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John Quiggin’s article, “This world is enough,” and the World Bank’s climate report, “Turn Down the Heat,” both make alarming observations and provide innovative solutions in regard to the climate problem. After reading both pieces, it is more clear than ever that research shows that conditions of poverty and environmental well-being are inextricably linked. The World Bank report states that the consequences of global warming as far as development goes would include declines in crop yields, diminishing water resources, the spread of diseases, and sea levels rising, which will lead toward more damaging floods and hurricanes among coastal populations. Ultimately, it seems like the consequences of climate change will end up making the already difficult task of development even more difficult. We discussed an example of how pursuing environmentally harmful practices not only hurts the environment, but also has massive negative impacts on the economy, in class on Tuesday concerning New Delhi’s air pollution problem. On certain days, New Delhi’s air quality reached such dangerous levels that schools and a large amount of economic activity has to be shut down, and the government ends up incurring a significant cost by issuing out face masks to its people to protect them from breathing in the polluted air. Not to mention, the actual health cost incurred over time from breathing in the polluted air add up overtime. Quiggin’s article provides an interesting contrast to some of the ideas mentioned in Solow’s speech that we read for Tuesday’s class. Solow mentions a trade-off between taking actions that will help future generations and taking actions to help the poor in today’s world immediately. However, Quiggin believes that we can avoid having to face a trade-off primarily through the advancement of technology. Quiggin sheds light on just how feasible sustainability can actually be. The fact that we have the technology to transition aspects of our society such as driving and energy uses toward more sustainable manners is half of the battle. The other half, Quiggin mentions, deals with our beliefs, values, and social institutions. Reading this article makes me wonder why there is such controversy surrounding climate change. If there is an option that allows everyone to benefit in the long run, then why would we not pursue it?
Toggle Commented Dec 3, 2019 on Last Blog Post for the Year at Jolly Green General
In the paper “Do Conditional Cash Transfers Improve Economic Outcomes in the Next Generation? Evidence From Mexico,” Susan W. Parker and Tom Vogl attempted to measure the effects of childhood exposure to the Mexican conditional cash transfer program, Progresa. They determined that exposure to Progresa did, in fact, improve educational attainment, geographic mobility, labor market outcomes, and household economic outcomes in early adulthood. An interesting point that the study addressed was the relevance of both internal and international migration. In an effort to produce unbiased estimates of the program’s effects, the study did its best to mitigate the effects of endogenous internal migration. The study accomplished this by including questions on the individual’s municipality of residence and original state of birth to try and “return” migrants to where they were originally when they became involved with Progresa. The possibility of international migration seemed more complicated to account for. There may be a significant difference between individuals who were exposed to Progresa and decided to emigrate from Mexico and those who decided to stay, which could have skewed the results. In order to account for international migration, the study tracked the cohort size and noticed some changes (the study also included census questions on international migration). The results lean toward the conclusion that Progresa recipients tended to stay in the areas where the program was offered because those areas might seem more appealing to raise a family. I thought that migration was an interesting factor to consider given our discussion in class about the underlying assumption in comparative advantage trade theory and how reducing controls over the flow of human capital within and between countries would be beneficial to countries’ economies.
Toggle Commented Nov 19, 2019 on Next Week at Jolly Green General
Barry Eicengreen and Ashoka Mody’s article, “Interest Rates in the North and Capital Flows to the South: Is There a Missing Link,” investigates the relationship between global credit conditions and the market for developing country debt. One point that stuck out to me was that structural reform in the borrowing countries is often times a necessary component to the rise or fall of foreign lending. The question, however, is if interest rates in the lending countries matter more. Later, the article mentions that recent econometric studies contradict qualitative accounts attributing importance to industrial/lending-country interest rates. I’m not sure how to interpret these models and what they mean exactly, but it seems like there is some discontinuity between theory and practice. Additionally, I thought that the parallel between the circumstances of lending in the 1970s and lending in the 1920s was interesting and supports a point that we’ve made in class before, which is that oftentimes, not enough weight is given to the history of economics and its tendency for trends to repeat themselves. In the 1920s, the Fed kept interest rates low to encourage American investors to invest abroad and help revitalize decimated European institutions after WWI. Then, the Fed sold government securities which decreased the money supply and decreased U.S. foreign lending. Similarly, in the 1970s, there were low real returns on investment at home, so investing abroad was the more appealing option. Then, there was less of an incentive for foreign lending once real interest rates rose. I would be curious to learn more about these trends and see how they relate to the financial crisis of 2008 and investment abroad.
