AE2- Midterms Reviewer - In addition to being concerned with the efficient
LESSON 1: ECONOMIC DEVELOPMENT
ECONOMIC DEVELOPMENT
- One of the newest, most exciting, and most
challenging branches of the broader disciplines
of economics and political economy.
- Adam Smith
o was the first “development economist”
o his “Wealth of Nations” published in
1776, was the first treatise on economic
development.
NATURE OF DEVELOPMENT ECONOMICS
1. TRADITIONAL ECONOMICS
- is concerned primarily with the efficient, least-
cost allocation of scarce productive resources
and with the optimal growth of these resources
overtime so as to produce an ever-expanding
range of goods and services.
o Basic microeconomics
o Allocation of resources
o Determination of market equilibrium
 Supply- upward curve
 Demand- downward curve
- Traditional neoclassical economics deals with
the advanced capitalist world of perfect markets;
consumer sovereignty; automatic price
adjustments; decisions made on the basis of
marginal, private-profit, and utility calculations;
and equilibrium outcomes in all products and
resource markets.
- An approach to economics that emphasizes
utility, profit maximization, market efficiency,
and determination of equilibrium.
2. POLITICAL ECONOMY
- Goes beyond traditional economics to study the
social and institutional processes through which
certain groups of economic and political elites
influence the allocation of scarce productive
resources now and in the future as well, either
for their own benefit exclusively or for that of a
larger population.
- The attempt to merge economic analysis with
practical politics – to view economic activity in
political context.
- Emphasizes the role of power in economic
decision-making.
3. DEVELOPMENT ECONOMICS
- Has an even greater in scope;
allocation of existing scarce (or idle) productive
resources and with their sustained growth
overtime, it must also deal with the economic,
social, political, and institutional mechanisms,
both public and private, necessary to bring
about rapid and large scale improvements in
levels of living for the peoples of Africa, Asia,
Latin America, and the formerly socialist
transition economies.
o Sociology and Politics- institutional
mechanisms.
- Concerned with the economic, cultural, and
political requirements for effecting rapid
structural and institutional transformations of
entire societies.
- The study of how economies are transformed
from stagnation to growth and from low-income
to high-income status, an overcome problems of
absolute poverty.
o How economies are transformed
After war…
- First world countries- rightist (US)
- Second world countries- leftist (Russia)
- Third world countries
THE IMPORTANT ROLE OF VALUES IN
DEVELOPMENT ECONOMICS
ECONOMICS
- Is a social science.
- It is concerned with human beings and the social
systems by which they organize their activities
to satisfy basic material needs (e.g. food, shelter,
clothing) and nonmaterial wants (e.g. education,
knowledge, spiritual fulfillment).
- It is necessary to recognize from the outset that
ethical or normative value premises about what
is or is not desirable are central features of the
economic discipline in general and of
development economics in particular.
- Concepts or goals such as economic and social
equality, the elimination of poverty, universal
education, rising levels of living, national
independence, modernization of institutions, rule
of law and due process, access to opportunity,
political and economic participation, grassroots
democracy, self reliance, and personal
fulfillment all derive from subjective value
judgements about what is good and desirable
and what is not. Thus, the validity of economic
analysis and the correctness of economic
prescriptions should always be evaluated in the
 light of the underlying assumptions or value - Development meant achieving sustained rates of
premises. growth of income per capita to enable a nation to
expand its output at a rate faster that the growth
VALUES of its population.
- Principles, standards, or qualities that a society o In terms of ECONOMIC GROWTH
or groups within it considers worthwhile or o GDP- finished goods within the country.
desirable. o GNI- consider the income of Filipinos
working abroad (remittances).
- INCOME PER CAPITA – Total Gross
National Income of a country divided by its total
population
o GNI ÷ Total Population
o 13th Philippines- 117 million
(population)
 1st- India
 2nd- China
- GNI – The total domestic and foreign output
claimed by residents of a country. It comprises
Gross Domestic Product plus factor incomes
accruing to residents from abroad, less the
income earned in the domestic economy
accruing to persons abroad.
- Saw economic development in terms of planned
alteration of the structure of production and
employment so that agriculture’s share of both
declines and that of the manufacturing and
service industries increases.
o Economically developed if not in
agriculture.
- Development strategies: focused on rapid
industrialization at the expense of agriculture
and rural development.
