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I read this piece in development economics and was profoundly affected by it. It’s part of why I lobbied so hard to get into environmental economics. When I read it in December, I was struck by the plight of the impoverished in the case of climate change and decided this was something I cared about deeply. It’s unfair for our developed country to carry on with our current practices at a disproportionate disadvantage to underdeveloped ones; additionally, it is worth noting that even those who are currently labeled as developed can be pushed into poverty through the extreme climate shocks set to follow a 4-degree increase. That I could understand pretty well without knowing as much about approaches to climate change policy. But reading this piece with a better understanding of the market-based approaches that can theoretically change this trajectory of anthropogenic global warming has opened my eyes further. Before, I was impassioned. Now, I am more focused. This is a problem that strikes a chord with people when they think about hungry kids and poor parents. At times, the incredible volume of global poverty paints it as an issue too big to tackle. But slowing carbon emissions will slow global temperate increase – and consequently slow the disproportionate burden shifting to the world’s impoverished. I can now read this with a better sense of solutions. The next step, then, is to implement them through petition to government. I would have our country’s leaders know that green growth is not inhibitory. Reducing emissions does not have to come at a cost for business. After reading Tuesday’s papers, reducing carbon emissions can accomplish conservative goals not typically highlighted. Following the theme of this course – If we know we can use a market-based approach to reducing carbon emissions, why wouldn’t we?
Toggle Commented Mar 28, 2017 on ECON 255 for Thursday at Jolly Green General
The Lawrence Summers quotation that opens the Aldy paper on a tax-based approach to climate change illustrates an important point: The U.S. cannot be a climate change leader so long as it is a free-rider in the eyes of developing countries. The Kyoto Protocol and other handshake agreements are not as effective as they could be, especially when one of the largest carbon-emitting countries does not partake. A tax, then, makes the most sense. The issue for me lies in the disproportional burden put on lower-income homes with certain policies aimed at reducing carbon emissions discussed in this week’s papers. Aldy writes that using lifetime income measures instead of static ones suggests that this imbalance is less dramatic than it might seem. But most important, tax systems can reallocate incomes from the fees in order to focus on low-income groups. Cap-and-trade systems can’t do the same. Cost-effectiveness of the tax might be reduced by reallocating tax revenues to industry rather than using them to provide tax cuts, though. Viewed through the lens of development, these tax cuts are quite important. According to Murray, the tax cuts include business tax cuts, personal income tax cuts targeted at lower-income groups, low-income tax credits and direct grants to rural households. These development-focused tax cuts associated are a better alternative than cap-and-trade policy because they take into account the higher proportion of household income spent on energy in lower-income classes. They should, hypothetically, allow for a reduction of carbon emissions through higher energy prices while simultaneously cushioning the price change for those who will feel it most. Carl and Fedor’s work shows that this aforementioned British Columbia tax is not particularly representative of the way carbon taxes recycle revenues. According to their paper, the BC tax is the only one that recycles all revenues in the form of tax cuts. This leads me to think that this is the best case scenario for reducing disproportionate burdens on the poor. It might not make perfect sense economically, but when only taking into account the underdeveloped sectors of society, this is the best they can get out of the deal. This is better than cap-and-trade because taxes represent the largest overall portion of incomes going to low-income groups.
Toggle Commented Mar 21, 2017 on Econ 255 readings - update at Jolly Green General
Twenty years, Schrag writes, is too short of a time scale to determine the comparative effects of greenhouse gases. But it seems a great deal can be accomplished on Capitol Hill in twenty years – even in twenty days. Is it necessary to take the half-century to determine if shale is better than coal when we already know, with a good deal of certainty, that coal is bad? Policy is already stagnant - I wonder how long we have to wait to make moves. The answer seems to be that we aren’t really sure – or the classic two-word answer, it depends. Schrag never really answers his title question, but he makes a good case for forging onward regardless of the answer. With such little traction in policy change, we ought to focus on what we do know – coal is not good for climate change, regardless of whether shale gas is. Tuesday's paper is interesting to consider in conjunction with Mason’s Economics of Shale Gas Development. The paper seems to be characterized by “it depends” issues. Prices have decreased for residential and commercial consumers, but national reliance on gas has increased. The information suggests air pollution and greenhouse gas emissions are better off, but water sources and aquatic ecosystems are under pressure. Revenue flows from boomtowns might be beneficial, but it depends on how they’re used. I understand the requisite uncertainty of Mason’s paper as a forerunner in the calculation of externalities, but I wish the authors would tease out some aspects to take more of a stand. The scope of economic benefits is large, the authors write, but there is not enough information about negative externalities. I wonder if they could take a cue from Schrag and march forward as he proposes is the proper thing to do with policymaking.
