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10/25/2019

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Christopher Watt

After reflecting more on the Schultz piece as well as reading from the text book, I have begun to think a lot about the idea that quality is a substitute for quantity and how this relates to economies of scale. Chapter 6 in T&S describes some positive impacts of population growth, one of which is the idea that population growth is an essential ingredient to stimulate development. Thinking back to some of the older ideas of economic development we discussed during our run through of the history of growth theory, many economists argued that increasing wages and the size of the urban sector were vital aspects of growth. This made the assumption, as we discussed, about the importance of economies of scale. Though this assumption had some push back, the Schultz people got me focused on the development of quality; however, it seems that quantity, at least in early stages of development, has some degree of significance in the creation of economies of scale and large enough markets to increase wages and hence overall output. However, it seems that it wouldn’t matter how many people were in the population if they can’t afford to stimulate economic activity due to initially low incomes, again refortifying the idea that wages must first be increased to increase output for the large market. Hence, quality and the ability to earn large wages is of great importance.

drewwoodfolk

I very much enjoyed Schulz's lecture about "The Economics of Being Poor" and found it fascinating for a couple reasons.

First, it was really interesting to see his thoughts on the value of farmers and agriculture on growing society. Coming into this class I had the preconcieved notion that the vast majority of meaningful economic growth would be found in urban areas and that agriculture was nothing more than an ancient sector that would slowly be phased out. Instead farmers are in fact some of the most skilled entrepreneurs that exist in a society. Constantly facing high stake decisions involving cost and returns, agriculture is an intricate juggling act that plays an important role in the development of any economy even in the 21st century. It was also intersting to learn that many governments engage in discriminatory practices and hold many of the same preconceived notions about agriculture as an economic sector as I did. Since must of a nations political capital lies in the hands of urban consumers, those in rural agriculture are often dismissed as "inherently backwards" and used for cheap food and nothing more.

The second point from the article that really stood out was Schulz's characterization for health as a stock. I'd never heard of the term "health capital" but I find it quite fitting as a term. I firmly align with Schulz's idea that health stock, just like any stock, has short term cost of investment but yields far greater returns in the long run. For example, revamping a nations health care infrastructure is certainly a large undertaking and has great initial cost, but the long run effects (making eduction more worthwhile, increasing life spans, etc) are exponentially greater.

Nicholas Tierney Watson

This essay really seems like a response to the failings and assumptions of the Lewis Two Sector Model. Shultz’s main issue is how the government creates incentive structures or in his words “incentives are greatly distorted in many low-income countries”. Governments are creating incentive structures that encourage migration to urban areas and “modernization”, taking away from the potential productivity in the agricultural sector. Granted, this makes sense, if you assume the marginal product of labor on farms is 0. This is where I think Shultz makes his most important point about how underrated the quality of human agents is. Even if the marginal product of labor of agricultural laborers is 0, that is when, more often than not, they have limited access to education and good health. There is so much potential productivity that is lost when we leave farmers in poor health and poorly educated. For example, in India, through investments made to educating farmers, and giving farmers good health, there for longer life, productivity on farms went up. The gains made through investments in human capital can also be seen through the generational gains made through land grant institutions in the USA. What I had never thought about before, and what underpins the importance of investments made to human capital, is that, for the most part, human capital accumulation is migratable across industries. Land that is best suited for farming will really only be used for agriculture, but a generally educated person is flexible and nimble in an economy and can be useful in a myriad of industries.

Lucas Flood

I found Theodore W. Schultz’s work on “The Economics of Being Poor” to be interesting, informative, and refreshing. Schultz goes straight to the point on one of the challenges of poverty alleviation: the rich simply do not understand the poor in many cases. Growing up, although my family was certainly far better off in comparison to families in developing nations, my family had a fairly low income in comparison to most Americans. Growing up without much money meant I did not get to participate in many of the things my friends participated in when they were younger. Nevertheless, I was still able to pursue a better future because of the two main variables Schultz identifies: education and health. Despite a relatively lower income in comparison to my friends, I was still able to get an excellent education in high school; an education that prepared me well for Washington and Lee. When comparing my family’s experience to the experience of families in developing nations, I therefore recognize the value of educational opportunities to create upward economic mobility. Thankfully I was not prevented from participating in anything due to my good health (something I certainly recognize is not the case for too many people). As Schultz pointed out, I am also incentivized to continue education after my time at Washington and Lee due to a relatively higher life expectancy in the United States.
It is fascinating to compare my experience in the United States, a developed and economically strong nation, to the experiences of the relatively poor in developing nations. In my experience, educational opportunities opened up and I was able to improve my own human capital; an improvement that in turn increased population quality. The logic of my situation makes sense to Schultz, specifically because he points out that “education accounts for much of the improvements in population quality.” When reading Schultz’s argument that “poor people are no less concerned about improving their lot and that of their children,” I was struck with the dual opportunities of education and higher life expectancy and the good fortune of being born into a family living in a developed nation.

Adrian Lam

After learning about T.W. Schultz and his development theory on quality of people in class, I thought his lecture on “The Economics of Being Poor” demonstrated really well his arguments in favor of investing in human capital. When I was reading this paper, I found several connections between his ideas and some concepts I learned about in my science classes, which I wanted to describe in this blog post.

