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Economics of scarcity

Dennis Gorecho - Kuwentong Peyups

Scarcity is an economic concept we encounter in addressing a basic problem—the gap between limited resources and theoretically limitless wants.

This situation requires people to make decisions about how to allocate resources efficiently, in order to satisfy basic needs and as many additional wants as possible.

We have to produce the maximum results from the scarce resources that are available.

This is the message of Marikina Representative Stella Quimbo during the homecoming last weekend organized by the University of the Philippines School of Economics Alumni Association (UPSEAA).

Quimbo was our class valedictorian from UPSE batch 1991 with her latin honor Summa Cum Laude. She later obtained her master’s and doctorate degrees in economics in UPSE.

Her research portfolio focused on the field of health economics, industrial organization, microeconomics, education, poverty, and public policy.

She said that we imbibed the “UPSE state of mind” of how to think critically and strategically.

We learned how to choose the most efficient option that benefits the greatest number of people without fear of questioning deeply rooted assumptions and proposing alternative solutions.

Quimbo voted against the controversial Anti-Terrorism Act saying it was against the country’s laws to give so much power and discretion to law enforcement over who’s really a “terrorist.” She said: “I cannot support a bill that contradicts fundamental principles in the Constitution that protects our citizens.”

In general, economics is the study of scarcity and its implications for the use of resources, production of goods and services, growth of production and welfare over time, and a great variety of other complex issues of vital concern to society.

Economics is derived from the Greek word oikonomia, which in turn is composed of two words: “oikos,” which is translated as “household;” and “nemein,” which is best translated as “management and dispensation.”

Quimbo said that many UPSE graduates would swear that they hardly remember the stuff that they learned in college.

We read the book “The Wealth of Nations” by Adam Smith wherein he argued for free trade, market competition and the morality of private enterprise.

On the other hand, Karl Marx disagreed as he argued that capitalism consistently only benefits a select few. Under Marxist economic model, the ruling class becomes richer by extracting value out of cheap labor provided by the working class.

Marx favored government intervention. Economic decisions, he said, should not be made by producers and consumers and instead ought to be carefully managed by the state to ensure that everyone benefits.

One of the basic principles that I recall is the law of supply and demand, which is a theory that explains the interaction between the sellers of a resource and the buyers for that resource.

This theory defines the relationship between the price of a given good or product and the willingness of people to either buy or sell it: as price increases, people are willing to supply more and demand less, and vice versa when the price falls.

 We dealt with relationships between variables, formulas, and graphs. A variable is simply a quantity whose value can change. A graph is a pictorial representation of the relationship between two or more variables.

UPSE was established in 1965, and is known for graduates who have been vigorously trained and prepared to become leaders in various fields. Many of the prime movers in government, business, civil society and academe obtained their formal training in economics from UPSE.

One of them is former Vice President Leni Robredo from batch 1986, who was our guest speaker during the silver jubilee homecoming of my batch in 2016.

UPSE is also the home of the economic managers of the current administration, namely Arsenio Balisacan as National Economic and Development Authority chief, Benjamin Diokno as Finance secretary and Felipe Medalla as Bangko Sentral ng Pilipinas governor.

 Economics was not my first choice when I took the UP entrance exam in mid-1980s, but another quota course, accounting.

I ended up cherishing this four-year undergraduate degree in economic theory, econometrics and applied economics, involving a deluge of formulas and graphs.

I finished BS Economics in 1991, and then proceeded to UP College of Law.

Prof. Winnie Monsod once asked me about the anecdote that economics graduates just cross the street to continue legal education, as we comprise a major portion of UP Law entrance exam passers.

 Quimbo gave a refresher on Pareto Optimality: the state when no further changes in the economy can make one person better off without at the same time making another worse off.

Despite divergence in advocacies, UPSE denizens cheer as one community during UAAP games with the slogan #UPFight.

Peyups is the moniker of UP. Atty. Dennis R. Gorecho heads the seafarers’ division of the Sapalo Velez Bundang Bulilan law offices. For comments, e-mail info@sapalovelez.com, or call 09175025808 or 09088665786.

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