In reading “Back to the Future,” it is interesting to consider our treatment of the planet as a geological experiment, but that’s just what it is. I think to myself that this is life – there is no second chance and we’re nearing the time in human history when we get no more chances at trying another control in the experiment. But what troubled me most from this piece is not that we are treating our earth as a science experiment without knowledge of what might come, but rather the knowledge that we’re missing something in this experiment. As Schrag said, there are still not palm trees in Wyoming. So what are we missing? Are we forgetting one important factor that could be the difference between life and death for the human race? This is clearly a bit hyperbolic at this point, but as a Floridian, I worry my state might be focusing too much on adaptation that mitigation. It’s as if we’re modeling a market with asymmetric information – a negative externality that will leave the burden of cost on someone. Who will bear it? And how will the externality be internalized? “The Power Problem” might suggest that nuclear power could be the answer. But when it comes to nuclear power, it’s as if we have all of the variables listed. Accidents, waste storage, terrorism – all the things that can go wrong come to the forefront. It’s interesting to compare the lack of variables in general climate change that Schrag laments with the apparent litany of reasons we can’t steer away from carbon-laden power sources. The “Stabilization Wedges” paper presents a more holistic picture, but even the solutions it suggests are “not exhaustive” and rely on dramatic scaling up. The gist of these papers appears to be suggestive of fixes to the problems, but almost fatalistic in the proposition of achieving the goals to reduce carbon emissions and climate change over the next few decades. There are things we can do, but a great deal of the damage is done.
Toggle Commented Mar 7, 2017 on Econ 255 for next week at Jolly Green General
This paper poses an interesting question in determining the public health damages and the burdens in Appalachia associated with coal mining. The astounding 81% share coal takes of CO2 emissions is of paramount importance, but the value of a human life is arguably of more importance (at least in the short term). I took part in an in-depth reporting project examining government and company-funded benefits for former coal miners suffering from black lung. As part of the project, I traveled to West Virginia to interview former miners and attempt to better understand their struggles. I was taken aback by the effort they had to exert to simply get through half a sentence. Coal mining quite literally took the breath out of many of the men. I learned a great deal about coal mining processes and the corporate scheme that keeps the miners from getting any money for treatment. But the most interesting part of the interview was when we asked the miners if they would tell their own sons not to go into the mines. Each and every one said they not only approved of their sons’ decisions to follow them in mining, but encouraged it. The issue is one of changing a culture, much like many issues economists face in creating policy to improve the environment. Perhaps this change has to come from the top. It is unrealistic in this moment to call for an end to coal as an electricity source. But if companies such as Westmoreland and Murray were encouraged by subsidies to phase out human labor in mines, fewer miners would die in accidents or as a result of pneumoconiosis. Subsidizing costs for technology and innovation would decrease loss of human life and the quantity of people employed in mines.
