Question

1-Imagine you're named an Economic Advisor to the president of a very poor and backward country (Sandokistan).   The President asks your advice on where they should use their very limited resources so that they can help escape the poverty trap. Should they invest in existing, traditional tools (think tractors, computers, known manufacturing techniques) or should they invest in cutting edge research where they might become a market leader? Please explain why you selected the option you did.   Conversely, why didn't you select the other option?  How does the option picked fit with the theory learned this chapter?
Note:  In a world of trade offs, you can pick only one.  I won't accept an answer that says they are both important. 
2-Bonus:  Economic theory suggests that the investment would get the greatest return where capital is scarce.  After all, adding another tractor to a field that already has modern technology isn't likely to increase output, whereas adding a tractor to a location that is currently capital starved would have the potential to add a substantially more to output.   This means we would expect capital to move from "capital rich" regions to "capital poor" regions when all else is equal (Ceteris Paribus).  This is NOT what we see in the real world (and it is known as the "Lucas Paradox").  Without researching, why do you suppose we actually observe capital moving from poor to rich rather than from rich to poor as the theory would suggest?  

Chapter: Capital Accumulation &Growth

Answer 1

1.

They should invest in existing traditional tools.

Firstly, the question establishes that the country is poor and backward. This means that country’s people are currently living in poverty. The purpose of any economic model should not be to focus on extravagant technology but to make sure that development is in place. The development of a country does not happen automatically. There need to be social spending from the part of the government. This is why the government should invest in existing traditional tools to first build a developed status and help alleviate the poverty in the country.

Considering a backward and poor country, it is unlikely that they will be able to support cutting edge technology and research. Thus this option is highly risky and thus makes it a poor choice.

2.

The main reason why the flow of funds move from capital poor to capital rich is because the economic system globally. Most countries around the world follow a capitalistic outlook on economy. The key feature of capitalistic economy is that the successful entities can take advantage of their wealth and create market conditions that are favorable to their advantage. This is exactly what is going on. One of the driving forces for such situation is globalization. Through the idea of globalization organizations from various developed nations set up their business in the developing nations and extract profit from the poorer nations. This results in flow of money from poor nations to the rich nations.