Overview Flashcards
Amartya Sen development theory
Development should be devoted to investigate the:
- “(S)ocial arrangements. in terms of their contribution to enhancing and guaranteeing the substantive freedoms of individuals seen as active agents of change, rather than passive recipients of dispenses benefits’’
- Freedom is both the primary end and the principal means of development.
- “The extent of the real freedom to live the kind of life that people have reason to value”
- “Development requires the removal of mayor sources of unfreedom: poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation, neglect of public facilities as well as intolerance or over activity of repressive states”
Mainstream approach
Well-being = Wealth = Income, so an increase in well-being equals an increase in wealth of nations, which increases the income in GDP terms.
- Technological change is the way to achieve economic growth
Unfreedoms
- Famines, little access to health care, to sanitary arrangements, to cleanwater (Unfreedom to survive).
- Undernutrition (Unfreedom to live well).
- Violation of political liberty and basic civil rights (Unfreedom to express the one own personality).
They are all constitutive (Grundlæggende) elements of development. They should be guaranteed in terms of themselves, and not in terms of their contribution to means of development, such as growth of income.
Neoclassical Economic Theory
A theory that believes that individual decisions are the outcome of an optimization process in which the others’ wishes and impact are not taken into account. If a person has both option x and y available and he/her chooses y, it is because the person actually prefers option y over option x.
Behavioral Economics
It is seen as a solution to the limits of neoclassical economic theory, since it is shown in reality that people have moral sentiments.
Behavioral economics is an approach to understand, explain and predict human behavior taking into account the human mind functioning, and the role played by social interaction.
Automatic thinking (Kahneman)
System A +System B
System A: Automatic thinking
- It is fast, effortless, associative and not subject to voluntary control.
- Humans engage in this system when they identify an emotion by a facial expression, or understand the point of a discussion in a second.
- It creates feelings and impressions.
System B: Deliberative thinking
It is slow, effortful and reflective.
- Engaging in this system requires high concentration and cognitive capacities.
- Humans find it difficult to engage in this system for a continued period of time.
Ex. It works when we solve math or when we aim to self-control an impulse
It evaluates the feelings and expressions made in system A.
Thinking socially
Here the consideration that human behavior has social micro-foundations, has been considered. People have social preferences rather than self-centered, self-interested preferences only, so most people fail to be self-interested at all times.
People value non-monetary regards such as status, recognition and friendly working environments.
Ex. The political in Columbia, who took a shower with his wife.
Thinking mentally
- The mental models are the shared understandings in a community. It includes identities and stereotypes. It also includes discourses of causality.
- Mental models have an impact on integration, since the common belief is that immigrants make greater use of public services than the native population even though it might not be true. Mental models do NOT require to be true in order to exist and spread.
Clark Doll test
It’s an experiment with two dolls, one black and one white.
- Black doll = Bad and ugly according to the kids
- White doll = Good
The young children prefer the white doll because it is white, has blue eyes and is apparently therefore more trustworthy and nice. They see the black doll as more ugly and less trustworthy.
Poverty trap (Duflo and Benerjee)
A poverty trap means the impossibility to escape from poverty given the current societal and individual characteristics. It is at the level of individuals or countries.
Nudging
The idea behind nodging is to affect the context so that people make decisions that increase their well-being.
- Nudge theory argues that if we wish to alter people’s behaviour in a particular direction, it is more effective to encourage positive choices rather than restricting unwanted behaviour with sanctions.
Confirmation bias
It is the ability to understand the information that affects our decisions. It is the propensity of human beings to align the new information with their preconceptions of the world.
- The tendency to interpret the new information in line with one’s own perceptions of reality.
- The perception to focus on the details that help enforce your own opinion, and to overlook that information that fails to support your own understanding of the world.
“The probability to answer a question correctly depends on the alignment between the one’s own view of the world and the correct answer.
Sunk cost bias
The propensity to continue with a project where you already invested energy, time and resources, although evidence strongly points to the failure of the full project.
“Global learning crisis” Talk by Amel K.
