SY, Ahcy Mari P.

Economic Development
BSA 2-12 Sir Abraham Camba
Reaction Paper #1:
Reaction Paper: CAPITAL IS BACK: WEALTH-INCOME RATIOS IN RICH
COUNTRIES 1700-2010
Due to the lack of data preservation in the past, it becomes really hard for scholars

nowadays to know what happened at a particular time and place, in terms of history, science, and

economics. I think that the research entitled “Capital Is Back: Wealth-Income Ratios in Rich

Countries” by Thomas Piketty and Gabriel Zucman, is really resourceful and clever, because

lack of information didn’t stop them to track down important economic data from the past using

traditional patterns, before World War I. I see that accurate articles and evidences are highly vital

to come up with a reliable information regarding the relationship of wealth-income ratios and

how it impacted developed countries, particularly, United States, Japan, Germany, France, the

United Kingdom, Italy, Canada, and Australia, to conquer the top. I feel that it takes a lot of

courage before making the decision to pursue this study; others might think that they’re

ambitious to study something that doesn’t exist in writings, but this what made their study even

more beautiful. They’re able to come up with data using patterns, not as accurate as the original,

but still is enough to open curious minds of future researchers to come. It seems that this study is

a match that triggers intellectual curiosity, because a lot of leaders coming from every nation

who do want to know what these developed countries did that made their nation economically

strong and growing.

In my opinion, this study is still relevant, despite the fact that the data they’re trying to

retrieve were dated hundreds of years ago. Many countries are still struggling in terms of

improving their economic strategies to race up with nations stated earlier in this paper. Like in

the Philippines, in 2013, the government has implemented K-12 curriculum for the students to be
“globally competitive”, and their basis of this implementation are USA and Europe. If K-12

didn’t lead their country to economic growth, Philippines wouldn’t replicate this strategy, and

might go for something else instead. Other factors that affect their growth are income growth

rate, and savings rate. According to Harrod-Domar-Solow’s formula where ß = s/g; where ß is

wealth-income ratio, s is savings rate, and g is income growth. Based on this formula, wealth-

income ratio increases as income growth increases, but same savings rate. Due to USA’s

population, it wasn’t hard for them to achieve economic stability, together with left and right

innovations brought about by the brightest minds like Bill Gates who’s still acing the business

industry ever since he founded Microsoft Corporation.

A good quote once said by Peter Drucker, “The ultimate resource in economic

development is people. It is people, not capital or raw materials that develop an economy.”

America owe its wealth to its people, because without their ideas and inspirations, their country

wouldn’t rise to the top. However, because of USA’s overpowered technology, it becomes hard

for other countries to think about something new and try to contribute to the industry of

technology. New products are being criticized, because it’s not as good as Steve Jobs’ invention,

that results to intimidation. For example, in the Philippines, the phone brand MyPhone, has been

criticized since Oppo and Huawei came to the country. Given that it’s a local brand, MyPhone

soon lost buyers, because of these new brands, and without money entering, they shall fail to

innovate and compete with other famous brands. They adjust their prices depending on their

consumer’s income, and for MyPhone, most of their customers are from low-income households.

With minimal income, comes minimal improvements and innovations, so it’s not that surprising

that they haven’t made significant changes since then.

 As you can see, the growth of a country doesn’t only depend on the leadership, but also

with its people, and their capacity and willingness to do something that’ll be beneficial for their

nation, however, many countries are still struggling to apply such measures in order to uplift

their economy. In addition, the data that was gathered in this study might help developing

countries to step up their game, and use this as basis of their economic strategies in the future.

The best way to evaluate the paper: CAPITAL IS BACK: WEALTH-INCOME RATIOS

IN RICH COUNTRIES 1700-2010 is by applying it in real life situations, to see if these patterns

are being practiced in developing countries, and if yes, how are they affected? Is it improving

their economy? Is it enhancing their way of living? If not, why? Which of these patterns are they

lacking? How will they be able to apply the same measures for the growth of their own

economy? What things do they need to change? How long is it going to take them? Asking

questions will help a nation to identify problems and resolve it quickly to minimize damages and

casualties in terms of allocation of resources.

