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LESSON 1: Introduction in Economic History of the Philippines

Objectives:
1. Define what is economics
2. Trace the historical development of studying economics that leads to the development of writing economic
history (world trend to Phil. Context)
3. Explain why need to study economic history

I. Motivation

Activity: Arranged the jumbled letters with the given clues.

EXCHANGE RATE rate at which one currency will be exchanged or another

EXPORTS - sales of domestically produced goods which are sold to the foreign countries
FISCAL POLICY the use of government spending and borrowing to affect the level and growth of aggregate
demand, output and jobs or influence macroeconomic conditions
GDP (GROSS DOMESTIC PRODUCT) broadest measure of aggregate economic activity encompassing every
measure of the economy, measuring the total value of final goods and service produced during a given period of
time.
GNP (GROSS NATIONAL PRODUCT) is the total market value all final goods and services produced by the
citizens of a country in a given year
GOVERNMENT BUDGET DEFICIT the amount by which some measure of government revenues falls short of
some measure of government spending
IMPORTS sales of foreign products bought by a domestic country
INFLATION RATE - measure of inflation, rate of increase of price index
MONETARY POLICY the process by which the monetary authority of a country controls the supply of money,
targeting a rate of interest for the purpose of promoting economic growth and stability
PCI (PER CAPITA INCOME) refers to income per head (National Income divided by the number of population)
POVERTY THRESHOLD (POVERTY LINE) - minimum level of income deemed adequate in a given country
(measure to consider socioeconomic reforms)
RESOURCES the labor, capital, land and natural resources and entrepreneurship that are used to produce goods
and services
SCARCITY a situation wherein the amount of something available is insufficient to satisfy the desire for it
TRADE BALANCE difference between exports and imports
UNEMPLOYMENT RATE measures of the prevalence of unemployment (%= number of unemployed/all
individuals in labor force)
WANTS - desires

II. Class Proper/Discussion

a. What is Economics?
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Derived from the Greek word oikos means house and nemein means management = Household
management

A social science that seeks to analyse and describe the production, distribution and consumption of wealth
https://www.britannica.com/topic/economics

A social science that deals with the study of allocation of scarce resources among unlimited and competing
uses to satisfy human needs. It tries to understand how members of a society behave and organize
themselves to meet their individual and communal material needs and desires.
(https://www.slideshare.net/gar_dev/what-is-economics-1224528)

Definitions according to emphasis:

1. Wealth Adam Smith

2. Welfare Alfred Marshall
3. Scarcity Lionel Ribbons
4. Growth Paul Samuelson

Adam Smith (1723 1790) Wealth Definition

- Father of Economics (An Inquiry into Nature and Causes of Wealth of Nations, 1776)
- Meaning of wealth and causes of wealth
- Around the industrial revolution, merchants are the most important powerful class in Western Europe,
and wealth for them meant MONEY only. Since money at that time was in the shape of gold, merchants
declared GOLD as the only wealth. The merchant rendered as the productive class, as they created it by
trade.
- Spokesman of the emerging class of petty industrialists/ hard workers widened the definition to
include ALL MATERIAL GOODS. He emphasized that traders were not the only cause of wealth.
- Freedom of trade and enterprise (laissez-faire) were the greatest causes of wealth because:
a. Human beings are born selfish
b. They have self interest
c. It is not benevolence (kindness) but self-interest which guides economic activity
d. So left to themselves, each individual would maximize his self-interest (income/wealth)
e. When all the adult citizens of a nation maximize their selfinterest, the wealth of nation would
grow the fastest
f. So why should the mercantilists or anybody else impose restriction on the freedom of individuals
- Exceptions where it does not work: defense, public utilities and law order and justice.

