SSE 117 Week 1-2 - Lecture notes 1-2 PDF

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WORK TEXT IN SSE 117 COMPARATIVE ECONOMIC PLANNING WEEK 1-2 Prepared by: Francis Dave N. Mabborang

SSE 117: COMPARATIVE ECONOMIC PLANNING

APAYAO STATE COLLEGE VISION, MISSION, GOALS AND OBJECTIVES Vision “Empowering lives and communities through stewardship for cultural sensitivity and biodiversity” Mission Apayao State College is committed to provide empowering and holistic development of citizens by providing quality and innovative instruction, strong research, responsive community engagement and entrepreneurship in order to prime the development of Apayao Province, the Cordillera Administrative Region.

ASC OBJECTIVES

ASC GOALS     

Transformative and empowering education Increase capacity and performance in research and innovation. Create a significant and highly visible development impact in the region. Generate additional resources for strategic investment programs and initiatives Transparent, responsive, unifying and empowering governance.

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To elevate quality access and relevance for instruction To strengthen research and development and extension capability, outcomes and impact Strengthen partnership and institutional linkages to increase the regional impact of ASC extension program. Increase productivity and income of ASC Enhance governance and organization and management system, processes and environment.

SSE 117: COMPARATIVE ECONOMIC PLANNING

TOPIC 1 Review of Important Concepts Objectives: At the end of these weeks, the preservice teacher (PST) should be able to: a. define Economics and explain the field as a social science; b. explain the nature and meaning of Economics; c. cite the importance of the study of Economics; d. explain the different views/connotations on development; e. cite examples explaining the real meaning of development; f. define economic planning and explain its nature. Readings: A. Economics: Its Meaning, Nature and Importance Economics is a social science concerned with the production, distribution, and consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices about how to allocate resources. Economics focuses on the actions of human beings, based on assumptions that humans act with rational behavior, seeking the most optimal level of benefit or utility. The building blocks of economics are the studies of labor and trade. Since there are many possible applications of human labor and many different ways to acquire resources, it is the task of economics to determine which methods yield the best results. Nature of Economics The nature of economics deals with the question that whether economics falls into the category of science or arts. Page 2 of 12

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Various economists have given their arguments in favor of science while others have their reservations for arts.

a. Economics as a Science To consider anything as a science, first, we should know what science is all about? Science deals with systematic studies that signify the cause and effect relationship. In science, facts and figures are collected and are analyzed systematically to arrive at any certain conclusion. For these attributes, economics can be considered as a science. However, economics is treated as a social science because of the following features:   

It involves a systematic collection of facts and figures. Like in science, it is based on the formulation of theories and laws. It deals with the cause and effect relationship.

These points validate that the nature of economics is correlated with science. Just as in science, various economic theories are also based on logical reasoning. b. Economics as an Art It is said that “knowledge is science, action is art.” Economic theories are used to solve various economic problems in society. Thus, it can be inferred that besides being a social science, economics is also an art. Importance of Studying Economics So, why do we study economics? Here are five reasons why studying economics is important. 1. Informs decisions Page 3 of 12

SSE 117: COMPARATIVE ECONOMIC PLANNING

Economists provide information and forecasting to inform decisions within companies and governments. This knowledge of economics – or economic intelligence – is based on data and modelling. 2. Influences everything Economic issues influence our daily lives. This includes issues such as tax and inflation, interest rates and wealth, inequality and emerging markets, and energy and the environment. A broad subject, economics provides answers to a range of health, social and political issues that impact households and wider communities. 3. Impacts industries Firms of all sizes and industries have to rely on economics, whether that’s for product research and development, pricing strategies or how to advertise. This wide influence means studying economics can open up a variety of career options across all sectors of the economy, from agriculture to manufacturing, to banking and consultancy. 4. Inspires business success Understanding how consumers behave is vital for a business to succeed. Economists use theories and models to predict behaviour and inform business strategies. For example, how to analyse ‘big data’. 5. International perspective Economics affects the world we live in. Understanding domestic and international perspectives – historic and current – can provide a useful insight into how different cultures and societies interact. For international corporations, understanding the world economy is key to driving success. Read excerpt from article “Why it's Important to Understand Economics?” by William Walstad, the Director of National Center for Research in Economic Education, University of Nebraska. Page 4 of 12