Nature based tourism is defined in the paper as, “relatively un-impacted facets of the natural environment and its resources including wildlife, topography, scenery and special features,” and eco-tourism is defined as a more sustainable means of, “responsible travel to natural areas that conserves the environment and improves the well-being of the local people.” I wonder if the use of eco-tourism is, in fact, a good of the commons without impact on the environment, as defined above. If Kansans travel to the West Indies to snorkel and vacation, they gain the experiential benefit of that trip. The islands enjoy the influx of money spent on meals, lodging and activities. But the Kansans go home, and the islanders bear the brunt of a dwindling island environments. It seems that, in this case, the benefit is shared by all but the cost is born by only the host. As the numbers of natives and tourists increase, mangrove forests, seagrass beds and coral reefs are threatened. Visitors need hotels to stay in and restaurants to eat in. Development and urbanization (“host stressors,” as this paper calls them) along coasts seem to be inevitable at this point as island nations rely heavily on tourism to bolster their national economies. But the paper begets a question: will the Kansans do their part to aid in conservation efforts, or will they simply travel to the Maldives next summer? The people-oriented conservation goals seem to hold that a compromise is in order – not everyone can win. Marine protected areas aim to achieve enhancement of tourism and recreational opportunities, conservation of critical ecosystems and sustainable and equitable use of coastal resources. But it can be hard to see long-term in these scenarios. When faced with giving up his snorkeling business and possibly placing his child in abject poverty in order to protect the reef near his home, I wonder what the Tobagonian man might choose. And the Midwestern visitors – how will they fit into the framework of conservation on an island which they’ve visited maybe once? Furthermore, the paper holds that both the Tobagonian man and the Kansas family might not even understand the impact the BRMP has on business or tourism – how, then, can they make conscious moves toward conservation? Regardless of how ambitious it might be, intersectoral, intergovernmental, spatial and international efforts must come to fruition – and perhaps all together – in order to approach conservation from a holistic perspective. Most importantly, these must be international initiatives aimed at engaging both tourists and locals in conversation.
There is an inherent irony in that only those who have had the pleasure of diving in Barbados truly understand the value of the experience. I worry that there is no solution to a valuation problem such as this one that does not have sufficient existence value. I have never been to Barbados, so attributing any value to an experience I’ve never had is difficult. But there is one natural environment I’ve witnessed change dramatically since I was young. When I go to the beach on Florida’s Panhandle, I am always taken aback by the diminishing number of dunes, the far less common turtle nesting areas and the sheer volume of new construction on what my own father remembers as barren but beautiful beaches that hosted few men and immeasurable natural resources. Now, the overdevelopment of Highway 30A has led what were once plentiful and untouched natural lands down a path of destruction. I lament this each time I visit – yet I visit anyway. I would love to know how native Floridians would react to a choice experiment like this one in Barbados. Perhaps factors such as sea turtle sightings, diver crowding and coral cover could be substituted by aforementioned dunes and nests and other highlights of the Panhandle beaches such as deep-sea fishing or blue heron sightings to be “more North Florida.” I imagine the old-Florida would step up, paying what we deem reasonable or engaging in subsidy programs. I would venture to say beachgoers would be willing to attribute value to the white sand beaches I grew up on. But until everyone understands the marginal value of these non-use turtle nests or dunes, there can be no real progress toward sustainable conservation without docking one of the largest sources of income in my state – tourism. The time discrepancy between what we use now and what we could benefit from in the future is skewed against the natural resources we ought to protect. We can understand a tangible experience – SCUBA diving in Barbados – now, but we cannot understand the value added to the system in the future if we conserve now.
I have chosen to focus on Hardin's piece. The house I share with six friends attempts to recycle. At the beginning of the year, we had three bins outside of our home for plastic, glass and cans, respectively. As time wore on, the bins became full with the containers, but also with rainwater, critters and dirt from our driveway. We waited too long to take them to the nearby recycling center. By midterms, they were overflowing, full to the brim with much more than plastic, glass and cans. Not one of the seven of us were willing to put the soiled bins in our trunks to take to the center down the road. We each admitted slowly to giving up on recycling. The simple task of taking the bins to the recycling center before they got too full was too much for us to handle, and the bins ended up in the back of a garbage truck and, presumably, at a landfill. The recognized cost we each incurred by allowing these recyclable goods to go into a landfill was not as high as the cost we perceived in taking the time to travel up the road to the recycling center. This serves as a handy example of population’s role in pollution of the commons. Had it been just me, I would probably have taken the recycling before it got too full. But when I felt every housemate had contributed, I lost all sense of accountability. The same, unfortunately, goes for hair in the shower drain and dishes in the sink. As the number of those contributing increases, the sense of responsibility decreases. If, as Hardin writes, the morality of an act is a function of the state of the system at the time it is performed, the system in which my home functions is in disarray. We lack the moral responsibility to simply take the recycling because the marginal cost of doing so is larger than the social benefit. But, just as it would be inappropriate and morally unsuitable to tell my roommates they must move out one by one until our system is properly functioning, it would be inappropriate to tell the world’s population how many children a family can have. This would be a technical solution, but it is simply not feasible. Is reproduction safe as a laissez-faire phenomenon? The hypothetical market, if you will, for population will not clear itself. Those populations that grow exponentially are typically those who are, as Hardin puts it, the most miserable. “A technical solution may be defined as one that requires a change only in the techniques of the natural sciences, demanding little or nothing in the way of change in human values or ideas of morality,” Hardin writes. Is there such thing as a technical solution in economics anymore? Have we moved so far into integrated studies that in order to fix one problem we must first address it within ourselves? We’ve mastered the models that come to equilibrium, but rarely do they fit in with reality. But this recognition that humanity must change to accommodate modern economic improvements cannot keep us from refusing to play the game. Walking away provides no fix for posterity, nor does it for our own generation.
