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New approach to economics education

Part 2

Published

Bernardo M. Villegas

Bernardo M. Villegas

As can be gleaned from the list of chapters, we have continued to follow the traditional division of the study of economics into Microeconomics, or the study of the individual units of the economy such as the persons, households and firms who interact with one another as they consume or produce goods and services generated within the economy; and Macroeconomics, the study of the behaviors of the economic aggregates such as the Gross Domestic Product, money supply, government expenditures, exports and imports. We go to great extent in explaining the meaning of an indispensable condition for long-term sustainable development, which is macroeconomic stability. Fortunately, the Philippines in the second decade of the Third Millennium has received a lot of accolades from independent international institutions such as the World Bank, the Asian Development Bank, credit rating agencies and multinational banks for having built solid institutions such as one of the best central banking systems in Southeast Asia and competent fiscal agencies that can guarantee macroeconomic stability (low inflation, low fiscal deficit to GDP ratio, low total debt to GDP ratio, etc.) over the long run. We also elaborate on the serious constraints imposed on the economy by the very low export to GDP ratio and the need to diversify into higher-value exports such as agribusiness products by significantly improving the productivity of our agricultural sector, long neglected as the “Cinderella” of development. We also highlight the importance of investing more in the manufacturing sector that can generate higher levels of employment by, among other means, opening up the economy to more foreign direct investments (FDIs) through amending the very restrictive provisions of the Philippine Constitution on foreign investments.

As regards Microeconomics, the new approach to economics education should take greater cognition of the imperfections of free market forces in attaining integral development. We are notorious for having the highest poverty incidence in East Asia: 21 percent of our population. When more than 20 million Filipinos go to bed hungry every day, it is not possible for them to have access to markets to improve their lives. They are too poor, too hungry, too unhealthy and too uneducated to benefit from free market forces. There must be a previous intervention of the State or of civil society to give them enough nutrition, enough health services, and enough education to prepare them for participation in a market economy. Hence, the need for government intervention in building farm to market roads, irrigation systems, post-harvest facilities to enable the millions of poor farmers to eke out a decent living from their small farms. There is need for the State to constantly increase the share of education and health services in the annual budget. In extreme cases of poverty, there is justification for conditional cash transfers that will enable the poorest of the poor to cover the barest economic necessities.

The State also has to make sure that the existing oligopolies and monopolies that are in the hands of the Philippine elite are regulated by the Philippine Competition Commission so that they do not victimize the consuming public with unreasonably high prices and poor services. The chapters on market structures will give a great deal of insights into the imperfections of the market economy. A constant theme in this book is that free markets in themselves should not be absolutized or idolized. What should be emphasized is the principle of subsidiarity, i.e. that what can be accomplished efficiently and competently by private individuals and groups should not be absorbed by higher bodies, least of all by an all-powerful State. This principle flows from the very dignity of the human being who should be given the freedom to do what he can achieve without interference from higher authorities. Markets are only means of allowing the principle of subsidiarity to apply to every economic society. At the same time, though, we have insisted on the other side of the coin, the principle of subsidiarity. Every human being, including the business man, is obliged by his very nature to always contribute to the common good in his individual actuations. We completely reject the neoclassical assumption that the only thing that a businessman has to do is to maximize his profit and for the individual consumer to maximize his individual pleasure for there to be an “invisible hand” that automatically promote the good of everyone. Businessmen and consumers must always act with social responsibility for there to be a just and humane society. Only then can we fully understand the oft-repeated reference to “People, Planet and Profit.”

Looking into the long-term future, especially as a guide to the so-called millennials (those born between 1982 to 2000) and the Z generation (those who were born after 2000) — the ones for whom the textbook is written — we have elaborated in several of the chapters the two “sweet spots” that will benefit their generations. The first is the demographic sweet spot. The Philippines is one of the few countries in the Asia Pacific region (together with Indonesia and Vietnam) that will enjoy at least for the next two or more decades a young and growing (and for the Philippines an English-speaking) population while the rest of East Asia suffer the economic consequences of rapid ageing and population decline. Because of this demographic sweet spot, the Philippines can benefit for a long time to come from the foreign exchange remittances of the more than 10 million overseas Filipino workers and from the earnings of the 1.2 million welleducated workers in the BPO-IT sector. This demographic advantage also provides the Philippines with a huge domestic market that makes it partly immune from the ups and downs of the global economy. The second sweet spot is geographic in nature. The Philippines is fortunate enough to be part of the so-called Asian Century during which Asia will be the epicenter of global economic growth, with China, India and ASEAN Economic Community as the major players in the next 20 to 30 years. Professor Luis Molina and I are happy to be able to deliver all these happy messages to the youth through our book.

I cannot end without expressing my deepest gratitude to Professor Molina, one of the best economic educators to have been produced by the University of Asia and the Pacific. Without him, this new approach to economics education would have not been written. Without any false humility, I can truly say that he is responsible for 80 percent of our book and I for 20 percent of the inspiration. Both of us also have been deeply influenced by the late Dr. Emilio Antonio Jr., who I can truly say was the best economics educator to have studied and taught at our University. I ask the reader for prayers for the repose of his soul.

A final warning. This book is not an easy read. Precisely because it strikes a balance between the necessarily mathematical approach to the science of economics and the multidisciplinary nature of the social sciences (to which economics belongs), all the chapters require more than just one reading. We actually consider this difficulty as another contribution to improving the quality of Philippine education. We will force the students of economics who will use the book to go through the mental gymnastics necessary to understand its content, thus inculcating in them one of the most important requirements for national progress: The persevering work and discipline of every citizen.

For comments, my email address is bernardo.villegas@uap.asia.

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