To begin, in biochemistry, the binding of epinephrine to a beta-adrenergic receptor can lead to a chain of events that can trigger the breakdown of a sugar named glycogen. In this example, an enzyme cascade occurs where each molecule that responds to epinephrine is able to activate many more molecules further down the pathway. In this manner, a single molecule can lead to a response that is many folds larger (think logarithmic scale). Just like these cascade events, investing in human capital creates a waterfall of benefits. By investing in areas like nutrition and education, a multitude of positive externalities and spillover effects are produced. For example, Schultz describes how investing in health can lead to longer lifespans, which tends to increase productivity of workers and reduce the amount of “sick time”, which in turn can lead to additional greater economic growth for the country. These healthier citizens now also have more incentives to invest in savings and education, which further propagates the cycle.

Another concept I was reminded of comes from my physics class. When we calculate the torque applied to an object, we use a cross product of two inputs. What is interesting here is how the cross product is different than simple multiplication. Unlike when you multiply two numbers, the cross product produces different results, depending on the order in which the inputs are given. I thought about the cross product when Schultz was describing the discrimination and biases against the agricultural sector. Just like the cross product, prioritizing investments in the “modern” sector before the “traditional” sector may not necessarily lead to the same results compared to if the opposite route was chosen. Schultz describes well the different mistakes economists have made here, such as classifying farming as “backwards” and overrating land. Focusing on policies that favor agriculture first may actually be best for a low-income country with many farmers.

Finally, the most astonishing statistic I found in Schultz’s lecture was how investment in agricultural research has shown a 40% return on investment in parts of India. This is made even more amazing when we account for all the associated noneconomic benefits, like increased quality of life and satisfaction, which may be difficult to quantitate. Ending on an optimistic note, I was very glad to read how advancements in knowledge, technology, and research can lessen our dependence on croplands and depleting sources of energy.

Jack_curtis25

The Schultz article was a reinforcement for much of what we have learned in class up until now. He speaks highly about investment in human capital and also ties in well with Sen’s capabilities theory. Shultz goes on in the section about human agents to state that investing in the population quality can significantly raise economic prospects for the poor. This speaks to Sen’s believe in enabling people to pursue their freedoms. If there is one thing that I have learned about economics it’s that people respond to incentives and generally take advantage of opportunities thrown their way. It is sad to see how he describes the urban bias against poor, rural farmers as they are seen as backwards towards economic development. Such an observation points to the weaknesses in the assumptions of the Lewis-two sector model. The inefficiencies the government creates through agricultural market intervention may very well be what’s holding down the economic prospects and well-being of many rural farmers. We have learned that empowering the agricultural sector with strong investment can be a key driver of growth in LICs. The prioritization by many developing economies, encouraged by some donor agencies, for the modern sector is misguided as we have learned. Rather, I think as does Shultz, farmers should be understood not to be backwards but as economic actors capable of making rational and efficient decisions. It appears the development economics community began to shift in the decade following Shultz’s lecture away from the rigid mathematically intense models back towards a more ideational approach marked by the return of HDT we learned earlier.

I also found it interesting how he spoke about how land is overrated in development economics. I agree with him as obviously geography, climate, soil, etc. matter when it comes to the initial and most basic prospects for a country. However, they should not be long-term limiting factors. Consider the example of Japan. Now it is one of the wealthiest and modern countries in the world. It certainly didn’t get any help from the land it currently has. In fact, only a small portion of the main islands are flat plains. The rest is mountainous and volcanically active. This makes farming significantly more difficult than in many of the other developed nations in the world. Despite this they are able to shine on the economic stage exactly because they have been able to invest so much into their human capital.

EC Myers

I appreciate what this paper is going for, but as much as there are points in this paper that I agree with, there are as many points that are extremely frustrating to me.

Schultz mentions that farming incentives are based upon the opportunities that farmers have to increase "the effective supply of land by means of investments," which reminds me a lot of an issue in Rockbridge County, VA today: stream-exclusion cattle fencing. For those of you who do not know, its bad to have cows in our streams. Bad for the cows, bad for the people, bad for the water, and bad for the animals who live in and live from this water. Really just not good in so many ways. As a result, farmers are encouraged to implement streamside exclusion practices, like fencing or riparian buffers to restrict cows access to waterways. Despite cost share programs in Virginia, only ~20% of farmers in Augusta county (highest agricultural production county) have implemented these practices. There is not a whole lot of research as to why they have not participated in these programs (but check in with me in April and hopefully my capstone will have answered the question why) but one of the theories is that it is not practical for small farmers. The program requires farmers to fence off a certain distance of land away from the stream, which can accumulate to acres depending on their land, greatly reducing their amount of productive and therefore profitable land. I thought this was a great example supporting how incentives matter when getting farmers to augment their land by means of investments.

Some phrasing in this paper doesn't quite align with my agricultural beliefs. In "Dirt to Soil" by Gabe Brown, the author states that you would have to eat 8 oranges to get the same amount of nutrients that your grandparents would have gotten from eating 1 orange because the soil has been stripped of so many of its nutrients. So when Schultz makes it seem like its just a great thing that in 1979 we produced 3 times the amount of corn on 33 million acres, it doesn't quite fit the whole story. Schultz does say that Ricardo's concept of "the original and indestructible powers of the soil" is inadequate, his little brag about the corn doesn't make it seem like he thinks this concept is inadequate because soil is in fact NOT indestructible.

Anywho, I shall hop off of my soapbox now. Thank you for coming to my TED Talk.

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