%0 Journal Article
%T Self-Reinforcing Mechanisms in Economics: with Two Case-Studies from Shipping Industry
%A Alexandros M. Goulielmos
%J Modern Economy
%P 1313-1337
%@ 2152-7261
%D 2018
%I Scientific Research Publishing
%R 10.4236/me.2018.97085
%X ¡°Returns to scale¡±, as a methodology,<b> </b><span style=\"font-family:Verdana;\">goes
back to Adam Smith (1776). Economists after Marshall (1842-1924), with certain
exceptions</span><span style=\"font-family:Verdana;\">, confined their interests exclusively to ¡°Constant returns to scale</span><span style=\"font-family:;\" \"=\"\"><span style=\"font-family:Verdana;\">¡±. As a return they secured for their analysis a </span><i><span style=\"font-family:Verdana;\">single equilibrium</span></i><span style=\"font-family:Verdana;\"> point with </span><i><span style=\"font-family:Verdana;\">convenient</span></i> <i><span style=\"font-family:Verdana;\">convex</span></i><span style=\"font-family:Verdana;\"> curves. Early economists were
sure that ¡°resource-based¡± economic sectors like ¡°Agriculture¡±, ¡°Bulk goods
production¡± and ¡°Mining¡± exhibited ¡°diminishing returns to scale¡±, a belief
valid till this day. However, at least 9 important ¡°knowledge-based¡± sectors
exhibited increasing returns. More important is that increasing returns
provides also no obstacle to growth of a firm, and of an industry¡­till it
becomes a monopoly... We presented arguments against and in favor of this last
theory drawn from Shipping and Marketing. Moreover, we examined the existence
of increasing returns in relation to shipping industry and especially with 2
case-studies dealing with: 1) the exceptional economies of scale concerning
¡°Vale S.A.¡± and its giant ships ¡°Valemax¡± of 400,000 dwt, double in size of
existing ships (</span><i><span style=\"font-family:Verdana;\">i.e.</span></i><span style=\"font-family:Verdana;\"> the Capes of
about 200,000 dwt) and 2) the case of shipowners locked-in within the extremely
high chartering markets during 2003-2008. The first was also examined in
relation to the impact of ¡°chance or small historical events¡±. Traditional
economists indeed did not have the mathematical tools to deal with ¡°increasing
returns¡± and ¡°path dependence¡± till 1983, when ¡°Arthur </span><i><span style=\"font-family:Verdana;\">et al.</span></i><span style=\"font-family:Verdana;\">¡± discovered the ¡°Urn schemes of the Polya kind¡±. This method
succeeded in combining probabilities or random facts with deterministic or
chaos motions! This had a great impact on methodology, which, prior to that,
dealt with either random or deterministic models in a water-proof separate
manner. The aim of this paper was to mark out the importance of increasing
returns,</span></span><span style=\"font-family:Verdana;\"> which has important implications in economic
development policies, and comes from
%K Increasing Returns to Scale
%K The Danger of Monopoly
%K Shipping Applications
%K Vale S.A. Case-Study
%K Lock-In Chartering Case-Study
%K Multiple Equilibria
%U http://www.scirp.org/journal/PaperInformation.aspx?PaperID=86383