bottom lines. While Sachs’s ideas were clearly shared in many ways with the final iteration of SDGs, he merely addresses shortcomings without offering clear solutions in anything more than abstract behaviors.
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Aug 26, 2020