Thursday, June 5, 2014

Reflection of the Class

a. What did you learn in this class that you believe will be most directly applicable to understanding how the world works?

I think the most applicable is path dependence. We defined path dependence as the decisions made in the past strongly influence the decisions and strategic planning made/done in the present. This is seen in things like the QWERTY keyboard. The QWERTY keyboard is by no means the best set up for a keyboard, but in the past it was developed in order to reduce the possibility for jams in a type writer. Ever since then, the QWERTY keyboard has been used in computers, laptops, and cellphones. The majority of the population knows how to use the QWERTY keyboard, and attempting to switch to a different layout of the keys would take too much time and money to change. Therefore, we don't change it.

b. What topics are you interested in learning more about, after this class ends?

I am very interested in learning more about Central Place Theory. It is very intriguing to try to explain the size and location of human settlements. The models that attempt to explain how these human settlements are laid out are also interesting. We make simplifying models to try to convince ourselves and others that this explains how land is used in urban spaces, but then we find out that modern settlements have surpassed that model. Then we construct a new one, but then modern settlements are so complicated that they are very hard to model in a simple diagram or figure.

c. What do you think will be the most challenging for you next year, whether you're studying abroad, studying away, or studying at K?

I will be studying abroad in Hungary, if you have not seen any of my other blog posts. I think the most challenging part will be to just go with the flow. I really like planning things out before I do them. I really like being efficient with my time. I am so conscious of time, that I actually have my alarm set in the morning at a time like 8:57, because I know it takes me about 3 minutes to actually wake up and start moving, and I know how long it takes for me to get ready in the morning. So, being able to take a step back from that and forget that time is a factor, will be my toughest challenge. It will be good for me though!

Thursday, May 22, 2014

Budapest City Analysis

1. Where does your city fall in the hierarchy of Central Places? Give specific examples of other central places (both smaller and bigger) associated with your city.

I am studying abroad in Budapest, Hungary in the fall. Budapest is the capital city of Hungary and it is the largest city with a population of 1.735 million people. This is a metropolitan size city. There is not a larger city than Budapest, so some examples of smaller central places are a large city Szekesfehervar (population 100,000), smaller city Erd (65,200), two towns Dunakeszi (population 40, 300) and Godollo (population 34,100), small towns Vecses (population 20,500), Dunaharaszti (population 20,000), Pilisorosvar (population 12,000), and Biatorbagy (population 10,700).

2. What does your city offer that wouldn't be available in a smaller place? What is unavailable locally, but that would be available in a higher order city?

Most importantly Budapest is the main hub of Hungary. The railways, highways, and motorways all flow through Budapest, for the most part. There are more specialized buildings in Budapest like the Parliamentary Building. Budapest also has the famous Andrassy Avenue with historic buildings and scenic views. National museums are located in Budapest. There is one castle and a couple museums in Szekesfehervar, where Budapest has many many more. Szekesfehervar has about four major companies, while Budapest has well over 200.

One thing Budapest does not have is a big fashion hub or company. There are big fashion hubs in metropolitan areas like New York City or Paris. Hungary's fashion is on the rise but is not quite to the level of other countries. Budapest has a few stadiums, but their largest has a capacity of about 56,000. The largest stadium in the US has a capacity of 109,000 people. This is almost twice the size of the stadium in Budapest. This is partly because of the population difference of the US compared to Hungary. Hungary does have some ports because they are on the Danube River, but these ports are not nearly the size of ocean ports worldwide.

What's Happening in Hungary Part III

Here is a link to the pdf of the newsletter I used as a reference.
http://mtva.hu/hu/hungary-matters/archive-hungary-matters-morning-issues/8196-0520am-hungarian-captive-in-ukraine--martonyi-urges-new-cooperation--banks-qface-high-costsq

1. Briefly summarize the issue.

On Monday, May 19th, a Hungarian man was driving in Ukraine when he was taken captive by a group of armed men. The counter-terrorism force (TEK) is working on investigating the case by contacting Ukraine officials.

2. Relate the issue to one or more of the economic concepts we have discussed in class.

We have been talking about trading among countries almost every day in class. Trade between Hungary and Ukraine may slow down if this issue continues. This may affect Hungary's economy in a negative way. Ukraine shares a border with Hungary making transportation costs relatively low. Since Hungary is a landlocked country it cannot fully take advantage of the big container ships that make transportation costs negligible. This means that Hungary will need to look elsewhere to receive the same goods for about the same price. This means that Hungary will have to look for countries close to its borders or countries on the Mediterranean in order to maintain a low transportation cost.

3 What led to this situation? Can you suggest a resolution to this problem? Are there policies that could improve this situation?

Ukraine is definitely feeling the pressure from Russia at the moment. Russian soldiers are close to the border between Ukraine and Russia. This has Ukraine frustrated. Since they do not want to start a war with Russia, a powerful country, they pester a smaller country, like Hungary, in order to release some of that frustration without starting a war. If this continues, Hungary may very well cut off trade with Ukraine, which will hurt Ukraine in a nail biting time like this. Hungarians may develop a way to safely escort Hungarians to Ukraine to make sure their civilians get to where they need to go safely. This all depends on whether or not Ukraine continues this behavior.

