Ethics in Engineering Essay - 1469 Words

Ethics is the moral behavior that guides our actions; it motivates us in our personal behavior and is relevant in a business setting as well. Many organizations have set forth a set of guidelines known as a â€Å"Code of Ethics†. The Institute of Electrical and Electronic Engineers, being one of these organizations, has set forth their code as a requirement for students and engineer members to adhere to. Heading towards a career in electrical engineering I choose this organization to elaborate on for my ethics project. In the paragraphs that follow you will be introduced to the Code of Ethics as outlined by IEEE, and what it means to its members. A comprehensive summarization will be provided for each guideline along with examples of how†¦show more content†¦This being the case it is important for the engineer to consider the application to which the design will be used as well as how and to what extent it will be handled. In the instance that risks and dangers are pr esent they must immediately be brought to the attention of the consumer, and if effected as a whole, the public. The second point outlines the regulation of avoiding real and perceived conflicts of interest and to bring the forth to all parties involved. Conflicts of interest are more prevalent in our society than many people believe. Many times conflicts of interest are most common in what is known as â€Å"self-dealing†. Self-dealing is the act in which an engineer operates in a fashion to which he benefits on both sides of the deal. For example if John, co-owner of a local corporation, uses his position as a part-time government official to secure job contracts for himself, this would be a conflict of interest related to self-dealing and deemed a violation of ethics by the IEEE. Engineers are also required to use honesty and not over exaggerate claims or estimates when the data is available to make an informed decision. When making statements regarding an estimate members are required to accurately measure the cost and time in which it will take to produce a design. Misleading development times and costs not only results in damages of a financial sense but also in a loss of quality of the product or design. To prevent suchShow MoreRelatedEngineering : Engineering And Ethics917 Words   |  4 PagesWhat is Engineering? Engineering is a profession in which knowledge of mathematical and natural sciences gained by study, experience and practices is applied with judgement to develop ways to utilize, economically, the materials and forces of natures for the benefits of Mankind – (Accreditation Board for Engineering and Technology-ABET) Sara Pfatteicher in her book Introduction to post disaster engineering and ethics describes engineers as â€Å"design under constrains†. 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This means that studentsRead MoreEthics And The Field Of Engineering1783 Words   |  8 PagesScholars and practitioners in the field of engineering identified as depicting high level interest in the question, ‘Do professional duties of an engineer go beyond conscientiously and effectively carrying out the instructions of their employer? If so, why and how? If not, why not? The general relevance of the question is identified in terms of ethics playing role in the field of engineering. In general terms, it deals with the nature and impact of the engineering technology on society. The researchersRead MoreComputer Engineering Ethics4002 Words   |  17 Pagesbetween a patent, a trademark, and a copyright ï‚ · Identify so me ways of credentialing a person to practice computer engineering ï‚ · Describe issues that contrast risk issues with safety issues ï‚ · Identify some issues in computer engineering that address privacy ï‚ · Describe whistle blowing and the conflicts between ethics and practice that may result from doing so ï‚ · Describe how computer engineering uses or benefits from social and professional issues. 2.2 Reasons for Studying Social and Professional Issues Read MoreThe Gold And Engineering Ethics932 Words   |  4 PagesGilbane Gold and Engineering Ethics Ethics are fundamental in all human interaction; they guide or beliefs and behaviors, therefore fundamentally affecting how we live life. 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A Career Of Computer Science - 1065 Words

A Career in Computer Science As a child, I said I was going to pursue many different careers because I had no guidance in this area and a head full of imagination. As I got older, I had to narrow my options. In high school, my 10th grade teacher asked me the burning question†¦.†What career do you plan on taking up?†. I couldn’t answer the question and from that point on, I started learning about myself, what I like, and what I was skilled in. I came to the conclusion that I would pursue a career in the technology/computer science field. â€Å"Computer Science covers the core concepts and technologies involved with how to make a computer do something† (Janzen 1). I plan on becoming a software engineer. â€Å"Software Engineering focuses on how to design and build software in teams† (Janzen 1). I chose this specified career due to external influences. I took a couple of technology classes in high school ranging from graphic design to AP programming . 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Analysis of Harold Hotelling’s Theory Free Essays

