Economics

 Social Science

 Efficient use of proper allocation

 Scarce Resources

 Satisfactiom

4 factors of production

LLCE

L - land - natural resources

L- labor - effort exerted be person that produce income

C- Capital- Finished goods use for production

E- Entrepreneurship - skills/ knowledge

Economics- Can be defined as the study of proper allocation and effecient use

of scarce resources to produce commodities for human satisfactiob and

unlimited human needs and wants

Needs-

Wants-

Presentation on theme: Economic Development by F. Fajardo

The Real concept of Development?

 A better quality of life has been the goal of societies and nations.

 Minos- son of Zeus

 Island of crete

 Perfect state

 Communal ownership of property

 Plato - Great Philosopher

The Basic Economic Problem:

1.poverty ( poor) -

2.coruption
3.Illiteracy

 Cant read and write

 Functional

KSA

K- knowlede

S- Skills

A- Attitude

4. Unemployment

5. Inequality

Meaning of Economic Development?

 The Progressive process of improving human conditions.

 It involves economic and non-economic factors

Classification of Countries

1.

2.

3.

Ideas and theories of economic development

Ancient Economic Ideas

 Based on holy scriptures and code of laws.

 The Bible and the Holy Men regulated economic practices and

relationships.

Ancient- Plato (the republic)

 In his book, The Republic, he explained an ideal state. He said that the

members are to be educated from childhood for their responsibility, and they are

to be chosen through competitive examination. There should be no gap between

the rulers and the ruled because the former are not allowed to own properties,

except for what is necessary to support them.

 He was against the accumulation of wealth through lucrative trade or

commerce.

 Agriculture is very important, and was in favor of specialization of

production.
  He said that there is a need for diversity of occupations since no person is self-

sufficient, and people have unique and innumerable number of

wants.

Aristotle (Management of Agriculture)

 He stressed the value of management of agriculture.

 He was not in favor of too much wealth.

 He did not like usury and trade.

 He disagreed with Plato about communal property. He claimed

that this is not feasible and that it destroys individual incentives.

Communal – shared or used by members of a group or community

Xenophon (Capitalism, the government should promote trade)

 - Was in favour of capitalism.

 - He proposed that the government should promote trade and shipping.

 He was in favour of joint-stock companies, specialization and division of

labor

Thomas Aquinas ( Medieval Feudalism, Power of the Church)

 distributive justice and compensatory justice because of feudalism.

Distributive Justice (fair distribution of goods among the members of society).

Compensatory Justice ( just wage and price).

Feudalism – A social system that existed in Europe during the

Middle Ages in which people worked and fought for nobles who

gave them protection and the use of land in return.

 He condemned usury and other unfair practices of capitalism.

 Usury – the practice of lending money and requiring the borrower to pay a

 high amount of interest.

 Capitalism – a way of organizing an economy so that the things that are used to

make and transport products (such as land, oil, factories, ships, etc.) are owned

by individual people and companies rather than by the government.

The Economic Doctrines of Mercantilism

Mercantlism – refers to an economic policy or trade system wherein a country focuses

on maintaining a favorable trade balance by maximizing exports and minimizing imports

with other countries.

 The great thinkers of Europe, like Machiavelli, Bodin, and Serra, influenced much

the growth of capitalism.

  Focused on the viral role of the state in economic development.

 Manufacturing was given top priority.

Serra claimed that manufactured products could be sold readily abroad than

agricultural products

Thomas Mun ways of achieving favorable trade; balance of payments.

Balance of Payments – A summary of the international transactions of a country or

region over a period of time including commodity and service transactions, and gold

movements.

 He said that foreign trade is favourable if exports are greater than imports.

Mun, an Englishman, dominated the whole concept of mercantilism in Europe.

Physiocracy- Rule of nature- the expansion of science, people are poor because they

violated the rule of nature (ex. Lazy and drunkard)

 A member of a school of political economists founded in 18th century

France and characterized chiefly by a belief that government policy should not

interfere with the operation of natural economic laws and that land is the source

of all wealth.

 The Enlightenment in England and France greatly stimulated thinkers and

philosophers to question the old doctrines and thoughts.

 People are poor because they violated the laws of nature.

 Those who obey and follow were believed to promote their own good.

 Importance of Agriculture.

 All wealth came from the land.

Laizzes Faire Theory- Limited Government interference

 In economics, it means the government should not intervene in economic affairs.

Just let the forces of the market interact with one another.

 French term; connotes non-interference, liberty or freedom.

 - The government should not intervene in economic affairs.

 - Individuals should be free to choose their own economic enterprise or

occupation.

Classical Theories

The real founder of the classical school of economics was Adam Smith.

Classical Theory- Adam Smith (Production is the real wealth)

 The real founder of the classical school of economics;

 Author of the famous book, Wealth of Nations.

 Only source of wealth is production thru labor and experiences.

  Production under free market

 economy would be most efficient.

 Production is the real wealth.

Thomas Malthus (Theory on Population)

David Ricardo (Comparative Advantage)

 David Ricardo, one of the famous classical economists, developed the theory or

law of comparative advantage.

 - Based on this theory, nations should export the goods which they enjoy the
greatest advantage, and should import the goods which they have the greatest

disadvantage.

This simply means – do not produce the product if it is cheaper to buy it.

Karl Marx (Theory of scientific social evolution and Theory of value: Labor is

necessary; communism)

 developed his theory of scientific social evolution.

Jean Sismonde Promotion of Human Values- Welfare of the poor, the state should

interfere to promote the welfare of the poor

 Jean Sismondi, a noted Italian writer, disagreed in many ways with Adam Smith.

 - He stated that wealth should not be measured in terms of material things but in

terms of human welfare.

 He (Sismondi) pointed out that no nation can be considered prosperous if the

conditions of the poor have not been improved.

 - He rejected the laissez faire theory which provided freedoms to individuals to

seek their own self-interest for their own welfare and that of society

 Sismondi asserted that the state should interfere to prevent the unfair distribution

of wealth spawned by unrestrained capitalism.

 - The main contention of Sismondi is focused on thewelfare of the poor.

 -He was more interested in social justice rather than in the accumulation of

wealth by the industrial system manipulated by the powerful capitalists fortheir

own materialistic inclinations.

Henry George - Theory on progress and poverty- (Rent is the cause of poverty; the

value of land is not on fertility but population growth)

 American author who wrote the book, Progress and Poverty. Increase in the

value of land is due to the growth of population.

John Meynard Keyness - Modern theory of employment- (Great Depression 1930’s)

  Based on the Keynesian theory of employment, employment determines the

necessity of equating the aggregate supply of goods with the aggregate demand

for goods.

 - When people buy more goods, it means there is more expenditure or

consumption. This condition stimulates more investments which also increases

employment and production.

Joseph Schumpeter Innovation Theory- (The role of innovator)

 author of the innovation theory; the role of innovator in economic development.

 Innovation can be any changed by the entrepreneur which leads to a faster and

better development of an industry.

 May be in the form of invention, method. of production or marketing strategy.