Understanding Economic Policy Reform Essay Example for Free

Understanding Economic Policy Reform Essay What is the point of loudly proclaiming reforms if these are not aimed at improving the well-being of a large majority of the population? And if that is their goal, why should reforms be unpopular? In many areas of policy, there may ex1 Quoted by Jose Maria Maravall in Luiz Carlos Bresser Pereira, Maravall, and Adam Przeworski (1993). â€Å" T ist â€Å"technical† uncertainty as to what the appropriate solution is to the problems at hand. Think of President Clinton’s health care plan, for example, or of global warming. Consequently, reforms will arouse opposition if they are viewed as applying the wrong fix or if they are perceived as being primarily redistributive (that is, zero-sum). What is remarkable about current fashions in economic development policy (as applied to both developing and transitional economies), however, is the extent of convergence that has developed on the broad outlines of what constitutes an appropriate economic strategy. This strategy emphasizes fiscal rectitude, competitive exchange rates, free trade, privatization, undistorted market prices, and limited intervention (save for encouraging exports, education, and infrastructure). Faith in the desirability and efficacy of these policies unites the vast majority of professional economists in the developed world who are concerned with issues of development. 2 2 The convergence is not complete of course. But compared to two decades ago, the various sides have moved substantially closer to each other. One indicator of this is the recent book by Bresser Pereira, Maravall, and Przeworski (1993), which advocates a â€Å"social democratic† approach. The views expressed in this book concede an inor- 9 10 Journal of Economic Literature, Vol. XXXIV (March 1996) we observe such instances of collective irrationality. The events of the last decade have underscored the need to understand the political-economy of policy making. One of the eventual consequences of the global debt crisis that erupted in 1982 was a wave of market-oriented economic reforms, the likes of which have never been seen. The reforms were strongest and most sustained in Latin America, where countries like Bolivia, Mexico, Argentina, Peru, Colombia, and Brazil joined Chile in orthodoxy. But this was very much a global phenomenon. â€Å"Stabilization† and â€Å"structural adjustment† became the primary preoccupation of government leaders in Asia and Africa as well, even though the commitment to economic orthodoxy varied across countries and over time. These countries were in turn soon joined by the previously socialist economies of Eastern Europe and the former Soviet Union. Economists who had cut their teeth in Latin America’s economic quagmires became the advisors and analysts of these transitional economies. Even India, the giant archetype of a closed, import-substituting economy among developing countries, embarked on a process of economic liberalization in 1991 (see Jagdish Bhagwati 1993 and Arvind Panagariya 1994). These reforms were encouraging to economists and a vindication of sorts to those among them who had long advocated market-oriented reforms. But they in turn raise their own puzzles. Most fundamental of all, why are so many governments reforming now, after decades of adherence to policies of an opposite kind? This question poses a particularly important challenge to political economists: an understanding of these countries’ experiences now requires a theory that explains not only why seemingly dysfunctional policies had been initially un- Hence economists are often torn between two conflicting perspectives: on the one hand, good economic policy should produce favorable outcomes and therefore should prove also to be good politics; on the other hand, the implementation of good economic policy is often viewed as requiring â€Å"strong† and â€Å"autonomous† (not to say authoritarian) leadership. The experience of Chile, a country which has perhaps gone further than any other in implementing liberal economic policies, provides a good example. An essay on Chile’s reform strategy by Jose Pinera (1994), an economist and minister of labor and social security under General Pinochet, concludes: â€Å"[i]n the end, good policy is good politics† (p. 231). The irony is that most of the reforms the author glowingly discusses in the preceding pages required the suspension of normal politics and as heavy a dose of authoritarianism as seen anywhere. Good economics does often turn out to be good politics, but only eventually. Policies that work do become popular, but the time lag can be long enough for the relationship not to be exploitable by would-be reformers. In Chile’s case, free market policies (implemented after 1973) were eventually resoundingly endorsed in the presidential elections of 1989 and have become the envy of Latin America. 3 Conversely, bad economics can be popular, if only temporarily. President Alan Garcia’s popularity soared in Peru during his first two years in office (1985–86), thanks to expansionary fiscal policies whose medium-term unsustainability should have been obvious to anyone with common sense (see Ricardo Lago 1991). The puzzle is why dinate amount to the consensus view, and depart from it in remarkably few details. I will discuss this book in Section IV. 3 For a recent evaluation, see Barry Bosworth, Rudiger Dornbusch, and Ral Labn (1994). Rodrik: Understanding Economic Policy Reform dertaken and then maintained for so long, but also why these policies were suddenly abandoned en masse during the 1980s, often by the same politicians who had been among their most ardent supporters. Second, while the reforms were inspired at least in part by the East Asian experience, they took place much more quickly and, in many areas, are going considerably beyond those undertaken in East Asia. This raises the question of whether the new wave of reformers have internalized the correct lessons from the East Asian experience. Finally, are there any helpful rules for reformers to follow in guiding their policies through complicated political terrain? Can one hope to develop a â€Å"how-to† manual for the reformist politician? Puzzlement over such questions has led to a large and growing literature. A very short bibliography would include books by Merilee Grindle and John Thomas (1991), Robert Bates and Krueger (1993), Krueger (1993), Przeworski (1991), Ranis and Syed Mahmood (1992), Bresser Pereira, Maravall, and Przeworski (1993), Stephan Haggard and Robert Kaufman (1992), Dornbusch and Sebastian Edwards (1993), Haggard and Steven Webb (1994), Lance Taylor (1994), Williamson (1994), and Ian Little et al. (1993), not to mention countless papers. As this partial list indicates, both economists and political scientists have devoted their attention to these issues, often together in coauthored or coedited works. Indeed, no other area of economics or political science that I can think of has spawned so much interdisciplinary work. 5 In this essay, I will provide an econo4 One recent survey—Mariano Tommasi and Andres Velasco 1995—which overlaps with this one deserves special mention. 5 The litera ture on the economics of policy reform is of course even larger. For recent surveys, see Vittorio Corbo and Stanley Fischer (1995) and Rodrik (1995b). 1 mist’s perspective on the political economy of policy reform. I begin by examining the origins and analytical content of the new orthodoxy in development policy (Section II). I will focus here on two issues in particular which I feel remain in need of clarification. One of these concerns the distinction between (a) macroeconomic policies aimed at economic stability, such as fiscal, monetary, and exchange rate policies, and (b) liberalization policies aimed at structural reform and growth, such as the removal of relative-price distortions and the reduction of state intervention. It has become commonplace to conflate these two groups of policies, but for analytical purposes they are best kept apart. As we shall see, they also have different political-economy underpinnings. Moreover, maintaining the distinction reminds us that the consensus on what constitutes appropriate structural reform is based on much shakier theoretical and empirical grounds than is the consensus on the need for macroeconomic stability. The second issue concerns the appropriate lessons to be drawn from the experience of East Asian success stories. The new orthodoxy has tended to draw a somewhat biased picture that needs correction. Next, I will turn to the reforms of the 1980s and 1990s. This experience has opened an important window on the motivations of politicians, as well as on the nature of interactions between the economy and the polity. As indicated above, an important question is why so many countries have suddenly caught the reform bug. The confluence of economic crisis with reform has led to the natural supposition that crisis is the instigator of reform, a hypothesis that keeps reappearing in the literature and yet is inadequately analyzed.

