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Samantha Smith
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I thought that this was a very interesting experiment and paper. I always knew from my economics classes that WTP was supposed to equal WTA, but was rarely the case. I understood that WTA > WTP, but I chalked it up to human behavior and attachment to certain items. The inclusion of morals and feelings I think it’s a new idea that seems to make sense, especially in the realm of public goods, it makes sense that the WTP and WTA gap closes. So in the WTA frame, they could either keep or donate SEK 100 and SEK 50 and in the WTP frame, they could keep all of the money, or donate SEK 100 and keep 50. It is obviously harder to give up money that you think that you’ll have, but adding in the donation and WWF change the game a bit. I don’t know if money was the best thing to use with this. While it was good because people don’t have the attachment to individual monies, so it takes away certain peoples’ attachment to certain goods, but also explains the discrepancy between WTP and WTA not as well as objects. I wonder if a coffee mug and money were used or a hat or basically anything else. And I would like to have seen the object be given to the person before the survey and then taken away at the end if they chose to donate rather than keep the object- this way I think we account more for human behavior and slightly irrational (is it irrational?? Just a thought…) attachments to things.
Toggle Commented Nov 17, 2014 on Econ 398 Papers at Jolly Green General
I am blogging on the first paper, “Latest Findings from Randomized Evaluations of Microfinance.” Going into this paper, I had a relatively negative view on microfinance. While I understand that microfinance is necessary for those unable to get into the traditional banking sector, my previous knowledge of microfinance had to do with understanding the extremely high interest rates, the general lack of aid, and the concept that microfinance is seen as “a million one dollar loans.” This paper helped me changed my previously negative view of microfinance into a slightly more positive one. While I understand that microfinance isn’t a fix all and that it doesn’t solve all issues of poverty and development, it does solve the problems it does intend to. Reading, “while media reports interpreted the lack of positive results along measureable dimensions of health, women’s empowerment, and education as signs that microcredit was a failure, Banerjee and Duflo say this study presented clear evidence that microcredit was working n the dimension it was supposed to,” made me realize while all of the issues surrounding microcredit and finance exist, there are some positive changes that come out of microcredit, specifically, a shift away from certain temptation expenditure, better choices, greater investment, and taking advantage of opportunity. In my opinion, another interesting aspect of this paper is the emphasis on the nuances of the structure of these microcredit deals. This makes a lot of sense and I previously did not know that these deals could be structured in different ways such as group/individual defaults and delaying repayment. I didn’t know too much about microcredit, so I just thought that people got generic loans and the only thing that changed was exactly how high the interest rate was. Lastly, I think it would be interesting to further look at the difference in savings and credit. In this paper, it seemed to me that savings might be better at alleviating poverty and fostering growth, even though it might be harder to initiate it. Although this paper does a very good job looking at the positives of microcredit while acknowledging the negatives and showing the empirical evidence in an honest manner, I would be interested in seeing a paper written the other side of this argument or empirical evidence to show the negatives associated with microcredit.
Before reading this piece by Wilson, I didn’t really know or understand affect versus emotion and analytical versus experimental systems in decision-making. I think that Wilson’s conclusions are interesting and make sense in that building trust, facilitating trade-offs and incorporating value based systems is important in order to get people to understand and to make conservation decisions. I think that it is important that the author acknowledges the difficulty that this may have and that there needs to be a balance in this dual process in the brain. A few questions that I have from this conclusion is- who does the author think are the people that need to be the most balanced? Is it the decision makers in the government? Would the general public make the most impact if there was a balance between analytical and experimental processes? Who could help public involvement the most? Where does she see the balance between technical and value-based objectives being the most beneficial to conservation efforts? Completely unrelated, one of the most interesting takeaways from this paper for me was on page 1454, when the author explains integral affect. I couldn’t imagine that as a humans we are all preprogrammed to have a preference for savanna-like environments because throughout evolution, humans thrived in these places. It seemed far-fetched because there is a chance that for generations and generations your ancestors didn’t live in savanna-like areas, but then again the history of the earth and early humans goes back hundreds of thousands of years so it is true that these unexplained preferences could exist even if an individual has never seen a savanna. I just thought it was crazy that this is in our brains whether we know it or not. It makes me wonder how much is already programmed in our brains and where our own life experiences start to take over our affect and emotions.