Alfred Marshall (1842 1924) Welfare Definition

- Principles of Economics (1890)
- Political economy or economics is the study of mankind ain ordinary business of life; it examines that
part of individual and social action which is most closely connected with the attainment and with the
use of material requisites of well-being.
- Economics is not restricted to material things but also to nonmaterial things (welfare, health,
education)
- Welfare is subjective (varies from time to time, country to country)

Lionel Ribbons (1898-1984) Scarcity Definition

- An Essay on the Nature and Significance of Economic Science (1932)
- The science which studies human behaviour as a relationship between ends and scarce means which
have alternative uses.
- Unlimited human wants (necessities, comforts and luxuries)
- It fails to explain why labour despite being scarce remains employed/underemployed
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- Fails to explain situations of abundance and ignores welfare.

Paul Samuelson
- Economics is the study of how men and society chose, with or without the use of money, to employ
scarce productive resources which could have alternative uses, to produce various commodities, over
time and distribute them for consumption now and in the amongst various people and groups of
society

Concerns
1. PRODUCTION - the use of INPUT (commodities or services) to produce OUTPUTS (goods and services
which come out of production process ) in quantity (what and how to produce)
2. DISTRIBUTION the allocation of the total product among members of the society (for whom to produce)
3. CONSUMPTION the use of a good or service (why to produce)

Resources
- Natural, human and man-made wealth (abundance of value) that can provide satisfaction through the
production of goods and services

Categories:
1. Natural form of wealth derived from nature (land, forests, mountains, rivers, seas)
2. Human most basic form of wealth (labor and brain power)
3. Man-made things used in the production of commodities and services

Government and Economy

- Crucial institution (acts as a producer and consumer)
- Economic Functions:
1. Allocative maximize economic welfare and ensures the proper utilization of scarce resources
2. Distributive equitable distribution of resources
3. Regulatory formulation and proper formulation of policies and laws
4. Stabilization moderate inflation and unemployment effects; balance among the macroeconomic
problems

Sectors of Economy
1. Household (consumers) consuming nit
2. Business Firms (producers) producing unit
3. Government (public sector) implementer of economic policies
4. Foreign sector international trade and net exports

Economic Sectors
1. Primary (Agriculture) natural resources (agriculture, forestry and fishing, mining, and extraction of oil
and gas)
2. Secondary (Industrial) create processed tangible product
3. Tertiary (Services) services to general population and to businesses (retail and wholesale, transportation
and distribution, entertainment, clerical services, media, banking, healthcare, tourism, banking, and law

b. History and Economics

- Systematic recording of past events and also a detailed and in-depth interpretation of the causes and
effects of past events on the lives of the members of the society.
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Economic History

- Study of the past economic phenomena and processes

The Emergence of Economic History

- Western Europe and North America (19th Century), specifically in Great Britain, Germany and America
- First appeared in a book in the work of a scholar Von Inama-Sternegg (1877 and 1879), ber die
quellen der deutschen wirtschaftsgeschichte and Deutsche Wirtschaftsgeschichte, covering the Middle
Ages.
- Theme: general economic development or specific sectors, esp. agriculture, commerce and
industrialization (critics on systems, comparison)
- Why? Increasing capacity and needs of the government to produce and consume statistical data
- 1960s new economic history or econometric history (cliometrics) in USA which involved the
systematic application of economic theory and quantitative methods (statistical and mathematical
models)
- 20th Century: Feminist Economics (universalism), Environmental Economics (sustainable development,
environmental costs), Institutional Economics (state, culture and ideology)

http://www.encyclopedia.com/social-sciences-and-law/economics-business-and-labor/economics-terms-and-
concepts/economic-history

c. Why study Economic History?

1. Understanding the allocation process in an environment of scarcity

2. Knowing why the government collects taxes from our incomes, from the things we buy, and from the things
we own
3. Knowing the bases for collecting taxes and the allocation of revenues for various expenditures
4. Understanding the economic explanation why the government provides the people with such services as
education, public utilities, roads and national defense
5. Role of money
6. Knowing the basis of commercial relations among natons
7. Knowing how societies increase their resources in order to grow and to improve the welfare of their
members
8. Learning the importance of economizing

III. Evaluation.

Complete the statement.

I learned today that economic history is important because ______________________________.

IV. Assignment.

No meeting next meeting. Classes resume on August 31 for Reporting of Group 1 Philippine Prehistoric
Economy.