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

Question 1 Discuss in no more than 200 words:

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

Banerjee, Duflo and Kremer won the Nobel Prize for their experimental approach to alleviating 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 to test 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 of testing in economics. This was through Randomised Controlled Experiments, where they

interact with communities in emerging markets on a personal-level and change a single variable. 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 school where 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 doesn’t align with real data and any work economists did to try and

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

placebo test, seeing what worked and what didn’t.

 Question 2  Discuss 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 a result of technological development. For example, the development of mills. Due to

Diminishing Marginal Returns as well as an assumed fixed amount of capital, Malthus concluded 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 have access 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 humanity would 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 in poverty innovations which caused aggregate income to rise so quickly growth couldn’t keep

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