Today many kids go to school, but they fail to learn. It needs to change so people learn as well and not just attend. You should learn from the best in your class, look at what they do and do the same.
Neoclassical economics (Education in the literature)
- Education, and schooling, is seen as a label.
- Schooling is seen as an investment that turns into money for children when they become adults.
- Schooling is seen as a personal development for skill attainment.
Marxists economics
Education in the literature
- Schooling is seen as an institution that helps to “Institutionalize” individuals and, therefore, to reproduce capitalist labor structure.
- If critical thinking vanishes, critical thinking fails to be productive.
“Being healthy”
- To be able to do what you want to (Freedom)
- To be happy and physically well → Said by one who already fulfilled the basic needs.
- To be mentally healthy → Nurse, who experienced horrible things
- To be able to do basic chores
- To have good living conditions
- To be able to go to work → Poor person in India, because she sees it as survival.
Health
Health is a multifaceted concept and not easy to measure. WHO definition: “Health is a state of complete physical and mental well-being and not merely the absence of disease or infirmity”
- Health is an important part of human capital.
Health care
The prevention, treatment and management of illness and the prevention of mental and physical well-being through the services offered by the medical and allied health professions.
The difference between heath and health care
The difference between health and health care is that health care can be traded on the market, but health cannot. Also, we demand and use health services, but are worried about our health.
Preventive care
- Preventive care is a combination of medical practices that are designed to avoid disease and illness.
- Preventive care is highly effective and a cheap health investment to prevent diseases and promote good health.
Malnutrition
A condition that happens when your diet does not contain the right amount of nutrients. It refers to undernutrition or overnutrition. It can cause:
Undernutrition, Growth delay, Global denutrition, Wasting, Chronic malnutrition, Stunting, Low weight
The causes of malnutrition
Basic: Poverty, type of public policies and institutions.
Intermediate causes: Food insecurity, inadequate social environment, care and health services.
Immediate causes: Inadequate feeding practices and infections.
Chronic hunger
Nutrition related concepts
Undernourishment caused by not ingesting enough energy to lead a normal, active life. It is linked to constant lack of food security.
Undernutrition
Nutrition related concepts
The lack of energy, due to deficits in calories, proteins and some nutrients. It includes low weight for age and low height for age.
Food security
Nutrition related concepts
People are considered food secure when they have availability and adequate access at all times to sufficient, safe nutritious food to maintain a healthy and active life. It includes food availability, access and utilization.
Wasting (Acute undernutrition)
- Rapid deterioration in nutritional status over a short period of time
- Non compatible with life
- Indicator: Weight for height (Low weight compared to the height)
Chronic malnutrition (stunting)
- Exposed during a long period of time to lack of adequate food and recurrent infections.
- Availability of food but lack of essential nutrients.
- Compatible with life (Hidden hunger: Often not visible, but can have big bellies))
- Indicator: Height for age (Low height compared to age)
Moderate malnutrition
It is in between a healthy child who lives in an adequate environment and the child who is severely malnourished and lives in a hostile and polluted environment.
Millennium development goals: 1990-2015
- Reducing to half the proportion of people with hunger.
- Reducing to half the prevalence of children under 5 years old with low weight.
- Reducing the proportion of the population with consumption of calories under the minimum level.
Sustainable development goals: 2015-2030
- End poverty
- End hunger, achieve food security, improve nutrition, and sustainable agriculture.
- Ensure healthy lives.
- Ensure quality education and learning
- Achieve gender equality and empowerment
- Ensure sustainable water and sanitation
- Ensure sustainable consumption and production patterns
- Revitalize global partnerships
Income gini coefficient
Measures of inequality
This is a measure of the deviation of the distribution of income among individuals or households within a country from perfectly equal distribution. A value of 0 represents absolute equality, a value of 100 means absolute inequality.
Income quintile ratio
Measures of inequality
This is the ratio of the average income of the richest 20% of the population to the average income of the poorest 20% of the population.
Inherited inequality
Children of high-income parents obtain bequests that include wealth, but children of low-income parents do not.