Toggle Commented Nov 8, 2014 on Econ 398 for Tuesday at Jolly Green General
This paper by Professor Casey reinforces the importance of human capital, education, and poverty in the context of Economic development. I went back to the comments on the blog from the last development class in the fall of 2013 (I had a little writers block…). I think that the class made very good points and reiterated the fact that issues of poverty and human capital are both simple in their correlation and solutions, yet still very complex. Two comments that I thought made very good points were first- Olivia Davis’ comment about the evidence “supporting the benefits of adopters as advocates.” The farmers implementing agroforestry have specific training and have the investment of human capital that allows them to have the correct amount of certainty and confidence while also understanding the benefits of agroforestry. It makes a lot more sense that one impoverished farmer can communicate the positives of agroforestry with other impoverished farmers better than a third party that doesn’t have much connection with the socioeconomic status and farming in that area. The second comment that brought up an excellent point was Greta Witter’s. Greta highlights that in this paper Professor Casey discusses economic development and environmental economics. Historically, environmental impacts were not calculated in economic development stories. Papers such as this one are important in the discussion and implementation of both economic development programs that help individuals and countries grow and also environmental policy. Because we have the technology to understand agroforestry and its benefits, as well as the resources to begin to invest in the human capital necessary to spread agroforestry, we may as well try to promote development and protective environmental policy at the same time. ​
Toggle Commented Nov 4, 2014 on Econ 280 for Thursday at Jolly Green General
I think that reading this paper at this point in the semester was a great idea. I think that as a class we are all familiar enough with Behavioral Economics to have either heard of the experiments in Rick and Loewenstein’s literature review or at least understand them. Even though we have been learning about emotions and behavioral economics for about 6 weeks now, I am still mind blown by so many of the contributions of the discipline. What I find most interesting/funny about Behavioral Economics (which was reinforced about 50 time throughout the paper) is that the results of most experiments have “obvious results.” These results aren’t obvious because I am a super genius economist, but rather I am a human being with emotions just like those in the experiments. Often times when learning an economic model for the first time, you cannot predict all the shifts and outcomes until your professor explicitly states the answer, but in behavioral economics that is rarely the case. For example, in the section about decision-making under risk, the paper relaxes the “assumption that utility is strictly defined over realized outcomes.” The example in the paper is, “suppose you anticipate a pay raise of $10,000 and subsequently receive a $5,000 raise. Although the raise is a gain relative to the status quo, you will likely code it as a loss, since it fails to meet expectations.” Another example is the importance of emotions and their influence on risky decision-making. We spoke about this Ariely example in class. It seems as though when you are sexually aroused you understand the risk of using or not using a condom, but you are less likely to use one in that moment. I think that the MTV show Teen Mom more real life proof of emotions and risky decision-making. Other examples, including the fact that you are more likely to delay a good thing and not a bad- the “save the best for last mentality” was another “obvious outcome.” These “obvious” outcomes are only obvious because we see people behave in these ways everyday in our lives, even if they aren’t in a controlled experiment. I think that behavioral economics is a very important growing discipline and that this paper helped to reveal that people breaking most assumptions should be an assumption.