In conclusion, United States, Japan, Germany, France, the United Kingdom, Italy,

Canada, and Australia, were able to boost their respective wealth-income ratios from 200-300%

from 1970 to 400-600% as of today, due to long-run asset price recovery. Despite of drastic

changes, they’re able to adapt with the situation, so their hard-earned resources won’t go to

waste after the World War. In addition, new policies are also implemented after the historical

event to help their nation emerge stronger, together with slow productivity and population

growth, which help in minimizing the consumption of scarce resources. These countries didn’t

achieve skyrocketing growth in an instant; they underwent hundreds of years of recovery, and

adaptation of new policies in money and trade, and I can say that their sacrifices are worth it.
This only shows high level of competence towards economic changes, that leads to full-

economic independence.

Reaction Paper #2:

Reaction Paper: A note on Piketty and diminishing returns to capital
In the field of academics, conflicts and debates shall arise from varying preferences. The

paper entitled: A note on Piketty and diminishing returns to capital contains Matthew Rognlie’s

views on Piketty’s paper: Capital in the Twenty-First Century regarding diminishing return to

capital. He reviewed two studies published by Piketty, and based on his findings, results are quite

contradicting. Piketty’s view on diminishing returns to capital simply states a decrease in capital

returns year by year, but according to his 2013 study, housing has an increase of almost 100% in

terms of capital/income returns.

I think that it’s true, because land doesn’t depreciate, in other words, it has nowhere to go

but up. Realistically, an old property needs a lot of maintenance that’ll cost a lot of money

allocated to expenditure, therefore its price will surely increase, and not the other way around. I

see that there are a lot of things to be corrected with Piketty’s study, especially with tons of

underlying conditions, and not only the ones stated in his data. Given that his study was only

conducted in 2014, his data may differ after significant changes, especially with innovations

happening left and right.

I feel that this note shall improve future studies, when it comes in being critical with the

data that they’re planning to present to the masses. These kinds of papers offer a lot of

possibilities of improvement for future studies to be as accurate as possible. It seems that

commentary papers are necessary and vital to the academe, if no one’s correcting published

studies, there are no rooms for improvement, and that’s very dangerous. In my opinion, we need

more people by Rognlie, because without him, published studies, especially in Economics, can

be as shallow as a puddle. It may contain inaccurate and useless data that we could never use to

improve our economic independence.

Moreover, Rognlie mentioned on how nations are supposed to invest more on intellectual

property and technology – which is true. Aside from it’s faster to accumulate money, it also costs

significantly less than housing and land. With minimal maintenance, expenditure will also

decrease in large amounts; and in this fast-phased world we live in, technology is vital. A

company that didn’t acknowledge the importance of technology would be erased from the map,

like what happened to Kodak. Once a very successful company, who made a huge contribution

in the industry of photography, but now, they’re almost unknown, especially to the Gen Zs.

William Pollard once said a good quote, “Without change there is no innovation, creativity, or

incentive for improvement. Those who initiate change will have a better opportunity to manage

the change that is inevitable.” Lack of innovation won’t trigger creativity and critical thinking,

we won’t be able to extract brilliant ideas and share it to the world, without these changes; and

we can’t ignore it either. The only thing left for us to do is to acknowledge it, and get the best out

of it.

For example, USA gives a lot of their fund in scientific studies about medicines, and

development of technology, and look where did it took them – through the roof. If only

developing countries thought of this in the first place, they would be competing with Apple and

Microsoft by now, but sadly, some of them focused on tangible capital like land and business,

and failed to recognize opportunity in the hands of technology.

 As you can see, drastic changes await the nation who has the courage to step up their

game, and make use of its manpower to export products that will change the industry of

technology. I do believe that every nation has very smart citizens, it’s just that some of these

nations do not recognize what they have, instead they invest their funds on infrastructures that

barely return what we invested. These brilliant minds need to be enhanced and improved through

supplementation of adequate resources from community funds. Consequently, soon our people

will be as smart as Bill Gates and Steve Jobs and end up with world-changing inventions, even

other countries will benefit from. I like to believe that smart people are made, and not born. Yes,

intelligence can be in-born, but if the person who has it doesn’t know how to expand and

enhance what he has, it’s no use. Unfortunately, in the Philippines, public universities – that are

maintained through the people’s taxes suffer from lack of equipment and supplies. Just like in

Polytechnic University of the Philippines, there are no chairs, electric fan, proper restrooms, and

more. These are just small things, but if you think about it, these hinder a student from studying

properly in a comfortable environment. Biology students also lack in scientific equipment

needed for experiments, but imagine if these are supplemented, I bet even first years will have

their own discovery. Filipinos have big dreams, but its leaders fail to acknowledge and make

these dreams work. They’re more concerned of the foreigners’ dreams, and address them first.