Tuesday, May 13, 2014

Junkyard Planet

The following post is related to Chapter five of "Junkyard Planet" by Adam Minter.

1. India and China are both rapidly industrializing countries with a large demand for resources, yet the vast majority of US scrap metal goes to China. Explain why.

This is simply a matter of the cost of transportation to China compared to India. "...it's seven cents per pound to ship it to India, and it's two cents per pound to ship it to China..." That is the major difference. All of those cents add up when you are shipping thousands of tons of scrap! India just does not export enough products to the West Coast of the United States so shipping companies do not have much incentive to offer discount shipping rates form L.A. to Mumbai.

2. Choose a passage from this reading that illustrates a larger issue or problem related to globalization. Explain.

The biggest issue of this chapter is the backhaul. It is a huge expense to ship from one country to another, but that expense is justified since there are products in the ship that are moving towards a country that values the product more. However, if that ship comes back empty, that is a lost opportunity for trade. This creates a problem for large players in globalization trying to trade with smaller players like Uruguay. The large player can send the small player a product, but sometimes the small player does not have a product that they can send back that is of higher value for the large player, unless that product is a finished good. So, this means that they small players have to be manufacturing oriented in order to survive in this global economy. This means that there exists players that do not even get to play! Countries like Kenya first must first develop its industry in order to be effective on a global level.

3. More generally, how does modern transportation relate to the themes raised by Jared Diamond in "Why Did Human History Unfold Differently on Different Continents for the Last 13,000 Years?"

Jared Diamond argues that geographical location played a huge role in the way human history unfolded. The development of the container and container ship further exploited the advantage of geographical location. Countries like China, Japan, and the United States all have access to the Pacific Ocean, which is where most of the trading happens. However, countries, like Uruguay, are facing the Atlantic Ocean and have to make the trek around South America to get to the Pacific Ocean, which is very expensive in terms of shipping. This also builds upon the success of the more powerful countries because they can afford to build these large ports and large container ships, whereas less powerful countries only have ships half of the size of the large container ships. This makes shipping even more costly in less powerful/developed countries. Thus, making them less effective in the global market and leaving them behind in terms of modernization.

Thursday, May 8, 2014

"The Box"

Here is a link to the article that I will be referencing.
http://press.princeton.edu/chapters/s9383.html

1. Pick an interesting part of the article and explain why you picked it.

I was very intrigued by the argument that "the key question today about an economy is not how much capital and labor it has, but the innovations that help employ those resources more effectively to produce more goods and services." Furthermore, "The economic benefits arise not from innovation itself, but from the entrepreneurs who eventually discover ways to put innovations to practical use--and most critically,  the organizational changes through which businesses reshape themselves to take advantage of the new technology. 

So let's break this down into the two components. First, the key question has shifted. It is no longer sufficient to have all of the capital and labor in the world. An economy needs innovations to continue the growth. Let's say we have a company that outputs clothing. This company has 100 workers and each worker works at a desk with their own sewing machine. Now, let's say there is another company that is also in the clothing industry. They only have 10 workers. However, this company has just innovated a new sewing machine that outputs 500 sweaters in the time a normal worker would only output 1 sweater. So now, the company with only 10 workers can output 5,000 sweater compared to the company with 100 workers that can output just 100 sweaters in the same amount of time. From here, it is clear to see that the mass producing of sweaters will allow the "smaller" business to lower its prices so that it can sell more sweaters. This can potentially drive out the company with 100 workers, since this company is not working on any innovations to improve on the amount of goods or quality of the goods that it can produce.

The thought that the innovations are not actually beneficial unless there are entrepreneurs that can put them to good use, is a trivial, yet powerful statement. I could invent a cube that transforms into a laptop computer with the push of a button. It would be easy to carry and could potentially help people all over the world. However, if somebody does not pick up that product and tell the world how this product can be more efficient than what we have right now, then this innovation will not survive. Let's assume that there is an entrepreneur that has a way to market this innovation and says that this laptop is great for work on the go. It can very easily be stored in a purse, bag, or even coat pocket. Some people might turn their heads. Then he might take it further and say that this laptop is less likely to be stolen since it is well-hidden inside a bag, rather than being in plain sight in a laptop bag or backpack where thieves can spot it quickly. Now, there may be a market for this product that will emerge, simply because somebody found a use for it. Innovation without further marketing, will not benefit an economy.

2. How does the author see the development of shipping containers contributing to globalization?

The author points out that the shipping container contributed to globalization. Before the development of the shipping container, there was not a uniform way to move cargo from one port to another. Each ship had its own size and a different amount of cargo that it could carry. There was also difficulty with loading and unloading the ships with the cargo. The expense to pay for all of the man power needed to move all of the cargo by hand was extremely high compared to what it is now. The development of the container lead to a more unified container ship and an efficient way to load and unload the ships. Since the cost of labor went down, the cost of transportation decreased as well. More money could be spent on the transportation that would happen across land masses. Essentially the cost of the transportation by sea was negligible to the cost of transportation by truck, or train in some cases. This allows for markets in China to explore markets in the Americas and vice versa. This made shipping to places like Hungary, which is a landlocked country, worthwhile to countries outside of the European domain. The development of the container created opportunities for countries that normally did not impact the global economy, to play a larger role.