- Nearly always seen as an economic phenomenon
in which rapid gains in overall and per capita
GNI growth would either “trickle down” to the
masses in the forms of jobs and other economic
opportunities or create the necessary conditions
for the wider distribution of the economy and
social benefits.
- Problems of poverty, discrimination,
unemployment, and income distribution were of
secondary importance to “getting the growth job
done”.
- The emphasis is often on increased output,
measured by Gross Domestic Product (GDP).

NEW ECONOMIC VIEW OF DEVELOPMENT

- Economic development came to be redefined in
terms of the reduction or elimination of
poverty, inequality, and unemployment within
the context of a growing economy.
- “Redistribution from growth” became a
AE2- Midterms Reviewer common slogan.
LESSON 2: VIEWS ON DEVELOPMENT - Economic development must be conceived as a
multidimensional process involving major
TRADITIONAL VIEW changes in social structures, popular attitudes,
 and national institutions, as well as the
acceleration of economic growth, reduction of
inequality, and the eradication of poverty.
o Wealth distribution in the PH (eg. 4p’s)
 Progressive Taxation
 Tax system
 Based on income
 1990’s Taxation
 Single parents are not
exempted.
- Development, in its essence must represent the
whole gamut of change, by which an entire
social system, social groups within that system,
moves away from a condition of life widely
perceived as unsatisfactory toward a situation or
condition of life regarded as materially and
spiritually better.
- Questions to be asked:
o What has been happening to poverty?
o What has been happening to
unemployment?
o What has been happening to inequality?
o 5%- natural unemployment rate
DEVELOPMENT & HAPPINESS
HAPPINESS
- Is part of human well-being, and greater
happiness may I in itself expand an individual’s
capability to function.
o Happiness is abstract, but money can’t
buy happiness.
Economists have explored the empirical relationship
across countries and over time between subjectively
reported satisfaction and happiness and factors such as
income. One of the findings is that the average level of
happiness or satisfaction increases with a country’s
average income.
WORLD’S HAPPIEST COUNTRIES (2020)
1. FINLAND
- This is the third year in a row that the Finnish
have taken the top spot, with the nation’s people
reporting a strong satisfaction with life and
confidence that they live in a place where people
take care of one another.
- In particular, Helsinki was also noted as the
happiest city in the world.
2. DENMARK
- Denmark won the top spot in 2012, 2013 and
2016!
- The Danish are known for their laidback attitude
to life.
- Their capital city Copenhagen is routinely listed
as one of the most livable cities in the world.
3. SWITZERLAND
- Back in 2015, Switzerland was named the
happiest country in the world!
- Considering the report’s suggestion that there’s a
direct link between green spaces and happiness,
it makes a lot of sense to see this beautiful
nation at number three.
- it’s the home of chocolate.
4. ICELAND
- Iceland has appeared on the list of happiest
countries before.
- The island, which sits in the North Atlantic sea
off Europe, has seen a boom in tourism in recent
years, with many nature-loving travellers
flocking to the green hills and dramatic sites.
- 0ne of the best places to see the natural magic of
the Aurora Borealis (or the Northern Lights).
5. NORWAY
- Formerly named ‘the happiest country’ in 2017,
- What often strikes us most is its diverse
landscape.
- Norway is also known for a stellar standard of
living, including an impeccable welfare system
and a sense of contentment with ‘less’ (AKA a
love for the simple life).
6. NETHERLANDS
- Famed for its cultural capital, Amsterdam, this
nation is a huge draw for lovers of art and
history – but don’t sleep on the rolling hills or
stunning national parks.
7. SWEDEN
- Sweden combines incredible natural sites like
glaciers and deep-blue archipelagos with a
cosmopolitan capital in Stockholm, providing
the best of both worlds on the report’s happiness
index.
- have one of the best welfare systems in the
world, receiving benefits such as subsidized
prenatal care, 480 days of paid leave when a
child is born or adopted and plenty of other
healthcare benefits.
8. NEW ZEALAND
- With a sprawling coastline of pristine beaches,
jaw-dropping mountain peaks and the world’s
favourite political leader, Prime Minister Jacinda
Arden, we’re not shocked to see New Zealand
placed so high on this list.
- The diverse landscape, a strong sense of
community and the fact that the government
actually released a ‘wellbeing budget’ in 2019
 all contribute to the happiness of New It is important to bear in mind that there is a
Zealanders. great deal of diversity throughout the developing world,
9. AUSTRIA even within these areas of broad commonality. Different
- famed for world-class architecture, dreamy development problems call for different specific policy
landscapes with rolling hills and pristine lakes, responses and general development strategies.
and PRETZELS.
