Opening Remarks Transcript of Hon. Amando M. Tetangco Jr.
Former Bangko Sentral ng Pilipinas Governor (2005-2017)
AB Economics Graduate Batch 1973
Good afternoon, everyone. Let me first greet the Ateneo Department of Economics Chair, Dr. Philip Arnold Tuaño, members of the faculty, officers of the Ateneo Economics Association, the special people for whom you are gathered today, the incoming freshman economics students, ladies and gentlemen.
It’s always a pleasure to be speaking at the Ateneo. My last speaking engagement in the university was during conferment of the Lux In Domino award at the great Hyundai Hall of the Areté. I never imagined then that after barely a year, I’ll be delivering a speech virtually through a video message. What difference can a year make!
For our incoming first-year students, this occasion marks the beginning of your exciting journey in the field of economics. I say exciting because as most of you already know, the world is rapidly changing. From far-reaching forces from disruptive technology, to climate change, to geopolitical developments, to new threats such as the COVID-19 – of which are forcibly exerting their impact on individuals, institutions, markets, and societies. The process of these forces are profoundly altering the way we conduct things from our social interactions to how businesses operate and how governments tackle policy making.
Indeed, the world has become increasingly complex, or as a younger generation you would say: “It’s complicated!”. Studying economics in this time of complexity is both a great challenge and a great opportunity. Economics, at its core, is the study of how humans make decisions in the face of scarcity. These decisions can be either individual, business, or societal decisions and involve understanding the relationships and interactions of a wide range of variables.
Complexity tends to blur economic relations between variables, and therefore challenges conventional wisdom on how the world works. Complexity also represents a reset of the order or hierarchy of things, and therefore opens up opportunities for us to discover new truths. In other words, complexity encourages a fresh start as this event aptly suggests.
In my more than four decades of central banking, I have come to realize the challenges and opportunities are just two sides of the same coin. I witnessed for the first time how the greatest economic crisis led to the most useful and progressive economic reforms. In fact, the number of decades I spent in the BSP is equivalent to the number of economic crises that I encountered as a central banker. I find it remarkable that the BSP, as well as the Philippine economy, have always come out of these crises stronger.
I have the same optimism for your generation collectively known as Gen Z. What sets your generation apart from your predecessors is your unbridled creativity and flexibility. Your creativity gives you the natural ability to perceive things differently and creatively. Meanwhile, your flexibility allows you to accept policies that work, but at the same time, quickly challenge the status quo when you see that they no longer add value. These traits allow you to embrace change: driving a digital economy and reap the potential benefits related to the Internet of things.
Your generation has already produced the likes of Malala Yousafzai, the youngest person ever to win the Nobel Peace Prize. Her unwavering courage to protest against infractions in the accessibility of education, especially to young women, aspire groundbreaking movements, prompting a more inclusive education for all people.
Although strictly not a Gen Z, the younger generation has also produced innovators like Benjamin Moll of the London School of Economics, whose trailblazing contributions to incorporate consumer and firm heterogeneity into macroeconomic models, open you important questions about the relationship between monetary policy and inequality.
To my mind, this culture of creativity and flexibility, which I refer to as the Gen Z spirit, will provide you with a great head start on your way to becoming brilliant economists.
Of course, you should realize that having the right traits is just one part of the equation. A person’s ability to transform challenges into opportunities also requires critical thinking and problem solving skills.
The father of modern macroeconomics, John Maynard Keynes, said that “A true master of the craft of policy and economics is a mathematician, statesman, and philosopher to some degree.
That person must also understand symbols and speak in words. He or she must also contemplate the particular in terms of the general and touch abstract and concrete in the same flight of thought. He or she must also study the present in light of the past for purposes of the future.”
Fortunately, you have chosen the perfect institution to help you hone your skills and talents. As an alumnus of this great institution, I know that the Ateneo is an excellent training ground for young students to obtain relevant training and meaningful learnings across many diverse disciplines.
Economic solutions require a holistic approach involving different skill sets and capabilities. Here, you will be exposed to different approaches and tasks which may challenge you, but ultimately, strengthen your existing skill sets, deepen your understanding, and broaden your perspective. You will also benefit from interacting with a very supportive and capable faculty composed of seasoned economists, who are at the forefront of their respective fields.