Toggle Commented Nov 3, 2014 on Econ 398 for Tuesday at Jolly Green General
Reading the first article on malaria and poverty from the perspective that malaria causes poverty was interesting and very relevant to me. I am currently looking at the Multidimensional Poverty Index’s indicators and their association to malaria incidence in children under age 5 in Ghana. While I focus on health, education, and living standard indicators of socioeconomic status as a potential “cause” of malaria, I found it interesting to see the other side, the “effects” of malaria in this piece. A hindrance to human capital, physical capital, and foreign direct investment, seem to be detrimental effects of the disease, thus proving that while it is valid that poorer socioeconomic status is associated with increased malaria incidence, there is dual causality and it does go the other way as well. The macroeconomic association between malaria and socioeconomic status exists both ways, so I look more specifically at the individual family level, but I think that the dual causality still holds. I am not sure if it exists, but I wish there were a way to measure which way dual causality is stronger because obviously in this case and many other in development there exists cause on both sides of the equation. It would be beneficial to gain insight into which said had “greater” causality, thus helping us to understand which side to invest more time/effort/money in, as a start to attempting to solving the problem. The beginning of the article states that malaria thrives where humans have not. This happens to be in tropical climates, which to me seems as though on whole haven’t had the opportunity to develop and obtain the income levels of HIC due to their climate and geographical conditions, so I think that this point would be important to include. Moving on to the end of the article, the author emphasizes the need for money for antimalarial programs. I agree with this, but I also think (largely in part to my research of the other side of the argument- and where I thought this paper was going) that we should address the micro socio-economic issues of each household in order to continue to eradicate this disease. I think that while the paper on malaria is more specific to the one disease, the second paper on the economics of the poor ties in nicely as the author states that “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” (Shultz & Lewis, 1979). This corresponds with my idea that in addition to funding malaria programs directly, the need to address the socio-economic issues of each household. I understand that this is much more difficult, but in a perfect world…
Toggle Commented Oct 28, 2014 on Econ 280 for Thursday at Jolly Green General
I agree with Alexandra that it is harsh to be shown child labor in a more rational light, but I do think that the author fairly addresses the evils of child labor in the introduction. I think that Udry understands the evils of child labor, but because of the nature of economics and the piece, takes a more rational approach to child labor in order to show the reader a rational proposed solution to the problem rather than an emotional response. In 398 we discussed marketing and how you are supposed to ask for a fee or donation at the ultimate height of emotion in order to get the required response (any sort of payment). I think that as an economist Udry understands this “marketing” concept and understands that policy makers care more about the bottom line than they do their emotions. This might be a bit of a stretch, but I do think that Udry is sympathetic to the cause of child labor, but wants to take a different approach in addressing the problem. Udry understands and has to help the reader understand that families who have children in the work force aren’t evil and aren’t bad parents, but rather impoverished and faced with only one option, which is to send their children to work rather than to school. With an unemotional argument and a “simple” economic solution, child labor becomes less of a debated topic and more of a “typical” (very complex) development issue simplified. As in all economics, sometimes it is easier to understand the problem and the solution when it is overly simplified. This view of child labor and the proposed subsidy is a simple, yet strong foundation to addressing the problem.
Toggle Commented Oct 22, 2014 on 280 Paper for Thursday at Jolly Green General
I agree with Alexandra’s point that in economics, models can be a double-edged sword, but maybe in some situations it goes beyond that and models are more harmful than good even with consciousness. Models provide an easy understanding of what is going on, but often (practically always) they are oversimplified. So even with a warning from your professor about the oversimplification, it is easier to understand the clear-cut model than it is to accept the complications and blank maps. Krugman says, “The problem is that there is no alternative to models. We all think in simplified models, all the time. The sophisticated thing to do is not to pretend to stop, but to be self-conscious -- to be aware that your models are maps rather than reality.” Self-awareness is obviously the key here, but what I want to know is when is an over-simplified model okay and when is it dangerous? For instance, Kuznet’s curve is an oversimplified model that happens to me “wrong” because there is no real correlation between income and its distribution yet, so is there any situation where that is appropriate, even if we are self-aware? I even think beyond development economics. Should some disciplines within economics (or all social sciences) avoid models all together based on the sheer complexity of the subject? Maybe monetary policy shouldn’t use models, while labor economics can. Are some oversimplifications, simply that, oversimplifications.