string(161) " the Hotelling model is that the market price of non-renewable resources must increase with time, provided that costs remain time-invariant \(Chakravorty et al\." Abstract Economists have long been concerned with the extraction of natural resources. This paper presents an evaluation or analysis of Harold Hotelling’s theory that asserts that the most socially and economically profitable extraction track of a non-renewable resource is one along which the price of the resource, determined by the marginal net revenue from the sale of the resource, increases at the rate of interest The paper presents a model of the Hotelling rule and examines its applicability to real life phenomena. The paper finds that while the Hotelling theory had contributed to the economics of nonrenewable resources and the rise of the conservationism movement, the assumptions laid out by the theory are not applicable to the real world. We will write a custom essay sample on Analysis of Harold Hotelling’s Theory or any similar topic only for you Order Now In conclusion, the paper suggests the need to relax the assumptions in order to explain the real-world phenomena. Introduction The efficient use of scarce natural resources, both renewable and non-renewable sources, has long been a concern of natural resource economics (Shogren 2000). For example, Adam Smith explored on the natural progress of opulence and suggested that for a country to achieve an optimum economic progress, it had to allocate capital to land, fisheries and mines (Barnett Morse 1963). In a similar vein, Ricardo explored on the significance of land quality on economic rent. Robert Malthus raised concern about the dangers of population growth, asserting that the increasing population was likely to preclude the endless progress towards a utopian society (Barnett Morse 1963). Similarly, Jevons raised concern about the consequences of coal depletion on population growth (Shogren 2000). A feature shared by all these economists is their treatment of natural resources as a free factor of production. That is, they all treat natural resources as provided freely by nature. But towards the beginning of the 21st century, a shift in mindset occurred as economists began treating natural resources as something more distinct than just a free factor of production (Shogren 2000). Theorists such as Hotelling and Gray particularly pointed out to the additional intertemporal cost of extracting natural resources (Shogren 2000). In this regard, this paper presents an evaluation or analysis of Harold Hotelling’s theory that asserts that the most socially and economically profitable extraction track of a non-renewable resource is one along which the price of the resource, determined by the marginal net revenue from the sale of the resource, increases at the rate of interest (Harold 1931). Harold Hotelling’s theory In 1931, Hotelling used differential calculus to derive the optimal extraction of a fixed resource over time (Bradley 2007). He began by recognizing the inadequacy of the standard economic analysis in the industry in which production was bound to decline (Bradley 2007). Hotelling then asserted that if the total resource base and capital investments were fixed and efficient extraction methods used, then the marginal net revenue of extraction of non-renewable resource would rise at the rate of interest over time (Hotelling 1931). This premium price was referred to as the ‘resource rent’ or rather the ‘hotelling rent’. In other words, under a perfectively competitive market, the market price of a non-renewable resource minus the marginal costs must grow in tandem with the interest rate. As such, the price of the natural resource should increase with time, provided that the marginal costs are kept constant (Chakravorty et al. 2009) Harold Hotelling’s theory postulated that the most socially and economically profitable extraction track of a non-renewable resource was one in which the price of the resource, determined by the marginal net revenue from the sale of the resource, increased at the rate of interest (Harold 1931). The theory thus proposed the time track of natural resource extraction that most increases the value of the resource reserve. But at the time, his analysis was way ahead of time as mathematics had not yet been incorporated into economics. As a result, his seminal analysis was originally rejected for this reason. However, Hotelling’s rule later came to be known as the pillar of the theory of nonrenewable resource economics through its rich insight on the long-run behaviour of resource price and scarcity of extraction and its contribution to the rise of conservatism movement (Gaitan et al. 2007). Modeling of the Hotelling rule To illustrate the Hotelling rule, let us consider as basic model where in So denotes an economy’s total stock of resource and Rt denotes the total extraction at time t (Gaitan et al. 2007). The utility of consumption would be denoted by U(Rt). The objective is to maximize the marginal net revenue of extraction of the non-renewable resource. Assuming that the extraction is carried out with constant unit costs, Then the optimal path of extraction of the natural resource would be found by the following equation †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. (i) But