Economic Development Notes

Writing Assignment One

Bullet Points

Paragraph Mode

The question of whether building more roads helps poor countries grow their economies is an interesting one. To investigate this, I would use a comparative analysis approach. This method involves looking at data from various countries that have invested in road infrastructure and comparing their economic growth before and after such investments.

This method is straightforward and leverages existing data, making it easier to identify patterns in economic growth without the need for complex modeling.

To conduct this analysis, I would require several resources, including World Bank or IMF reports on infrastructure and GDP growth, as well as case studies from developing countries. Additionally, basic statistical tools like Excel or Google Sheets would be necessary for the analysis of the collected data.

February 3, 2025

• The US can obtain money very easily, many countries will lend to us because we are a well established country. We don’t necessarily need to print more money.

  • Causes inflation if we print more money to pay off the debt. Creates hundreds of thousands worth of debt.

• WC —> Economic growth —> Big institutional —> Regression

• MDG —> Poverty Relief —> —> Specific Policies —> RCT

Growth Notes

• Y = AK^aL^1-a

  • Y = Output

  • A = Level of technology (knowledge about how to turn inputs into output).

  • K = Capital

  • L = Labor

  • The exponents indicate marginal productivity of each input.

February 17, 2025

• Easterly

  • Regression Analysis

    • Macroeconomic issues with a heavy emphasis on economic growth.

      • Model of growth:

        • Solow: Just increasing physical capital won’t increase the growth rate.

        • Restow: Emphasized big jumps in investment.

      • Increases in productivity

  • The Southern United States invested more into human capital vs. the Northern United States which invested more into innovation.

  • Why do investments in innovation and human capital not of diminishing marginal product? (Varies from country to another)

    • Positive externalities

      • Spillovers

      • Matches

        • Goes more with human capital.

      • Traps

    • Positive Externalities has to come from something good.

  • Fundamental Sources of Growth

    • Geography

      • Each country has different set of products that they can create. For example, Jamaica is tropical so they make sugar type shit.

    • Institutions

      • The reason we have patents. So people who come up with the idea can have at least some of the benefit of creating the idea.

    • Culture

    • Luck

  • Historical Factors (Next upcoming reading)

    • How might history shape the choices that people make? [In regards to economical growth].

• Duflo/Banerjee

  • RCTs

    • Focussed more on microeconomic issues, alleviated poverty, dealing with poverty traps.

March 19, 2025

• Population growth effect

  • Growth ?

  • Well being

    • Mothers

    • Children

• Choices

  • Benefits

    • Social Security + Savings

  • Costs

    • Contraception

• Gary Becker

  • Head who said invest in a few kids instead of having a shitload for a better return.

    • They take care of you instead of raising a shitload of bums.

March 26, 2025

• Basic Economics

  • Showing a supply and demand graph

March 31, 2025

• Why does insurance matter?

  • Farmers have a backup in case all hell breaks lose.

  • Risk averse

    • In economic terms: If you were given a choice between a sure thing and a risky proposition (same expected value)

      • Losing $50 or gaining $100

• Asymmetric information

  • When two sides of a trade have different information in regards to the trade.

  • Insurance markets are usually this.

• Moral Hazard: Hidden action (After you made the deal)

• Adverse Selection: Hidden information

April 7, 2025

• Issues with entrepreneurship in low income countries

  • Not enough capital to get started

  • Land may be limited

  • Low growth potential

  • Government corruption

  • Institutions

  • Why people start their own business

  • Risk

  • High competition

Writing Assignment Three

Markets are not just abstract economic constructs — they depend deeply on the social, political, and institutional context in which they operate. While markets often function efficiently in high-income countries, the same cannot be said for many low-income countries. As Easterly and Duflo argue, the failure or absence of markets in poorer countries often stems from weak institutions, poor incentives, and the high costs of information and enforcement.

A major reason for poorly functioning markets is the lack of reliable institutions. Easterly repeatedly highlights how corrupt or incompetent governments can distort markets. For instance, legal systems may be too weak or corrupt to enforce contracts, making it risky for businesses to lend, invest, or trade. Without credible enforcement, the trust that underpins market exchange breaks down. For example, if a borrower knows they can default without consequences, credit markets collapse.

In addition to weak institutions, poor incentives also hinder market development. Easterly emphasizes that “people do what they get paid to do “ — and in many low-income countries, incentives do not align with productive behavior. Government officials may benefit more from rent-seeking or favoritism than from fostering competitive markets. Similarly poorly designed aid or development programs often reward appearances over outcomes, leading to superficial compliance rather than real economic activity.

Poor Economics adds to this analysis by showing how information problems and behavioral biases people disrupt market functions. For example, health insurance or fertilizer markets may not exist because people don’t trust the product, can’t judge quality, or don’t have the upfront cash — even if the long-term payoff is large. Moreover, poor people often face overwhelming risk without formal safety nets, so they avoid markets that might expose them to potential loss, even if the expected value is positive.

Transactions costs are also higher in poor countries. Improper infrastructure, lack of transportation, and poor communication networks all contribute to fragmented and inefficient markets. A farmer in rural Uganda may grow plenty of crops but has no way to transport them to a profitable market, leaving them reliant on local middlemen who can’t dictate prices. In contrast, a farmer in the U.S. has access to national logistics systems and price information.

Lastly some markets don’t exist because of social norms or political resistance. Easterly says how politically connected elites often block reforms or market innovations that would erode their power. Duflo shows how gender norms or caste discrimination can exclude people from participating in labor or credit markets entirely.

In short, markets fail in low-income countries not because the idea of the market is flawed, but because the context in which they are supposed to work is not conductive to fair, efficient exchange. Strengthening institutions, improving information, and getting incentives right are crucial for markets to succeed in these settings.