3. Who do you see gaining and losing from this transformation of global transportation.

Overall the big gainers in this development are the national economies of the world. Countries that were out of the loop before the development of the container can now trade on the global level. Countries that have been in the loop, now have another market that they can tap into and benefit from trade. However, the losers in this development are the local businesses. Local trucking businesses that would transport cargo are not needed as much because it may be cheaper to ship rather than transport by truck. Railroads are also losing business since a new mode of transportation is cheaper. 

Tuesday, May 6, 2014

What's Happening in Hungary Part II

Here is a link to the information that I am referencing.
http://mtva.hu/images/download/hungary_matters/2014/morning/hm0505am.pdf

József Pálinkás, who is the president of the Hungarian Academy of Sciences (MTA), said that under his leadership the academy had reformed its research organization, implemented important infrastructure projects and launched a successful program to encourage Hungarian scientists living abroad to return to their homeland.

This directly relates to our supply and demand graph. Jozsef has implemented these reforms in order to increase education. Increasing education affects the supply of many different products. An easy one to point out is the market for cellphones. With an increase of education, there will be new ideas for technologically advanced cellphones. Because of the technological advances, there is a shift in the supply curve to the right in the market for cellphones. This causes the equilibrium price of cellphones to drop and the equilibrium quantity to increase.

These reforms and programs will have an immeasurable positive externality. We discussed in chapter 10 of Reinventing the Bazaar by John McMillan the effects of externalities. There is a negative externality for every person that drives on the road. They add more pollution into the air and also add to congestion on the road which causes people to have to sit in traffic for an hour or more when they could have been using that time effectively. Jozsef, however, has brought a positive externality to Hungary. He has brought in about 40 million Forints worth of assets to the country. He is reaching out to the Hungarian scientists to keep them in the country. He has taken 43 facilities and compressed them into 10 centers and five new institutions in order to ensure cost-effective operations. In compressing these facilities he has saved 500 million Forints annually. Now, he can use these funds for different projects he has planned. These programs and reforms will help increase the technological world in Hungary, which is the future in the 21st Century. As I pointed out above, the advances in technology will trickle into many markets. It may lead to a way where we can grow food more efficiently or harness the power of an alternative fuel. The possibilities are endless, and they are being fostered by the kinds of strides that Jozsef is making.

The problem that Jozsef is addressing is the issue of the lack of resources in Hungary. Hungary is not using the labor force as efficiently as possible. There are scientists that are leaving the country, let alone the 10% unemployment rate in the country currently. He addressed the issue by offering scientists about the same salary that they would receive in a western country. This makes Hungary more appealing to its scientists. Another way to address the issue is to increase its assets. Having state of the art equipment will help attract scientists to Hungary as opposed to other countries. This is exactly what Jozsef is doing as well. He has vastly updated and improved machinery. Something Jozsef has not implemented, or at least it is not known publically, is improving benefits for the scientists. Two similar job offers may differ only in benefits. The obvious choice is to pick the job offer with the better benefits. Another way to connect to scientists is to help spark their interest in science at a young age! If you support them while they are young and just learning about the discipline they may be inclined to return the favor by working for you later. Possibly starting a sister's in science program or programs of that sort would be a great way to accomplish that.

Sunday, May 4, 2014

Transportation in Hungary

1. Water Transportation
  • Hungary is a landlocked country so it does not have a direct seaport. However, the closest seaport to Hungary is Senj in Croatia. Senj is about 530 km or 330 miles away from Budapest.
  • Hungary does have some local ports that navigate the waters of the Danube River. The most important port is Budapest, followed by Dunaujvaros and Baja. Hungary also has Csepel, Almasfuzito, and Mohacs.
2. Land transportation
  • Freight Railroads: Záhony Port Railway, AWT Rail HU, CER, Floyd, MMV, and Rail Cargo Hungaria are all of the Hungarian freight operators.
  • Passenger Railroads: Deli, Keleti, Nyguati, and Kelenfold, Gomori, Tiszai. The first four are in Budapest and the other two are in Miskolc.
  • Hungary has an extensive road system, centred in Budapest. 70% of the road traffic is passing through the motorways and main roads of the country. The length of the country's expressway network is 1,110 km. Hungary has a highway network and multiple four-lane motorways that link all of the major cities in Hungary. Motorways are marked by 'M', international roads (European transit roads) are marked by 'E'. Seven of the eight main roads start from Budapest and all of them link up with the European road network.
3. Air Transportation
  • International Airports: Budapest, Debrecen, Sármellék, Győr-Pér, and Pécs-Pogány.
  • Other Airports: Fertőszentmiklós, Nyíregyháza, Siófok, and Szeged are all domestic airports. Hungary also has a numerous amount of non-public airports as well. They also have about four military airports stationed throughout the country.