the maximization must meet the condition †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. (ii) Assuming that private and social discount rates are the same and that there are no externalities (Gaitan et al. 2007), then the solution to equation (i) and (ii) can be found using optimal control theory as shown below: †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. (iii) But conditions require the optimal extraction path to fulfill the following relation (Gaitan et al. 2007), †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. (iv) The opportunity cost or rather the shadow price at time t, Yt, is in the present case constant. We thus have Equation (iv) can thus be rewritten as follows: †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. (v) And given that in a market economy, then it can be seen that equation (iv) reflects the Hotelling rule that the marginal price of the natural resource increases with increase in the rate of discount. Hotteling’s predictions of a decline in non-renewable resources with time such as oil, minerals and forests led to demands for regulation of exploitation of such exhaustible assets (Rothband 2000). The selfish exploitation of natural resources at a rapid rate gave rise to the conservation movement (Rothband 2000). This theory has formed the basis of the conservationist movement and has been influential to the point that prohibitions against oil and mineral mining and deforestation in certain government lands have been justified on this ground (Hotelling 2007). Criticism of Hotelling’s theory An important point to emphasize in the Hotelling model is that the market price of non-renewable resources must increase with time, provided that costs remain time-invariant (Chakravorty et al. You read "Analysis of Harold Hotelling’s Theory" in category "Essay examples" 2009). However, in reality such an increase in the price of non-renewable sources may not persist as many short-run factors such as regulation and speculation in commodity markets may come into play resulting in alternative phases of upward and downward price movements (Chakravorty et al. 2009). For example, if the Kyoto Treaty was to impose a target of 450 PPM of carbon, energy prices would be expected to rise but fall soon after the constraint becomes binding (Chakravorty et al. 2009). But when there is a fall below the 450 ppm level, the prices are bound to rise again (Chakravorty et al. 2009). Such a cyclical behaviour in the prices of non-renewable resources is not covered under the Hotelling model. As a result of such kind of price variations, Harold’s Hotelling theory has come under criticism. Economists have argued that Hotelling’s theoretical prediction of a rise in scarcity and relative prices of nonrenewable resources over time is not borne out of facts (Watkins 1992). For example, Krautkraemer (1998) argues that for the most part, Hotelling’s theoretical predictions have been inconsistent with empirical studies of non renewable resource prices and in situ values. Over the past 100 years or so, there hasn’t been a persistent increase in the prices of nonrenewable resources (Krautkraemer 1998). Also, economic indicators do not provide evidence of an increase in scarcity of these resources (Krautkraemer 1998). Although the popuplar view among the general public is that exhaustion of non-renewable resources is progressing at a faster rate, this view is highly debatable. In fact, economic indicators have shown that there has been growth in nonrenewable resource supply as new deposits continue to be discovered and the extraction technology continues to progress (Krautkraemer 1998). This has been argued to mitigate the scarcity effect (Krautkraemer 1998). But the above criticism may not necessarily hold as just like other economic analysis on this subject, Krautkramer’s analysis has been conducted at the global level (Wright Czelusta 2002).Although it may seem appropriate to test Hotelling predictions at the global level, such analysis leaves open the possibility that the depletion may have been staved off at the global level, through the discovery new and underexplored territories (Wright Czelusta 2002). Nonetheless, the popular view that the world is likely run out of natural resources in the near future may not necessarily be true. If resources are considered to be scarce, then there is a higher likelihood of its real price rising (Braddley 2007). In the event of an increase in real price, producers are likely to be induced by the high prices to explore for more reserves resulting in an increase in resource stock (Braddley 2007). The lifetime measures of most resources can thus be assumed to remain constant over time Another error that Hotelling made was linking his highly conditional analysis to the real world (Braddley 2007). Hotelling faulted laissez-faire for deviating from his derived optimality in extraction of non-renewable resources, stating that the extractive industries had discrepancies which resulted in wasteful forms of exploitation (Braddley 2007). He also argues that such wasteful forms of exploitation would have been regulated in the interest of the general public (Braddley 2007). Whilst Hotelling was quick to recognize market failure, he failed to account for what is currently known as government failure (Braddley 2007). As can