10. LUXEMBOURG CHARACTERISTICS OF DEVELOPING WORLD
- Top-10 newcomer Luxembourg pushed Canada
and Australia to 11th and 12th, followed by the 1. Lower levels of living and productivity.
United Kingdom in 13th. 2. Lower levels of human capital.
- it’s known for rich cultural experiences – the 3. Higher levels of inequality and absolute poverty.
country is home to 130 stunning castles! 4. Higher population growth rates.
5. Greater social fractionalization.
WORLD’S HAPPIEST COUNTRIES (2023 & 2024) 6. Larger rural population but rapid rural-to-urban
1. Finland migration.
2. Denmark 7. Lower levels of industrialization.
3. Iceland 8. Adverse geography.
4. Israel 9. Underdeveloped financial and other markets.
5. Netherlands 10. Lingering colonial impacts such as poor
6. Sweden institutions an often-external dependence.
7. Norway
8. Switzerland LOWER LEVELS OF LIVING AND
9. Luxembourg PRODUCTIVITY.
10. New Zealand
STANDARD OF LIVING
- refers to the quantity and quality of material
goods and services available to a given
population.
- focuses on basic material factors such as
income, gross domestic product (GDP), life
expectancy, and economic opportunity.
- It is closely related to quality of life, which can
also explore factors such as economic and
political stability, political and religious
freedom, environmental quality, climate, and
safety.

AE2- Midterms Reviewer
LESSON 3: CHARACTERISTICS OF
DEVELOPING WORLD
There are important historical and economic
commonalities among developing countries that have led
to their economic development problems being studied
within a common analytical framework in development
economics.
Example…
One measure of standard of living is the United
Nations' Human Development Index (HDI), which
scores 189 countries based on factors including life
expectancy at birth, education, and income per capita.
As of 2019, the countries with the five highest HDI
scores are Norway (0.957), Ireland and Switzerland
(0.955), Hong Kong and Iceland (0.949), and Germany
(0.947).4
Conversely, the countries with the five lowest
2019 HDI scores are Niger (0.394), Central African
Republic (0.397), Chad (0.398), Burundi and South
Sudan (0.433), and Mali (0.434). The United States
came in at #17 while China was #85.
To exemplify the difference between the scores of
0.957 and 0.394, Norway has a life expectancy at birth
of 82.4 years, 18.1 expected years of schooling per
citizen, gross national income (GNI) per capita of
$66,494 (purchasing power parity-adjusted currency
units), a homicide rate per 100,000 people of 0.5, and an
internet usage rate of 96.5% of its population. Niger,
meanwhile, has a life expectancy at birth of 62.4 years,
6.5 expected years of schooling, a GNI per capita of
$1,201, a homicide rate of 4.44, and an internet usage
rate of 5.3%.
The U.S. scored seventeenth on the list, with a
combined score of 0.926, a life expectancy at birth of
78.9 years, 16.3 expected years of schooling, and GNI
per capita of $63,826.
STANDARD OF LIVING VS. QUALITY OF LIFE
The terms standard of living and quality of life
are often believed to mean the same. While they may
overlap, there is a difference between the two.
Standard of living generally refers to wealth,
comfort, material goods, and necessities of certain
classes in certain areas—or more objective
characteristics—whereas quality of life is more
subjective and intangible, such as personal liberty or
environmental quality. Characteristics that make up a
good quality of life for one person may not necessarily
be the same for someone else.
LOWER LEVELS OF HUMAN CAPITAL
HUMAN CAPITAL
- an intangible asset not listed on a company's
balance sheet and includes things like an
employee's experience and skills.
- perceived to have a relationship with economic
growth, productivity, and profitability. Like any
other asset, human capital can depreciate
through long periods of unemployment, and the
inability to keep up with technology and
innovation.
- Since all labor is not considered equal,
employers can improve human capital by
investing in the training, education, and benefits
of their employees.
- Example:
o Knowledge
o Creativity
o Wisdom
o Judgement
o Experience
o Training
o Education
o Skills
o Abilities
HIGHER LEVELS OF INEQUALITY AND
ABSOLUTE POVERTY
INCOME INEQUALITY
- how unevenly income is distributed throughout a
population.
- The less equal the distribution, the higher
income inequality is.
