ARCINUE, JOHN VINCENT V.

TABOBO, QUENNIE A.
NCBA – Master in Public Administration
Subject: MACROECONOMICS AND PUBLIC POLICY

Session 2:
 Factors of Production
 Production Possibilities Curve and Economic Growth
 Government Policy on Long-term Economic Growth

What is production?
Production is a process by which resources (or input) are transformed into a more useful commodity
or services (or output).

 FACTORS OF PRODUCTION
Factors of production is an economic term that describes the inputs used in the production of goods
or services in order to make an economic profit. These include any resource needed for the creation
of a good or service. They are the starting point of the production process. Factors of production are
the parameters which affect the output of production.

The factors of production such as land, labor, and capital were originally identified by the early
political economists such as Adam Smith, David Ricardo, and Karl Marx. However, some economists
considered entrepreneurship as fourth factor.

1. LAND
In literary sense, land is regarded as soil. However, in economics, land, a factor of production, has a
much wider scope. Marshall has defined land as, “the materials and the forces which nature gives
freely for man’s aid, in land and water, in air and light and heat.” Land refers to a natural resource
that can be utilized to produce income. It is a useful factor of production, but is available in limited
quantity.

Land has a broad definition as a factor of production and can take on various forms, from agricultural
land to commercial real estate to the resources available from a particular piece of land. Natural
resources, such as oil and gold, can be extracted and refined for human consumption from the land.
Cultivation of crops on land by farmers increases its value and utility. For a group of early French
economists called the physiocrats who pre-dated the classical political economists, the land was
responsible for generating economic value.

While the land is an essential component of most ventures, its importance can diminish or increase
based on industry. For example, a technology company can easily begin operations with zero
investment in land. On the other hand, the land is the most significant investment for a real estate
venture.

2. LABOR
Labor constitutes one of the important factors of production. This factor involves human services and
efforts for the production of goods or services. Labor is commonly thought of a group of unskilled
labor working in factories. However, in economic terms, a work, physical or mental, carried out for
monetary purpose is called labor.

A work that is undertaken by an individual for the sake of interest and pleasure, then the individual
would not be regarded as labor in economics. According to Marshall, “Any exertion of mind or body
undergone partly or wholly with a view to some good other than the pleasure derived directly from
the work is called labor.”

Among all the factors of production, labor is the only factor that is living. This peculiarity of labor
differentiates it from rest of the factors of production.
Labor, as a factor of production, involves any human input. The quality of labor depends on the
workforce’s skills, education, and motivation.
For the early political economists, labor was the primary driver of economic value. Production
workers are paid for their time and effort in wages that depend on their skill and training. Labor by
an uneducated and untrained worker is typically paid at low prices. Skilled and trained workers are
referred to as human capital and are paid higher wages because they bring more than their physical
capacity to the task. For example, an accountant’s job requires synthesis and analysis of financial data
for a company. Countries that are rich in human capital experience increased productivity and
efficiency.

3. CAPITAL
Typically refers to money and capital goods. The primary driver of value. It enables entrepreneurs
and company owners to purchase capital goods or land or pay wages. It is one of the most important
factors as production cannot take place without the involvement of capital. Because an organization
requires a number of capital goods, such as tools and machinery to produce goods.

TECHNOLOGY
Refers not just to robots and computers but the entire body of knowledge or science that informs or
improves a production process. It is a combination of invention, advances in knowledge, and
innovation. Effective and efficient when used properly in an industry and can greatly increase the
level of productivity. But it is sometimes considered a threat to the labor force because it can reduce
the number of working people without reducing the output.

4. ENTREPRENEURSHIP
Defined as combining all the factors of production into a product or service for the consumer market.
The entrepreneur is the one that initiates the process of production. He is the risk bearer and in
consideration of this the profit maker as well. Entrepreneurship often leads to innovation, new
processes or new products. It can increase the productive efficiency of a firm.

 PRODUCTION POSSIBILITIES CURVE AND ECONOMIC GROWTH

Is a curve illustrating the different possible amounts that two separate goods may be produced when
there is a fixed availability of a certain resource that both items require for their manufacture. It
represents the point at which a country’s economy is most efficiently producing its goods and
services. To achieve efficiency, must decide what combination of goods and services can and should
be produced. It operates under the assumption that the production of one commodity may only
increase if the production of the other commodity decreases due to limited available resources.
When it shifts upward, we can imply that there has been growth in an economy. If downward, it
indicates that the economy is shrinking due to a failure in its allocation of resources and optimal
production capability.

ECONOMIC GROWTH
Refers to an increase in aggregate production in an economy. It is commonly measured in terms of
the increase in aggregated market value of additional goods and services produced, using estimates
such as GDP.

