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The World Bank’s report called “Turn Down the Heat” analyzes climate change and its consequences on the environment and subsequent economic development. There have already been some serious adverse effects due to climate change and predictions are that we are on pace for far worse consequences. The article illuminates the fact that developing nations will be hit the hardest from increases in global temperature. After spending about 2 months in Indonesia living with a family in a small coastal fishing village, I was able to see these effects firsthand. Fisherman in this village had been living and harvesting off the ocean and reefs for thousands of years. In the wake of rising global temperatures and average water temperatures, the reefs, as we have seen, have started to die; the people in this village have suffered as a result. What I found most disturbing in my time there was not that when you dove under water all of the coral was dead, but it was more alarming that these small villagers were being blamed for the death of the reef. The villagers had no concept of climate change or have any idea of what coral bleaching was, but instead someone came and told them that they were at fault for killing the reef. I find this to be disturbing as the people who are most at fault for climate change are projecting blame onto others. Most developed countries like the U.S. and China have the highest CO2 emissions and are at fault for climate change. The disconnect is how these developed countries do not make progressive change to improve the situation as a whole and the lives of those who they have hurt.
Toggle Commented Dec 5, 2019 on Last Blog Post for the Year at Jolly Green General
In “DO CONDITIONAL CASH TRANSFERS IMPROVE ECONOMIC OUTCOMES IN THE NEXT GENERATION? EVIDENCE FROM MEXICO”, Susan W. Parker and Tom Vogl attempt to show the long term effects of the conditional cash transfer systems in Mexico. Progresa gives money to families whose children attend and pass each year of schooling as well as visiting getting medical “check ups”. This creates incentives for children to attain more education and receive health care. One figure stood out most to me after reading this paper and that was the intianal level of participation in the program; 97 percent of the families that were offered the program participated. I found this to be an impressive rate and clearly a good incentive for families to keep their kids in school. The results showed an increase in wages by almost $40 per month. What I found to be even more astonishing was the program’s effect on women; women’s labor participation increased by 7-11 percent. Taking a Sen type approach already validates the effectiveness of a Conditional Cash transfer system like Progresa. Education rates and women’s empowerment both increase due to this system. As we have learned, this is both an ends and a means to development.
Toggle Commented Nov 20, 2019 on Next Week at Jolly Green General
“Interest Rates in the North and Capital Flows to the South: Is There a Missing Link?” by Barry Eichengreen and Ashoka Mody illustrate and show that there is a statistical correlation between capital flows into developing nations and the interest rates of developed countries like the U.S or Japan. As some of the financial lingo was quite difficult to follow at times, I was able to take away the idea that as interest rates in the U.S. rise, there is decreasing foriegn investment in developing countries. The effect of capital flows to developing countries is the opposite of this when the cost of borrowing in the U.S. falls. The biggest takeaway I have from this article is the idea that developing countries are in fact at the mercy of some of the world's financial leaders. We know that a capital is needed for initiating and sustaining growth in a developing growth. The problem arises because the capitol flow is dependent on exogenous interest rates, and thus the developing countries are susceptible to shock caused by increasing foreign borrowing rates. The question is then, what kind of policies and institutions can a developing nation put in place to absorb such shocks and maintain capital stocks and GDP. This is yet another example of a complex cyclical trap that some countries, like the Latin America nations, can fall into. Like many of the other problems we have discussed in this class, there is not a clear cut solution and it requires cooperation between private and public sector, both domestic and foreign.
Toggle Commented Nov 14, 2019 on For Thursday's Discussion at Jolly Green General
Sachs’s and Melaney’s article on the social and economic burden of malaria reemphasizes all of our discussions in class. It is evident that the malaria endemic has exceptional effects on both economic output but also the simple welfare of people. This problem reminds me a lot of Sen’s idea of freedoms and creating more freedom is the means and ends to development. It should be a priority to eradicate malaria as this disease kills a child every 40 seconds. People should have the freedom to live without the threat of malaria and there should be institutions that are set up to do so in malaria effected countries and communities. As far as economic development goes eradicating disease will also help GDP growth. GDP grew at .4 percent in areas of malaria versus 2.3 percent in areas that were not affected. There are a number of reasons why this is the case but it can be easily explained by everything we have discussed in class. Investment in healthcare and education in children and women is really what is necessary for growth. I find the investing in and empowering women would be particularly helpful in the eradication of malaria - the ends and means. Studies showed that areas of malaria shows higher fertility rates as families want to ensure a sufficient number of surviving children. This plays into education and healthcare as the children are raised; the already poor family now has to divide their scarce resources to more children. Empowering and educating women is incredibly important for fertility rates and the ability to fight malaria. We know that educating is a metaphorical contraceptive and will help malaria infested areas. As fertility rates go down, childrens’ education increases, healthcare is more accessible, and saving is made easier on the family. To reiterate, it is both an ends and a means. All of these problems are linked to each other in one way or another and development requires multifaceted strategies to impact successful and sustainable growth.
