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Kevin Thole
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My main takeaway from the microcredit paper is that you can't provide a service and expect one set outcome. At the end of the day, human agency determines if microcredit loans are effective at alleviating poverty or not. In most of the studies, access to microfinance had a positive, albeit modest, effect on many variables but the most salient one was stability. A huge issue that people in poverty face is an irregular cash inflow. Microfinance loans serve to give these people peace of mind even if all the money isn't used for investment spending. It's not surprising that many people didn't use microfinance loans for investment purposes because not everyone is an entrepreneur. Some people would not be well-served if they used loans to start a business because not everyone has the skills to start one successfully and there is not enough market share to go around for everyone to own a business. Some people need money to reduce stress on whether or not they will be able to pay their bills. I found the part about how formal savings accounts increase savings interesting. I wonder if there's a selection bias where people who were planning on saving more anyways chose to participate in savings accounts.
This paper was more technical than many others we read and used many terms from financing and lending markets. The main issue explored in the paper was whether emerging markets could institute concrete policies to attract foreign capital or if attracting for capital was up to external forces beyond their control. The paper found that interest rates in the United States and other countries. This has several implications for developing countries. The major one is that developing countries are dependent on economic conditions in the United States for attracting capital. Since the COVID-19 pandemic began, and even before the pandemic, the Federal Reserve has kept interest rates relatively low which has incentivized foreign investment. Present fears about inflation caused the Fed to do a slight monetary contraction in the summer and they may do a larger one in the future. If this occurs, US investors may shift more of their money towards domestic investments rather than invest in emerging markets. This will seriously hurt these developing countries who were disproportionately hit hard economically by the pandemic.
Toggle Commented Nov 19, 2021 on ... at Jolly Green General
This report concisely and clearly explains the returns of education in different domains. It shows that an additional year of schooling will have different returns in different contexts. For example, an additional year of schooling in primary school has a much larger effect on future earnings than an additional year of high school. In countries with gender disparity in education rates, more effort should be put towards educating girls because it has a higher return. In a perfect world, countries would devote as much resources as possible towards educating as much of their population as they can. However, In countries where the public financing of education is a scarce resource, they must triage education sometimes. This paper increases understanding of where they should divert their funds to get the maximum return on investment. It also shows how these returns differ in different regions of the world due to external factors such as corruption or a poor education system. This allows us to see how these factors hold back a country's human capital and therefore their economic development.
Toggle Commented Nov 11, 2021 on For Friday's Discussion at Jolly Green General
My main takeaway from this article is how the many negative effects of climate change pile up and reinforce each other as the climate continues to warm. It also did a good job of pointing out the negative effects of climate change that often are glossed over in the media. Everyone focuses on sea level rise and tropical storms, but not enough attention is given to the myriad of climate factors that lower crop and fishery yields as well as cause adverse health effects. The article really hammered home the urgency of fighting climate change by comparing the effects of two degrees of warming with four degrees. Two degrees is what we can hold the warming to if we act now while four degrees is what will happen if we put off acting on climate change. What struck me was all the positive feedback loops that occur when warming reaches a certain point. Different effects of climate change interact and multiply each other even if all emissions halt. The article didn't go too in depth about the social and political consequences of a warming planet, but I think there are some serious negative forecasts in these domains. The article mentioned the migration of people but didn't talk about how this would cause extreme social and political tension that would have negative effects of its own. Simply look at the European refugee crisis in 2015 and the reactionary politics it fueled to get an appetizer of what climate migrations would cause. I also think the scarcity of water combined with failing crop yields will produce many internal and international conflicts. Two areas where this can blow up are in Kashmir and the Nile Renaissance Dam in Ethiopia.
Toggle Commented Oct 21, 2021 on For Friday's Discussion at Jolly Green General
This article did a great job of explaining how South Korea's developmental timeline differed from other developing countries and highlighting the social costs that came with it. It's interesting to note that the high savings rate of South Korea contributed to the development of capital they needed rather than borrowed funds. However, it's important to remember that this was only possible due to a huge amount of foreign aid from the United States which makes it unlikely to be a viable strategy for other developing countries. We can't just tell other poor countries to be in a militarily strategic spot in a geopolitical rivalry between two superpowers. The political history of South Korea, including the threat of a developing North, created the conditions that pushed South Korea to grow. I also was very interested in the chaebol system where politically-connected firms received special treatment from the government. This seems like an economically inefficient system that was only slightly redeemed by the meritocratic bureaucracy of the government and results-based reward systems. In the modern day this seems to have created too-big-to-fail firms that stifle innovation and startups.
I found it interesting how the article discussed how economic growth depends on both technology and institutional factors and that a lack of one or the other contributed to some countries lagging or being stuck in a poverty trap. I found it interesting how the main difference between the fast growing countries and the lagging countries was trade policies. Open, export-oriented economies grew the fastest and closed, import-substitution economies did not grow as quickly. I wonder what the middle growth countries look like and whether or not they have similar policies. For example, perhaps import-substitution policies correlate heavily with mismanagement of debt and perhaps that could have led to not optimal outcomes.
Toggle Commented Sep 30, 2021 on For Friday's Discussion at Jolly Green General
I found Krugman's thoughts about the supremacy of models in economics compelling. The analogy he made to European ignorance of Africa painted a good picture of how discussions of developmental economics evolved from the early 20th century to the late 20th century. High development theory suffered during the model craze of the 1960s because it couldn't accurately be presented in a model. I always felt that that models in economics are restrictive because they leave out many variables and phenomena that could potentially affect outcomes. However, as long as the relationships represented in these models are accurate, the exclusion of other variables can be forgiven as long as those variables are taken into consideration in the creation of public policy. I also think that the obsession with models diminishes economic concepts that are more normative and are better described in writing. I found Krugman's ideas surrounding what gets left out of models interesting. His ideas highlight how some thoughts may not be wrong just because they can't be illustrated in a model. The assumptions required in many economic models don't hold up in the real world which creates problems for these models. This is why Krugman is enamored with Fultz's dishpan and other very simple models which don't rely on a whole lot of complexity. As long as the model explains a truth of the world around us, it is a good model.
Toggle Commented Sep 23, 2021 on Krugman for Friday at Jolly Green General
This paper challenged the traditional development path by pointing out how its consequences are typically damaging for the natural environment. Many western countries, such as the United States, went through a development phase in which heavy industry bridged the gap between a mainly agrarian economy and a mainly service economy. The global challenge today is that it would be disastrous for the global ecosystem if developing countries took the same route as the United States. The MDGs hinge on economic growth in these developing countries. To achieve this, the author of this paper proposes the Sustainable Development Goals to achieve a higher HDI without environmental destruction. Because the global climate affects all countries, the SDGs would apply to all countries with wealthy countries spurring much of the technological innovation that would allow sustainable development to occur. I thought the SDG about good governance was the most important one in there. If this goal is not met, none of the others can succeed. Previous economics classes I've taken have stressed the importance of good institutions for economic outcomes. If political institutions in developing countries misappropriate the funds intended for the development of the SDGs, it will be difficult to achieve them. Developing countries may also be discouraged by the hypocrisy of wealthy countries lecturing poorer countries not to use the same development path that they themselves took advantage of. Firms in developing countries may opt for the easier, more polluting option for prosperity if there is a lack of government will to regulate. If the global community wants to tackle these SDGs, powerhouse economies must come together and provide incentive structures for poorer countries to develop in a sustainable way. This would involve aligning the interests of private firms with a stakeholder model which prices in negative social and environmental externalities.
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Sep 16, 2021