be seen with the long history of petroleum regulation in the US, government intervention has generally been lacking in information and has been highly problematic in practice (Adelman 1993). Only an omniscient planner would know the specifics of demand, supply, price, cost, interest rates, and entreprenurial alertness needed to arrive at an optimal extraction solution (Braddley 2007). Role of logistics Harold’s hotelling theory can be applied to the logistic industry. According to the hotelling theory, the most profitable extraction is one in which the price of the resource, determined by the marginal net revenue from sale of the resource, increases at the rate of interest. In this respect, to reduce on the marginal cost of extraction, it would require that an industry be located close to the extraction point. This would not only decrease the transport costs, but will also increase efficiency in the supply chain and logistics. Logistics thus has an important role to play in determining the optimal extraction solution. The lower the transport costs, the more likely are the returns to scale. Whilst the transport costs are account for a small percentage of the total costs, the optimal extraction solution must also take into account the total logistics costs. Logistics have an impact on a firm’s optimal location behaviour and thus must be taken into account of when determining the optimal extraction solution of a natural resource. Conclusion In Summary, the Hotelling theory has contributed to the economics of nonrenewable resources. It has formed the conceptual and theoretical framework used by economists to model the supply and the prices of nonrenewable resources. More so, it has contributed to the conservationist movement. However, the Hotelling theory, though elegant, seem somewhat misplaced. The model points out to a rise in trajectory of net prices of non-renewable resources along with the rate of interest yet there is a lack of empirical evidence to back this pricing behaviour. Moreover, the assumption of an increase in scarcity of non renewable resources is highly debatable. These assumptions seem not applicable to the real world. Perhaps, to explain the real-world phenomena, it would be helpful to relax these assumptions. For example, in order to explain the price of oil, it would be necessary to discard all assumptions of inevitable increase in price and the assumption of a fixed stock. Reference Adelman, M. A., 1993. ‘Introduction’. In M. A. Adelman (Ed.), The economics of petroleum supply. Cambridge, MA: MIT Press. Barnett, H. and Morse, C., 1963. Scarcity and growth. The economics of natural resource scarcity, Baltimore, Johns Hopkins University Press Braddley, R.L., 2007. Resourceship: an Austrian theory of mineral resources. Rev Austrian Econ 20: 63-90 Bradley, R. L., 1996. Oil, gas, and government: The U.S. experience. Lanham, MD: Rowman and Littlefield. Chakravorty, U., Leach, A. and Moreaux, M., 2009. â€Å"Twin peaks† in Energy prices: a hotelling model with pollution and learning. School of Business and department of Economics. Gaitan, B., Tol, R.S., and Yetkiner, H., 2007. The Hotelling’s rule revisited in a dynamic general equilibrium model. University of Hamburg Hotelling, H., 2006. ‘Stability in competition’. The Economic Journal, vol.39 (153), pp.41-57 Hotelling, Harold, 1931. ‘The economics of exhaustible resources’. Journal of Political Economy 39 (2), 137–175 Krautkraemer, Jeffrey A. (1998). â€Å"Nonrenewable Resource Scarcity,† Journal of Economic Lin, C., Meng, H., Ngai, T.Y., Oscherov, V., Zhu, Y.H., 2008. Hotelling revisited: oil prices and endogenous technological progress. University of California Literature 36: 2065-2107. Rothbard, M. N., 2000. ‘Conservation in the free market’. In: Egalitarianism as a revolt against nature and other essays, Auburn, AL: Ludwig von Mises Institute, pp. 175–189. Shogren, J.F., 2000. Natural resource economics. USA: University of Wyoming. Watkins, G. C., 1992. ‘The Hotelling principle: Autobahn or Cul de Sac?’ Energy Journal, 13 (1), 1–24. Wright, G. and Czelusta, J., 2002. Resource-based economic growth, past and present. Stanford University How to cite Analysis of Harold Hotelling’s Theory, Essay examples Analysis Of Harold Hotelling’s Theory Free Essays string(161) " the Hotelling model is that the market price of non-renewable resources must increase with time, provided that costs remain time-invariant \(Chakravorty et al\." Abstract Economists have long been concerned with the extraction of natural resources. This paper presents an evaluation or analysis of Harold Hotelling’s theory that asserts that the most socially and economically profitable extraction track of a non-renewable resource is one along which the price of the resource, determined by the marginal net revenue from the sale of the resource, increases at the rate of interest The paper presents a model of the Hotelling rule and examines its applicability to real life phenomena. The paper finds that while the Hotelling theory had contributed to the economics of nonrenewable resources and the rise of the conservationism movement, the assumptions laid out by the theory are not applicable to the real world. We will write a custom essay sample on Analysis Of Harold Hotelling’s Theory or any similar topic only for you Order Now In conclusion, the paper suggests