It was refreshing that Rodrik is so open in this paper by essentially saying that anything is possible and neoclassical economics works, but only under the right set of conditions. In the past weeks our class discussions have concluded that, there is no one “development answer,” so while it is easy to conclude that based on any of the papers we have read, I enjoy reading Rodik’s deeper look into this. He uses trade liberalization as one of his examples and then goes to list seven conditions that need to be met in order for trade liberalization to be a correct growth strategy. One of Rodrik’s points is that “sound economics has often been delivered in unsound form.” This is a direct response to the “Washington Consensus,” which places a bias to western development ideas. Whether or not the west agrees with China’s economic practices, these economists cannot argue with China’s positive growth rate. Throughout the second half of the paper and in his conclusions, Rodrik emphasizes that a mix of conventional and unconventional policies will work based on the realities of the country. Even when Rodrik explains the two-pronged growth strategy of investment to stimulate growth and then institutional building to sustain it, he acknowledges that this varies for each country and situation. So to answer HeeJu’s question based on the paper and how I interpreted it, I think that anything is case-by-case, including protectionism. A quick comment- one of my favorite lines in this paper is “It goes without saying that not all unorthodox remedies work. And those that work sometimes do so only for a short while.” I liked this line with the example of Argentina attached because as I was reading this paper, I started to get caught up in abandoning the “Washington Consensus” all together, but this brought me back to rational thinking about individual cases and circumstances.
Toggle Commented Sep 29, 2014 on ECON 280 Paper at Jolly Green General
Duflo warns us earlier in the article and then concludes "Women Empowerment & Economic Development" with a pessimistic view on the future of gender equality. Duflo acknowledges that neither development nor women's empowerment is the answer to both problems/solutions in the article. Duflo explains the bidirectional relationship between women's empowerment and development, but as I mentioned she knows that neither one can really solve the other. To be honest, I am not very surprised by this conclusion. To me, it is obvious that, unfortunately, the world is not ready for gender equality nor is the world ready to go out of its way to aid in the development in Lower Income Countries (LIC). I say this because while it is appalling how unequal women are in certain countries and cultures, I do no think that the Higher Income Countries (HIC) always provide the best examples of gender equality. I am not saying that I am not thankful to be born in the US where I am afforded many of the same opportunities as my male peers, but I am constantly aware of inequalities. I see this in business and the wage gap between men and women and I also see this in politics- why have we not had a women president if men and women are considered equal? It was not only in the conclusion that I was reminded of gender inequality in the United States. In section 2.6 (“Will Economic Development Be Enough?”), Duflo highlights sex-selected abortions and mentions that certain cultures in the US and Canada participate in this. What struck me the most was the example of math being a “boy-thing” and that females often believe that males are better than them in math. I am not sure when in my life I gained this opinion, but I guess I kind of believe that- maybe not consciously, but that thought is in the back of my mind. There is also the stigma that men are better leaders than women, which I also see in various aspects of life in the US (business world/politics). I am not saying that HIC are responsible to set a perfect example of development and equality for the world, but maybe the equality advances aren’t enough in the HIC. LIC are obviously faced with more constraints and harder choices to make in the investment in the youth. The gender inequality that we see existing throughout the world obviously has less to do with the opinion that men being the “greater sex” and more to do with the economic constraints that billions are faced with everyday- this relates to the article from last week on the economic lives of the poor. ​
Toggle Commented Sep 23, 2014 on ECON 280 paper #2 at Jolly Green General
I found Banerjee and Duflo’s article to be shocking for many reasons. I was both positively and negatively surprised throughout the paper. It is shocking that there are so many people living on such little income, but was positively shocked by the commendable innovation of these poor and extremely poor people. The sheer number of people living on $1 or $2 a day is very depressing and seems like an almost hopeless situation in the world. Although it seems that these extremely poor people have choices in their consumption and labor, these choices in comparison to those in wealthier countries is quite limited. It is amazing what these extremely poor people make of their situations, but we cannot ignore the fact that they are essentially starving and unhealthy to most Americans standards. The authors cite quite a few aspects in the lives of the poor. The authors reveal that while their situations are limited, these people do make many choices (wise or not) in their everyday lives. What I truly feel is that while the poor make choices, they really do not have a choice. It isn’t fair to criticize the poor for not saving, when they are barely making enough money to provide the basic