- Income inequality is often accompanied by
wealth inequality, which is the uneven
distribution of wealth.
- Populations can be divided up in different ways
to show different levels and forms of income
inequality such as income inequality by sex or
race. Different measures, such as the Gini
coefficient, can be used to analyze the level of
income inequality in a population.
Income inequality and income disparity segregations
can be analyzed through a variety of segmentations.
Segmentations of income disparity analysis are used
for analyzing different types of income distributions.
Income distributions by demographic segmentation form
the basis for studying income inequality and income
disparity.
The different types of income segmentations studied
when analyzing income inequality may include
distributions for:
 Male vs. female
 Ethnicity
 Geographic location
 Occupation
 Historical income
POVERTY
- a state or condition in which a person or
community lacks the financial resources and
essentials for a minimum standard of living.
- Poverty means that the income level from
employment is so low that basic human needs
can't be met.
- Poverty-stricken people and families might go
without proper housing, clean water, healthy
food, and medical attention.
- Each nation may have its own threshold that
determines how many of its people are living in
poverty.
o 92 pesos per day (individual)
NYAHAHHAA yung nasa assignment na to
HIGHER POPULATION GROWTH RATES
GROWTH RATE (World Health Organization)
- The annual average rate of change of population
size, for a given country, territory, or geographic
area, during a specified period.
- It expresses the ratio between the annual
increase in the population size and the total
population for that year, usually multiplied by
100.
- The annual increase in the population size is
defined as a sum of differences: the difference
between births less deaths and the difference
between immigrants less emigrants, in a given
country, territory or geographic area at a given
year.
o High population growth rate in the
Philippines are due to:
 Lack of sex education
 Teenage pregnancy
 Children are considered as
retirement fund
GREATER SOCIAL FRACTIONALIZATION
SOCIAL FRACTIONALIZATION
- measures the probability that two randomly
selected individuals in a country will belong to
different ethnolinguistic and religious groups.
- Social Fractionalization = Ethnic
Fractionalization + Cultural Fractionalization +
Religious Fractionalization) / 3.
o Philippines are open pagdating sa
religious chuchunes
LARGER RURAL POPULATION BUT
RAPID RURAL-TO-URBAN MIGRATION
URBAN AREA
- refer to towns, cities, and suburbs.
- An urban area includes the city itself, as well as
the surrounding areas.
RURAL AREA
- opposite of urban areas.
- Rural areas, often called "the country," have low
population density and large amounts of
undeveloped land.
- In 2022, the share of urban population in the
Philippines remained nearly unchanged at
around 47.98 percent. Still, the share reached its
highest value in the observed period in 2022.
- In 2020, 58.93 million or 54.0 percent of the
total 109.03 million population of the
Philippines lived in urban barangays. This
represents an increase of 7.20 million persons
from the 51.73 million urban residents in 2015.
The rural population or those who lived in
barangays classified as rural in 2020 comprised
the remaining 50.10 million persons or 46.0
percent of the total population.
o The level of urbanization or the
proportion of the total population living
in barangays classified as urban was
recorded at 54.0 percent in 2020. This is
2.8 percentage points higher than the
51.2 percent level of urbanization in
2015.
- In 2015, the level of urbanization or the
percentage of population residing in urban areas
in the Philippines was recorded at 51.2 percent.
This means that a total of 51.73 million persons
resided in barangays classified as urban. There
were 7,437 barangays classified as urban and
34,599 as rural. The level of urbanization in
2010 was only 45.3 percent.
LOWER LEVELS OF INDUSTRIALIZATION
INDUSTRIALIZATION
- the process by which an economy is transformed
from a primarily agricultural one to one based
on the manufacturing of goods. Individual
manual labor is often replaced by mechanized
mass production, and craftsmen are replaced by
assembly lines.
- Industrial Revolution, in modern history, the
process of change from an agrarian and
handicraft economy to one dominated by
industry and machine manufacturing. This
process began in Britain in the 18th century and
from there spread to other parts of the world
INDUSTRIAL REVOLUTION 1.0
- Important inventions of the Industrial
Revolution included the steam engine, used to
power steam locomotives, steamboats,
steamships, and machines in factories; electric
generators and electric motors; the incandescent
lamp (light bulb); the telegraph and telephone;
and the internal-combustion engine and
automobile, whose mass production was
perfected by Henry Ford in the early 20th
century.
- gave rise to textiles, railroads, iron, and coal.