Just as in countless other disciplines, economics is often focused on the problem of good intentions paired with ignorance, interests and ideology. Krugman’s account of pollution tax in place if income or employment taxes is an interesting one that highlights the importance tempering good intentions with both personal and market failures. Of particular interest to me is information imperfections. I contend that in oil markets especially, those who have the most information are those who can benefit the most from the market's movements. Could there be negative externalities that are more than pollution, but rather inequality of market knowledge? This past summer, I had the unique opportunity to intern at Bloomberg News as a writer for the oil team. From the first day, the writers imbibed in me the importance of knowing just how the crude oil makes its way from the ground to the pump. I was covering markets, but knowing what made the oil valuable – or not valuable – was paramount to understanding why people traded it. Toward the end of my time at Bloomberg, I had gained enough insight to write a story about a strange exchange traded fund called UWTI. The fund was wild – up and down each day and boasting three-times the exposure of trading regular WTI futures. In late November, the ETF was delisted and many experts cited its unpredictability. While I was at Bloomberg, I learned that the very unpredictability that drew some daring investors was tamed only by traders. Oil traders – those who made their lives of trading futures – were the only investors with requisite knowledge to benefit from trading UWTI. The imperfect information – and the interests of oil traders – made the fund flawed. This drives me to wonder if market failures are at play in the oil futures market, just as they are in other environmental sectors. Does oil in the ground start as a market nearing failure and move all the way to an ETF traded with triple leverage in a city far from any oil wells or refineries? Perhaps UWTI’s delisting is a sign that the market cannot solve its problems. Those who harbor the most information are armed with it when they hit the trading floor, and maybe even before the crude product becomes gasoline, naphtha or diesel fuel.
The first sentence of the foreword of this paper reads as follows: “It is my hope that this report shocks us into action.” Yet again, I am met with a theme in this course that will not soon leave my consciousness. We can speak ad nauseam of this world’s injustices with clinical efficiency, but until those who hear us are jarred by statistics that are personal, they will feel no call to action. Until it was made clear to me that my own home could be gone in a few decades, I cared little for the issue of anthropogenic climate change. Perhaps it is our innate selfishness that requires such a personal affront to engender change. Or perhaps we don’t see problems until they smack us into reality. A global mean temperature increase does not just mean fewer snow days for my grandchildren or a larger summer wardrobe. The difference in a world we could see at 4 degrees Celsius warmer is close to that that marks present time from the last ice age. To think of surviving in the ice age is nearly impossible, but to think of it in reverse is terrifying. The ice age affected the less populous arctic parts of the world disproportionately. But the 4 degrees Celsius world will affect the most populous parts more, leaving the already underdeveloped tropics and northern Africa more susceptible than anyone to devastating climate change that will rob from them their economies and their homes. The poor will suffer the most. They will lose their livelihood and even their lives. I understand the reasoning and the science behind the skew toward the poor from previous classwork and reading. But what struck me most in this paper was the following example. Just the heatwave that struck Russia in 2010 led to 55,000 deaths, 25 percent crop failure and one million hectares burned. The economic loss was a staggering $15 billion, one percent of the country’s GDP. And this devastation was in a developed country with better market access and technology. It’s not too difficult to imagine the magnitude of such a change in country with GDP per capita under one hundred dollars. In Burundi or South Sudan – two countries who would feel the immeasurable effects of global climate change – a one percent decrease in GDP would mean a per capita decrease of what could be several days of work from what was only a heatwave. The magnitude of climate change in a 4 degrees Celsius world is by far more unsettling. The paper holds that this type of fatal heatwave would be a casual summer. The coolest months of the year would be warmer than the warmest are now. I can feel with my body the warm days and try my best to imagine what a bitter February at 95 degrees might be. And I can understand what useless loss of life would occur due just to a warming world. But to understand how that increase in warmth could change the world’s economy is staggering. Even developed countries would lose crops and entire markets. The young of the tropics who could live through a heatwave would be left to create an economy in a world bereft of any sustainable agriculture or ecotourism. The burden falls on this generation. I am young, but I do not wish for my great grandchildren a world free from the opportunities I enjoy today. To steal from them their world’s livelihood is both unfair and criminal. Policy can be the change, though. The World Bank is right – early, cooperative, international actions can make change happen.
