ECONOMIC GROWTH
- Quantitative
- Shirt-term
- Focuses on production of goods and services
ECONOMIC DEVELOPMENT
- Qualitative
- Long Term
- Focuses on distribution of wealth and resource
ADAM SMITH
- “Father of Economics”
- “Father of Capitalism”
- He created the idea of GROSS DOMESTIC
PRODUCT (GDP)
- He advocated the FREE MARKET AND
COMPETITION
- DIVISION OF LABOR (improving efficiency and productivity)
- VALUE THEORY
LAISSEZ-FAIRE ECONOMICS – it argues that the
government should not interfere with the
economic operations and affairs of individuals and
the society.
THE INVISIBLE HAND – a metaphor that describes
the self-regulating nature of the marketplace in a
capitalist system.
CRITIQUE OF MERCANTALISM – argued for benefits
of free trade and criticized the inefficiency of
monopoly.
DAVID RICARDO
- He developed the THEORY OF COMPARATIVE
ADVANTAGE, ECONOMIC RENTS AND THE
LABOR THEORY OF VALUE
RICARDO EQUIVALENCE – it suggests that when a
government tries to stimulate and economy by
increasing debt-financed government spending,
demand remains unchanged because the public
increases their savings to pay for expected future
tax increase that will be used to pay off debt.
PAUL SAMUELSON
- Foundations of Economic Analysis” (1947)
- Made significant contributions to many areas
of economics.
- He helped develop the neoclassical synthesis,
blending Keynesian, and classical economics.
KARL MARX
- “FATHER OF SCIENTIFIC SOCIALISM”
- He believed in the LABOR THEORY OF VALUE to
explain the relative difference in market prices
- “The Communist Manifesto”
- “Das Kapital”
- Developed the THEORY OF HISTORICAL
MATERIALISM, CLASS STRUGGLE, CRITIQUED
CAPITALISM, and INTRODUCED THE CONCEPTS
OF SURPLUS VALUE.
JOHN MAYNARD KEYNES
- “FATHER OF KEYNESIAN ECONOMICS”
- FOUNDING FATHER OF MACROECONOMIS
- Known for his economic theories the Keynesian
economics, and his support for employment
and government interventions.
ALFRED MARSHALL
- “FATHER OF NEOCLASSICAL ECONOMICS”
- The originator and known for his work on
Microeconomics
- Theory of Demand and Supply, and everything
under it.
JOSEPH SCHUMPETER
- Best known for The Theory of Creative
Destruction and for offering the first German
and English references to methodological
individualism in economics.
MILTON FRIEDMAN
- The founder of monetarism
- also believed in free market and less
government involvement.
FRIEDRICH HAYEK
- ardent defender of classical liberalism, he
critiqued central planning and emphasized the
importance of price signals in free market for
efficient resource allocation.
AMARTYA SEN
- Known for his contributions to welfare
economics, social choice theory, and
development economics.
1
 CAPABILITY APPROACH - assess economic
development by individual’s abilities to pursue
valuable activities.
DEPENDENCY THEORY
- First proposed in the late 1950s by the
Argentine economist and statesman Raul
Prebisch.
- According to dependency theory,
underdevelopment is mainly caused by the
peripheral position of affected countries in
the world economy.
- It argues that the underdevelopment of
some countries is a result of their
dependency on developed nations.
CORE CONCEPTS OF NEO_MARXIST
DEPENDENCY THEORIES
CAPITALIST EXPLOITATION – Neo-Marxist theories
argue that developed nations exploit developing
nations for their resources, labor, and markets. THE
RICH RICHER AND THE POOR, POOR
UNEQUAL EXCHANGE – the idea of unequal
exchange is central to Neo-Marxist analysis. This
unequal trade makes countries dependent on each
other and MAKES THE RICH RICHER AND THE POOR,
POORER.
IMPERIALISM – Neo-Marxists sees it as a key
mechanism through which developed nations
maintain control over developing countries, both
economically and politically.
DEVELOPMENT THEORY
HARROD-DOMAR GROWTH MODEL:
- This model, formulated by Sir Roy Harrod
and Evsey Domar, emphasizes the
significance of savings and investment in
economic growth. It posits that a nation's
economic expansion is tied to the levels of
savings and the efficiency of capital
investment. Additionally, it introduces the
concept of a 'steady-state' growth rate,
which is the sustainable growth rate an
economy would achieve with full resource
utilization and no inflation.
LEWIS DUAL SECTOR MODEL:
- Arthur Lewis introduced this model, which
dissects an economy into two sectors: a
traditional, labor-intensive agriculture sector
and a modern, capital-intensive industry
sector. The theory suggests that the surplus
labor from agriculture can transition to the
industrial sector, fostering industrialization
and economic progress without triggering
wage hikes or inflation.
2
 SOLOW GROWTH MODEL:
- Robert Solow's model, also known as the
Solow-Swan model due to Trevor Swan's
parallel work, is a neoclassical portrayal of
economic growth. It expands on the Harrod-
Domar model by incorporating technological
advancements and labor growth into the
analysis. The Solow model asserts that
sustained economic growth hinges on
technological innovation and investments in
human capital, rather than solely capital
accumulation. It introduces the notion of
'steady-state growth,' where the capital
stock expands in harmony with population
growth and technological enhancements,
resulting in continual per capita income
growth.

