A world of whose making - Economic Interdependence and Political Order Essay

A world of whose making - Economic Interdependence and Political Order - Essay Example A world of whose making - Economic Interdependence and Political Order These advantages cannot be transferred from one economy to the other, and therefore countries aim to use the advantages they have for producing goods with relative competence. This provides an insight into the reasons for countries like Japan and U.S. to develop their technology with relative efficiencies. When countries produce a specific good with comparative efficiency, they may not focus on the production of other goods. As a result, they would have to trade their goods with other countries. This is the argument buttressed by the theory of comparative advantage (Madura 2008). The theory provides an insight into the dynamics of the international trade and helps to show how trade provides advantages to the trading parties (D'Anieri 2009). The theory of comparative advantage in economics refers to the concept of production of goods and services at a lesser cost than that produced by another country. The country has a margin of superiority in the goods produced; this pertains to the notion that the opportunity cost of the goods produced by one country is less than that in the other country. David Ricardo was the developer of the basic theory of comparative advantage. He was of the view that absolute advantage is a subset of the more general theory. After Ricardo, a number of theorists furthered and developed the theory of comparative advantage including Heckscher, Ohlin and Samuelson. The theory projected the facts that different countries have varying factor endowments of labor, land and capital input. Countries are going to prefer the production of those products which extensively use the factors of productions with the greatest endowment (Tutor2u 2011). This follows that if the countries gain advantage by specializing in these goods, there will be an increase in the total output and economic welfare. This holds credibility even when one nation may have an absolute advantage over the other country. One of the assumptions which constitute the theory of compara tive advantage is that there is perfect occupational mobility of the factors of production. This means that the resources of one industry can be transferred to another without significant loss of efficiency. The theory also assumes that there should be constant returns to scale; a proportionate increase in the inputs leads to an equal increase in the outputs. There are no externalities surfacing from production and consumption. Also transportation costs are not taken into consideration. Increased returns are a product of specialization and the idea was put forward by Paul Romer and Paul Ormerod. If businesses take advantage from increasing returns to scale, the gains from the trade are more. There is no transport costs associated with comparative advantage. Costs do not vary and economies of scale are not present. There are two economies producing and trading homogenous goods. Moreover the trade carried out between the two countries is not impeded by trade barriers. Also the buyers and sellers have perfect knowledge and the buyers are able to trace down the cheapest goods available in the market (AC Mulligan n.d.). Comparative advantage is not a static concept; rather it keeps changing. Businesses may have had comparative advantage in a market in one product for years in a row. However the gains made during this period may suddenly be at stake as new competitors enter the market. The contribution of Ricardo in the basic theory of

Why Americans should embrace Alternative fuel vehicles Term Paper

Why Americans should embrace Alternative fuel vehicles - Term Paper Example If this trend is to continue in the future, then very shortly the phenomenon of 'peak oil' would be triggered and global competition of remaining oil will escalate the prices beyond affordability. Moreover, there is the persuasive argument from environment preservation angle. If current energy usage patterns continue for a few more decades then the ecosystems and environments across the world would be damaged beyond repair, putting at risk the long-term survival of our species. (Borowitz, 1999, p.255) The rest of this essay will elaborate on these points and present the reasons why Americans should embrace alternative fuel vehicles. Beyond concerns about peak-oil and issues of sustaining conventional oil supplies, there is the danger posed by environmental pollution. While manufacturing industries play their part in polluting air, water and soil, the chief contributors are motor vehicles. For example, 90% of the carbon monoxide, 50% of the volatile organic compounds, and 40% of the o zone in metropolitan areas come from motor vehicles. (Meotti, 1995, p.27) With car ownership per-capita in America being one of the highest among advanced economies, there is a urgent need for alternative fuels. There is also the option of attempting to reduce car sales and car usage. But since this outcome is highly unlikely, finding substitute fuels for petroleum-based ones is the more plausible option going forward. Soybean oil is another alternative fuel that holds a lot of promise. When oil prices spiked during the first Gulf War in 1991, American farmers put to use the huge surplus of soybean oil stored in tanks across the country. They said that Soybean oil can be refined into bio-diesel, which can be used by vehicles. Already, by this time, bio-diesel was being manufactured in Europe using rapeseed oil. And by following the same procedure, Soybean oil could also be converted into bio-diesel, which would prove to be a cleaner and eco-friendly energy alternative. (Schmidt, 200 7, p.87) Experts and business people have now identified bio-diesel as a key player in the alternative fuels market. It also has the advantage of being produced by both small-scale manufacturers as well as large industries. While bio-diesel cannot completely substitute for petroleum products, it has the capacity to power a wide variety of vehicles. At present 95% of passenger vehicles in America run on gasoline. Bio-diesel can significantly help reduce this percentage. (Schmidt, 2007, p.87) Promoters of bio-diesel also feel that its advantages outweigh its disadvantages. It is not only a sustainable energy option, but also an eco-friendly one. For example, â€Å"Numerous studies show that compared to petrodiesel, B20 emits at least 10% less particulate matter, carbon monoxide, and total hydrocarbons. The relevant data are summarized in a 2006 NREL report titled Effects of Biodiesel Blends on Vehicle Emissions. Unlike fossil fuels--which contain carbon from underground sources--biod iesel contains carbon from plants that were recently alive and drawing carbon from the atmosphere. For that reason, burning it doesn't add more carbon dioxide to the atmosphere than what was already there. What's more, biodiesel contains 11% oxygen by weight, which enhances fuel combustion, and reduces the amount of carcinogenic soot that diesel engines spew into the air.† (Schmidt, 2007, p.87) Diesel-run vehicles, on the other hand, are decisively more polluting. They release a lot of sulphur into the atmosphere, which in turn creates sulfate-based particulates, which in turn