Free trade is good. “Freer trade provides greater incentives for investment, the benefits of scale and competition, limitation on rent-seeking activities favored by trade restrictions and openness to new ideas and innovations,” the authors assert. But free trade might not be for everyone. “Trade entails a reallocation of resources away from less productive activities to more productive ones,” Haltiwanger, McMillan and Verduzco conclude. “There are too many barriers to entry and exit for firms, and too many barriers to labor mobility for workers,” the authors write. The surplus of labors, who are presumably living in poverty, must move from the contracting sector to the expanding one. But how can an impoverished worker take advantage of the increasing capital and technology in a new market when he hardly has such for his own contracting business? But among those countries who need widespread poverty reduction, few maintain such infrastructure. The transportation, communication, financial markets and monetary and fiscal policy required for such an environment are all too often incapable or missing altogether. I wonder, then, if the goal should first be infrastructure and then open trade. Without deep financial sectors, high education levels and strong institutions, according to the authors, developing countries cannot take advantage of freer trade as a means of poverty reduction. Instead of looking to open borders immediately, perhaps we should look instead at the policy that ought to go along with trade improvements. Newfarmer and Sztajerowska assert that trade benefits are not automatic, but rather take time and take concurrent policy change in order to become effective. With policy aimed at macroeconomic stability and favorable investment circumstances, developing countries can more effectively use freer trade as a way to bring their people out of poverty. Freer trade and boundary openness often occur simultaneously with other development goals, so it might be impossible to know if free trade is actually the aspect that relates directly to reduced poverty or if it is simply happening with another factor. The benefits of freer trade are, as the authors put it, ambiguous. This brings to mind the work of Esther Duflo in wondering if foreign aid really helps the poor of the world. We don’t know for sure, but we know something is happening and we can’t afford to stop making that thing happen.
Toggle Commented Nov 30, 2016 on Reading for Thursday at Jolly Green General
In reading “Latest Findings from Randomized Evaluations of Microfinance,” I was particularly struck by what the authors refer to as the “missing middle.” The firms that are stuck in the no man’s land between microcredit and mainstream credit are left without many options to further their capital through financing. A small enterprise without much collateral but with the entrepreneurial spirit and some documented success could very well be stuck in the middle – just as the lower middle class trap can suck in a family with enough to get by but not enough to move up in the socioeconomic ladder. There is a discernable lack in the middle when considering financiers – the small, yet formal firms that provide the reliability and structure of a mainstream bank but eschew the hoops through which one would have to jump are nonexistent in developing countries with a great deal of businesses in the aforementioned middle rung. So I wonder – can high potential be a form of collateral? In a developing economy, little is guaranteed. But if there were means of proving potential as a promissory form of security and deposit, would there come to fruition a middle ground bank that would provide for loans to grow capital without the requisite to-do list required by formal and mainstream banks? Could venture capital be exported to developing economies? The paper would argue against the notion. But what if the ideas, skills and trustworthiness could be insured? This is where Khwaja’s computerized psychographic test becomes prevalent. A test that could meet or exceed the predictive abilities of the tried and true credit scoring model could allow for ideas, skills and trustworthiness to serve as more than just characteristics. They could be collateral of sorts. The inherent issues lie in the lack of consequence should the borrower default. Could this newly formed middle ground, formal bank remove a borrower’s trustworthiness if he defaulted? There is no real significance should the worst case come to be. If the system is not based on credit score, a docked rating might not matter for future business endeavors. So, then, what becomes of a firm who is duped repeatedly by borrowers who seem reliable on paper but never repay a loan? The system is flawed, and it will continue to be so until a system can be put into place that provides financing for those with entrepreneurial promise and consequence for those who default.