Toggle Commented Nov 7, 2019 on 3 readings for next week at Jolly Green General
Theodore Shultz’s Prize Lecture was a great synthesis of a number that we have learned so far in the course. He talks how in order to understand the economics of being poor is synonymous with understanding the economics of their lifestyles, agricultural. His main argument discusses how the quality of people and the quality of human capitol is certainly important. He says “While land per se is not a critical factor in being poor, the human agent is: investment in improving population quality can significantly enhance the economic prospects and the welfare of poor people.” The quality of people do matter. As we have mentioned many times in class, investments in education and healthcare are paramount for increasing welfare and growth for poor nations. As Shultz puts numbers on these education and healthcare investments, he shows they really do help the economy as longer lifespans lead to more working hours and higher productivity. Many of the investments for creating a higher quality population go hand in hand with each other. As healthcare increases, there is more incentive to invest in education and there a number of effects that trickle on down the line. The evidence is clear that these investments are beneficial and rational and should be made (should be made because that’s the right thing to do and education and healthcare should be accessible to everyone). I found the agricultural land example to be quite interesting. Shultz talks about how as we improve technology, farming techniques, and famers quality, its no doubt that yields become more efficient. He notes, “The corn acreage harvested in the United States in 1970 was 33 million acres less than in 1932. Yet the 7.59 billion bushels produced in 1979 was three times the amount produced in 1932.” Shultz uses this to point out that we overvalue land and that we do have enough land to feed the ever growing population. I understand that we can become more and more efficient in our farming techniques, but to say that we overvalue land seems a bit of a stretch to me -given the state of the environment and climate currently. Is it possible for the world to stop deforestation in addition to making the existing farmland that much more productive? According to Shultz, it will depend on “the intelligent evolution of humanity.”
Toggle Commented Oct 30, 2019 on Blog Post for Next Thursday at Jolly Green General
Esther Duflo’s paper “Women empowerment and economic development”” argues that economic development will on its own help women’s equality; she ultimately concludes, however, that focusing on development will not completely close the inequality gap between men and women and thus there needs to be specific policies targeting women’s empowerment. Just as development can improve the lives of women, empowering women can also improve economic growth. In one aspect promoting economic growth and alleviating poverty will indeed help women to some extent. Creating better access to healthcare and education will inherently help women of impoverished communities because now it is much easier for families to take their daughters to the doctor or enroll them in school. Reducing poverty and increasing growth with naturally help women. This, however, will only go so far. I think the best example of this is women holding political positions. Only 26 countries world wide met the goal of having 30 percent of women holding national legislative seats. We know that women will target legislation that will help other women. I thought that these ideas fit very nicely into Amartya Sen’s approach to women’s equality and development. Sen argues something very similar as he notions both the treatment towards and agency of women. It’s the agency of women in addition to empowering policies that will benefit women which will have subsequent effects on development. Empowering women and decreasing the equality gender gap is both an ends and a mean to development. I find it shocking that even in a place as developed as the United States that this disparity still exists and the “ends” to this have yet to be made. We know that a women in office will have positive spillover effects on other women in the community as well as overall development. Similar to how we learned about the under investment in research and development because of a marginal social benefit. Could this be similar to how we see not as many women in political position. I think the quota system might not be a bad idea for giving women political representation. Empowering women is first and foremost the right thing to do but it also has the potential to stimulate development.
After reading Dani Rodrick’s paper Growth Strategies, there were two related themes that stuck out to me, the patterns for successful growth and the means and policy by which this growth comes from. According to Rodrick and his insights on the growth data over the past 50 years, he argues there is in fact a broad recipe that stimulates growth; he describes some of these as property rights, market-oriented incentives, sound money, and fiscal solvency – all of which are ideas that stem from a more orthodox, neoclassical approach. To stimulate an economy to grow these are the things that traditional economists say need to happen and is also what is seen in the data. The theory and model match up to what is seen in the world. What Rodrick then goes on to say is that the means to carry these things out does not have to align with the principles of the classic “Washington Consensus”. I find this point to be very interesting. There are seemingly infinite ways to carryout the broader orthodox needs for growth; many of these may fall under the policy strategies that do not align with the “Washington Consensus, but have been shown to be very effect at sustainable growth. Rodrick uses China as an example and their decision to give land rights based on family size and to pay farmers on the margin after they have met their obligatory yield to the government. To me that seemed like an ingenious idea, even though traditional economics would have prescribed something else. This perhaps gives some insight into the discipline of economics. We briefly mentioned in class how Sen was solution oriented and not affiliated with any political agenda. It could be that many economists and policy makers are too narrow focused on traditional and complex ideas rather than being open minded problem solvers looking for the simplest solution. I am not exactly sure what this tells us but I do think the short sightedness that strictly adheres to orthodox models can be harmful and we need to understand there are different ways to solve problems.
