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Tommy MacCowatt
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This paper goes into great detail about the impact of interest rates in developed, industrial countries on developing markets. As others have mentioned, I also found this paper quite difficult to grasp but very informative. The correlation between US interest rates and the level of investment in developing nations is evident. Latin America saw an influx of capital in the early 1990s when they made fiscal reforms through the Brady Plan. During this same period, the US short term interest rate fell almost 50 percent and resulted in an increase of 4 percentage points to GDP in Latin America. The best explanation for this correlation is that investors see the low interest rate in the US as useless and look for other opportunities to invest. Targeting developing markets allows investors a chance at higher returns without investing a ton of capital. With interest rates extremely low, investors see no reason to keep their money in the US and outsource their capital to other markets.
Toggle Commented Nov 19, 2021 on ... at Jolly Green General
This study by Psacharopoulos and Patrinos highlights the importance of expanding human capital through education. In under-developed countries, increases in education are crucial to growing the economy and increasing productivity. Countries with the lowest income levels ultimately have higher rate of return, of 9.3%, on their education, compared to a high-income country where the rate of return is 8.2%. This shows that the private benefit of being educated in a lower income country is higher than a country with higher income levels. This was not particularly surprising to me, but I was shocked that the mean years of schooling was just 5 years in these low-income countries. Despite going to school for 4.2 fewer years on average, these countries see a higher rate of return on their investment in education. This should encourage under-developed countries to narrow their focus and increase investments in education. The social returns of increases in education are also highlighted throughout the paper. These benefits are much harder to measure as they are not monetary, but they are more important to the overall health of the country. In developing countries, the social return on completing primary education is 22.1%, which is higher than the average country which is 17.5%. There is an even larger gap for people who attend secondary school where the social benefit is 18.1% in low-income countries compared to the average of 11.8%. These figures show just how much of an impact education can have on an individual and their community. Despite the difficulties of measuring the social benefits of education, the authors do provide strong evidence of positive social impacts.
Toggle Commented Nov 11, 2021 on For Friday's Discussion at Jolly Green General
I thought the most interesting aspect of this paper was the South Korean’s focus on developing the technical skills of their people. Through the expansion of education in South Korea, they were able to learn import skills early on. This coupled with the attractiveness of working in the government of South Korea allowed them to hire strong candidates who continued to develop a new economy. Another interesting factor was the lack of foreign investment early on in their development. Smartly, Park wanted to establish a strong economy in South Korea without the help of other countries. After the first 5-year plan had been successful, Park encouraged the growth of foreign investment which was previously untapped. I also found the correlation between economic and social transformation very fascinating. It is well known that urbanization occurs when economies become more technologically advanced, but South Korea saw an especially rapid urbanization. Over the 20-year period from 1960 to 1980 the percentage of farmers in South Korea dropped almost 40%. I found this surprising because urbanization can be a long process and convincing people to leave their farms for urban areas is not always easy.
I found this article very interesting and thought they chose some very interesting countries to research. Hearing the story of every country and understanding the reasons behind why they have been successful or have not. Throughout the reading, I thought about the second question posed in the opening, “how important is the role played by institutional barriers with relation to technology adoption?” The authors make a strong case that the institutional barriers play the most important role in terms of technological adoption. The 10 development laggards all experienced some issues within the government that slowed the adoption and development of new technologies. The first example given was Comoros who has had governmental struggles since the 1970s and had accumulated a lot of government debt. This does not lend itself well for a country that is looking to develop a stronger economy and increase technological adoption. Another great example was Côte d’Ivoire which has struggled due to their large effort in cocoa production which has not been successful. Additionally, Côte d’Ivore is an extremely corrupt country which is a major hinderance on development. Brazil is a slightly different example as they had grown their economy successfully in the 1950s and 1960s, but government spending slowed development. In the 1970s and 80s, Brazil continued to import goods and tried to industrialize the country but ultimately cause massive inflation that peaked in the early 1990s. These countries share the common theme that they lack the strong institutional systems that are so key to development.
Toggle Commented Sep 30, 2021 on For Friday's Discussion at Jolly Green General
I thought the most interesting aspect of this paper was the discussion of methodology in the study of economics and social science. Krugman describes how different people have different approaches to developing an economic theory. Most theories are accompanied by a model that helps to illustrate and explain that theory, but these can be restricting. I really liked the comparison between a model that analyzes an aspect of social science and a model of the global weather system. Both of these are extremely complex systems that can not be completely understood or accurately modeled. Although models are imperfect and cause people to make assumptions about what is important, they can provide a new understanding of a complex problem. In the following section of the paper, Krugman explains how economists were shifting their focus to modeling despite the possible pitfalls. Models became more accurate during this period as economists perfected their techniques. Krugman compared the growth of modelling in economics to the mapping of Africa in the 15th and 19th centuries. During this time Europeans began to develop more accurate maps of certain areas of Africa but lost certain other details that had already been accurately depicted. This is one of the difficulties of deciding what should and should not be included in a model and what can be lost as people develop them further. Clearly models are still a key aspect of economic theory and allow us to simplify all the complexity of a real-world economy and focus on the key factors.
Toggle Commented Sep 24, 2021 on Krugman for Friday at Jolly Green General
This article from Jeffrey Sachs effectively describes the Millenium Development Goals (MDGs) and why the new Sustainable Development Goals (SDGs) will be more successful. I admittedly did not know anything about the MDGs before this reading but saw their connection to China and India’s rapid growth. Although the MDGs have proved successful in some countries, others have not improved or even have declined in terms of hunger, income poverty, and avoidable disease and deaths. The SDG framework proposed by Sachs is relatively broadly organized but covers the key growth categories necessary to be successful. The organization of the proposal is similar to the idea of Environmental, Social, and Governance (ESG) initiatives which have come to the forefront of responsible investing. I believe that the most significant challenge will be the response of the governments where action is necessary. Government officials must create sustainable economic growth and strong political institutions in their country to enact long-term change. The private sector will also play an important factor in the execution of the SDGs because their resources are essential to expanding the technologies available, the quality of medicine, and other resources. Sachs also mentions the importance of social media and information technology to share knowledge with other scientists, activists, and officials who are working to make change across the globe. I believe the ability of governments and private institutions to work together over the next 10+ years will determine the effectiveness of the Sustainable Development Goals.
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Sep 16, 2021