« 280 Paper for Thursday | Main | Econ 398 for Tuesday »

10/27/2014

Comments

Taylor Theodossiou

I agree with Ferrell that it is interesting that both of these articles focus on human capital. Schultz says that the common idea that the poor don’t try to change their economic situation is not true. The poor are especially entrepreneurial, which flies in the face of the idea that the poor have given up on the economic struggle. However, in order to really help the poor, human capital must be of utmost importance. The skills and knowledge of these populations need to be raised. This leads to Schultz talking about how it is important to focus on population quality so that there can be economic growth. By investing in population quality such as acquiring information and skills through schooling or investing in health a population can really benefit. For instance, he goes in to talking about how investments in health care can benefit the poor greatly. If health care is better people will have longer life spans, which then provide additional incentives to acquire more education, as investments in their future earnings.
This ties in very nicely to the Sachs and Malaney article on the economic and social burden of malaria. This article describes the correlation between malaria and poverty in underdeveloped countries. When I was in the Dominican Republic I got to experience the negative effects of a disease similar to Malaria. While Malaria wasn’t a big problem in the area I was living in another disease very similar called Chikingunya was spreading to everyone. Although only life threatening in rare cases the symptoms of Chikingunya can prevent a person from being productive for up to three weeks because of high fever and bone pain the disease brings. Therefore it can be very detrimental to a person’s ability to work, much like Malaria is. The spread of Chikingunya was also very detrimental to the tour industry in the Dominican Republic that summer. People did not want to go to a place where there was a potentially deadly disease that they had never heard of before. This is what was especially frustrating. People did not know much about the disease and therefore there wasn’t much being done to keep it from spreading. Sachs and Malaney talk about the many ways that Malaria can be prevented and how much this will benefit the populations that are affected by the disease.

Mac McKee

In Schulz's speech I was interested in several different points. First was the mention of entrepreneurship as a vital skill found in farmers. I'd never associated farmers with entrepreneurial tendencies, but Schulz makes a compelling case. After all, being in such a low-margin industry demands precision and innovation, It surprised me even more to learn that this entrepreneurship is often squashed by governments that don't provide proper incentives to the agricultural sector. I wonder how one would go about changing the negative attitude that governments seem to have toward agriculture. Further, what sort of incentives are required to make technological investment a wise move for farmers? How should a government go about incenting entrepreneurship from its farmers?

Second, after reading this piece, I've begun to think how this different perception of the individual worker could add complexity to the Solow Growth model (this would take a better economist than I). As it functions currently, amount of capital is the only thing that effects a worker's productivity. Schulz's speech introduces elements of education, health, and skilled workers. This would provide a much more detailed picture of productivity per capita but would turn model on its head because of the increasing marginal returns of improved health and education.

Griffin Cook

One of the things that most struck me in the Shultz and Lewis lecture is the line “interventions by governments are currently the major cause of the lack of optimum economic incentives.” Obviously, this is counter-intuitive to the state in which things should be, as government interventions and policy implementations should be providing people with incentives for making economically sounds decisions and maximizing overall social benefit. As we are all well aware, people respond to incentives, and the best way to implement optimum, positive change is to provide effective incentives to entice people into changing their behavior or choices. Of course, this lecture is about 25 years old by now, and the global climate for many countries and governments has changed, but overall I believe that there are many circumstances in which governments are still acting as barriers for proper incentives rather than instituting them.

Another interesting aspect of the lecture is its emphasis on agriculture, or the rural sector. Schultz and Lewis indicate the significant returns to agricultural research in India, as well as the potential benefit agricultural endeavors can have in terms of opportunities for providing food and income in poor countries and regions. I think the focus on agriculture in this lecture is especially interesting when considered in comparison to the Lewis two-sector model. The assumptions that the marginal product of labor for the rural sector is zero while the urban sector has a greater marginal product of labor yields the conclusion that investment in the urban sector can lead to economic growth and increased income, so incentives should be tailored to producing this result. However, as mentioned in the lecture, I think that proper incentives and extensive research for agricultural laborers can be just as effective in inducing growth. Improving agricultural conditions and the effectiveness of yielding crops can not only improve the marginal product of labor, but also increase human capital. Better farming technology means that fewer workers are needed, so children can attend school rather than being kept home to work on the farm. In addition, the development of new farming techniques can produce more and better crops, providing for better overall health and nutrition. This allows the farmers themselves to be more productive and better feed their families, giving them better long-term outcomes. As Schultz and Lewis highlight, population quality is important. In certain situations, I think that trying to change population quality through methods such as improving agriculture can initially be just as effective, if not more effective, in certain countries than trying to incentivize agents to make decisions that try to drive urbanization or simply try to completely overhaul certain established ways of life in farming communities that have lived the same way for centuries.