There are ways to generate economic growth. First is an increase in the amount of physical goods in
the economy. Second is new technology because it allows workers to produce more output with the
same stock of capital goods. Another is to grow the labor force. More workers will generate more
goods and services. Last method is increase in human capital. This means laborers become more
skilled through trainings, trial and error, or more practice.
 GOVERNMENT POLICY ON LONG-TERM ECONOMIC GROWTH
1. Intensifying Infrastructure Development
 “BUILD, BUILD, BUILD” PROGRAM
TRANSPORTATION (64.20%)
- Road Transport ICT (1.41%)
- Mass Transport Network - Juan Konek!
- Air and Water Transport - National Government Portal (NGP)
- National Broadband Plan
WATER RESOURCES (12.12%) - National Government Data Center
- Irrigation
- Water and Supply Sanitation POWER (1.01%)
- Power Generation
SOCIAL INFRASTRUCTURE (13.05%) - Electrification
- School Buildings
- Health Facilities OTHERS (6.62%)
- Solid Waste Management Facilities
GOVERNMENT BUILDING (1.59%)
- Maritime Safety and Security Projects
- Disaster Risk Reduction Facilities
- Flood Management Structures
- Research and Development Centers

Sector Breakdown of 2017-2022 Infrastructure Investment Targets (in ₱ million and % share)

2. Enhancing Programs on Human Development

 Expanded Educational Opportunities
 Universal Access to Quality Tertiary Education Program
 Science, Technology, and Innovation Scholarships
 K to 12 Transition Program
 Tulong Dunong Program
 Private Education Student Financial Assistance

 Social Protection – Empowering the Poor

 Conditional Cash Transfer Program
 Unconditional Cash Transfer Program

 Social Protection – Other Social Mitigation Measures of the Train Law

 Pantawid Pasada Program
 PUV Modernization Program

 Social Protection – Protection for Vulnerable Groups

 Social Pension for Indigent Senior Citizens
 Implementation of the Centenarians Act
 Individuals and Families in Difficult Circumstances
 Supplementary Feeding Program
 Bangsamoro Umpungan sa Nutrisyon
 Distressed Overseas Filipinos and Trafficked Persons

 Social Protection – Sustainable Livelihood and Community Welfare

 Kapit-Bisig Laban sa Kahirapan – Comprehensive and Integrated Delivery of Social
Services
 Sustainable Livelihood Program

 Health Care
 Universal Health Care Act
- National Immunization Program
- Elimination of Infectious Diseases
- Tuberculosis Control
- Prevention and Control of Infectious Disease

 Food Security
 Improving Food Production
- Rice Program
- Corn Program
 - Organic Agriculture Program

 Support Farmers and Fisherfolk

- Free Irrigation Service Act
- Rice Tariffication Law

 Secure and Meaningful Employment

 Tulong Hanapbuhay sa Ating Disadvantaged/Displaced Workers Program
 DOLE-Integrated Livelihood Program
 DOLE-Adjustment Measures Program
 Government Internship Program
 Special Program for Employment of Students
 JobStart Philippines
 Establishment of Negosyo Centers
 Shared Service Facilities Project
 One Town, One Product: Next Generation

 Decent Housing and Clean, Healthy Environment

 High Density Housing Program
 Socialized Housing Loan Take-Out Receivables Program
 Resettlement Program
 Sagana at Ligtas na Tubig para sa Lahat
 Sitio Electrification Program
 Total Electrification Program
 Water and Supply Sanitation Program
 National Greening Program
 Forest Protection
 Solid Waste Management Program
 Coastal and Marine Ecosystems Management
 Clean Water Program
 Clean Air Program
 Boracay Island Rehabilitation Project
 Manila Bay Rehabilitation Project

3. Building a More Peaceful and Secure Nation

 Revised AFP Modernization Program
 Rice Subsidy for Military and Uniformed Personnel
 Payapa at Masaganang Pamayanan Program
 Flood Control
 National Disaster Risk Reduction and Management Fund
 Philippine Atmospheric, Geophysical, and Astronomical Services Administration
Modernization Program

4. Sustaining Reforms in Government Service Delivery

 Philippine System Identification Act
 Budget and Treasury Management System
 Project Digital Imaging for Monitoring and Evaluation
 National Government Rightsizing Program
 Ease of Doing Business and Efficient Government Service Delivery Act
 Philippine Innovation Act
 National Payment Systems Act

REFERENCES:
https://www.toppr.com/guides/business-economics-cs/theory-of-consumer-behavior/factors-of-production/
https://www.investopedia.com/terms/f/factors-production.asp
http://www.economicsdiscussion.net/production/factors-of-production-4-factors/3613
http://www.bsp.gov.ph/
http://www.neda.gov.ph/
www.investopedia.com
www.economicsdiscussion.net
www.economicsonlone.co.uk
www.tutor2u.net
www.stlouisfed.org