Presented by: Jester P.

Aguirre
What is Economics?

A branch of study that concerns itself

with the problem of allocating scarce
resources so to attain the optimum
satisfaction of society’ unlimited
wants.

What is Efficiency?

Economic state whereas every

resources is optimally allocated to
serve individual or entity in the best
way while we minimize the waste and
inefficiency of an available product,
services and goods
What is Economic Efficiency?

Economic efficiency implies an

economic state in which every
resource is optimally allocated to
serve each individual or entity in
the best way while minimizing
waste and inefficiency. When an
economy is economically efficient,
any changes made to assist one
entity would harm another. In
terms of production, goods are
produced at their lowest possible
cost, as are the variable inputs of
production.
 What is allocation Efficiency?

A condition in a market when all capital and other resources are

assigned to projects with the highest profitability. In an environment
of allocation efficiency, only the projects with the highest potential
profitability receive funding and then only in the precise amount that
is needed.

The basic principle of allocative efficiency is that it guarantees a

proper allocation of resources based on the needs and wants of
consumers. In economic terms, the allocative efficiency represents
the utility derived from the consumption of a good or a service with
respect to a certain level of price. Therefore, both producers and
consumers benefit.
As long as the marginal benefit of consuming additional good is above the
marginal cost of producing it production will increase, this is because price
consumer are willing to pay exceed the cost face by the producer, once the price
Consumer are willing to pay meets the cost producer face equally the reach at this
point consumer and producer surplus are maximized, so in this condition their
marginal benefits or price is equal to marginal cost that resolves them allocative
efficiency
Malcolm wants to buy a new car. However, he doesn’t know what brand would suit him the
best or what color to choose. So, he goes to the car seller, and he asks for advice.

Most car retailers have in-demand vehicles, efficient car most consumers would buy or are
willing to buy. Therefore, Malcolm assumes that red cars sells the most and are the ones with
the greatest demand. If this stands true, then this represents the allocated efficiency, which
suggests that the availability of cars is based on the limited resources of car retailers, who
know what will sell the most. So, they provide what consumers need to sell more cars and
realize a higher profit.

Malcolm’s marginal benefit is almost equal to the car retailer’s marginal cost, which
represents the Peso amount that the car retailer will pay to acquire (produce) extra units of
cars. Also, while not all consumers will agree on a red car, if a large group of consumers shows
a preference for red cars, car retailers will choose to promote and sell this type of cars.

Allocative efficiency means managements across the economy is deploying resources in the
most efficient manner to match customer preferences.
 What is Pareto Efficiency?

Pareto efficiency, or Pareto

optimality, is an economic state
where resources cannot be
reallocated to make one individual
better off without making at least
one individual worse off. Pareto
efficiency implies that resources are
allocated in the most efficient
manner, but does not imply equality
or fairness.
 Pareto Efficiency Made Simple

If we build a new airport – let us assume there

are winners and losers:

The private and external benefits are

estimated at Php. 2.5Billion

The cost of building airport is Php. 1.9 Billion

Residents living nearby see a loss in personal

welfare of 60 Million per year (due to pollution
and congestion)

The benefit to the society are Economic growth

and attracts more investor and boost tourism.

However, using principles of Pareto efficiency

– this is not a Pareto improvement because
those living nearby lose out.
Pareto improvement occurs when a change in allocation harms no one and helps
at least one person, given an initial allocation of goods for a set of persons. The
theory suggests that Pareto improvements will keep enhancing value to an
economy until it achieves a Pareto equilibrium, where no more Pareto
improvements can be made.
 Is this Pareto Improvement?