Toggle Commented Nov 14, 2016 on Readings for this week at Jolly Green General
“The Economic and Social Burden of Malaria” and “The Economics of Being Poor” inspired me to ask a question I’ve long wanted an answer to: what is the government doing? The question is too broad and the answer is never satisfying, regardless of where your political tendencies lie. But, as a young woman dedicated to the ideals of a government by the people and, most importantly, for the people, I wonder what can be done. In sub-Saharan Africa, much of the blood used for transfusions to treat children suffering from malaria is infected with HIV. Perhaps it is my first-world blindness, but this seems incomprehensible. Treating a child with a terrible illness, only to give him one with a near certain death sentence? How can this be? And, more importantly, what can be done to stop it? I wonder if there is a means by which the government (in the normative sense, without the corruption that plagues sub-Saharan Africa just as the mosquitoes do) can step in. It seems simple infrastructure to provide blood tests for donations or even for the donators could help prevent this problem by at least some measure. And in the case of land use, what can the leaders of this world do to encourage “intelligent evolution of humanity” instead of the fatalistic natural earth view. We see programs to implement smart technology in some countries, but those are not the ones with a bulk of their population in agriculture. How can we remove the spotlight from land depletion theory and focus instead on human capital? I think the answer might lie in stepping out of the comfortable world in which I live. I’ve spent 22 years thinking a very specific set of thoughts, and I’m excited that these thoughts are being questioned in this class. How could I look a starving child stricken down by malaria in the eyes and say that I would rather not give the government a few extra tax dollars to help him. Are we so hung up on preserving what we think is right that we overlook what our hearts can tell us is right? So many can look to the core of agriculture and call it traditional, call it a fleeting revolution, call it whatever seems to fit to accomplish a separate goal. My generation has the power to change how we think in a more global way than ever before. Should it not be our mission to help make sure that every child born is allotted the same God-given opportunities to greatness without the shackles of illness, illiteracy or geographic separation from aspiration. Yet again, I find this class and these readings inspiring me to more – to invest in the education and health and quality of the global population of which I am a part.
Toggle Commented Nov 2, 2016 on Readings for Thursday at Jolly Green General
I found so very many aspects of Esther Duflo’s “Women Empowerment and Economic Development” inspiring in the way that makes you feel true wretchedness in your gut but simultaneously want to do everything you can to fix it. She illustrates a problem that is as old as time, one which might never be solved. I found particularly striking her words on selective abortion and South African pension plans as they related to the height and weight of girls. But more than anything, I was struck by the sheer amount I simply did not know before I took this class and availed myself to the harsh realities that I would have faced had I been born elsewhere. The past five weeks have opened my eyes to so many parts of the world I’ve never thought to know, encouraging me to act and learn and do as much as I can. But this week has hit home, perhaps because I’m a woman who is on the precipice of those years in which I will have to think about childbearing and economic agency. I called my mother after Tuesday’s class to explain to her that what I’m learning in college is informing me in ways I’d never imagined. In this particular conversation, I was explaining to her how grotesquely privileged I am in my ability to gain a meaningful education and subsequent employment. I was relaying how I felt guilty for thinking about what a future husband could provide for me, now realizing that I am so indescribably blessed to be able to provide for myself. And I said I planned to do just that, based partly on a guilt I had never experienced. But my mother then said to me that no matter how hard I work to provide for myself, I alone cannot have a child. My husband can support me in all I pursue, but he cannot bear a baby. She cut to the quick, reminding me that my own biology is, in itself, considered a setback. She encouraged me to continue in my goals, but she provided a reality check that even in this country, my gender is at a disadvantage. As the conversation waned and we hung up, I got to thinking – I want a child someday. I want a lucrative career that can support me and, hopefully, my family. But I am stuck – even in the best possible country in which I could have been born – in a cycle that preaches the inability of women to have it all. This sent my mind tumbling, thinking of all the amazing things I can do in America, like vote and start a business and even be born in the first place. But I also came to the harsh realization that my problems are astoundingly minuscule compared to women my age in India, Sub-Saharan Africa and so many more places. I want to continue to learn what I can do to make this inequity a thing of the past, to empower women to pursue the same goals I can and to ensure that missing women are soon found.