In conclusion, A note on Piketty and diminishing returns to capital by Matthew Rognlie

is about the corrections he made on Piketty’s paper: Capital in the Twenty-First Century about

diminishing capital returns. He made significant comments and insights on how broad its scope

should be, compromising possible changes through the years.

Reaction Paper #3:
Reaction Paper: Dynamic Optimization in Continuous-Time Economic Models (A Guide
for Perplexed)
Specific information about economic activities is needed to be reported on a regular

basis. Disclosures regarding important data must be included and not only be hidden under the

general term economic activities; not only that, inclusion of changes in policies and patterns are

also necessary to keep an accurate and detailed presentation of the flow of economy. I think that

these would help in assessing which problems are needed to be resolved in order to improve the

management of economic resource towards better allocation. I see that it would be impossible to

compare present and past data, due to lack of records, that might be a result of negligence and

unforeseen events like wars, but if there were records, I believe we would have a better reference

and grasp on how the economy used to run back then. I feel that attention to detail is the key to a

better economic standing; if a country knows their strengths and weaknesses, and able to use

both to their advantage, it wouldn’t be so much of a problem.

Records will show how it went wrong, and what they can do to refrain this from

happening again, together with innovative plans towards a more efficient allocation of economic

resources. The only problem is, it seems that people are not giving enough importance about

finance and how it works; what are considered to be the most important asset? What is the best

investment? How will they be able to maximize what they have with minimal risks? These

questions are necessary in life, and for me, people should be learning more about these rather
than letting professionals take over the entire operation; and they’ll be left clueless about what’s

going on.

If people are supplemented with enough knowledge, their investments would have better

returns, hence improved overall economic standing. In my opinion, if a household is successful

in managing their funds, the whole country would benefit from it, and vice-versa. A hardworking

household is needed to be supported by a competent government; supplementing opportunities

for all, healthcare and education benefits, financial assistance, and other programs to give quality

life for the entire community of people – all of these working together, the path towards

economic growth is just a few steps ahead.

Now, with this study, people like me, can comprehend economics even better. Way back,

I used to think that economics is so boring, I wouldn’t even bother to study it, but as I grow up,

learn how it greatly impacts our performance as a country, and how it can solve numerous

problems with the use of effective and smart planning. In addition, equations are also simplified

with the use of descriptions for people who are easily overwhelmed with the combination of

numbers and letters in the formula – it has become more comprehensive to the eyes of non-

economics majors. For example, a very long formula explaining the summation of all

expenditures would be intimidating, just looking at various amounts of expenses allocated in the

different expense accounts, but with descriptions, the conclusion would be easier to understand

and insights are easily extracted from the readers. Consequently, ideas for improvements and

solutions wouldn’t be also hard to attain, and later on would result to better policies and

management patterns.

In conclusion, reporting of data isn’t just about gathering numbers and events, but also

about indicating major and minor details that could affect the information presented when some
of them gets altered due to unexpected future events. With these, it would be easier to track

down issues and conflicts to come up with better solutions on how to deal with them in the

future. Prevention of these mistakes opens up the gates for better management, relationships,

statistics, and policies, hence better life for all citizens.

Reaction Paper #4:

Reaction Paper: Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six
Headwinds
Growth of economy is both a positive and negative note. In U.S.’s case, they’re one of

the fastest-growing economies since industrial revolution; inventions after inventions are

introduced to make our lives easier, but speed can also be a problem when they’re trying to grow

even more, but there’s no room for improvement left. I think that it would be a lot harder for

developing countries to achieve economic growth in terms of innovation and global contribution,

due to lack of technology. If one doesn’t have access to good-quality equipment and machinery

to perform a certain task, expected results would be hard to attain, especially in countries where

most citizens are suffering from poverty. Fund for advancements are out of the priority list,

because the need to feed these hungry stomachs is immediate, and restricting the national fund

for technology would be inappropriate in the eyes of many. Yes, it’s important to keep up with

other countries, but keep in mind that the situation and betterment of the citizens always come

first, in some countries.

