« For Friday's Discussion on the SDGs | Main | For Friday's Discussion »



Mark Natiello

I was really interested in the high development theory and the idea that circular and cumulative causation happens in modern economies while some get locked into a trap of stagnation. This was similar to the analogy we were talking about the other day in class that had to do with people who get their high-level medical degrees gravitating to places with hospitals and job opportunities rather than rural underdeveloped areas. This promotes the self-sustaining modern economy because good technology, a good job market, and good infrastructure attract talented people. Talented people have quality work outputs which stimulate the modern economy. This is contrary to the theory that capital flows toward places void of it. Capital attracts capital.

It was interesting to see how as time went on, models became necessary in order to be validated by economists which resulted in the discrediting of Development Economics. Although Krugman mentioned that qualitative theories weren't taken as seriously as those with models, I believe that some models can be restricting and can portray an unrealistic depiction of the economy. In this model, I feel like not accounting for capital or quality of labor and equating expenditure to income overlooks some key factors when trying to understand the performance of a self-sustaining economy.

Isaiah Curtis

The paper explores the concept of ignorance forming out of a vast amount of newfound knowledge. Exploring concepts without the human capital to completely digest information does not seem ignorant, but rather elementary. Modeling has become an integral part of society's understanding of information because it properly allows for comparisons across the entirety of a discipline. However, information converted to models such as the Rosenstein-Rodan publication diminishes the insight early-stage economic evaluation is able to provide. Understanding, much less American understanding of rapid development during an essential period of economic development cannot be dismissed. Tying together to the ideas of ignorance and global development, the forward and backward development model is comparable to the O-ring model. The lack of educational development is why it is hard to expect labor to be held constant without expecting the interpretive ability of this rudimentary graph to hold substance in today's understanding of development econ.
The real-life example culminating in impoverished communities' spending habits. However, the inability to breed modernization is not necessarily absent but slowed compared to larger economies. Going forward, we should evaluate whether or not modernization can also be modeled linearly, which doesn't seem to hold true as of today. Could that be determined to be an ignorance bubble in the near future?

Tommy MacCowatt

I thought the most interesting aspect of this paper was the discussion of methodology in the study of economics and social science. Krugman describes how different people have different approaches to developing an economic theory. Most theories are accompanied by a model that helps to illustrate and explain that theory, but these can be restricting. I really liked the comparison between a model that analyzes an aspect of social science and a model of the global weather system. Both of these are extremely complex systems that can not be completely understood or accurately modeled. Although models are imperfect and cause people to make assumptions about what is important, they can provide a new understanding of a complex problem.

In the following section of the paper, Krugman explains how economists were shifting their focus to modeling despite the possible pitfalls. Models became more accurate during this period as economists perfected their techniques. Krugman compared the growth of modelling in economics to the mapping of Africa in the 15th and 19th centuries. During this time Europeans began to develop more accurate maps of certain areas of Africa but lost certain other details that had already been accurately depicted. This is one of the difficulties of deciding what should and should not be included in a model and what can be lost as people develop them further. Clearly models are still a key aspect of economic theory and allow us to simplify all the complexity of a real-world economy and focus on the key factors.

Connor Verrett

I think that the qualitative model approach definitely makes a lot more sense if you can achieve the end goal of a general prediction of what happens in certain development situations. Models no matter how complex will always suffer from simplicity, but we would be nowhere without allowing ourselves to take them as simple as they are. At times I've questioned how one could call something so simple a model. I liked the weather pan comparison because it put economics into context with other fields. Drawing on financial models like discounted cash flow analysis have similar issues in that they are very simple and really only work within their assumptions. Economics is unique in my opinion because it combines qualitative and quantitative analysis. Setting an abstract quantitative bar for theory seems contrary to the field itself. Having models for simplified situations give economists something to compare the complex situations to.
One thing I've noticed that's not really addressed in many of the models we've looked at is how would account for lacking institutional structures and things like rule of law in developing countries. Even the most complex models could never fully address a random military coup that results in the destruction of capital. Maybe people don't save because of runaway inflation or nowhere they can reliably store their money. None of the model's we accounted for really factor risk. Yes, capital could have more marginal productivity in a nation with less capital. However, would you take the chance at that investment if there was a high probability of instability ruining your investment? You would probably accept that there would be lower productivity in a developing nation with the trade-off that it won't be destroyed. Additionally some of the models even show that it would have higher productivity. Thing's like the O-ring theory show that even just the smallest thing in the world could completely throw off a model. Does this mean the model is bad? I don't think so. A model was never intended to capture all of the minutia.

Yuhan Liu

I find this piece by Kruger intriguing because it not only presents a simple and effective model of the high development theory but also a fascinating discussion of Hirschman and model building. Rosenstein’s high development theory was largely rejected because the economists of the 1940s and 50s were unable to model the economy of scale. Thus, economists like Hirschman and Myrdal, in the 1950s, proposed a way of doing economics rejecting the drive toward rigour. However, in this paper, Kruger states that while models have their limitations, building models is essential to doing economics. A fascinating point Kruger makes is that the widespread scepticism about the usefulness of economic models is often misplaced. Kruger argues that models should be treated as a kind of guide that economists and policymakers can use to view empirical evidence instead of as some doctrines that hold their truth regardless of what’s happening in real life. On the other extreme, it is not true the existence of assumptions and simplifications in economic models render the whole concept of modelling meritless in practice like Hirschman may imply. Kruger compares the simplification in economic models with some crude modelling done in natural sciences to illustrate the point. He suggests that models are good if they succeed in “explaining or rationalizing some of what you see in the world in a way that you might not have expected.” He even goes as far as saying that rhetorical technique like metaphor used by Hirschman among others is also a kind of modelling because it also offers an abstract way for us to view the empirical world. I find this discussion about the merit and demerit of modelling a crucial one because economic modelling is a dispensable language of the economists’, so knowing how, when, and why to apply them is one of the most important things for students and scholars of economics.

The comments to this entry are closed.