END OF REPORT 1

MEASURING ECONOMIC DEVELOPMENT – the
process or assessing measures that represent raising
people’s living standards and general wellbeing
within an economy.
RICHARD G. LIPSEY
- According to him, the amount of capital and
savings per person, social capital, and
income per person, are some ways to
determine a country’s level of development.
Human Development Index (HDI)
- A composite index measuring average
achievement in key dimension of human
development.
- An index measuring national social and
economic development, based on combining
measures of education, health and adjusted
real income per capital.
LAW
- commonly define as a body of rules of
activity established by governing power and
possessing legal enforcement.
NATIONAL GOVERNMEN
- refers to the governing body or political
authority that exercises control over a
certain nation.
ECONOMIC DEVELOPMENT
- are programs, policies, or initiatives aimed at
improving a community’s economic well-
being and quality of life.
GOVERNMENT FAILURE
- a situation in which a government attempts
to intervene in a market to resolve an issue,
but the result is a poor allocation of limited
resources, thereby worsening the situation.

3
 DOUGLASS NORTH
- he proposed a paradigm that helps explain The Malthusian theory, proposed by Thomas Robert
the qualitative variations in how policies are Malthus, revolves around the idea that population
formulated between nations. growth tends to outpace the availability of
resources, leading to checks on population growth.
INSTITUTIONS – refer to formal and informal rules Malthus, an English economist and demographer,
shaping the economic environment. articulated his theory in the late 18th and early 19th
centuries.
ORGANIZATIONS – are entities that form in response
to the incentives created by these institutions.
At the core of the Malthusian theory is the principle
that while population tends to increase
DEMOCRACY – the people hold the power
geometrically (1, 2, 4, 8, 16...), the means of
AUTOCRACY – all power is concentrated in one
subsistence - such as food and resources - only
person who has absolute rule.
increase arithmetically (1, 2, 3, 4, 5...). This
EDUCATION – is the transmission of knowledge,
discrepancy implies that population growth will
skills, and character traits and manifesto in various
inevitably surpass the capacity of resources to
forms.
sustain it. As a result, Malthus posited that
SKILLS – the ability to use one’s knowledge
populations would be naturally restrained by two
effectively and readily in execution or performance.
types of checks:
HUMAN CAPITAL – consists of the knowledge, skills
and health that people invest in and gain over their
POSITIVE CHECKS: These are factors that increase
entire lives; allowing them to reach their full
mortality rates and include events like famine,
potential as contributing members of society.
disease, war, and other calamities that reduce the
population size.
20th CENTURY
PREVENTIVE CHECKS: These are measures that lower
- “AGE OF HUMAN CAPITAL”
the birth rate, such as delaying marriage, practicing
- Education, skills, and the acquisition of
contraception, or promoting abstinence.
knowledge have become crucial
determinants of a person’s and a nation’s
Malthus believed that if left unchecked, population
productivity
growth would eventually be curbed by the harsh
realities of insufficient resources, leading to a
HORACE MANN
"MALTHUSIAN CATASTROPHE" - a period of
- “FATHER OF HUMAN CAPITAL THEORY”
widespread suffering and depopulation due to
- He advocates education as a mean to
scarcity.
improve worker quality and community
wealth.
END OF REPORT 2
HUMAN CAPITAL THEORY – it emphasizes investing
in individuals’ education and skills to enhance
ECONOMIC DEVELOPMENT – it refers to the uptake
productivity, leading to economic growth and wealth
of new technology, the shift from an economy
creation.
dependent on agriculture to one based industry, and
an overall rise in living conditions.
Theoretical Pipeline of human capital development
includes preparation, recruitment, and retention to
CAPITAL FORMATION
create talented and effective workers and leaders.
- it is the process of adding new physical
assets to an economy’s stock of net capital
MALTHUSIAN THEORY
goods within a given accounting period.
- relationship between food supply and
population growth.
4
 - Determined prior to depreciation expense
deduction.
- Serves as a major resource of goods and
services that will be used for an economy to
improved; leading to a long-term economic
progress.
SIMON SMITH KUZNETS
- he was introduced the capital accumulation.
- He stresses that the primary cause of
economic prosperity is capital accumulation.
COMPONENTS OF CAPITAL FORMATION
GROSS CAPITAL FORMATION (GCF) – is an economy’s
total investment, which includes net and
replacement investments.
NET CAPITAL FORMATION (NCF) – is merely the
increase in net investment, calculated by deducting
the value of depreciation from the total investment.
FINANCIAL CAPITAL – is the amount of money
needed for a company to offer products and
services.
HUMAN CAPITAL – is made up of the health,
knowledge, and abilities that people acquire and
invest in throughout the course of their life, allowing
them to reach their full potential, as contributing
members of the society.
PHYSICAL CAPITAL – the land of property on which
industries, shipping terminals, and retail
establishments are constructed.
SAVINGS
- Putting away money for future purposes