The skill sets that you’ll acquire from this institution will put you in a position – a unique position to contribute to society in various capacities: law, risk management, actuary, finance, foreign affairs, public administration politics, policy analysis, health administration, entrepreneurship, market analysis, journalism, and other careers in the future. Sooner or later, your creative abilities and those of your contemporaries will drive and shape the economy and the country.
The country depends on you.
As many of you know, the COVID-19 pandemic has had an unprecedented impact on the Philippine economy. In the second quarter of 2020, GDP contracted by an all-time low of 16.5 % year-on-year, from -0.7 % in the previous quarter. Based on these latest figures, full-year GDP for 2020 is now expected to shrink by 8.5 %.
Fortunately, the structural reforms that we have pursued in the past have provided the economy some cushion. Because we entered this crisis from a solid footing, the Philippine economy is expected to take on a U-shaped recovery with the gradual easing of lockdown measures and the support of fiscal and monetary stimulus; this, of course, contingent on the successful containment of the pandemic.
This is likely not the last pandemic your generation will encounter. You may experience black swans or unpredictable events, and pink flamingos which are known events but are ignored because of old cognitive biases. It’s therefore imperative that you train yourselves to build buffers against the unknown unknowns and pay more attention to the known knowns.
This way, you can use these challenges to create opportunities during challenging times. Take for instance, leveraging on the COVID-19 pandemic to promote the use of e-money and shift towards a more digitized economy. This, of course, requires a lot of determination, hard work, and sacrifice from your end.
Therefore, I wish to end this message by sharing some of the lessons that I’ve learned from my own journey, in hopes that it might invoke the Malala Yousafzai and the Benjamin Moll in you.
Lesson number one: Always strive to be excellent, or as we economists would say, maximize your utility.
Being excellent or maximizing your utility means diligently, passionately, and consistently working hard in whatever endeavors you pursue.
It means giving your best whether you’re working on finding a Nobel Prize-winning dissertation or submitting a one-page essay for your Economics 101 course. It also means staying focused, being patient, believing in the process, and not wanting shortcuts. Success does not happen by chance, and it certainly does not happen overnight. It takes small, but strategic actions in the right direction to get there.
Lesson number two: Recognize that life is not just about selfies. It is more about cooperative outcomes. Avoid what is known as a Prisoner’s Dilemma at all cost. This same paradox in game theory wherein two individuals acting on their own self-interests end up worse off.
In this situation, like most times in real life, best outcomes are achieved when you consider what is best for you and for the group. In the real world, cooperation is a powerful reality that we can all leverage upon. Trust me when Ii say that the world will be a nicer and better place if you view reality in a more cooperative and collaborative way.
People matter. As much as possible, surround yourself with persons that will lift you higher and push you to discover your greatness. Your lives, relationships, and networks can also determine how far you will go in life. In the real world, cooperation and collaboration will always gain more likes than selfies.
Lesson number three: Always have faith in a higher power. By higher power, I’m referring to God, our Creator. While economists write themselves as the only social science that practices mathematical rigor, every single economic equation in the history of the science is not complete without the inclusion of an unexplained factor.
Take for example, the cornerstone of macroeconomic growth theory – the Solow Growth Model. While this model has been widely used to explain economic growth trends in different parts of the world, academics and policy makers alike remain baffled with the concept of the Solow residual, or growth that is not explained by factors of production. Economists refer to these unexplained factors as residuals or error terms. I like to think of this uncertainty as a manifestation of a greater power.
In my mind, the best way to deal with uncertainty is to have a strong faith in God and have a higher purpose in life. Having a firm spiritual foundation will teach you to be more appreciative of success. More importantly, it will give you the humility to acknowledge your limitations. Recognizing your limitations makes us more open and receptive to the deeper and more meaningful lessons in life.
This higher purpose is what the Ateneo education cemented in me, Ad Majorem Dei Gloriam.
With this, let me end my message by encouraging everyone to make this fresh start your head start.