the need to relax the assumptions in order to explain the real-world phenomena. Introduction The efficient use of scarce natural resources, both renewable and non-renewable sources, has long been a concern of natural resource economics (Shogren 2000). For example, Adam Smith explored on the natural progress of opulence and suggested that for a country to achieve an optimum economic progress, it had to allocate capital to land, fisheries and mines (Barnett Morse 1963). In a similar vein, Ricardo explored on the significance of land quality on economic rent. Robert Malthus raised concern about the dangers of population growth, asserting that the increasing population was likely to preclude the endless progress towards a utopian society (Barnett Morse 1963). Similarly, Jevons raised concern about the consequences of coal depletion on population growth (Shogren 2000). A feature shared by all these economists is their treatment of natural resources as a free factor of production. That is, they all treat natural resources as provided freely by nature. But towards the beginning of the 21st century, a shift in mindset occurred as economists began treating natural resources as something more distinct than just a free factor of production (Shogren 2000). Theorists such as Hotelling and Gray particularly pointed out to the additional intertemporal cost of extracting natural resources (Shogren 2000). In this regard, this paper presents an evaluation or analysis of Harold Hotelling’s theory that asserts that the most socially and economically profitable extraction track of a non-renewable resource is one along which the price of the resource, determined by the marginal net revenue from the sale of the resource, increases at the rate of interest (Harold 1931). Harold Hotelling’s theory In 1931, Hotelling used differential calculus to derive the optimal extraction of a fixed resource over time (Bradley 2007). He began by recognizing the inadequacy of the standard economic analysis in the industry in which production was bound to decline (Bradley 2007). Hotelling then asserted that if the total resource base and capital investments were fixed and efficient extraction methods used, then the marginal net revenue of extraction of non-renewable resource would rise at the rate of interest over time (Hotelling 1931). This premium price was referred to as the ‘resource rent’ or rather the ‘hotelling rent’. In other words, under a perfectively competitive market, the market price of a non-renewable resource minus the marginal costs must grow in tandem with the interest rate. As such, the price of the natural resource should increase with time, provided that the marginal costs are kept constant (Chakravorty et al. 2009) Harold Hotelling’s theory postulated that the most socially and economically profitable extraction track of a non-renewable resource was one in which the price of the resource, determined by the marginal net revenue from the sale of the resource, increased at the rate of interest (Harold 1931). The theory thus proposed the time track of natural resource extraction that most increases the value of the resource reserve. But at the time, his analysis was way ahead of time as mathematics had not yet been incorporated into economics. As a result, his seminal analysis was originally rejected for this reason. However, Hotelling’s rule later came to be known as the pillar of the theory of nonrenewable resource economics through its rich insight on the long-run behaviour of resource price and scarcity of extraction and its contribution to the rise of conservatism movement (Gaitan et al. 2007). Modeling of the Hotelling rule To illustrate the Hotelling rule, let us consider as basic model where in So denotes an economy’s total stock of resource and Rt denotes the total extraction at time t (Gaitan et al. 2007). The utility of consumption would be denoted by U(Rt). The objective is to maximize the marginal net revenue of extraction of the non-renewable resource. Assuming that the extraction is carried out with constant unit costs, Then the optimal path of extraction of the natural resource would be found by the following equation †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. (i) But the maximization must meet the condition †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. (ii) Assuming that private and social discount rates are the same and that there are no externalities (Gaitan et al. 2007), then the solution to equation (i) and (ii) can be found using optimal control theory as shown below: †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. (iii) But conditions require the optimal extraction path to fulfill the following relation (Gaitan et al. 2007), †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. (iv) The opportunity cost or rather the shadow price at time t, Yt, is in the present case constant. We thus have Equation (iv) can thus be rewritten as follows: †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. (v) And given that in a market economy, then it can be seen that equation (iv) reflects the Hotelling rule that the marginal price of the natural resource increases with increase in the rate of discount. Hotteling’s predictions of a decline in non-renewable resources with time such as oil, minerals and forests led to demands for regulation of exploitation