Consider the example of two criminals

arrested for a crime. Prosecutors have
no hard evidence to convict them.
However, to gain a confession, officials
remove the prisoners from their
solitary cells and question each one in
separate chambers. Neither prisoner
has the means to communicate with
each other. Officials present 4 deals:

1. If both confess, they will each receive

a 5-year prison sentence.
2. If prisoner A confesses but prisoner B
does not, prisoner A will be Free and
prisoner B will get 20 years.
3. If prisoner B confesses but prisoner A
does not, prisoner A will get 20 years
and prisoner B will be set Free
4. If neither confesses, They both
receive 1- year in prison
 Pareto Example
Making prisoners in jail do some
socially useful task rather than
sitting in a cell.

If prisoners are sitting for 23 hours

in a cell, there is a waste of resources.
It costs the taxpayer money, and the
prisoners may become disillusioned
with life and more likely to remain a
criminal after leaving jail. However,
if prisoners were escorted to pick up
litter from the street and
countryside, there would be a Pareto
improvement because society gains
some benefit from prisoners picking Litter pickers in the Tour de France
up litter. Also, prisoners may gain (Yorkshire 2014)
more self-esteem from doing a
socially useful task – rather than
getting bored in prison.
 Former President Ferdinand E. Marcos

Former President Ferdinand E. Marcos was the 10th

President of the Philippines after defeating former
President Diosdado Macapagal in a re-election bid
on 1965. In a Chapter co-authored by Robert S.
Dohner and Ponciano Intal Jr. “Introduction to The
Marcos Legacy: Economic Policy and Foreign Debt in
the Philippines” After his proclamation the
administration of the latter moved to improve
economic growth with more aggressive government
expenditures and economic policies compare to the
previous administrations as a result economic
growth accelerated during mid-1970’s despite of the
first oil shock and recession in the industrialized
countries. The author also point out that the
structure of exports had shifted away from primary
commodities to light manufacturing products,
during his regime he also expanded agriculture as
new strains of rice turned the Philippines into a rice
exporter by the end of the decade.
 The Period of Economic Growth in 1970’s

On the first half of 1970’s GDP grew roughly around 5% due to a moderate
export promotion strategy adopted by the Marcos Government that boost flow
of investment. Inflation plays a vital part on the oil price hike which ignites
expansionary in terms of monetary and fiscal policies. In 1975 – 1979 the country
attained 6.2% growth rate with the help of industrial sector in addition in the
same period 8.48% growth was recorder in the sector of the manufacturing and
due to some aggressive infrastructure project the construction subsector grew by
20.53%. On the same era the development of industrial zone depends to the
advocates of policy in shielding the countries domestic industries from foreign
competition by taxing imports. The Marcos administration also focuses on the
investment in the Energy sector as he foresaw the incoming demand on energy
due to big boost of industrialization. Before the end of the decade external debt
reaches $13.35M almost tripling the recorded external debt of 1975.
from LEFT to RIGHT:
Secretary of National Defense
Ernesto Mata, President
Ferdinand E. Marcos and Chief
of Staff Manuel T. Yan circa
1968. General Yan is the
youngest AFP Chief of Staff at
the age of 48.

Upon declaration of Martial Law the Military benefits the most wherein the
size, responsibility and emoluments were greatly expanded an estimated
60,000 soldier were list at during martial law and it expanded more than
250,000 by the end of 1975. In addition the budget of the military quadrupled
between 1972 and 1976.
 Philippine Economic Deterioration in the 1980’s

The economic situation of the Philippines got worsen rapidly in the 1980’s
due to the second oil price shock, the government tried to counter the
upcoming recession by raising again expenditures that focus primarily on
energy and industrial investment. To give a brief history what happen in the
second oil shock, Iranian oil got off the market after the death of their shah
or king of Iran, other sources increased oil production, but an actual
shortage existed, and this helped to create the Second Oil Shock. One good
example is Saudi Arabia wherein they increased production from 8.5 Million
barrels per day (mmbpd) to 10.5 Million barrels per day (mmbpd) by the end
of 1978, and oil prices went from $13 to $34 a barrel resulting in huge changes
in world economy and global politic considering that there is only 4$ - 5%
global shortage this cause an uproar globally resulting to 150% increase in oil
prices. Due to their fear of repeating shortage that previously happened in
1973 people are buying and storing oil even it is relatively expensive as a
result the situation got even worse.
During that event the Philippines has a huge comparison in other Asian countries which
although suffer the same fate of our country, they still manage to overcome hindrances and
manage to restore economic growth and in generating export. To provide an accurate data
we will see in the table below the differences:

Comparative Growth Rates for Selected Asian Countries, 1974-84

GDP Growth Rates

1974-1979 1980 1981 1982 1983 I984

Philippines 5.5 5.2 3.9 2.9 0.9 -6

Indonesia 6.9 9.9 7.9 2.2 4.2 5.8

Malaysia 7.1 7.8 7.1 5.6 6.3 7.6

Thailand 7.8 5.8 6.3 4.1 5.8 6.2

Korea 9.7 -3 7.4 5.7 10.9 8.6

 What is Gross Domestic Product?

Gross domestic product (GDP) is the monetary value of all the finished goods and
services produced within a country's borders in a specific time period. Though
GDP is usually calculated on an annual basis, it can be calculated on a quarterly
basis as well (in the United States, for example, the government releases an
annualized GDP estimate for each quarter and also for an entire year).

GDP includes all private and public consumption, government outlays,

investments, private inventories, paid-in construction costs and the foreign
balance of trade (exports are added, imports are subtracted). Put simply, GDP is a
broad measurement of a nation’s overall economic activity. It may be contrasted
with gross national product (GNP), which measures a the overall production of an
economy's citizens, including those living abroad, while domestic production by
foreigners is excluded.
On the 26th of February 1986 Corazon Aquino
was suddenly the President of the Philippines
with her affiliation with the military. Upon
assumption of office the Corazon Aquino
administration faces several challenges that
involve both political and economic
reconstruction wherein the former
administration had corrupted and nearly
destroy the Philippine institution and the
military which was highly politicized. In 1986
the NPA was more organized and was more
effective in executing its operation compare
to the Armed Forces however despite of
exposed weakness in the field it remained a
potent force in manila politics their
participation in people power one convinced
many that their position was coequal with
the new president
Philippine terms of trade rose by 16 percent in 1986, the largest increase since
the 1973 commodity price boom. Almost all of this improvement came from
the sharp fall in world oil prices, which reduced Philippine petroleum imports
by $580 million, or 2 percent of GNP. Commodity export prices were little
changed until the last quarter of 1986, when coconut prices rose sharply. World
commodity prices rose strongly in 1987 and Philippine terms of trade rose by
an additional 9 percent. International interest rates also slid during 1986.

What is Gross National Product?

GNP extends to other countries/regions for activities performed and net

income generated by its nationals. GNP includes income earned by citizens and
companies abroad, but does not include income earned by foreigners within
the country.
In 1992, the economy was subjected to a
severe shortage of electric power, which
could be traced to the 1983 foreign debt
crisis. After the government declared a
moratorium on foreign-debt servicing, the
National Power Corporation (NPC), a
government monopoly in power generation
and transmission, was unable to build new
generating capacity, even to replace, for
instance, the foregone power from the
mothballed Bataan Nuclear Power Plant. At
the height of the power shortage, the
country experienced daily brownouts
lasting 8 to 12 hours. All sectors of the
economy, especially, non-agriculture, saw
their respective output slow down.
Import liberalization and tariff reduction: To enable domestic firms of any
size to have access to least-cost imported inputs, such as, capital equipment,
spare parts and components, import liberalization was accelerated. Executive
Order (EO) no. 470 was issued providing for tariff reduction through time
until a uniform rate of five percent was reached.

