Abstract
This article reviews the seminal econometric1 models published by maritime economists between 1934 and 2012, indicating the main mistakes committed during this period, so that future research can avoid them. The errors were spurious regression, identification and the false assumption that maritime markets are sufficiently efficient, if co-integrated. Three further mistakes are noted: the belief that a shipping firm is its vessel; the assumption that a random walk is appropriate for modeling tanker markets, and the assumption that shipping markets are random and linear. Koopmans was correct (in 1939) in stating that the discrepancy (surplus/deficit) between supply and demand for ship space determines freight rates, something that passed unnoticed until recently. The papers reviewed cast in four centers -on the basis of the academic domicile of their authors: 1) the pioneering Dutch Center, 1934-1939, 2) the Zannetos Model, 1966, 3) the Norwegian Center, 1976-2012, and 4) the Beenstock-Vergottis Model, 1985-1993 and English Center, 1987- 2002. Unfortunately, each new shipping model rejected almost all previous ones and consequently the research did not build a clear picture. Moreover, maritime markets are not perfectly competitive, and most maritime economic concepts need a re-definition, including: shortrun, shipowners expectations and marginal cost.
Highlights
Models are important because they attempt to represent reality
Geometrical models use diagrams, few variables, including supply and demand. Such models appeared in shipping economics, because the price or freight rate is theoretically determined by supply and demand for hiring ship space
Demand cannot adapt to supply, unless the freight rate is so high so that to affect the final price of the goods in the market
Summary
Models are important because they attempt to represent reality. A model is a simplified representation of actual phenomena, and has three specific purposes: to explain, to predict and to control reality. Shipping is an international industry, and as such attracted the close attention of international regulatory bodies: the United Nations (UN) and its specialized agencies: the International Maritime Organization (IMO), the International labor office (ILO); the Organization of economic cooperation and development and European Union (EU) among others. In Talley (2012) [8], 18% of the papers reviewed dealt with this limited range of topics This was a result of the opinion that shipping has a negative impact on sea environment, climate, crew and passenger lives, and on third party property. ML emerged when sea transport wanted to provide door-to-door and just-in-time services It combines: ports, sea, air, land, rivers; storage depots and assembly centers. Part 7, provides a critique of the models presented, and Part 8, suggests further research
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have