Toggle Commented Nov 13, 2019 on For Thursday's Discussion at Jolly Green General
In continuing with the theme of human capital, both Sachs and Mulaney’s article, “The Economic and Social Burden of Malaria” and Baranov and Kohler’s article, “The Impact of AIDS Treatment on Savings and Human Capital Investment in Malawi” stress the linkage between human capital investment and economic development. Diseases such as Malaria and HIV/AIDS impede on economic growth by limiting human capital investment whether that be through missing school believing that your life expectancy is short. Sub-Saharan Africa seems to be hit the hardest by these diseases, and the region has suffered the consequences. I thought it was interesting how the Malawi study examined the subjective expectations on life expectancy, as those are the true determinants of decision making. If you expect to live longer, then you will invest more in your education because you will expect higher returns in the future. If you live in an environment where it is common to die at a young age, you might not have as much incentive to save your money or invest in your education. Another element that stuck out to me was that foreign aid needs to not only be targeted at vaccines and medical treatments, but also in infrastructure and communication outlets. As observed in the Malawi study, transportation costs were one of the main reasons why patients failed to follow up on appointments. Even though ART was “free,” you still had to pay for it through finding transportation to the building where the treatment was being offered which was a struggle for many rural patients. Additionally, because of the heavy stigma surrounding HIV/AIDS, information about these clinics might not have spread as efficiently or might not have reached as many people as it potentially could have. Other methods of communication besides word-of-mouth could be useful in reaching more people and in helping to maintain the patient’s privacy.
Toggle Commented Nov 6, 2019 on 3 readings for next week at Jolly Green General
Theodore Schultz’s Nobel Lecture “The Economics of Being Poor” took a very Senian approach to development that relates well to what we have covered in this course so far. Specifically, Schultz emphasizes the importance of the quality of human agents. The mention of “agency” reminded me of Sen’s distinction of the well-being of women in poverty into two categories: agency and treatment. Even though Sen was talking about women in this scenario, I believe that the agency argument can be applied to poor farmers (including the vast amount of whom are women). Increased agency through political participation, labor market participation, and education, has the potential to improve the treatment of the poor involved in agriculture by working to overcome the “urban bias.” I thought it was very interesting how Schultz framed farmers’ struggles through a lens focused on the distorted incentives that farmers face. Schultz notes how farmers haven’t made the necessary technological investments either due to a lack of information or a lack of incentives. Oftentimes, governments keep the price of produce artificially low to satisfy the urban population who values cheap produce and supposedly contributes more to the growth of a nation. Through more agency, poor farmers would be able to lobby more effectively for fair prices that justify the work that they are contributing, therefore improving the treatment of poor farmers. The point of agency and treatment inherently ties in well with Schultz’s main argument, which is that “the decisive factors of production in improving the welfare of poor people are not space, energy, and cropland; the decisive factor is the improvement in population quality.” At first I was confused by this seemingly contradictory argument. I thought that it just fed into the "urban bias" even more. It started to make sense as he went on, though, and I began to see that as the returns of quality (returns to education, healthcare, etc.) increase and eventually begin to exceed the costs of quality, quality will be demanded more than quantity. This substitution for quality over quantity will ultimately help poor farmers by increasing their agency to lobby for fair prices which will then enable them to invest in better technology/farming methods. Overall, Schultz makes an intriguing argument which makes me wonder why more development projects aren't geared toward this way of thinking.