Toggle Commented Oct 19, 2016 on Reading for Thursday at Jolly Green General
In my Civil War history class (from which I have drawn considerably more comparison than I expected for development economics), we are currently discussing whether the war was perceived by the American people as an event or a process. Was it a marked occasion with a beginning, middle and end punctuated by some sought-after change? Or was it a festering issue that had roots hundreds of years in the making and no clear end? We went back and forth in attempts to figure out which the war was, ultimately deciding that the nature of war in the nineteenth century was different from that today. It was a decades old problem, but the Civil War was remarkably well peppered by battles and events considered to be a beginning (Fort Sumter), middle (the turning point in 1863) and an end (Appomattox Courthouse). Today’s history discussion got me thinking about development economics as an event and a process. I believe it can be both. It is an event in that there is a clear goal and there are moves to achieve that goal. But it is a process in that it is ever-changing and ever-growing. In Rodrik's "Growth Strategies," I find evidence for both event and process. It has been a process from big push ideals to market-oriented strategies to the Washington Consensus. The move toward second generation economic development policy illustrates that taming the beast of extreme poverty and inciting economic growth is not a one-time event, but rather something that takes adaptation and human compassion and truly has no end. In that, it is a process. But I would argue that this process is marked by sporadic events – policy implementation or a change in popular opinion – that move the crusade forward. The decisions, like whether to accept direct foreign investment or to liberalize trade or to implement transitional institutions, are events with a strict beginning, middle and end; however, they parlay into a much larger framework of procession that cannot be boiled down quite so easily. Latin America has made a “determined attempt” to eradicate extreme poverty, arguably more so than East Asian countries, but has seen so little come of their efforts. It is my belief that these events – policy changes and national movements – are simply events of a long process with less tangible short-term effects but remarkable long-term ones. Moves to secure higher order economic principles – property rights, fiscal solvency, etc. – are also but a piece of the puzzle. Detailed policy moves are not quite as tied to economic growth. They are greyer and they are less concrete. But they are of utmost importance in the ongoing pursuit of economic growth. Regardless of strategy, economic growth is a moving, breathing, living goal. It is not complacent and it is not easily attained. It is both event and process, married to one another in order to achieve a better future. There was no beginning and there will be no end.
Toggle Commented Oct 5, 2016 on Reading for Thursday at Jolly Green General
Krugman has backed me into a corner. The Rise and Fall of Development Economics stirred in me an uncertainty that’s not particularly comfortable, but that ignited a series of deeper economic thoughts to which I had not given much consideration. Models are both the villain and the hero in my study of economics so far – I am a right-brained person with little skill in mathematics, but a model always clarifies my studies far better than reading and rereading definitions can. I feel woefully uncomfortable when faced with a statistics or econometrics problem, but visualizing curves, lines and intersections provides me with a deeper understanding of what’s in front of me. Krugman’s mention of Alfred Marshall and his tendency to tuck away difficult or confusing math and models in favor of parables and metaphors at first sounded like my kind of study. But later in the paper, Krugman talked through the Big Push with words. I was lost, and I scrolled to the bottom of the article for clarification in none other than a graphical model. So how do I, as a student of economics, deal with complexity? It appears I utilize both metaphorical, value-laden words and clean, crisp economic models. With that, I fall in line with Krugman. There is an intersection between the two that can provide those of us with an inclination for the written word a pathway to better understanding through visualization and analysis. In microeconomics, I read about supply, demand, perfect competition – but the multi-colored model Professor Kaiser drew on the blackboard is permanently engrained in my mind. I could reproduce it in my sleep – though I could never repeat the words I read. My personal dichotomy translates into the broader study of development economics in that parables can provide a framework for study or a simpler version of economic theory for those unable to understand graphical or numerical renderings. But models provide a more visual understanding of how development economics can be translated into policy. Neither option is perfect – the words are over simplified and the models are perfect in an imperfect world – but the two paired together are unbeatable.