- A money that you want to have an easy
access to as possible, with minimal risk and
tax implications.
Investments
- Is the process of purchasing assets with the
expectation that you will profit from your
purchase, such as stocks, bonds, mutual
funds, or real estate.
FINANCIAL INSTITUTIONS
- it provides financial services to individuals,
businesses, and governments.
- It includes managing money, facilitating
transactions, providing loans, and offering
investments.
COMMERCIAL BANKS – provides checking and
savings account services, takes deposits, and makes
loans for both personal use and profitable
investments.
CREDIT UNION – a nonprofit cooperative financial
entity that is owned by its members. It provides
services like commercial banks but focuses on
serving a specific group.
INVESTMENT BANKS – it offers services to companies
and people looking to raise money, make acquisition
and engage in other financial transactions. They
serve as middleman in intricate business deals.
INSURANCE COMPANY – provides individuals and
businesses with protection against financial losses
due to unforeseen events. The primary purpose of
an insurance company is to offer risk management
solutions through the sale of insurance policies.
MICROFINANCE INSTITUTIONS (MFI)
- financial services given to low-income or
jobless people or organizations that don’t
have access to traditional banking services.
5
- It supports the growth and creation of small
businesses as they provide capital for people
who need more collateral or credit history to
afford traditional bank loans.
THEORIES OF ECONOMIC DEVELOPMENT
SOLOW GROWTH MODEL
- This economic growth model compares the
creation of output, determining the cost of
each unit produced, to the input of a
nation’s population, savings, and
technological advancement.
- it is a tool used to determine the direction
of a country’s economy by calculating the
rate of economic growth over a given period.
PRODUCTION FUNCTION
- it connects the tangible results of a
production process to the tangible inputs or
production components.
- It is a mathematical function that connects
the greatest output that can be produced
with a specific number of inputs, usually
labor, capital and technology.
STEADY – STATE MODEL
- The situation in which the capital per worker
stays constant over time, where the amount
of capital lost due to depreciation and the
requirement to train new employees is equal
to the quantity of new capital added through
investments.
PUBLIC CHOICE THEORY ON DECISION
MAKING
- An economic concept that applies the
principles of economics to the study of
political behavior.
- This theory examines how decisions are
made and how public officials and voters
interact, considering the incentives and
constraints they face.
JAMES M. BUCHANAN
- He was the American economist who won
the 1986 Nobel Prize in economics for his
work on public choice theory.
GORDON TULLOCK
- Co-author of public choice theory.
- His studies of bureaucracy, early insights on
rent-seeking, political revolutions,
dictatorships and incentives and results in
foreign policy were some of his contributions
to Public Choice Theory.
END OF REPORT 3
PETER DRUCKER
6
 - “Innovation is not invention. It is a term in
economics rather than technology”
TECHNOLOGY – it influences various aspects of
growth, productivity an overall economic health.
INNOVATION – the development and applications of
ideas and technologies that improve goods and
services or make their production more efficient.
DEVELOPMENT – the goal is to better fiscal,
economic, and social conditions of developing
countries.
INNOVATION THEORY
- The innovation theory, also known as the
diffusion of innovations theory, was
developed by sociologist Everett Rogers in
1962. This theory aims to explain how, why,
and at what rate new ideas and technology
spread through cultures and societies.
PRODUCTION INNOVATION – This type of innovation
involves developing new or improved products or
services.
PROCESS INNOVATION – innovation focuses on
improving the way products are produced or services
are delivered. It aims to enhance efficiency, reduce
costs, and streamline operations through changes in
processes, technologies, or workflows.
BUSINESS MODEL INNOVATION – involves rethinking
the way a company creates, delivers, and captures
value.
JOSEPH SCUMPETER
CREATIVE DESTRUCTION – mechanism by which new
production units replace outdated ones.
PAUL ROMER
ENDOGENOUS GROWTH THEORY – it states that
investment in human capital, innovation, and
knowledge are significant contributors to economic
growth.
NETWORK GOVERNANCE
- governance through networks of public and
private sectors.
GOVERNANCE – concerned with the relationships
between three actors: state, market, and civil
society.
FINANCIAL POLICY – refers to the actions taken by a
central bank to control the money supply, interest
rates, and credit conditions in the economy. It aims
to achieve economic objectives such as price
stability, full employment, and sustainable growth.
FISCAL POLICY - refers to the government's use of
taxation and public spending to influence the
economy. It aims to achieve economic goals such as
controlling inflation, promoting economic growth,
and stabilizing the business cycle.
FISCAL DEFICIT – public expenditure is greater than
public revenues.
FISCAL RETRENCHMENT – the process of
formulating, adopting, and implementing strategies
in response to a budget crisis.
END OF REPORT 4
AGRICULTURAL AND RURAL DEVELOPMENT
7