Exports expanded enabling the Philippines to elude the painful impacts of the
1997 Asian financial crisis. When Ramos exited in 1998, he handed a long-
term plan to the incoming president that embodied a 2020 vision, essentially a
continuation of the comprehensive reform process aimed at transforming the
Philippines into a newly industrializing economy by the year 2020.
Joseph "Erap" Estrada was elected president
of the Philippines in 1998 and served for 31
months until he was ousted after the People
Power II protests in January 2001. A former
college dropout, movie actor and vice
president. Estrada was the first president to
deliver his inaugural address in Tagalog
rather than English and the first to dispense
with the traditional inaugural ball to cut
costs. Estrada’s cabinet appointees included
respected businessmen and scholars as well
as a former Miss International beauty queen
as the top tourism official and a former
leftist guerrilla as the head of agriculture
department.
Little we know regarding the administration of Joseph E. Estrada as he
only serve the office for a short term. Including the inflation and
unemployment rate during his time

Retail Trade Liberalization Act (Republic Act No. 8762) – The bill
dismantles 40 years of state protectionism over the country's retail trade
industry and opens the sector to big foreign players. With the retail trade
liberalization, well-known foreign players like France's

Unemployment Rate Inflation rate

10.3
1998 9.4
9.8
1999 6

11.2
2000 6.7
As an economist infrastructure play a vital role in
developing the country, the president plays her card very
well in terms of remarkable projects to uplift the status
of the country regarding economic growth here are
some project that was created and implemented under
her regime.
The P32-billion Subic-Clark-Tarlac Expressway
(SCTEX), located north of Manila, tops the list of
completed new road projects. Now in full operation, the
94-kilometer SCTEX reduces travel time from Manila to
Tarlac to one hour and 25 minutes and from Clark to
Tarlac to a mere 25 minutes. And SCTEX, a part of the
Luzon Urban Beltway, is just an example of the
government’s thrust in this direction. The newly
completed Southern Tagalog Arterial Road (STAR)
Tollway is another. The road cuts travel time from Sto.
Tomas, Batangas, to Batangas City by 90 to 120 minutes.
In the Visayas, the P2.2-billion Bohol Circumferential
Road does the same for the residents. Completed in
2006, travel time from one end of the island to the other
has been reduced by half, from eight to four hours.
 Seaports & Airport

Also in the list of completed projects are 22 roll on-

roll off facilities and seaports. These projects, with an
aggregate worth of P5.61 billion, are designed to
facilitate the movement of people and goods from
Luzon to Mindanao, and vice versa. In an
archipelagic country like the Philippines, seaports
are a must. The government has thus refurbished the
Subic Bay Port at a cost of P8.04 billion. Similar other
projects and their respective costs are: the Batangas
Port, P6 billion; Jagna Port, Ubay Port, And Tubigon
Port, all in Bohol, P128.08 million; and Lucena Port,
P32.86 million. The construction of new airports and
improvement of old ones has been undertaken at a
cost of P40 billion. The Diosdado Macapagal
International Airport in Pampanga and the Poro
Point International Airport in La Union fall under
this category. So do the Bacolod-Silay Airport and the
Iloilo Airport.
For an economist it is vital to invest on infrastructure as it boost economic
development through connecting major road from one point to another, connecting
island to island for trade purpose. below we will see data regarding the impact done
by the infrastructure project done by her administration.

Major Economic Indicators

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

3,889 4,198 4,548 5,120 5,678 6,271 6,893 7,721 8,026 9,004

GDP (current prices)

3684 3819 4009 4277 4481 4716 5028 5237 5702 5910
GDP (constant prices)

2.9% 3.6% 5.0% 6.7% 4.8% 5.2% 6.6% 4.2% 1.1% 7.6%
Growth rate (real GDP)

6.7 5.3 2.7 2.3 4.8 6.5 5.5 2.9 8.3 4.2
Inflation Rate (2006=100)

50.99 51.60 54.20 56.04 55.09 51.31 46.15 44.47 47.64 45.11
Exchange Rate, US$1 : PhP (ave.)

