Summary
Highlights
The session welcomes participants to Econ 212, applied economics, and outlines the week 8 objectives. These include analyzing supply and demand forces affecting the Philippine currency, applying the law of demand and supply to housing shortages and the real estate boom, understanding the concept of minimum wage, and the necessity of government taxes.
The discussion begins with the Philippine peso and foreign currencies, explaining exports (selling local products to earn dollars) and imports (buying goods from other countries). An example of currency conversion for a trip to Vietnam is used, showing how 10,000 pesos convert to millions of Vietnamese dong, and highlighting the weakness of the Vietnamese currency due to historical factors like its late entry into global markets, extensive government control, corruption, hyperinflation, and continuous printing of notes.
The video reiterates the principles of supply and demand in relation to currency value: increased supply leads to decreased value, and increased demand leads to increased value. The US dollar is presented as a high-demand currency, requiring more pesos to purchase. Imported products become more expensive due to exchange rates and additional fees. The need for foreign currencies for trade and tourism is also emphasized, noting that higher demand from foreigners can strengthen the peso.
The discussion shifts to the common problem of housing shortages in the Philippines and the real estate boom. The Asian financial crisis in the late 1990s led to a slump in construction and real estate. However, post-crisis recovery saw a surge in condominiums and townhouses, driven by the booming BPO sector, which created employment opportunities and increased demand for both commercial and residential spaces. The role of Overseas Filipino Workers (OFWs) remittances in boosting housing demand is also highlighted.
The concept of rent is defined from both a layman's and economic perspective, with economic rent being the positive difference between actual payment and expected payment for a factor of production, often due to scarcity. The problem of unaffordable housing is discussed, particularly for the poor who lack formal employment and access to housing loans, leading to squatting situations. Government efforts to provide housing are mentioned, alongside the challenges of certain beneficiaries reverting to squatting.
Investment is defined as building capital stock for future production and consumption, with savings as postponed consumption. The credit system, managed by intermediaries like banks, connects savers (households, businesses, government, foreigners with surplus funds) and investors (borrowers with fund shortages). Banks lend money to borrowers (businesses, government, households) and generate income through interest, while savers can also directly invest in financial markets like stock exchanges. Government also borrows to finance infrastructure projects, which contribute to capital accumulation and economic development.
The issue of inadequate wages and unemployment in the Philippines is addressed, particularly how job scarcity can lead to exploitation by employers. The government mandates minimum wage to protect workers, though enforcement can be lacking. Creating more jobs is seen as a way to empower workers to demand higher wages. Statistics on employed Filipinos by age group are presented, showing the highest employment rate among 25-34 year olds. Wage orders and minimum wage standards across different regions and industries are also discussed, noting higher minimum wages in more developed areas like NCR.
The role of taxes in enabling government to provide public goods and services (e.g., roads, public schools, medical services) is emphasized. However, tax collection is hindered by corruption, leading to shortfalls in government revenue and reduced spending on essential public services. Corruption also distorts spending priorities, favoring less important projects over critical social needs. The lack of funds often impacts the quality and accessibility of public services.
The video concludes by introducing Alfred Marshall, a dominant figure in British economics. His definition of economics as a science of human welfare and well-being, and his belief that human beings are the most valuable capital, are highlighted. His expertise in microeconomics, particularly the study of individual markets, is mentioned, along with his influential book 'Principles of Economics'. Marshall emphasized the interplay of supply and demand in determining prices and output, and contributed concepts like price elasticity of demand and consumer surplus.