Unfortunately, in the Philippines, the government is prioritizing global competence rather

than the lives of millions of Filipinos dying of poverty. They are more concerned on how to

compete with developed countries, without thinking about other major problems. It’s obvious

that they lack in compassion for the poor fellowmen, while it overflows for the foreign visitors.
 I see that economic growth has more positive results, but when it keeps on accelerating

through time and only concentrated in one area, the next big idea might come in few more

decades. Just like how Generation Z was treated to be the last generation of technology

advancement before, but just recently I learned that there is what we call Generation Alpha,

early-2010s to mid-2020s, and now they’re considered to be the last generation, for now. People

are assuming that there’s a possibility that technology advancements may not possible in the

future, because of these kinds of instances. I feel that despite of the capability of our minds to

create great ideas, we’re still expecting the worst out of things, because what we have isn’t

permanent – good and bad changes might happen in the future, and this might affect our

economy big time. It seems that brilliance isn’t enough to avoid unfortunate events; no matter

how much we slow things down and be careful with every step, we might still encounter things

that we don’t want to – and that’s just how it is.

In my opinion, U.S.’s growth would still be possible in the future. However, I think they

are focusing more on capital returns rather than actual technological improvements that are

legitimately helpful to mankind. For example, the company Mac produces different kinds of

iPhone every year, and sometimes they have one to three versions of the same unit released in

the same year, with varying prices. When you take a look of the specs, you would notice how

little the changes were compared to the previous version; some says that they only changed the

name (from iPhone 11 to iPhone 12), it’s not any different. In my opinion, Mac knows how

people are obsessed with their new releases, even people who can’t afford to buy one unit would

want to buy so bad, they would loan money just to get one.

Of course, people with Apple products are assumed to belong in the middle to upper class

members of the society – so basically, they’re just buying it for the social status glued in every
Apple product; and Mac is taking advantage of it. No matter how many iPhones, iPad, Macbook,

Airpods, and any other gadgets they produce, they know a large group of people would want to

buy it. Very little innovation, but very huge profit – this is how businessmen’s mind work.

In conclusion, if U.S. would take their time to discover other inventions and supply

sufficient funds and manpower, they’d still be able to enhance their growth and produce more

world-changing advancements. A highly-developed country doesn’t need to stop innovating once

they reached the top; they need to find new strategies to maintain their economic performance.

Reaction Paper #5:

Reaction Paper: The Cointegration Relationship and Casual Link of Internet Penetration
and Broadband Subscription on Economic Growth: Evidence from ASEAN Countries
Having to live between year 2001-2021, I’ve seen a lot of changes, especially in terms of

technology. Way back, I used to have a very small and heavy Nokia phone that is only capable in

sending text messages, making calls, and playing games like Snake and Space Impact. I didn’t

know how important the internet was before honestly, I lived for almost 8 years without it, but

by the time I was able to access it, I can’t get enough. It seems that I’ve been dependent on it for

12 years; I use it for learning, communication, entertainment, and updates. I must say that it has

both positive and negative side, yes, everything is so much faster, but so as crimes. People with

criminal minds are using the internet as a medium to steal, threaten, and hurt other people for

their own benefit – for money and even for their sexual desires.

Based on the paper: The Cointegration Relationship and Casual Link of Internet

Penetration and Broadband Subscription on Economic Growth: Evidence from ASEAN

Countries, ASEAN countries are affected positively by both internet penetration and broadband

subscription. I see that our transition to advance technology has opened lot of opportunities for
many Filipinos; jobs have been generated from industries that require knowledge and skills

regarding the internet, and a lot of things became easier. With jobs arising from left and right, it’s

not surprising that people became more capable on buying the things they need and want.

However, this doesn’t apply to people who are, up until now, still don’t have gadgets, and are not

able to access the internet, simply because they don’t have the means to do so. It’s been so long,

but how come people like them are still not reached by this so-called “growth”? Having a great

standing in economic growth is something we should be proud of, but how about the

marginalized and the oppressed? Those people who are paid below minimum wage who are as

industrious as the ones who work in the comfort of offices? How come that our farmers are the

poorest in the country, despite working on agriculture, which is as important as call center? I

think that along with these advances, the government should also consider people who are in the

lower class of the society, because if these are only offered to the rich, it doesn’t make any sense.