Job segregation
It is the distribution of workers across and within occupations, based on demographic characteristics ex. gender. Woman and men differ in their choices of studies and job
- Women choose: Secretaries, elementary school teachers and nurses. Women choose jobs that are paid worse.
- Men choose: Carpenters, mechanical engineers and airplane pilots.
Neoclassical decision theory
This theory is following the fundamentals of neoclassical paradigm, which support that the allocation of family duties is guided by:
- The comparative advantage of an individual
- The bargaining power of an individual
Preference for sons
A couple is likely to develop preference for sons due to a historical background of female disadvantage.
Microcredits
The lending of small amounts of money at low interest to new businesses in the developing world
Microsavings
Microsavings is a form of microfinance where organizations and financial institutions encourage individuals to save money. Microsavings accounts are similar to traditional savings accounts, but are designed for small deposits.
“A world of 3 0´s (0 poverty, 0 emission, 0 unemployment) by Mohamad Yunus
According to Mohamad, people are selfless. He thinks that people should be a business, a social business. Kids should be taught to work for profit business or for social business or little of both. It should be a choice, which they dont have today. Also, people should not be working for others, they should be their own entrepreneur. He provides financial support to those who want to become entrepreneurs, especially women. He believes that poor people become alive when they get the right resources to grow and be creative.
Governance
Governance is the process and institutions by which authority in a country is exercised:
- The process by which governments are selected, held accountable, monitored and replaced.
- The capacity of governments to manage resources efficiently, and to formulate, implement and norce sound policies and regulations; and
- The respect for the institutions that govern economic and social interactions among them
Misgovernance
Misgovernance is a bad or corrupt government.
Misgovernance results in poverty through various channels – reduced growth being a key one
Acemoglu and Daron (Robinson)
Why Nations fail
- Until political institutions are fixed, countries can not really develop.
- Good economic institutions will encourage citizens to invest, accumulate, and develop new technologies, making societies more prosperous.
- Bad institutions tend to perpetuate bad institutions: the vicious circle, sometimes called “the iron law of oligarchy”
- How to break the vicious circle? Through Social/Economic/Policital revolution or a big outbreak
Jeffrey Sachs (Why nations fail)
Corruption and poverty trap: more aid to implement basic programs in order to reduce poverty and improve living standards, what in turn will empower civil society and governments to mantain the rule of law
Paul Romer
If you cannot run your country subcontract it to someone that can.
William Easterly
- The real problem of development is not one of figuring out good policies, but to sort out the political process.
- If the politics are right, good policies will emerge. Leave the countries alone to solve their problems, example: Iraq and US.
- Give freedom to a country to develop democracy, and emanate their own institutions from the bottom up.
Paul Collier
Countries stuck in a vicious circle of bad economic and bad political institutions: it is the duty of western countries to rescue them, if necessary through military interventions.
Duflo
- Like Acemoglu they do not support the imposition of institutions from outside.
- Differently to Acemoglu they see a lot of significant institutional changes happening, at the margin, in the absence of an outside invasion or a full-scale social revolution.
Geographic theories by Jared Diamond
The reason for the differences between countries in poverty and the patterns of growth
Differences come from different endowments of plant and animal species, which influenced agricultural productivity.
Cultural reasons
The reason for the differences between countries in poverty and the patterns of growth
Prosperity and culture ( beliefs, ethics, values, religion etc…)
Example:
- Africans are poor because they lack good work ethic
- Latin Americans are poor because they are intrinsically profligate and impecunious, and have the iberian culture of “manaña” (meaning tomorrow*).
The culture hypothesis can be right. Social norms are difficult to change and may support institutional differences
The ignorance hypothesis
The reason for the differences between countries in poverty and the patterns of growth
- Our rulers do not know how to make poor countries rich.
- There were no differences between Cortes and John Smith in terms of ignorance. There were differences in the institutional constraints that the countries´s presidents and elites were facing.
The institutional hypothesis (Acemoglus & Robinson + Douglas North)
(The reason for the differences between countries in poverty and the patterns of growth)
Nations sometimes manage to adopt efficient institutions and achieve prosperity but most do not. This is the study of politics and political process, which is crucial to understand world inequality.