INDUSTRIAL REVOLUTION 2.0
- Rapid advances in the creation of steel,
chemicals and electricity helped fuel production,
including mass-produced consumer goods and
weapons.
- It became far easier to get around on trains,
automobiles, and bicycles. At the same time,
ideas and news spread via newspapers, the radio
and telegraph.
 - Gave rise to built on steel, electricity, chemicals,
and petroleum.
o 75 cents for 3 minutes call
o 120 pesos for 3 minutes (LDR)
INDUSTRIAL REVOLUTION 3.0
- Beginning in the 1950s, the third industrial
revolution brought semiconductors, mainframe
computing, personal computing, and the Internet
—the digital revolution.
o Arrived in the Philippines during 1990s
FOURTH INDUSTRIAL REVOLUTION (NOW)
- The concept of the Fourth Industrial Revolution
was coined in 2016 by Klaus Schwab, the
founder of the World Economic Forum, in a
book of the same name.
- "The Fourth Industrial Revolution creates a
world in which virtual and physical systems of
manufacturing cooperate with each other in a
flexible way at the global level".
- The Fourth Industrial Revolution, however, is
not only about smart and connected machines
and systems. Its scope is much wider. Occurring
simultaneously are waves of further
breakthroughs in areas ranging from gene
sequencing to nanotechnology, from
renewable energies to quantum computing. It
is the fusion of these technologies and their
interaction across the physical, digital and
biological domains that make the Fourth
Industrial Revolution fundamentally different
from previous revolutions.
o Nano technology
o Quantum Technology
o Artificial intelligence
o Solar-powered Cars
o Digital education- vision since pre-
pandemic.
To analyze how we have reached the Fourth
Industrial Revolution it is a good idea to look back at the
previous three industrial revolutions, how they changed
our lives and the world when they occurred. Let's take a
quick look at:
 First Industrial Revolution. It occurred at the
end of the 18th century, in 1784, when steam
was harnessed for mechanical production. The
invention of the first mechanised loom was a
watershed.
 Second Industrial Revolution. In 1870, mass
production powered by electricity was first
introduced. The assembly line was invented and
the industrial sector speeded up exponentially.
 Third Industrial Revolution. In 1969,
advances in computing led to machine
programming, which opened the door to
progressive automation.
Around 2014, the industry experienced another
"about turn" with the appearance of smart factories
and online production management. Returning to
Schwab and his book The Fourth Industrial
Revolution, the German economist foresaw what
was to come: "We are at the beginning of a
revolution that is fundamentally changing the way
we live, work, and relate to one another". In its
scale, scope and complexity, what I consider to be
the Fourth Industrial Revolution is unlike
anything humankind has experienced before. And
this is for three reasons about which the experts
agree: Its speed, scope and unprecedented impact.
PROS AND CONS OF INDUSTRIAL
REVOLUTION
The Industrial Revolution, the period in which
agrarian and handicraft economies shifted rapidly to
industrial and machine-manufacturing-dominated ones,
began in the United Kingdom in the 18th century and
later spread throughout many other parts of the world.
PROS
1. Goods Became More Affordable and More
Accessible
2. The Rapid Evolution of Labor-Saving
Inventions
3. The Rapid Evolution of Medicine
4. Enhanced Wealth and Quality of Life of the
Average Person
5. The Rise of Specialist Professions
CONS
1. Overcrowding of Cities and Industrial Towns
2. Pollution and Other Environmental Ills
3. Poor Working Conditions
4. The Rise in Unhealthy Habits
a. Fast-fashion
 Producing disposable clothes
b. Obsolescence
 condition of being antiquated,
old fashioned, outmoded, or out
of date
ADVERSE GEOGRAPHY
- conversion of agricultural land to commercial
and industrial land which results to lower
production of crops and locals are expensive and
imported ones are cheaper.
- Philippines have seas and mountains which
affects the trading.
- Local problem, connectivity of places.
UNDERDEVELOPED FINANCIAL AND OTHER
MARKETS
- In the Philippines, it’s not a problem because we
have a strong central bank (P’Noy
Administration)
- Central Bank regulates the monetary policy of
a country and determines the interest rate in
loans.
- Financial Market- manages the stock.

LINGERING COLONIAL IMPACTS SUCH AS

POOR INSTITUTIONS AN OFTEN EXTERNAL
DEPENDENCE
- Spanish, American, and Japan
- Japan taught the Filipinos some tech-voc skills
- Philippines debt

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