It’s like we’re covering up the ugly truth about our country with fancy phones, laptops, tablets,

and any other gadgets to be invented in the future.

In my opinion, it’s not fair that we call it “economic growth” when truthfully, it’s only

the middle up to upper classes who are really growing. There are people stuck in low-paying jobs

with minimal benefits and assistance by the government. How long will it take before they

experience that “growth” too? Do their grandchildren get to live an abundant life surrounded

with luxury after a few years?

In addition, the internet’s greatest gift is globalization. Information, trading, and even

services are travelling quickly, because of it. More jobs are generated, with the help of fast-

trading, and we can easily work even when our boss or employees are in other areas. Things that

are this beautiful have a corresponding ugly side to it; indirect colonization. Unfortunately,
foreign countries can easily impart their culture onto ours that might result to us forgetting where

we originated – or worse we fight against our fellow countrymen for our “kpop idols”. You can

see it all over social media: Filipinos fighting over which is more important, BTS Taehyung’s

birthday or Dr. Jose Rizal’s death anniversary. Obviously, as Filipinos, our answer would be

Rizal’s birthday, because unlike Taehyung, he sacrificed his life for our freedom, but sadly, some

BTS fans think the other way around.

In conclusion, I can say that internet penetration and broadband subscription really did

well in improving our economic growth, but there are also other things to be considered other

than mere statistics. We must keep our eyes open to the reality of the world, because no matter

how good our numbers are, but many people are in poverty, it doesn’t make any sense.
Reaction Paper #6:
Reaction Paper: The Dynamic Relationship of Domestic Credit and Stock Market
Liquidity on the Economic Growth of the Philippines
When it comes to profit allocation, one must be critical. Every cent is equal to blood,

sweat, and tears of working for the capitalist economy. Most Filipinos are taught to study hard to

be able to get a decent job in the future, but that’s where we’re wrong. Like my father always

say, “no one gets rich as an employee.” Well, let’s set aside corrupt politicians, accountants,

lawyers, and more. I think he’s right; if you keep on depending on your salary that gets spent

immediately on your monthly expenditures, allocation for investments wouldn’t be possible.

You’ll be needing to work really hard just to get an extra and invest as your passive income, or

you can make your own business and earn faster.

Luckily, with stock market, simple employees are able to save and invest on highly liquid

investments with minimal risks. They don’t need to think about losing what they have worked

hard for, and they can also help the economy to support everyone through loans and business

financing. I remembered when I was a kid, my mom told me that saving money on a piggy bank

is bad, because it’s like you’re saving up for an accident or sickness. I feel that it’s half wrong,

and half right. She’s wrong when she thought that it was for accidents, because saving is a
necessity. We need to save for our future, because we’ll never know if we’re able to work the

next day; if we’re able to walk, see, smell, feel, and taste. There’s no certainty of what will

happen tomorrow; and saving is the best way to be prepared and secured for the unforeseeable

future ahead of us. However, she’s right when she told me that saving on a piggy bank is bad,

because the money won’t be able to circulate and attain its productive purpose. Instead of

financial intermediaries making use of my money to lend people who need it, also known as fund

demanders, it’s stuck inside my little, pink, piggy bank.

I understand that not only we can save efficiently with passive income on the side, we

can also help the economy in terms of supplementing funds across the country that can be

invested in establishments, advancements, and other assets that can boost our economic growth

as a nation. On the other hand, it’s also important to acknowledge the fears of an investor when it

comes to choosing which type of investment to engage to. I think that some investment

opportunities are intimidating at times, especially with minimum investments required, risks

involved, income requirements, maturity dates, and many more. As a citizen who once was

oblivious of what these factors are and how it impacts one’s investment, I can say that it can be

very hard to comprehend and grasp when you have very little knowledge regarding the matter.

With stock market, information is easier to understand, and it removes the fear of investing and

trying something productive with your savings or income.

With the overflowing amounts of citizens who are starting to be interested in stock

market, it’s only normal that the economic growth is also accelerating. New projects are being

financed by public funds, and profit is generated through this establishments and advancements.

However, in my opinion, some of these projects are not highly-inclined to technology.