Toggle Commented Oct 30, 2019 on Blog Post for Next Thursday at Jolly Green General
Esther Duflo’s article “Women Empowerment and Economic Development” has many parallels with our discussion of Chapter 8 in Amartya Sen’s Development as Freedom. She mentions that empowerment (in the forms of increased healthcare, education, economic involvement, rights, and political participation) can accelerate development. This relates to our discussion of how the agency of women can help to facilitate better treatment of women. However, both scenarios face the “chicken or the egg” dilemma. There is uncertainty over which one comes first–– empowerment of women or development, or, for Sen––improved agency or treatment of women. The article also related to our discussion in class on Tuesday through making the point several times that although there is an additional strong “business case” for women empowerment, gender equality is a goal in and of itself that policymakers should be striving for. One point that really stuck out to me was that although it might come at the expense of men in the short run, having more women in positions of power has the potential to make everyone better off in the long run. Higher female participation in positions of power will change the way societies will deal with problems and raise the quality of global decision-making. This point reminded me of a piece I read by J. Ann Tickner arguing for a more feminist approach to global politics. Tickner points out that because historically, the field of politics has been male-created and male-dominated, words used within and to describe politics have developed to have a masculine connotation, such as “objectivity” and “power.” However, this is only a partial understanding of politics. Tickner argues that a feminist perspective on international relations is more suited to today’s climate, where national interest demands cooperative rather than zero-sum solutions to global problems which include, nuclear war, economic well-being, and environmental degradation. I thought this point tied in well with the study conducted in West Bengal that observed that women had different concerns than men, which were more focused around improving accessibility to drinking water and quality of roads, and less about education and irrigation. In short, different people have different perspectives, and it is in no one’s best interest to only be hearing 50% of the population’s perspectives. Duflo’s article also relates very well to a short book I read over the summer called Wolfpack by Abby Wambach. In her book, Wambach recounts a TED Talk about wolves in Yellowstone National Park. Wolves were removed from Yellowstone, and as a consequence, the deer population skyrocketed and ate all of the vegetation, which harmed the ecosystem. Naturalists reintroduced wolves to the park and found that the predators helped regenerate the park’s plant and animal ecosystems. Abby makes the parallel between women and wolves, writing, “The wolves — who were feared by many to be a threat to the system — became the system’s salvation. Women — who are feared by many to be a threat to our system — will become our society’s salvation.” It is interesting how the idea of women’s empowerment plays in so well to the advancement of development economics, as well. There is a balance to everything, and gender equality is crucial to finding the balance for the most effective development policies.
I thought that Rodrik’s “Growth Strategies” article did a good job of clearly conveying that there is no one set of growth policies that will automatically work for every state due to the reality that the success of policies and institutions is context specific. Instead, Rodrik sets out to focus less on the specifics, and more on the more generalized, “higher-order” economic principles, which include market-oriented incentives, property rights, and macroeconomic stability. From my understanding, these higher-order economic principles are ideally the goals that policies wish to achieve. The example of China’s unique method of growing their economy was particularly interesting to me because what Rodrik had to say tied in very well with what we are currently discussing in my Global Politics class. We recently watched a video of scholars debating if they thought that China’s economic model could be replicated and applied to other countries to help their economies grow. Rodrik would say no, because different countries have different underlying political, historical, and cultural conditions, which means that differing countries should take unique approaches to economic growth that best suit their initial conditions. In the politics class, we also talked about how it is not always the best idea to implement “democracies” on developing nations because depending on ethnic divides within a country, a minority group could easily be overpowered by the majority which would consequently lead to further oppression and political instability. This reminded me of Rodrik’s argument that implementing Washington Consensus reforms might not be the best course of action for a country with complex political and cultural institutions already in place. Examples of the consequences of this “west-is-best” approach can be seen across the globe, particularly in Latin America. Rodrik mentions that despite the fact that Latin American countries did more liberalization, deregulation, and privatization in the course of a few years than East Asian countries have done in four decades, their growth has been much slower. Additionally, despite widespread attempts to spread democracy in the region, there are still large amounts of social inequality, corruption, and low levels of political participation, whereas much more stable political systems are seen in certain East Asian countries that do not fit the democratic mold. In conclusion, it is not always necessary to replicate western political/economic systems. In fact, as shown by China, for example, it is often more beneficial to work with the existing political, historical, and cultural systems to accomplish the broader goals of market-oriented incentives, property rights, macroeconomic stability, an overall higher levels of living.