The Causes of Deforestation in the Amazon Rain Forest Essay -- Exposit

The Causes of Deforestation in the Amazon Rain Forest      Ã‚  Ã‚  Ã‚   The Amazon Rain Forest crosses several national boundaries in South America, although the majority of it is located in Brazil. It covers over 3,562,000 acres, making it the largest in the world. But globally, over 138,600 acres of rain forest are lost each year to deforestation, 50,000 of those in Brazil alone (Holdsforth), and the world's rain forests are quickly disappearing. Deforestation in the Amazon occurs primarily for three reasons: clear-cutting, fragmentation, and edge effects.       The term "deforestation" refers to the clear-cutting of large sections of primary or original-growth forest, which causes the loss of native species of plant and animal life. This clearing of land is mainly due to agricultural needs, such as farming and cattle ranching, but also occurs to support logging and mining companies. The effect of the loss of forest is most obvious in the loss of native species. Eugene Ng, of the Hong Kong Technical Institute, explains that the "destruction of habitat forces species out of areas, or causes them to die." Other factors, according to Ng, "further restrict their range, exposing them to disease and predators."       Deforestation does not occur neatly. "Fragmentation" also weakens the rain forest. As large sections of rain forest are cut down by farmers, ranchers, and loggers, those plant and animal species are left to die. If all deforestation occurred along the outside boundaries of the forest, then some of the species could move deeper into the Amazon to survive. But as Mason Skold and Bill Myer explain, fragmentation produces "areas of less than 100 square kilometers which are surrounded by d... ...in Forest and to protect the species who live there must take into account how deforestation occurs.       Sources Cited    Center for Planetary Studies. "Deforestation Isn't the Real Problem in the Amazon." June 1996. http://www.ctr_planets/Amazon.html (7 June 2003).    Holdsforth, J. R. "Deforestation Estimates for Eight National Biozone Regions and Implications." 1990. http://www.biozone_project.html (7 June 2003).    Johns, Lucia and Freida Simms. "Deforestation: Global Problems, Programs, and Agreements." Environmental Policy Division,   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Congressional Research Service. March 1997.   Ã‚   http://www.cnie.org/nle/for-4.html  Ã‚  Ã‚   (14 June 2003).    Ng, Eugene. "Deforestation Affects Diversity." Hong Kong Technical Institute. 1991.  Ã‚   http://www.hktech.edu/forests_diversity.html  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   (12 June 2003)