of such exhaustible assets (Rothband 2000). The selfish exploitation of natural resources at a rapid rate gave rise to the conservation movement (Rothband 2000). This theory has formed the basis of the conservationist movement and has been influential to the point that prohibitions against oil and mineral mining and deforestation in certain government lands have been justified on this ground (Hotelling 2007). Criticism of Hotelling’s theory An important point to emphasize in the Hotelling model is that the market price of non-renewable resources must increase with time, provided that costs remain time-invariant (Chakravorty et al. You read "Analysis Of Harold Hotelling’s Theory" in category "Essay examples" 2009). However, in reality such an increase in the price of non-renewable sources may not persist as many short-run factors such as regulation and speculation in commodity markets may come into play resulting in alternative phases of upward and downward price movements (Chakravorty et al. 2009). For example, if the Kyoto Treaty was to impose a target of 450 PPM of carbon, energy prices would be expected to rise but fall soon after the constraint becomes binding (Chakravorty et al. 2009). But when there is a fall below the 450 ppm level, the prices are bound to rise again (Chakravorty et al. 2009). Such a cyclical behaviour in the prices of non-renewable resources is not covered under the Hotelling model. As a result of such kind of price variations, Harold’s Hotelling theory has come under criticism. Economists have argued that Hotelling’s theoretical prediction of a rise in scarcity and relative prices of nonrenewable resources over time is not borne out of facts (Watkins 1992). For example, Krautkraemer (1998) argues that for the most part, Hotelling’s theoretical predictions have been inconsistent with empirical studies of non renewable resource prices and in situ values. Over the past 100 years or so, there hasn’t been a persistent increase in the prices of nonrenewable resources (Krautkraemer 1998). Also, economic indicators do not provide evidence of an increase in scarcity of these resources (Krautkraemer 1998). Although the popuplar view among the general public is that exhaustion of non-renewable resources is progressing at a faster rate, this view is highly debatable. In fact, economic indicators have shown that there has been growth in nonrenewable resource supply as new deposits continue to be discovered and the extraction technology continues to progress (Krautkraemer 1998). This has been argued to mitigate the scarcity effect (Krautkraemer 1998). But the above criticism may not necessarily hold as just like other economic analysis on this subject, Krautkramer’s analysis has been conducted at the global level (Wright Czelusta 2002).Although it may seem appropriate to test Hotelling predictions at the global level, such analysis leaves open the possibility that the depletion may have been staved off at the global level, through the discovery new and underexplored territories (Wright Czelusta 2002). Nonetheless, the popular view that the world is likely run out of natural resources in the near future may not necessarily be true. If resources are considered to be scarce, then there is a higher likelihood of its real price rising (Braddley 2007). In the event of an increase in real price, producers are likely to be induced by the high prices to explore for more reserves resulting in an increase in resource stock (Braddley 2007). The lifetime measures of most resources can thus be assumed to remain constant over time Another error that Hotelling made was linking his highly conditional analysis to the real world (Braddley 2007). Hotelling faulted laissez-faire for deviating from his derived optimality in extraction of non-renewable resources, stating that the extractive industries had discrepancies which resulted in wasteful forms of exploitation (Braddley 2007). He also argues that such wasteful forms of exploitation would have been regulated in the interest of the general public (Braddley 2007). Whilst Hotelling was quick to recognize market failure, he failed to account for what is currently known as government failure (Braddley 2007). As can be seen with the long history of petroleum regulation in the US, government intervention has generally been lacking in information and has been highly problematic in practice (Adelman 1993). Only an omniscient planner would know the specifics of demand, supply, price, cost, interest rates, and entreprenurial alertness needed to arrive at an optimal extraction solution (Braddley 2007). Role of logistics Harold’s hotelling theory can be applied to the logistic industry. According to the hotelling theory, the most profitable extraction is one in which the price of the resource, determined by the marginal net revenue from sale of the resource, increases at the rate of interest. In this respect, to reduce on the marginal cost of extraction, it would require that an industry be located close to the extraction point. This would not only decrease the transport costs, but will also increase efficiency in the supply chain and logistics. Logistics thus has an important role to play in determining the optimal extraction solution. The lower the transport costs, the more likely are the returns to scale. Whilst the transport costs are account