needs. It is impossible to criticize the poor for not encouraging their children to go to school, when they could double their income if their children when to work. We say that specialization is important and that these people could be more efficient if they specialize, but the poor often do not have the capital or time to specialize. We then see in the article that there are some things that the poor can do to improve their situation but don’t because they prefer not to rather than are unable to. The authors highlight that the poor spend a portion of their dollar a day on tobacco and alcohol. I quickly judged this and looked down upon the people who did this. My thoughts were- how could you possibly think about tobacco and alcohol when you probably do not have enough food or clean water? It is easy to get caught up in what the poor are doing wrong- how can they complain that they aren’t saving when they are buying sugar, tea, and snacks? When I take a step back and sit with my thoughts, I quickly refrain from judgment. Just because these people were not born into the fortunate situation that I was, why should I judge them for acting like humans. Just because my parents have allowed me to go to college and have given me an allowance much greater than one to two dollars a day doesn’t mean that I am allowed to overindulge in sweets or drink alcohol on the weekends and the poor are not. I am lucky enough that when I buy coffee in the morning, I am not taking away from the food I will consume that day, but that does not give me the right to make more choices than a poor person in a poor part of the world- I am afforded more choice in my life, but not more judgment free choice. (I am not sure if that makes a lot of sense). I am afforded more choices, so I should look at myself as fortunate and not at the extremely poor person as incorrect or wrong for their choices. This paper made me realize that it is just as wrong for me to buy a pack of cigarettes as it is for a poor person in India. I can still have an opinion on what the poor do, but I must place the judgment equally on negative behavior for those in HIC as I do those in LIC. So I do question why these extremely poor people would “waste” money on tobacco and alcohol because I do not understand why anyone would waste a significant portion of their income on tobacco and alcohol. Banerjee and Duflo have helped me understand that limitations placed everyday on the poor and have also given me perspective on how to view the few “choices” that the poor have in their daily life.
Toggle Commented Sep 16, 2014 on 280 reading for Thursday at Jolly Green General
I found “Adam Smith, Behavioral Economist” to be a very thought provoking article. What I found myself wondering and thinking about while reading this piece was, to what extent is it human nature to act in these certain ways (altruistic, fair, etc.) and where does individual preference come in? I found the section on the markets and altruism/fairness to be very interesting. It is clear that business is done based on altruism/fairness so that trust and relationships are built, but then we hear and read all of the negative press about banks essentially taking down the financial world because of individuals’ own self motivation and greed. This leads me to wonder about the balance between the motivations (just as the authors mention in the article). When the authors mention Smith’s idea that people overestimate happiness and sadness- to what extent is that humans in general and then when do individuals’ chemical imbalances take over, such that they are depressed and cannot adapt to the sadness in life. So if there is one unemotional person will their overestimation of emotion be less than a very emotional person based on where their emotions started? While I started thinking about individuals, it lead me to think broader- do these various behaviors vary by gender? Do men and women behave very differently inherently or do outside factors heighten differences in different cultures. There are no concrete answers to my questions, but I look forward to gaining understanding of behavioral economics as I learn more.
Toggle Commented Sep 14, 2014 on 398 reading for Tuesday at Jolly Green General
Group 2: Flores, Retzloff, Smith, Travis Article: Full cost accounting for the life cycle of coal This article attempts to determine the full cost of the life cycle of coal. This includes coal at all stages, from exploration to dissipation. The article is broken up into four main sections: an introduction, explanation of the authors’ method, the explanation of the costs of coal, and then finally alternatives, public finance, and the conclusion. The introduction explains that there is going to be an increase in energy demand and by 2030, the electricity demand worldwide is projected to double. Coal is the main supplier of the world’s electrical energy. The flipside of this is that coal is a very inefficient producer of energy. In 2005, coal produced 50% of the electricity, but 82% of the emissions. Carbon dioxide is the main byproduct of coal and is a concern, but it should not be the only focus because there are many other heavy metals and chemicals that are by products of coals. We measure this as a unit of energy, so it is easily comparable to other energy methods. The end of the introduction, addresses that the costs of coal extend even further to the rail transportation of coal and the risks associated. An interesting note from the introduction is that the U.S., Russia, China, and India contain about 70% of the world’s coal reserves. The next section, methods, explains how the authors determined their values in accounting for the cost of coal. The authors studied the stages