SSE 117: COMPARATIVE ECONOMIC PLANNING

The case for economic literacy is a strong one. George Stigler, a Nobel Laureate in economics, probably stated it best almost three decades ago when he wrote: "The public has chosen to speak and vote on economic problems, so the only open question is how intelligently it speaks and votes." In Stigler's view, economic literacy is special because it contributes to two classes of knowledge. First, it serves as a "means of communication among people, incorporating a basic vocabulary or logic that is so frequently encountered that the knowledge should be possessed by everyone." Second, it is a "type of knowledge frequently needed and yet not susceptible to economical purchase from experts." Economic literacy certainly contributes to the first class of knowledge. People like to think and talk about the economic issues that affect them as consumers, workers, producers, investors, citizens and in other roles they assume over a lifetime. Economic literacy also gives people the tools for understanding their economic world and how to interpret events that will either directly or indirectly affect them. Nations benefit from having an economically literate population because it improves the public's ability to comprehend and evaluate critical issues. This understanding is especially important in democracies that rely on the active support and involvement of its citizens. Economic literacy contributes to a second class of knowledge. For some economic decisions, such as buying a home or investing in the stock market, it is possible to hire professional or technical help when making a choice, but in most cases it is neither economical nor practical for an individual to hire a skilled professional every time an economic decision needs to be made. Even when such advice is given, the final choice must be made by the individual, not the adviser. What this means is that each person must ultimately serve as his or her own economist in making many economic choices, whether those choices involve buying a product, getting a loan, voting on candidates and economic issues, or Page 5 of 12

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something else. Economic literacy improves the competence of each individual for making personal and social decisions about the multitude of economic issues that will be encountered over a lifetime.

B. Other Important Concepts Development is basically an economic concept that has positive connotations; it involves the application of certain economic and technical measures to utilize available resources to instigate economic growth and improve people’s quality of life. Development as Economic Growth. From an economic perspective, Schumpeter (1984, 1985, 1989) cannot be left unmentioned. He used the term development as evolution, unfolding, revelation and innovation. For this school, it seems that there is no need for a development theory, applying modern economics to the concept, which is an antihistorical and universally valid discipline being sufficient. According to Veiga (2005, p. 80): “The market fundamentalists implicitly consider development as something redundant. Development would come as a natural consequence of economic growth, thanks to the trickle-down effect”. Development as Fiction. Development cannot be reduced to a quantitative understanding of the world is present. Rivero (2002) defends the idea that those who believe in development ignore the historical-cultural processes, society’s non-linear progress, ethical approaches and even dispense with ecological impacts. Another point that characterizes the authors forming part of this current scepticism is related to the fact of believing that a reduced, or almost non-existent, possibility exists of peripheral countries rising in the rigid world capitalist hierarchy.

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SSE 117: COMPARATIVE ECONOMIC PLANNING

The ‘Alternative’ Route. The multidisciplinary concept of development is complementary to the unidisciplinary idea of economic development. Veiga (2005), for example, considers that Furtado has the best conception of the concept: Economic growth such as we know it has been basing itself on preserving the elites’ privileges that satisfy their enthusiasm for modernization; now development is characterized by its underlying social project. Having resources to invest is far from being a sufficient condition for preparing a better future for the mass population. However, when the social project prioritises effective improvement of this population’s living conditions, growth metamorphasizes into development. Sustainable Development. The term sustainable development appeared in the late 1970s and was definitely consolidated in 1987 by the aforementioned Brundtland Commission. This commission prepared the most broadly accepted definition of sustainable development: Sustainable development is a transformation process in which the exploitation of resources, direction of investments, orientation of technological development and institutional change are reconciled and reinforces present and future potential, in order to attend to needs and future aspirations (...) it is that which attends to present needs without compromising the possibility of future generations attending their own needs. Well-being as a Variable Objective of Development. Sustainable development is something that takes place through a combination of human and the ecosystem’s wellbeing. People live in and form part of the ecosystem and, consequently, analysis of the well-being of both cannot be carried out separately, i.e. the well-being of the natural environment does not make sense without human dimensions (political, economic and social) and humanity’s well-being cannot be disassociated from the environment. Three Objectives of Development Page 7 of 12

SSE 117: COMPARATIVE ECONOMIC PLANNING

1. Raising people’s living levels, i.e. incomes and consumption, levels of food, medical services, education through relevant growth processes. 2. Creating conditions conducive to the growth of peoples’ selfesteem through the establishment of social, political and economic systems and institutions which promote human dignity and respect. 3. Increasing peoples’ freedom to choose by enlarging the range of their choice variables, e.g. varieties of goods and services.