Toggle Commented Oct 2, 2019 on Rodrik article for Thursday at Jolly Green General
As I plan to major in a natural science, chemistry, I found this article very fascinating as it discussed both social science and material science. Krugman talks about models and their inherent nature to focus on a specific detail or factor while subsequently leaving something out of the picture. As we try to model and hypothesize very complex problems, it is necessary to break into more manageable parts; when we do this decisions and assumptions need to be made. When we think of the social science of economics, more and more assumptions are made to bring a model to simpler and broader terms. You can play with these factors, but any one model is limiting in its own right. This makes me think that economics, as much as it tries to be, is not as much of an objective science but perhaps more of a subjective one. Every scenario, depending on its specific exogenous and endogenous factors, is worthy of its own manipulation of a broader model. So in my opinion, how one uses a certain model is foundational to the model itself. Dr. Uffelman always talks about good scientific models both describe how something works but also can predict accurately how a system will act in the future. When I think of some of the economic models that have been accepted and used and the ones that have been denied, my mind goes to Harrod-Domar model and its usage. It was a great model for post World War 2 Europe but it was not an effective model for other developing countries in different scenarios. It was used for quite some time with these other scenarios. It is not so much that this model was wrong, it is just that some of the assumptions made were for only post WW2 countries and not for other scenarios. There was a disconnect between the actual model and the application of it. Factors need to be checked and altered according to different situations. Models are great ways to describe and predict but they can naturally only take you so far, especially when they are not used entirely
Toggle Commented Sep 25, 2019 on Reading for next Thursday at Jolly Green General
This article from Wang, Wong, and Yip categorizes countries into two groups based on their policy and development, over a time period and looks at the country's subsequent relative growth. These two categories are "fast growing" and "development laggards". The success stories from the fast growing economies contrasted against the lack of success in the development laggards offers an idea of how a government or state can use policy to progress a country’s economy. There seems to be a formula and pattern for success and growth. So, my question is: why is it hard for countries to follow this formula? The fast growing economies seemed to focus on policies that stimulated exports and specialization in diverse industries. For example, Taiwan’s implemented the Ten Major Constructions Projects which gave way to the export-led growing economy. This policy helped industrialize and gain a trade surplus. This pattern seemed to flow through most of the cases of fast growing economy. Why, then, if there seems to be a formula for growth, do the lagging slow growth countries not implement similar policy. I think that there is just a slight disconnect in many of the “laggards” to what could have caused success. I think Brazil is a great example of this. Set aside the incredible amounts of corruption, Brazil started an intense import substitution program which took the society from agriculture to industry. A step in the right direction. It grew 7 percent in the 1950’s. Although here is where the disconnect in the policy came through. The government did not set up the institutions for export growth so Brazil started to rack up a large current account deficit which worsened as Brazil imported more for industrialization and the cycle worsened. Brazil started to experience incredibly high rates of inflation and Brazil is still struggling today. What I take from this case is the fact that they started down the right path of industrialization but lacked infrastructure and policy to export their goods. I’m sure that corruption and other factors played into why this did not happen, but Brazil seemed to be close to success. Had they had the right sort of policy to help export and create a trade surplus, then perhaps Brazil would be among the success stories.
After spending about 3 and a half months in Indonesia living with host families throughout a number of very poor villages, I was able to relate firsthand to the some of the topics and statistics brought up by Banerjee and Duflo. It is one thing to read about some of these things but it is a completely different perspective when you are apart of them. There is one experience from my time in Indonesia that sticks out. It relates directly to a few of the topics discussed in the article; A woman died while I was in this small agricultural village on the island of Flores and I attended the funeral. As Banerjee and Duflo talk about how poor people do not spend as much money as they could on food, but rather save and spend on festivals - in this village funerals were that type of celebration. Everyone in the village and all of the neighboring villages poured in to attend this funeral and give support to the family. It is tradition that a gift is provided to the suffering family; people brought money, rice, food, and the most customary thing to bring was a live pig. By midday, there were around 30 pigs tied up in front of the house that the funeral was in. Long story short, there was a ceremonial sacrifice of all of these pigs for the diseased and the celebration began shortly afterwards- food, drinks, music, and games. When I was there in the moment, I never thought of the economic implications of this until I had read this article. These festivals and celebrations are deep rooted in community and tradition in the village so it does make sense that one may choose not to purchase more food but rather save for this type of festival. Banerjee and Duflo bring up another point that I found relevant to the funeral and that is the idea of insurance and using social groups for loan exchange. In this village, The whole idea of offering support(money, food, or pig) is so that when your own family member dies, you receive the same support. The customary thing to do in Indonesia is to reciprocate with a gift that is similar or larger in size and value. People take records of what they receive from each person, so when it comes time to loan back, they can do so appropriately. I found it fascinating to look at the experiences I had in Indonesia through a different lens. I thought that the exchange of pigs at a funeral was a way to give support and strengthen the community; I did not realize it was also an insurance network within the community as well.
Toggle Commented Sep 11, 2019 on Readings for next week at Jolly Green General
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Sep 11, 2019