Toggle Commented Oct 2, 2019 on Rodrik article for Thursday at Jolly Green General
Throughout his analysis of the “strange history” and methodology behind high development theory, Krugman effectively demonstrates the functionality of models by actually incorporating various clever metaphors/models into his argument. Krugman supports the idea that even though models are limited, they still help explain how systems around us behave in a way that is easier to understand. As long as one acknowledges that the scope of the model is limited, one is ultimately better off with the insight that models provide than not bothering to give thought to a model in the first place. Krugman’s first metaphor/model was his comparison of Hirschman to a “tragic hero,” which helped me to better understand Hirschman’s role in development economics. In trying to do what he thought was best (abandoning models and the technical side of economics), he limited the reach and perhaps the legitimacy of his findings. The critical assumption of economies of scale that high development theory depended on had never been modeled, so Hirschman decided to ignore models all together. Another model/metaphor that Krugman used was the comparison between the African mapping dilemma and the loss of information in the field of economics in what he referred to as “the evolution of ignorance.” I found this topic very interesting because in both scenarios, improved technique led to a loss in knowledge for a while. The “dark regions” that could not be explained in technical terms were discredited, even though they weren’t necessarily incorrect. Krugman later uses the metaphor of the Norwegian cloud “folklore” to model the reemergence of high development theory in the economic world. Both concepts were discredited because they could not be proved, but later were found to fit with the technical models. High development theory’s popularity essentially came full circle. Lastly, Krugman refers to Rosenstein Rodan’s Big Push story as “the essential high development model.” Rosenstein Rodan simplifies the economic model by creating a set of assumptions for resources, technology, demand, and market structure. Obviously labor isn’t the only resource in an economy, however by simplifying the system in this manner, one is able to understand its impacts in a “traditional” sector along with a “modern sector.” Ultimately, Krugman’s “The Fall and Rise of Development Economics” makes the important point that even though models leave out certain variables, models stick overtime and help us to understand a complex system. By using various “models/metaphors” throughout his article, Krugman inherently strengthens his claim.
Toggle Commented Sep 25, 2019 on Reading for next Thursday at Jolly Green General
Wang, Wong, and Yip’s study aims to answer the question of why some nations develop faster/more successfully than others. Their study concludes that institutional barriers, such as government misallocation and corruption, for example, contribute immensely to widening income disparities in certain countries. One theme that stuck out to me was how certain countries’ economic conditions seemed to be either helped or hindered by foreign influence throughout history. In cases when countries’ economies were helped, foreign powers helped to increase business infrastructure, which in turn gave way to those countries embracing export-led open policies. For example, a portion of Hong Kong’s immense economic success was thought to be attributed to the U.S. building production lines to produce American supplies during the Korean War. It is easy to see how Hong Kong’s garment and textile industries must have benefitted from the introduction of these mass production facilities. Additionally, Japanese rule in Taiwan before and during WWII was responsible for enhancing infrastructure, such as transportation systems, and making primary education a requirement. It appears that these improvements to Taiwanese society probably contributed to giving the people the capital resources to build an industrialized and technology oriented economy. In cases where countries’ economic conditions were hindered, colonization appears to be at fault. For example the study mentioned that African countries such as Comoros, Ghana, Uganda, and Kenya did not gain independence until around the 1960s-70s, which is relatively recent. Whether it is a correlation or causation, these countries’ economies have also suffered due to a dependence on agriculture, lack of export diversification, and corruption. To what extent is the fact that these countries have recently become independent related to the fact that their economies’ are “trapped” in a dismal state or “lagging” behind other economies? Could African colonization be considered an institutional barrier that hindered the process of these countries’ structural transformations? If so, how could foreign countries intervene in a more beneficial manner like what was seen in Asia?
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Sep 11, 2019