I hadn’t given much deeply intellectual thought to the Civil War until this year. Of course, I had studied it at length and always been interested in our nation’s history, but I had never really sat down and thought about the implications of those bloody four years outside of loss of life until this semester in a Civil War history class. What did the Civil War mean for other countries, for women, for the future – and now – for economic development across the globe? How does outlawing the ownership of another person impact access to freedom? In the first two chapters of Development as Freedom, Amartya Sen presents an interesting argument about the incredible turning point the Civil War represented in the realm of economic freedom and, particularly, access to markets. Though Sen presents two approaches to market access, I choose to address the first. According to Sen, “a denial of opportunities of transaction, through arbitrary controls, can be a source of unfreedom itself,” (25). When slaves were denied access to the open market to sell their labor at a cost, they were denied an invaluable economic freedom. This brings to mind last week’s article and the inability of many of the extremely poor to access reliable means of investment. But what sharply drew my attention was Sen’s analysis of Fogel and Engerman. The two held that slaves had “pecuniary income” unrivaled by life without their chains. Their life expectancy was at the same level as such developed nations as France and Holland and far longer than that of industrial workers in the U.S. and Europe. I would ask Fogel and Engermen why, then, did freed slaves deny the offer to work in the same conditions for pay? I would argue that newfound access to the market – regardless of how tumultuous it might have been in Reconstruction years – was a higher benefit than returning to paralyzing expulsion from labor markets. As Sen writes, “the interest of slaves was not well served by the system of slavery.” Access to a market on which to offer labor for pay was hypothetically more important to freed slaves than a steady job – their economic freedom had value. By rejecting the social arrangement of slavery, the United States eschewed economic unfreedoms. There is truth to Karl Marx’s statement that was the “one great event of contemporary history.” It set the standard for democratic countries’ economic freedom. In transitioning from bonded labor to free-contract labor, societies improve their own development in a general sense. A country with more economic freedom – by means of market access and the ability to change employers – is a more developed one.
As a business journalism major, I have spent the last three years fixated on how people gather and receive information and how that information informs their lives. In reading Banerjee and Duflo’s The Economic Lives of the Poor, I was struck by the lack of information access afforded to the very poor, particularly in their primary education. In their lack of access to quality education, the poor and very poor are at a disadvantage in workplace competitiveness, personal freedoms and general wellbeing. This disadvantage can be solved through basic tenets of development economics, though. By means of improved education policy, poor and very poor children could face better prospects later in life and family units could spend less of their income in the attempt to attain quality education for their children. I propose policies in poor countries to improve basic financial skills of young children by teaching useable math and very basic economics, smart decision making and improved awareness of nutritional needs. A family in Udaipur could spend up to 30 percent more on food than it already does (6). 99 percent of the very poor still own land (7). But very few rely on savings accounts in reliable or commercial banks from which they could earn interest. Evidence shows the poor and very poor have some degree of freedom of choice in their economic decisions, but I believe there is more to gain from this freedom. Buying healthy food instead of spending money on festivals could mean parents won’t go without a meal – a simple phenomenon that will result in healthier parents and lower levels of unhappiness (9). Investing saved money in banks or other ventures could promise returns down the road. Using owned land smarter and implementing rentals could increase family income. When a child knows to buy a healthier and more economic food choice over a processed and more expensive one, he is better prepared to arm his own family with knowledge that might aid in breaking through the poverty line. These useful choices could be rooted in simple lesson plans reinforced from a young age in more efficient public schools. Parents could react and pressure the government, as the authors propose (21). This could become cyclical – the issue at present has much to do with the poor education of children’s parents. If these children receive good educations, they will be better positioned to recognize if their own child is being neglected in public school. By knowing their options, children will experience greater economic freedom. Lesson plans could include the basics of banking, including money-saving tactics and interest rate manipulation; smart nutrition choices and how to find advantages in the food market – and even the groundwork for future careers. In the dosa example provided by the authors, the woman appears unaware of the competitive advantage she could gain by pairing with another woman on her street. If she had received basic economics lessons in primary school, she might recognize this opportunity and improve her own status. Families might not spend very much on education at present, but the current return on that investment is incredibly low. For the same amount of their income and with the aforementioned policy changes, families could realize incredible gains down the road in order to become more informed, more competitive and, theoretically, less poor.
Toggle Commented Sep 14, 2016 on ECON 280 Reading for Thursday at Jolly Green General
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Sep 13, 2016