Micro Economics Fiori Pasta

1. Meet the Fiori family and its Fiori Pasta Company. Papa Don is the president, son Tony is vice-president of sales, and daughter Gina is vice-president of production. Fiori Pasta produces high-quality pasta products. It has estimated its demand curve for its pasta to be P=39. 898-0. 03757Q, This demand function has been given in terms of price. So to find the Total Revenue (TR) you need to multiply the above equation into Q (which is your quantity). TR=39. 898Q-0. 03757Q2 MR=39. 898-0. 0751Q where Q represents thousands of cartons (each containing five dozen packets of pasta) demanded per year by its wholesale customers.Its cost of producing this spaghetti has been estimated to be: TC = 2,500 + 12Q + 0. 01538Q2, where TC is measured in thousands of dollars. Fiori is having a management meeting to reconsider its pricing strategy. Its current price for the spaghetti is $27. 50 per carton. Since the current price is given we can estimate the current quantity to be 330 ,000 units. Don wants to maximize sales volume subject to earning a target profit of $500,000 per year. Tony wants to maximize sales revenue since his bonus payment varies directly with sales revenues.Gina wants to maximize profits so that the company can afford to install the latest high-tech manufacturing equipment. You have been hired to give an impartial analysis of pricing strategy for Fiori Pasta under the assumption that you will pursue a single price policy. a) As the consultant for Fiori Pasta, what price policy would maximize profits? b) What price policy will be chosen Tony Fiori? c) What price policy will Don Fiori choose? (Hint: plot the TR, TC, and Profit Function). Prepare your report for presentation at the Fiori management meeting and make your case for one particular price policy. For Revenue Maximization- Toni’s IdeaMR=0 MR=39. 898-0. 0751Q=0 When you solve for this you get the revenue sales maximizing quantity as Q=531,000 at a price of $19. 9 (this can be achieved by sub stituting the quantity of 531 into the demand equation given) Though in this method we are actually making losses as the price is low and the quantity isn’t enough to make up for the lost margin. Profit Maximization: Gina’s preference MR=MC MC= 12+0. 0308Q MR= Given above When you equate them to eachother you get the following profit maximizing quantity of 263,437 cartons at these are to be sold at a rice of $30 (you get this price by substituting the profit maximizing quantity into the emand equation given at the beginning) Quantity maximizing to achieve a profit 500,000 – Don’s preference Profit= Total Revenue- Total cost =39. 898Q-0. 03757Q2-2500-12Q-0. 01538 =52. 95Q2+27889Q-300,000 On solving this quadratic equation (which is basically a function on excel, she doesn’t expect anyone to actually solve it, though there is an equation ) You get two quantities= 376 and 151 So for the quantity of 376 we have a price of $25. 75 and $34. 24. I will ex plain this better later today. Hope it helps.

Reality Tv Is A Good Source Of Education - 1599 Words

I. INTRODUCTION: There are reality TV shows for everything. There are reality shows for surviving Reality TV does not depict real life struggles accurately. They do not show the daily struggle of some issues that families, adults, and teenagers have. If people say reality TV is a good source of education, why are there still teens getting pregnant today? If teens are still getting pregnant, it shows how little they care of the outcomes of unprotected sex. Especially when it comes to teens that are pregnant. Teen pregnancy shows should not be aired on television because the episodes falsely convey the hardships of being a mother, omit delivery and financial complications that may arise from giving birth too young, and inaccurately depicts the social impact that having a baby as a teen may have on the young family. II. The episodes falsely convey the hardships of being a mother like speeding up the physical process and showing how simple it is after the birth. A. They speed up the process of motherhood and make things look easier 1. â€Å"On The Secret Life of the American Teenager, the teen – mom character, Amy, had a baby last year and was back in school the next year with balanced classes, social life, motherhood, and looked great† (Khidekel). a. TV shows like that show how â€Å"easy† it is to get back on your feet after giving birth. They don’t show how long it can take to get back into school, how long it takes to get time alone to yourself, or how long it takes to lose the babyShow MoreRelatedReality Televisions Influence on Society794 Words   |  3 PagesReality television tries to disguise what is really going on in the television shows. The actors and producers shine a false spotlight on â€Å"reality†. â€Å"Reality television is defined as a ‘TV show observing real-life situation: television programs often deliberately manufactured situations, and that monitor their emotions and behavior’† (Paredes 26). 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