Gallup, Sachs and Mellingers paper between the correlation of geography and poverty reminds us economists that we must

be careful not to overlook certain factors. These factors, which affect growth (both positively and negatively) range from institutions, historical background, industrial base and many more. The usually disregarded factor, in this case, is geography. According to Adam smith, he predicted that geography would play a huge role in the long-run growth of the economy. This is because geography affects economic development in three major ways, through transportation (cheaper in sea), endemic diseases (more prevalent in tropical zones) and agricultural production (staple food productivity is greater in temperate zones). In reality, these advantages of the temperate regions and coastal areas might seem insignificant, but compounded through the years it becomes drastic. Such is the difference between developed countries now and developing countries. Of the three major factors, I believe that the coastal geographic factor plays an important but least explicit role. Diseases and agricultural productivity are easy to spot as they are factors that increase population. A healthy society and stable food source allows society to focus on other things namely invention and innovation. But what does a coastal area have to offer? The paper mentions the ease of trade. This is because it is simply cheaper to travel using sea transport than by land. Thats it? It sounds discountable, but consider it in terms of how prices of commodities are set. In economics, the cheaper cost of transporting commodities through sea-trade translates to cheaper transaction costs. Transactions costs refer to the expense incurred in making an exchange. For example, when you are buying a shirt. There are implicit expenses that you incur for, getting the information regarding what shirt to buy, knowing where to buy it, by traveling to get there etc. The expense beyond the shirt itself is the transaction cost. The implications of transaction costs could be broad. For instance it could increase the price of a specific commodity by adding the transportation cost to the price of the commodity. Remember why it is always cheaper to by straight from the source? Buying a commodity from the factory itself may release you more transaction costs compared from buying in a retailer store (usually). Too much transaction costs could also distort prices. This is because, the productivity of an area, let say Mindanao, is counter-acted by the distance to its market, in this case Manila. Products from Manila sold in Manila would be cheaper in transaction costs which might not reflect the true productivity of Mindanao. So what are the benefits then? Prices are reduced which allows people to buy more. With the increase in purchasing power but lower prices, consumption could increase. We know that national income has a component of consumption; hence it could increase our GDP. Plus, we should remember that we are compounding the benefits in the long-run. The money saved could be invested again somewhere, or could be used to consume more. There could be gratuitous amounts of possibilities which could emerge from this. Of course this is only normative economics. In the Philippine context, we absolutely have geography of coastlines and sea. We are an archipelago, but it does not mean it can be advantageous. Why? Because there are other factors affecting the movement of commodities in our country. Locally, it some economists believe that land transportation is better in our country, because the implementation of roro system was inefficient. First of, the quality of the boats are substandard. There are multiple break-downs which causes delays for transportation. Secondly, the roros have to jump from one place to another which could slow down travel since it is indirect. And third, the infrastructure of our sea-

trade is not as well developed. Sea-ports being polluted and congested are some of the things we have to work on. I believe that our country could benefit from our geography, but getting there would be another story. We have to analyze what system would work for us and how we can implement it better. We should also learn from our mistakes. Mistakes like the tragedies of Sulpicio Lines are examples of wakeup calls that we need to change the status quo. State institutions play a big-role for no matter how ingenious a solution could be, like the roros, without proper implementation instead of reducing transaction costs we are actually increasing it.