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In this paper, Casey, Kahn, and Rivas explore an important question: is non-use value dependent on income? By implementing a choice modeling experiment, the authors are able to indirectly extract the non-use value of the ecosystem. Survey respondents chose between several environmental risk scenarios, each with different non-use value associations. We found this methodology to be much more appropriate, given the context, than a more direct contingent valuation/willingness to pay experiment. Because the state of the environment is such a complex ‘good’ to value, a choice experiment is the best way to account for its multiple attributes. In our group discussion, we found the way in which the authors used fuel, health, and education as compensation means to be particularly interesting. Recognizing that survey respondents primarily operate outside of the formal economy means that cash payments were irrelevant compensation for environmental damage. However, we still had questions about the relative values of these measures. Just how valuable is an extra year of education in a community where the opportunity sets are already so limited? Given that more than half of respondents had not received greater than an elementary education, can they be relied on to make rational economic decisions? Our group also talked about the local respondents’ relatively positive perception of Petrobras. Large oil companies are often cast as dangerous profit-seeking machines, unconcerned with environmental consequences. And yet, Petrobras operations did not seem to scare or bother the ribeirinhos. We would have expected a community so dependent on the environment for their livelihoods to be particularly cognizant of Petrobras’s potential threats.
Ravallion’s piece is a great one to end the course with, as it includes most all of the topics which we have discussed this semester. A thoughtful application of China’s economic development lessons to Africa requires a solid understanding of development economics fundamentals. Just as many others have mentioned, Ravallion suggests that the importance of agricultural productivity and the key role played by a capable administration are two of the lessons that Africa may take from China’s recent history. The historical and economic analysis behind these two suggestions is solid and comprehensive – Ravallion is careful and considerate in his approach. To take this piece a step further, it is worth considering (as all development economists and policy makers would) just how these suggestions might be implemented in African nations. The lesson of “productivity growth in smallholder agriculture,” though seemingly simple, actually encompasses much of what we have discussed this semester when we consider policy implications. We should certainly think through the sustainability and environmental implications of agricultural practices, and later of industrialization and urbanization. Especially when promoting small scale agriculture, we must consider the role of women and how they can be most effectively and equitably utilized to promote development. As policy makers, perhaps we would involve Esther Duflo’s scientifically designed research experiments to determine what types of programs and incentives use aid most effectively. In a wider sense, perhaps the most important elements to consider are the cultural, institutional, and social ones. Certainly, these are not constant across continents, nations, cities, or even villages.
Toggle Commented Dec 5, 2013 on China and Africa (Econ 280) at Jolly Green General
Historically, discussions of economic development seem to ignore environmental impacts. Policy has been more focused on increasing production levels than on the environmental sustainability of doing so. As Prof Casey has said multiple times in class, developing nations often solve one problem simply by creating another. And yet, the secondary (often environmental) issue’s negative externalities and social costs seem to be undervalued. Understanding and thinking more deeply about what goes into poor families’ decision making has been a clear theme of this course – Prof Casey’s piece analyzes the impact of uncertainty/confidence on decisions to undertake agroforestry. Even though we understand agroforestry to be a socially and environmentally beneficial practice with many positive spillovers, we fail to see sufficient levels of implementation. Like many of the papers we have read, I was interested in the importance of adult education in the Keynesian sense of ‘weight’. Casey’s regression model shows that improving not only individuals’ ability to interpret presented information, but also confidence in skills and experiences do have significant impacts on the likelihood of adopting agroforestry. To a subsistence farmer, failure could potentially be associated with death, as the poor lack any sort of Plan B or social safety net. These farmers understand the precariousness of their lives and are unwilling to take the risks that are sufficient levels of investment. I would be interested to analyze the impacts of the introduction of access to capital or insurance on these same farmers’ decisions. Would they be more willing to take the risk, regardless of the information level/confidence/weight, remedying the market inefficiency?