Economic Planning Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources between and within organizations contrasted with the market mechanism. As an allocation mechanism for socialism, economic planning replaces factor markets with a procedure for direct allocations of resources within an interconnected group of socially owned organizations which together comprise the productive apparatus of the economy. Top 8 Features of Economic Planning 1. Definite Objective. The most significant characteristic of economic planning is that it should possess definite objectives. Planning means conscious and deliberate undertaking for a definite objective. For instance, economic planning has the objective to accelerate the rate of growth, elimination of trade cycles, bringing the stability and a attain full employment in the economy. 2. Central Planning Authority. The existence of a central planning authority is another feature of economic planning. This central planning authority is responsible to prepare different schemes of Page 8 of 12

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development and coordinating the various activities. The central planning authority takes all decisions relating to production and consumption in an economy. Democratic Character. Another pioneer feature is its democratic nature. No doubt, various plans are prepared by experts but at the same time, adequate opportunities are provided to the people to actively participate at various levels. Being federal structure of Indian Constitution, the Union Government only uses its fiscal, monetary and physical controls to guide and give direction in consequence with the five-year plans. Only an Advisory Role of Planning Commission. In the decentralized set up of planning. Planning Commission is the apex body. It provides the necessary perspective, guidance and coordination. Furthermore, it serves as a close link between different agencies so that functioning may be smooth. In this regard, Planning Commission is an advisory character. Comprehensiveness. Another important characteristic of planning is its comprehensiveness in scope. As central planning authority takes all decisions regarding production, consumption and distribution, thus, it must cover the entire economy which must be comprehensive in scope. In other words, planning must be effective so that the planning of one sector may not be nullified by the absence of planning in other sectors. Planning for Consumption. In a centrally planned economy, it should not be confined to production alone but at the same time, it must cover the distribution and consumption also. In other words, the planning authority should not decide what and how to produce but it must keep in mind and decide accordingly among whom it is to be distributed. Rational Allocation of Resources. Generally, in under-developed countries, available resources are scarce and these resources are allocated in such a manner as to get maximum social welfare. It needs to fix up priorities relating to economic development, thus, allocation of resources in accordance to these fixed priorities. Feasible Policies and Targets. A good planning is based on the initial resources of the country to achieve the feasible goals and Page 9 of 12

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policies. In this way, domestic resources are planned for attaining economic stability.

Exercises: Write your answer in a separate sheet of paper indicating your Name and Block Number as well as Lesson Number. Write an essay in relation to the meaning and importance of Economics and Development.

References: William Walstad. (1998) Why it's Important to Understand Economics | Federal Reserve Bank of Minneapolis. Retrieved , from https://www.minneapolisfed.org/article/1998/why-its-important-tounderstand-economics What Is Economics, and Why Is It Important? – Principles of Economics. (n.d.) Retrieved , from https://opentextbc.ca/principlesofeconomics/chapter/1-1-what-iseconomics-and-why-is-it-important/ Why is it important to study economics?. (2020) Retrieved , from https://www.durhamisc.com/blog/why-is-it-important-to-studyeconomics Amaka Metu. (2018) THE NATURE AND SCOPE OF ECONOMICS. Retrieved , from https://www.researchgate.net/publication/325677755_THE_NATURE_ AND_SCOPE_OF_ECONOMICS

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Nature And Scope of Economics – StudiousGuy. (n.d.) Retrieved , from https://studiousguy.com/nature-and-scope-of-economics/ Adam Hayes. (2020) Economics Definition: Overview, Types, & Indicators. Retrieved , from https://www.investopedia.com/terms/e/economics.asp Rabie M. (2016) Meaning of Development. In: A Theory of Sustainable Sociocultural and Economic Development. Palgrave Macmillan, New York. https://doi.org/10.1007/978-1-137-57952-2_2 What is Development? - Sid Israel - Society for international development. (2021) Retrieved , from https://sid-israel.org/en/what-isdevelopment/ Jair Soares Jr. and Rogerio Quitella. (2008) Development: Development: An Analysis of Concepts, Measurement and Indicators. Retrieved , from https://www.scielo.br/j/bar/a/5SHFxh5cBhrQtBM6GXWy3tp/? format=pdf&lang=en Shelly Shah. (n.d.) Development: Development as Connotations. Retrieved , https://www.sociologydiscussion.com/society/developmentdevelopment-as-multiple-connotations/1039

Multiple from

Top 8 Features of Economic Planning. (n.d.) Retrieved , from https://www.economicsdiscussion.net/economic-planning/top-8features-of-economic-planning/4658

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