EC 205: Development Economic (Macro) - Report - Economics Assignment Help

Question1Discuss in no more than 200 words:

(1) the main reasons for granting the Nobel prize in Economics to Abhijit Banerjee, EstherDuflo and Michael Kremer; (2) Provide a critique of the award.

Banerjee, Duflo and Kremer won the Nobel Prize for their experimental approach toalleviating global poverty. Unlike normal scientists who can test theories easily due to

scientific laws remaining constant, economists struggle due to the nature of the subject totest their theories due to the tendency for humans to be irrational and unpredictable.

Banerjee, Duflo and Kremer innovated, by creating a new way of approaching the problem oftesting in economics. This was through Randomised Controlled Experiments, where they

interact with communities in emerging markets on a personal-level and change a singlevariable. For example, introducing a subsidy for a certain good to this community and then

seeing if/how this changes anything - in this case it was subsidising children to go to schoolwhere they ended up helping 5 million children in India. I believe this award was definitely

appropriate due to the various problems we see with regards to development economics,where theoretical data doesnt align with real data and any work economists did to try and

find solutions did not work due to this disconnect. Banerjee and cos work allowed us tofinally bridge these data sets together with highly tested and clean data operating similar to a

placebo test, seeing what worked and what didnt.

Question 2Discuss in no more than 200 words the Malthusian model.

(1) What are the main mechanisms and the main conclusions for economic growth?

(2) How did humanity escape the Malthusian poverty trap?

Malthus suggested that population growth follows income growth, which usually occurs as aresult of technological development. For example, the development of mills. Due to

Diminishing Marginal Returns as well as an assumed fixed amount of capital, Malthusconcluded that over time as population grows there will be no growth in income, and in fact

there would be a decrease in income as he stated that if growth is left unconstrained,population growth will be exponential and faster than the growth in income in turn causing a

lower income per capita for the overall populous, as they outgrow the resources they haveaccess to. This in turn would cause a decrease in standard in living and therefore overall

population by the axioms he laid out. Malthus concluded this would be a cycle humanitywould be stuck in forever, as there was no conceivable way for our incomes to rise quicker

than our populations. Humanity escaped this poverty trap in three main ways, acceleration inpoverty innovations which caused aggregate income to rise so quickly growth couldnt keep

up, the rise in demand for skills and education creating a more skilled populous and overalldemographic changes from lots of children to less higher-quality children.