Toggle Commented Nov 14, 2013 on ECON 280 Paper for Thursday at Jolly Green General
As we could have expected, child labor encompasses many themes of development economics. The “insidious evil” involves not only human capital development, but also women’s empowerment, financial market access, and decision making ability. Child labor seems particularly dangerous in analyzing economic development, as it exemplifies the cyclical nature and pervasiveness of poverty. Udry’s piece discusses many of the possible scenarios and cost-benefit analyses that poor families may face – and yet, I find it unlikely that these rational decision-making processes play out so smoothly in reality. Throughout the term, we have considered poverty and stress’s impacts on cognitive function and decision-making capability. Similarly, it takes a certain level of financial and economic understanding to weigh a child’s present value against her future potential. Poor rural communities often lack access to information. Even further, these sorts of decisions regarding future worth are inherently filled with uncertainty. Though I do not doubt the intentions and altruism of parents, from a policy standpoint, we must be sure to look a bit deeper families’ ability to make the ‘rational’ decision.
Toggle Commented Nov 7, 2013 on Corel Office Document at Jolly Green General
Sachs and Malaney’s discussion of malaria’s powerful impacts as a disease burden echoes many of the themes which we have discussed as a class. Not only the vital importance of human capital improvements to economic growth and development; but also, more nuanced effects of the disease on cognitive function and physical capital acquisition. It is understood that the stresses of living in poverty can impact the ability to make rational and thoughtful decisions – the presence of malaria only intensifies this issue. Sachs and Malaney argue that “the adverse effects on schooling are likely to go far beyond the number of days lost per year” (683). Even further than this immediate impact on education and human capital development, malaria can damage cognitive and fetal development. The consequences of damaged decision-making seem to be pervasive and persistent – just like the disease itself. Malaria places constraints on individuals’ ability to save for the future and migrate towards better jobs, just as it discourages firms from investing in malarious regions – this sort of isolation is dangerous in a modern economy so centered on globalization.
Randomized evaluations parallel the scientific testing methods of hard sciences – offering a “nuanced and precise” way to answer specific questions in development economics (19). By honing in on the purpose, context, and details of this body of research, academics gain insights on specific behavior and incentive structures of the poor. In her TED talk, Duflo suggests that this model of answering smaller questions to design the most effective programs and systems will chip away at poverty; rather than the overwhelming, and nearly impossible goal of eradicating poverty in one fell swoop. The microfinance piece pays close attention to the details, noting specific changes to programs, which if implemented, would increase effectiveness. Often times, these small design tweaks run contrary to the conventional wisdom. Targeting women, group liability, and immediate weekly payments “have long been considered defining attributes of a classic micro-credit model” and are considered “keys to success in keeping default rates close to zero” (9). However, this low default focus is centered on benefitting lenders, while a few key changes could make micro-credit more available and more impactful to borrowers. Similarly, evaluating program design through randomized studies allows researchers to answer specific questions about behavior and psychology, particularly, the drivers of spending and savings tendencies. By understanding why the poor are unwilling or unable to dedicate their savings, however small that may be, to investments, researchers will be able to target the poor by playing directly into their psychology. This approach is certain to be more impactful that a more passive one.
Toggle Commented Oct 24, 2013 on Microfinance (econ 280) at Jolly Green General
With reference to widespread gender inequalities, Michael Kimmel said “privilege is invisible to those who have it” (LSE Public Lecture 2012). Men have long been firmly seated atop the rankings of social hierarchy. Gender inequality, masculine dominance in particular, is deeply rooted in societies and widely pervasive. Tradition dictates that men hold positions of control in economic, political, social, and domestic spheres alike. These gendered divisions dole out power and privilege – most often to men, who continue on blindly reaping the benefits of the most advantaged rankings in society. Without some powerful combination of genuine grassroots and public sector support, social and cultural norms seem destined to continually adapt to maintain current understandings of privilege. Duflo gets at the heart of this dilemma, by arguing that “neither economic development nor women’s empowerment is the magic bullet it is sometimes made out to be” (1076). Rather, policy actions must be implemented at each step along the development path, so as to keep chipping away at the pervasive social inequalities.