46% 47% 47% 49% 49% 53% 53% 49% 45% 51%
Exports as % of GDP

53% 56% 55% 54% 53% 53% 50% 49% 44% 51%
Imports as % of GDP

11.1% 11.4% 11.4% 11.8% 8.7% 7.9% 7.3% 7.4% 7.5% 7.4%
Unemployment Rate
Zero-based budgeting
The introduction Zero-Based Budgeting (ZBB) approach was the first reform that
President Aquino instructed us to use, both in creating fiscal space in the 2010
Budget that he inherited, as well as in designing the 2011 Budget, the first of his
administration. Through ZBB, we were able to review the relevance of programs
and projects; in terminating or redesigning those which have been inefficient and
ineffective, such as the DepEd Food for School program, the NFA rice subsidy
program, among others; and in reallocating funds where these are needed and
where this will create impact
Major Economic Indicators
2011 2012 2013 2014 2015 2016

9,708 10,561 11,539 12,634 13,322 14,481

GDP (current prices)

5,910 6,305 6,751 7,166 7,600 8,127

GDP (constant prices)
Growth rate (real GDP) 3.7% 6.7% 7.1% 6.1% 6.1% 6.9%
Inflation Rate (2006=100) 4.6 3.2 3.0 4.1 1.4 1.8

43.31 42.23 42.45 44.40 45.50 47.49

Exchange Rate, US$1 : PhP (ave.)
Exports as % of GDP 48% 48% 45% 48% 49% 50%
Imports as % of GDP 49% 48% 47% 49% 52% 58%
Unemployment Rate 7.0% 7.0% 7.1% 6.8% 6.3% 5.5%
Under Philippine President Rodrigo Duterte, the
Southeast Asian country is experiencing an
infrastructure boom unseen since the time of
strongman Ferdinand Marcos.

Over the next decade, the government is set to embark

on an ambitious $180 billion infrastructure spending
bonanza, set to transform the Philippines’ economy.

Philippine Department of Finance (DOF) chief

economist Karl Chua said in an interview that the
government is looking at 75 flagship projects, which
include six airports, nine railways, three bus rapid
transits, 32 roads and bridges, and four seaports that
will help bring down the costs of production, improve
rural incomes, encourage countryside investments,
make the movement of goods and people more
efficient, and create more jobs.
Key infrastructure projects under the BBB Program include:

(a) the Subic-Clark Railway

(b) The North-South railway projects connecting Los Baños, Laguna to

Tutuban, Manila and Clark Freeport in Pampanga

(c) a 1,500-hectare industrial park in Clark, Pampanga

(d) an expanded Clark International Airport also in Pampanga.

(e) four energy facilities

(f) 10 water resource projects and irrigation systems

(g) five flood control facilities

A priority project under the Build Build Build program, the North Luzon
Expressway (NLEX) Harbor Link Segment 10 will connect the MacArthur Highway
in Valenzuela City to the C-3 Road in Caloocan City. The six-lane, 5.58-km
elevated expressway will benefit 30,000 to 50,000 motorists daily.
Construction of the NLEX Harbor Link Segment 10 up to C-3 will finish this year.
Meanwhile, the four-lane, 2.60-km section from C-3 to R-10 in Navotas City will
open by the last quarter of 2019.

Benefits of the NLEX Harbor Link Segment 10:

Reduced traffic on Metro Manila roads (especially EDSA, C-5, and Balintawak
Toll Plaza) through direct access to NLEX
Shorter travel time from Valenzuela City to Caloocan City from over 1 hour to just
5 minutes
Shorter travel time between NLEX Valenzuela and R-10 from 23 minutes to 11
minutes (via Balintawak-EDSA Monumento) and from 26 minutes to 13 minutes
(via Balintawak-A. Bonifacio/C-3)
Faster cargo movement of delivery trucks to and from the Port of Manila through
direct connection between R-10 and NLEX.