of the life cycle of coal to address the hidden costs. We thought that it was very honest that the authors provided both a high and low estimates on the costs of carbon dioxide ($10-$100 a ton). The authors also conducted a literature review in which they found a basis for their estimates. Then the authors valued the climate impacts using estimates, the mortality risk costs (VSL), and federal subsides. The authors provide a table explaining how they broke down the externalities by economic, human, environmental, and other costs. The next section, full costs, is the bulk of the paper. This section conducts a life cycle analysis. This analysis included explaining and quantifying the costs associated with underground mining and occupational health, mountaintop removal, methane, impoundments, and processing plants. One important note that we wanted to highlight was that coal mining had the largest number of negative externalities. The authors then discuss coal combustion waste (fly ash). This was something that we all did not know too much about, but quickly learned its negative effects including local water contamination, carcinogen emission, and mining and community health. The section continues with an explanation of the ecological impacts of coal acquisition and dissipation including imperiled aquatic ecosystems, transportation, the vast social and employment impacts, effects of combustion, algal blooms, dead zones, and climate change. The degree to which these negative impacts of coal mining, refining, and use adversely affect various systems was eye-opening for many of us. The final section encompasses the Carbon Capture and Storage (CCS) method, public finance, limitations, and conclusions. The authors present the alternative CCS method that is supposed to produce “clean coal.” While at first this sounds like the answer to a large part of the coal problem, there are still many risks associated with this method and the method is not efficient because it has not been thoroughly studied and applied. The section goes on to explain the public finance side of coal accumulation and dissipation; this includes subsidies and abandoned land mines. What we found most interesting in this section was that in Kentucky there is a net loss of $115 million from coal mining, without even including the costs of health, lost productivity, water treatment, and water infrastructure. The government must subsidize the coal mining greatly for the state to continue the practice, which is what has historically been done. The authors conclude that their estimate of the total cost accounting for the life cycle of coal is $345.3 billion. While the authors estimate this extraordinarily large number, they do mention that there are limitations associated with their study, focusing on the fact that the measurements of environment, community, mental health, and economic impacts are not easily quantifiable. They also mention that there are problems with region versus negative impact on the entire U.S., boom-bust cycles, discount rates, and opportunity costs. Our group thinks that the authors do a very thorough and complete job of estimating these costs. We also believe that the authors were very conservative and the actual cost of the coal life cycle is even greater than their estimate. As we mentioned in class, it is important to note that the solutions to the coal problem as of now are just cleaning up after it rather than solving our problem of dependency of coal. At this point the cost is all on the consumers rather than the producer. After reading and discussing the paper, our group wanted to highlight these important points that the paper made. The VSL cost is estimated at around $74.6 billion, yet the benefits of coal mining are estimated to be only $8.08 billion, which proves that while the popular belief is that coal mining helps the economy and creates jobs, it actually has a much more negative impact. Our group also discussed the fact that Appalachia has the most biodiversity, second to the tropics, so there are many potentially lasting effects of destroying the ecosystem. Our final thought is that we feel as though the region has been very lucky that there have not been more disasters and we should do something about our “coal habit” before that luck runs out. Our group discussed these questions about the article: -Given that many of coal’s greatest negative impacts affect those mining and living near the mines the most, why is it that those people are frequently some of the least willing to accept the inherent dangers associated with coal extraction, processing, and use even when those dangers are often quite visible? -The coal industry is a major part of the economy in Appalachia. Were we to replace our use of coal with renewable sources of energy, how would that affect the economy in Appalachia? Would the area be able to continue to rely on energy production as a major part of their economy or would the people in the coal industry be out of luck? -Were the findings of this study widely known throughout the country, would we change our energy habits? What negative cost of coal would people take the most issue with? -In the conclusion, there is a whole paragraph that includes the limitations and omitted externalities that they did not measure in this study. Some of these measures included morbidity/mortality statistics and long term effects on the environment, health, etc. All of these extra externalities included, what would the more true cost of coal really be? How would we morally go about measuring these long term effects?
Toggle Commented Feb 12, 2014 on Paper for next Tuesday at Jolly Green General
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Feb 12, 2014