AGRICULTURE
- “Foundation of the economy”
- It does not only supply food but also raw
materials for urban population and their
industries.
RURAL DEVELOPMENT
- refers to the process of improving the quality
of life and economic well-being of people
living in rural areas. It involves implementing
strategies and initiatives to address the
unique challenges and opportunities faced
by rural communities.
- Primarily concern with the optimum
utilization of resources such as: human,
economic, social and physical.
Land reform – a deliberate attempt to reorganize and
transform agrarian system to improve the
distribution of agricultural incomes and facilitate
rural development.
GOVERNMENT – is the name given to the entity
exercising authority.
AUTHORITY – simply define as legitimate power.
POLITICS – is the art of government. It is the exercise
of control within the society through the making and
enforcement of collective decisions.
THE INSTITUTE ON GOVERNANCE – defines
governance as the process whereby societies or
organizations make their important decisions.
GERRY STOKER
- his main interests are in local government,
urban politics, and cross-national policy
transfer.

GOVERNANCE THEORY
PHYSIOCRACY OR “AGRICULTURAL SYSTEM”
- political theory that uses the term
- The wealth of nation is derived from the “government” to refer to the formal
value of “land Agriculture” or “land institutions of the state and their monopoly
development” and that agricultural products of legitimate coercive power.
should be highly valued over industrial
goods. END OF REPORT 5
- Developed by FRANCOIS QUESNAY

CORE PRINCIPLES
THE NATURAL ORDER – Physiocrats believed in the
existence of a natural economic order that governed
the economy. They thought that economic activities
should align with this natural order to achieve
prosperity and avoid disruptions.

THE SINGLE TAX THEORY – One of the key principles

of Physiocracy was the concept of the "impôt
unique" or single tax. They proposed a single tax on
the land, known as the "taxe foncière," as the most
equitable and efficient way to finance government
expenses. This tax was believed to be non-
distortionary and would not hinder economic
productivity.

THE PRIMACY OF AGRICULTURE - Physiocrats viewed

agriculture as the only productive sector of the
economy, generating a surplus that could support
other activities. They believed that the wealth of a
nation was derived from the land and the cultivation
of crops.