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Political Economy Pt 2 - Coggle Diagram
Political Economy Pt 2
Lecture 19 - Climate Agreements
Abatement Costs - The costs associated with removing the negative byproducts created during production. E.g. Cleaning an oil spill
The keener a country is to arrive on agreement, the more they are willing to pay to achieve said agreement. So the more a country stands to gain from the agreement/ lose from no agreement, the less bargaining power they have
Example: Russia may actually benefit from global warming (they have little to gain from an agreement) ended up receiving high pollution quotas. Other European countries with more to lose from a non-agreement ended up bearing a relatively large share of the abatement costs.
The "Hold-Up Problem"
Domestic policies can affect future bargaining power. For example, investing in technology that can reduce the abatement cost can prompt other countries to require that the high-tech country contribute more. For example more domestic abatement/ lending technology cheaply to other countries
So countries may have second thoughts about heavy R&D investment, especially if negotiations are right around the corner.
Investing in R&D can be useful if an agreement is signed and abatement requirements tighten
A frequently re-negotiated agreement may be worse than no agreement at all because countries will be hyper-focused on what will improve their bargaining power in the short-term rather than what is best for the environment in the long-term
Countries can increase bargaining power by:
Investing relative little into abatement tech
Undertaking substantial adaption to climate change
Pretending to be reluctant to the agreement
Appointing a representative that is actually reluctant to the agreement
Time Horizons, and Harmonisation
If uniformity is required in agreement (e.g. everyone cuts down emissions by x% of historical y) then individuals may be less likely to agree/ threaten to exit in the future
Even with very complicated formulas, sudden shocks to a country may find them in need of violating the agreement. If the other countries insist they stick to it, they me threaten to leave entirely. If the other countries acquiesce and give the a better deal, even as a time-limited one-off, then the formula is less effective. Countries may anticipate this when considering agreements and see them as less valuable because of it
Agreement too short - Lots of renegotiation and you get the 'hold-up problem'
Agreement too long - Countries may be reluctant to join as the future is uncertain and the agreement may leave them trapped in the event of a shock
More participating countries - Longer time period, to make renegotiation harder
Less participating countries - shorter time period to allow for entry of new participants. Countries may be more willing to invest in R&D because it may incentivise other countries to join
Lectures 16, 17 and 18 - Conflicts
Theory on Ethnic Conflicts
Two groups:
Victims - Individuals decide to buy security against attacks
Aggressors - Individuals decide whether to engage in violence
Proposition 1 - Under a proportional increase in group income:
Attacks perpetrated on group member increase, as long as that group is under a certain income threshold
Attacks instigated by group members decline
Proposition 2 - Under symmetry, the poor ethnic majority prefers ethnic conflict to class conflict
Proposition 3 - Under symmetry, the rich ethnic majority prefers ethnic conflict to class conflict when the poor ethnic majority prefers class conflict to peace
Proposition 4 - Under reasonable restrictions the rich prefer peace to class conflict
Conflict Induced Narcotics Production
Main case study - Increased opium production in Afghanistan:
Accounts for 90% of global production
53% of legal GDP
Opium production increased by 10833% (110x) from 1932 to 2007
Reasons for increased production:
Opium (made from poppies) is more drought resistant that the main alternative crop (wheat) and easier to produce
Opium does not require road transportation.
Prolonged military activity destroys road and agricultural infrastructure, and reduces incentives to rebuild. So easy-grow crops are produced en-mass
Unstable government, and weak law enforcement allows warlords and drug syndicates to run rampant
Lecture 15 - Conflicts
Income Shocks and Conflict
Rapacity Effect - Rise in contestable income may increase violence by raising gains from appropriation
Opportunity Cost Effect - Higher wages may lower conflict by reducing labour supplied to appropriation.
Main case study: Colombian civil war
Started with a communist insurgency in the 1960's
Three main actors: left-wing guerrillas, govt, right-wing parliamentaries
Right and left wings financed by cocaine trade, kidnapping, extortion, stolen govt revenue, and predation on public funds
Areas with high natural resource endowment show higher predation levels
Different commodity shocks have different effects.