The role of institutions according to Douglass North
- Douglass North: role of institutions as “to reduce uncertainty by establishing a stable (but not necessarily efficient) structure to human interaction”.
- “Institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction”. Douglas North
Institutions
Institutions are: Humanly devised; sets constraints; shapes incentives.
- Political institutions: Political rules of the game (democracy versus dictatorship, electoral law)
- Economic institutions: Economic rules of the game (property rights, contracting institutions)
How to model institutions:
4 views
Efficiency institutions view
Society or the economic agents will choose whichever set of institutions and regulations will maximize the size of the “pie”.
**this is not that realistic
The social conflict view
Institutions emerge as a result of economic agents´ conflicting preferences. They are not necessarily efficient.
North: there is: “persistent tension between the ownership structure which maximizes the rents to the ruler (and his group) and an efficient system that reduces transaction costs and encourages economic growth”.
Major barrier to efficiency: commitment problems
The ideology/beliefs view
Different institutions chosen as a result of different beliefs. But where do beliefs come from?
The incidental institutions view
Institutions emerge as a byproduct of other interactions: Historical accidents
Two types of political power.
Formal institutions - De jure power
De jure political power is allocated by political institutions (such as constitutions or electoral system)
For example, whether a country has a Supreme Court, Separation of power, Parliamentary system etc.…
*this is the rules, ideally what should happen
Informal institutions - De facto power
De facto political power emerges from the ability to engage in collective action, use brute force, paramilitaries, armies, or other channels such as lobbying and bribery.
For example, may Latin American countries have a presidential system similar to the U.S, but in practice, they have very different “political institutions”
*this is what happens in real practice
Aid
w. conditionalities and without
With conditionalities: COnditions on the way the money is spens and government recipient policies
Without conditionalities: For example, budget support from bilateral donors.
Multilateral institutions/organizations
- These are organizations formed between three or more nations to work on issues that relate to all of the countries in the organization.
- These institutions can play a variety of goals, such as: increase trade, improve infrastructure, peacekeeping, promote good governance, develop technology, provide health and education etc.
- Ex. United Nations Development Program (UNDP), World Bank Super-national bodies that have been created with representatives from the governments of many member states. These may be closed groups, e.g. NATO or theoretically open organizations, e.g. the United Nations.
Big Push theory (1970)
The Big Push Theory is a concept that emphasizes that a firm’s decision whether to industrialize or not, depends on its expectation of what other firms will do. It assumes economies of scale and oligopolistic market structure and explains when industrialization would happen.
Bilateral organizations
Type of organisation
A bilateral organization is a government agency or nonprofit organization that receives funding from its home country’s government to then be used toward a developing country. This aid is more specifically targeted than multilateral aid, which may go through an international organization such as the United Nations.
Civil society organizations
Type of organisation
Also known as Non-Governmental Organizations (NGOs), Non-Profits & Not-for-Profits.
Civil society is an umbrella term for an extremely diverse and numerous group, including charities, religious and private foundations. There are both international and national civil society groups.
Civil society groups are started and owned by private individuals or organizations. They are independent of governments, but may receive (in some cases substantial) funding from governments.
Private sector
Type of organisation
This is a term that describes any privately owned group or person involved in profitable activities. Of course this is a huge group, and distinct from the other categories as organizations within the private sector are all for-profit.
Research institutions
Type of organisation
Defined as any group involved in investigative study for scientific or educational purposes. They may be privately owned or funded by the state.
Conditionality
- Conditionality is when donors offer aid or money buy only under certain conditions.
- When countries put conditions with their aid, it is commonly assumed that the sole objective of conditionality is to induce policy change.
The 5 objectives of conditionality
- Induce change in policies
- Selectivity
- Paternalism
- Restraint
- Signalling
How to achieve sustainability and inclusive green growth?
- Civil society
- Private firms
- Factors of change for the firms
- Government
- New financing methods
- New macroeconomic indicators