Some of it are spent in fixed assets like subdivisions, buildings, housing projects, and other land
investments. Yes, these are important, for the maximization of income due to the appreciative

value of these properties, but in today’s modern world, technological innovations are just as

important as physical ones. It might be intangible, but it can generate millions as soon as it

proves its importance and standing in the market. With new technologies, developments in terms

of education, medical, military, business and other industries are possible; and these shall be

beneficial to the country as a whole.

After reading the research paper, I have concluded that investing the stock market is a

great way to contribute to your country’s economic growth. When you decided to try something

out of your ordinary, you’re hitting two birds in one stone: first, you’re subjecting your savings

to more productive use, second, you’re helping the country through financing to generate more

profit and to increase the GDP in the long run.

Reaction Paper #7:

Reaction Paper: Estimating the Nature of Relationship of Entrepreneurship and Business

Confidence on Youth Unemployment in the Philippines
As a person who belongs to the youth, I have battled against my own thought about the

career that I am willing to pursue, and able to pursue. I think that willingness is not enough to

determine whether you’re going to graduate in your desired degree; it’s also a matter of finance.

Most Filipinos don’t have the means to study in high-end universities like De La Salle, Ateneo

de Manila, San Beda, and other universities that offer high quality education alongside pocket-

aching tuition fees. Students like me, who belong in a low-income household, need to thrive to

get into state universities with minimal expenditures and pure hard work. As I studied in

Polytechnic University of the Philippines (PUP), I have witness thousands of students beat

themselves up by commuting just to go to the academe, and get home afterwards. Hours are

spent in public transportations, and very little left for rest and review. It’s sad, but it’s the truth.

Given the situation that only PUPCET passers are able to set foot in the university, still, many

students are deprived of educational right, just because they don’t have the financial means and

intellectual capacity to enter such universities.

 Above problems will result to even more bigger conflicts like job mismatch, because

fresh graduates are stuck in a mediocre job that they don’t like, just because of extremely high

job requirements. This is also a matter that must be resolved immediately; job applications that

require years of experience, yet give slightly above minimum salary sounds really silly. Years of

studying in the academe are wasted, and for what? For 17,000 pesos per month? Not only that

it’s disrespectful, it’s also unfair for the young people. Some of us just graduated, it’s only fitting

that we don’t have experiences in the real world of employment. They’re missing the fact that

most of us are fast-learners, and willing to be trained inside the organization in order to represent

the company at its best with our capabilities and talents.

Second problem that will arise due to job mismatch is lowering business confidence. If

you’re not proud and passionate of what you’re doing, it’s most likely impossible for you to

establish a business inclined to your chosen career. Most of us are pursuing a degree that our

parents chose; unfortunately, in an Asian household, you don’t get to decide who you want to be

in the future. Your parents are going to control your dreams and crush them if needed, just to

chase after a high-paying job that will make you unhappy. I have heard so many stories about

doctors and nurses who once dreamt of being a dancer, theater performer, artist, architect,

comedian, and more. Later on, as they subject themselves to a particular profession that’s

extremely unrelated to their passion, they’d grow tired and feel purposeless.

In my opinion, parents and the government should fix this problem hand-in-hand, by

educating parents to let their children chase after their dreams, while the government provides

career coaching in schools are early as possible. As I have seen in my senior high school years,

many students are still confused of who they want to be in the future; some of them chose a

particular strand, just because it sounds cool, or their friends are in it. There’s no particular
purpose or concrete plan. During senior high school, we’re taught about understanding the self,

where we can dive deeper into our personality traits and be able to handle our emotions and

extract its meaning. However, I think, understanding the self should be taught as early as

possible, specifically during primary education. Discovering ourselves needs to be done in an

earlier timeframe, so when we reached the age where we need to decide which path to take,

we’re ready.

With this strategy, fresh graduates will have a higher chance of being employed

immediately in a job they really love, and soon will be able to engage in businesses where they’ll

generate more profit. According to the research paper, high business confidence will result to a

higher unemployment rate in the youth sector in the long run, however it will be highly

beneficial in the short run. In order to assess this future conflict, we need to address every

problem our society has, like gender bias, inequality among various households, as well as job

opportunities for all.

With these things working together, we can put an end to the expanding number of

unemployed youth each year, until there’s nothing left.