I found the discussion of institutions particularly interesting and worth considering further. Rodrik argues that economic convergence does not rely on institutional convergence; and yet, there are certain “high- quality institutions” which seem to ensure growth’s durability and sustainability. This conclusion is entirely in line with his argument that basic tenants of sound economic theory run throughout successfully tailored local policy implementations. Rodrik certainly stresses the importance of policy-makers’ understanding of the locality, but the piece does not seem to delve beyond the political diversity of the world’s underdeveloped nations. I would argue that certain social norms and cultural institutions are just as important hurdles and barriers to consider on the path to sustainable growth. In many LDC’s women are irrelevant to the formal economy, though their domestic work and informal contributions are vitally important. Would Rodrik agree that NGO and foreign aid campaign focus on these social inequalities are necessary to economic progress? Or would he counter that economic growth itself would pull women into the formal economy? Equality, of all sorts, seems to go hand in hand with development – not only is it important to consider a policy’s implication on the societal fabric, but also the challenges of an initially flawed fabric.
Toggle Commented Sep 26, 2013 on Growth Strategies - Econ 280 at Jolly Green General
Krugman makes clear that Development Economic theory has suffered a validity crisis – the discipline’s implicit reliance on the economies of scale assumption prohibits adequate quantitative models. Academic economics has shifted to focus (almost entirely) on technical rigor. Meaning the introduction of a solid quantitative model is the only way to turn a theoretical story into a respectable mainstream academic topic of discussion. Only then, it seems, a theory will be considered for policy implication and implementation. The piece ends on a rather pessimistic note – “there’s not much that can be done about the kind of apparent intellectual waste that took place during the fall and rise of development economics. A temporary evolution of ignorance may be the price of progress, and inevitable part of what happens when we try to make sense of the world’s complexity.” Is Krugman suggesting that we have, in fact, taken off the blinders? Bradford Delong in his piece, “Economics in Crisis,” seems to disagree – with economists’ ineptitude at figuring out the global financial crisis as his primary evidence, Delong argues that macroeconomic models are simply not up to the job and are still in dire need of revolution. He claims economists’ assumptions are too broad and the intensive mathematic models are too distracting. As social scientists, economists are ignoring vital political, social, and psychological components of their field. On another note, I had several questions as I read Krugman’s recount of the history of the discipline: during all this academic theoretical debate, what’s going on in the real world? How are underdeveloped nations progressing? What policies are being applied? What’s the role of the state?
As others have discussed, the poor’s lifestyle and economic choices are as complex as they are diverse. Though choices may be driven by social norms or desires, decisions are “constrained by… market environment” (13). Without viable formal credit facilities individuals are unable save or borrow. Expansion of instinctive entrepreneurship into a financially sustainable and scalable enterprise is nearly impossible. In nations where political and legal systems are rudimentary (or corrupt), it would be naïve to assume that access to modern sophisticated financial institutions could possibly be solution. Yet, Banerjee and Duflo mention the success of micro-credit facilities as a “disciplined way to save” (15). The poor are willing and able to make smart decisions with their limited capital – but our Western institutions and social infrastructure cannot simply be transplanted, they must be must be tailored to the local landscape. Micro-credit offers a potential pathway to efficiency and stability on an individual level, but a huge amount of responsibility will inevitably fall on the national government’s plate. Healthcare and education stand out as the most basic social services to which the poor lack availability, access, and quality. Without any form of social safety net, many are unable and unwilling to take any form of risk (financial, educational, medical), as the consequences could be dire. Considering the public sector’s responsibility leads us to the duality of Eastern and Western development – is a healthy and educated workforce the pathway to GDP growth, or is GDP growth required to medicate and educate the workforce?
Toggle Commented Sep 12, 2013 on Economic Lives of the Poor at Jolly Green General
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