[OPINION] Perhaps the wake-up call for the UP School of Economics should run deeper

When JC Punongbayan’s column, “What has happened to the School?: Winnie Monsod’s wake-up call,”  circulated in a Viber group I belong to, my initial reaction was dismissive — I said it was a cop-out. But my thoughts on the column and my reaction lingered, and this piece is an attempt to explain my remark.

Punongbayan recounts Professor Emerita Solita Monsod’s question to Acting Budget Secretary Rolando Toledo during a public lecture: “How could you not have known?,” referring to the large-scale corruption in the budget. Beyond Professor Monsod’s disbelief, the fact is, when you’re at the highest rungs of the bureaucracy, ignorance, or not knowing, is a serious failure that demands an explanation.

Punongbayan’s analysis of the issue is grounded on a powerful economic intuition: people respond to incentives. In a politicized bureaucracy, even technically competent officials may rationally choose silence over confrontation. Smooth fund releases and political alignment, for instance, can translate to career protection or even advancement. 

While resistance carries risks that could be immediate and personal, the costs of acquiescence are distant and diffuse. From this perspective, the puzzle is not just why officials failed to act, but how we can fix the incentives so that they do. In addition, having a strong moral fiber, which Punongbayan hopes the UP School of Economics (UPSE) is able to impart to its graduates, would also help.

The explanatory force of the analysis lies in helping understand passivity and why otherwise capable technocrats would choose to look the other way. But to me it still leaves Professor Monsod’s question only partially addressed. Incentives may explain silence or acquiescence, but they do not explain ignorance. 

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The incentives framework presumes that relevant information is available, and that the main decision point for officials is whether or not to act on what they know. But Professor Monsod’s question could point to another possibility: that in some institutional settings, not knowing is not merely a personal failure or a strategic choice, but a predictable outcome of how the state itself is organized. 

Over the past four decades, the Philippine state has been steadily reconfigured away from direct production, planning, and economic coordination, and is instead focused on procurement, contracting, and fund release. The Department of Budget and Management functions as manager of financial authority rather than as developmental institution. Responsibility for implementation is fragmented across agencies and levels of government. Monitoring exists formally, but information about what actually happens on the ground is generated downstream after funds have been released and projects are already underway or completed.

Dispersed, delayed knowledge

In such a configuration, no single actor sees the entire picture. No single office fully owns outcomes. Authority is centralized, but knowledge is dispersed and delayed. Within this architecture, ignorance is not an aberration. 

This matters because an incentives-centered diagnosis risks mistaking a structural failure for a problem of misaligned incentives plus individual courage or ethics. When the state is organized in ways that systematically obscure outcomes, exhortations to “speak truth to power” or to “strengthen moral fiber,” while laudable, are necessary but not sufficient. The deeper question is why the institutional design of Philippine public finance makes it so easy, even normal, for senior officials to plausibly claim that they did not know.

It is here that the responsibility of UPSE deserves closer scrutiny. Not because the School “caused” corruption, but because it has played an outsized role in shaping how economic problems within the Philippine state are diagnosed and framed.

A look at the undergraduate curriculum is instructive. The core sequence is anchored overwhelmingly on microeconomic and macroeconomic theory, quantitative methods, and econometrics. These are treated as the primary markers of rigor and competence. Courses that explicitly engage political economy, institutional history, or competing traditions of economic thought do exist, but they remain peripheral, offered as electives rather than as part of the foundational analytic formation.

Students are trained intensively to analyze behavior under given constraints, to model incentive effects, and to evaluate efficiency under stylized assumptions. They are far less consistently trained to interrogate how those constraints are historically produced, how institutions distribute authority and responsibility, or how policy instruments reshape the state itself over time. 

Intellectual homogeneity

This imbalance matters because training shapes diagnostic reflexes. When economists are habituated to treating constraints as given, policy failure is naturally interpreted as misbehavior within the system rather than as failure of the system. Attention gravitates toward incentives, compliance, and enforcement, while questions about institutional architecture and state capacity recede into the background.

These analytic tendencies are reinforced by the pattern of institutional circulation post-EDSA. Agencies such as NEDA (now DEPDev), the Department of Finance, the Department of Budget and Management, and the Department of Trade and Industry have long functioned as destinations and revolving doors for UPSE graduates. While this  circulation may be evidence of professionalization and technical continuity, it also has less examined consequences. When a relatively homogeneous intellectual formation dominates both educational training and key policy agencies, the range of ideas circulating within the state narrows even as personnel rotate. Yes there are debates,  but core assumptions about markets, incentives, fiscal discipline, and the role of the state are shared and rarely contested.

The result is a form of intellectual homogeneity, “intellectual monoculture” in some literature, that is technically sophisticated and rigorous but analytically constrained. 

If the School is to take Professor Monsod’s challenge seriously, the response cannot stop at incentives and moral fiber. It must also confront what kinds of questions its dominant mode of economics are structurally equipped to ask. 

The deeper issue is not whether individual alumni failed while in office, but whether the Philippine state possesses the intellectual capacity to diagnose failures that are systemic. Seen this way, the wake-up call should also be about the unsettling possibility that even well-intentioned, highly trained economists can remain analytically underprepared to see certain kinds of failure. – Rappler.com

Nepomuceno Malaluan is co-founder of Action for Economic Reforms and vo-convenor of the Right to Know Right Now Coalition.