Zach Colby

I really enjoyed the Schultz and Lewis piece. They won a Nobel prize because of the way that they thought outside the box and challenged what everyone else in their field had though. The discussion really makes you think and makes you wonder what else we are getting wrong right now and where are there easy fixes that we are missing. The text reminded me of a discussion we recently had in Professor Goldsmith's Econ 235 class. We read a piece about and discussed rational addiction theory. This theory challenges what you or I might think about an addicts behavior. We used the stark example of a heroin addict continuing to use and using their money to buy drugs instead of taking care of their kids. Now to you and I this probably seems like a completely irrational decision but when examined a little closer we see that it is not. Addictive goods shift their preference curves out after first use and continue to shift out and shift in their substitutes. Now this doesn't necessarily relate exactly to Schultz and Lewis' thoughts but the neoclassical way of thinking really makes us reexamine problems, the way Schultz and Lewis frame the economics of being poor.

Austin Pierce

It's a point we have discussed in class before, but I feel like most social science discounts all the education needed to be a truly efficient farmer. Granted, in a lot of these countries, not everyone on the farm is necessarily most efficient on the farm. Also, granted, being literate and numerate would probably increase output on the farm.

But while you're learning how to quote Shakespeare or take derivatives, you aren't learning that sorghums produce prussic acid (ok...you probably aren't learning that in the field either) which can poison livestock (in different temperatures in different climates). You also aren't learning to look at a cow's flank to make sure it's eating, even if there is forage available.

Those also are the types of things computers, mechanics, and technology can't do as well. So, there is a benefit to learning on the farm and not necessarily acquiring what economists would traditionally call human kapital.

None of this is to bash the impact of higher education, scientific developments, engineering, etc. Those are all important and can lead to better qualities of life. Also, most of the poor aren't even acquiring the basic skills of literacy and numeracy that would make them more effective workers. I just feel that, especially when addressing agricultural, it is important to recognize that the standard economic explanations are likely failing to recognize some important element (in part because it is harder to quantify and model).

Richard Nelson

Schultz’s format is very easy to follow, as he starts with pointing out modern economist’s mistakes and leads into the importance of different human investments. He points out that our understanding of low income economies is flawed because we aren’t using valuable resources at our disposal. We treat standard income and low income countries as totally different entities, when really the fundamental inputs and cost-benefit analyses going into decision making is exactly the same. Then he goes on to talk about education, agency, health, and growing skilled workers. Everything seemed to reinforce what we have already learned, except for one argument in between titled “land is overrated.” My first thoughts were that land is everything. From it we derive property, ownership, agriculture, and something tangible. With the proper laws and enforcement, it is one of the most valuable assets, especially if it is arable. The social-economic view, which Schultz prefers, states that human intelligence and innovation is what really matters.

I find the rest of this argument in this section to be a bit over-shot. First, land is very important, and land that is already suitable for crops is even better. Sure, our future will be determined by what we innovate and how our skills improve the production of our land, but this is assuming that everyone has access to these resources. Schultz implies that the modernization of agriculture is just a switch waiting to be flipped in our modernization process once we realize it’s value, when really it has just been us weighing our cost-benefit analysis. We have realized it needs to be done, but other things are more important. Why do we take our children out of school, or not bring them to the doctor? The reason is because we don’t have enough scarce resources, and that it foregoes precedence to many other more essential things in many areas. Second, arable land is just like giving a man a fish instead of teaching him how to fish. It is not causal, and just because poor people live in great growing areas does not undermine the value of land itself. You can’t deny any benefit of having better land. At the same time, it doesn’t mean that the population will be less poor, and it doesn’t mean that better land is not important.

Austin Pierce

I also have to add a critique from outside of economics in that "subduing Nature" might not be the best thing for humanity. A lot of this has led to mechanization, technicity, and an ideology that is potentially corrupting what it is for us to be human. We live in an age of plastics and factories where we don't know where things come from, we have no connection to what we are eating, and we are (as discussed some in ECON 398 on Tuesday) losing our qualities of compassion and empathy.

So subduing Nature, while letting us fulfill our wants, might be doing so at the cost of our humanity and (relative) freedom.

Brian Lawler

I thought the Schwartz article was very interesting. He made it very clear that he thought poor members of the agricultural community were just as rational when making decisions as anyone else. In fact, he said they were very efficient in that they knew how to allocate scarce resources well. I am curious as to how he would respond to the data that shows that these individuals t=do not necessarily respond in the way we would expect to increases in wages in relation to child labor. He might say this is another example of their excellent capacity for making short-term vs long-term decisions or he might be surprised. I cannot quite tell.

The comments to this entry are closed.