for a small percentage of the total costs, the optimal extraction solution must also take into account the total logistics costs. Logistics have an impact on a firm’s optimal location behaviour and thus must be taken into account of when determining the optimal extraction solution of a natural resource. Conclusion In Summary, the Hotelling theory has contributed to the economics of nonrenewable resources. It has formed the conceptual and theoretical framework used by economists to model the supply and the prices of nonrenewable resources. More so, it has contributed to the conservationist movement. However, the Hotelling theory, though elegant, seem somewhat misplaced. The model points out to a rise in trajectory of net prices of non-renewable resources along with the rate of interest yet there is a lack of empirical evidence to back this pricing behaviour. Moreover, the assumption of an increase in scarcity of non renewable resources is highly debatable. These assumptions seem not applicable to the real world. Perhaps, to explain the real-world phenomena, it would be helpful to relax these assumptions. For example, in order to explain the price of oil, it would be necessary to discard all assumptions of inevitable increase in price and the assumption of a fixed stock. Reference Adelman, M. A., 1993. ‘Introduction’. In M. A. Adelman (Ed.), The economics of petroleum supply. Cambridge, MA: MIT Press. Barnett, H. and Morse, C., 1963. Scarcity and growth. The economics of natural resource scarcity, Baltimore, Johns Hopkins University Press Braddley, R.L., 2007. Resourceship: an Austrian theory of mineral resources. Rev Austrian Econ 20: 63-90 Bradley, R. L., 1996. Oil, gas, and government: The U.S. experience. Lanham, MD: Rowman and Littlefield. Chakravorty, U., Leach, A. and Moreaux, M., 2009. â€Å"Twin peaks† in Energy prices: a hotelling model with pollution and learning. School of Business and department of Economics. Gaitan, B., Tol, R.S., and Yetkiner, H., 2007. The Hotelling’s rule revisited in a dynamic general equilibrium model. University of Hamburg Hotelling, H., 2006. ‘Stability in competition’. The Economic Journal, vol.39 (153), pp.41-57 Hotelling, Harold, 1931. ‘The economics of exhaustible resources’. Journal of Political Economy 39 (2), 137–175 Krautkraemer, Jeffrey A. (1998). â€Å"Nonrenewable Resource Scarcity,† Journal of Economic Lin, C., Meng, H., Ngai, T.Y., Oscherov, V., Zhu, Y.H., 2008. Hotelling revisited: oil prices and endogenous technological progress. University of California Literature 36: 2065-2107. Rothbard, M. N., 2000. ‘Conservation in the free market’. In: Egalitarianism as a revolt against nature and other essays, Auburn, AL: Ludwig von Mises Institute, pp. 175–189. Shogren, J.F., 2000. Natural resource economics. USA: University of Wyoming. Watkins, G. C., 1992. ‘The Hotelling principle: Autobahn or Cul de Sac?’ Energy Journal, 13 (1), 1–24. Wright, G. and Czelusta, J., 2002. Resource-based economic growth, past and present. Stanford University How to cite Analysis Of Harold Hotelling’s Theory, Essay examples

Strategy US International Equity Investment

Question: Discuss about theStrategyfor US International Equity Investment. Answer: Introduction Shefa is a small private company founded ten years ago as makers of potential and highly effective herbal painkillers. They employ 50 persons including employees and scientists and most of them are working with the company since their establishment. Their strategies were based on differentiation focus given by Porter. According to this approach, generic policies are not commonly exclusive and each of the strategy can be connected to various strategic means. At the time of foundation they made philanthropic pledge that if they ever find out a treatment for a chronic sickness, then it will be made accessible to everyone who requires it despite of their economic condition. Two years past, they found an amazing thing with their painkiller named Herball that it could be used to shrink organ cancer. They decided to purify the new drug and to increase its effectiveness they allocated more funds. However, the allocation of resources did not go well with the company and they were almost ruined. They expensed all their savings and went under debt of 10 million Dirham. However, in the last month the company made a burst through as the drug completely healed liver cancer of a rat in lab test (Popelka and Hopkinson 2015). They are thinking of testing the drug on human. The company, at present, has various choices to go with and continue in future: Cash out: Under this method, the company can sell the technology to any big pharmaceutical company and use the money to pay off their debt and continue their business like before with their other drugs. However, if the technology works on human, it can be proved as a boom in the industry and can shake the whole industry. Thus, selling the technology to other company will result in loss of long-term earnings opportunity for the company (Walker et al. 2015). Begin Human Testing: Under this strategy, the company can sign up with any big American hospital for trials on human. They have offers from a major hospital from US who are willing to sign an agreement with them to begin with human trials. If the human trial does not begin, then it is not possible to assess the outcome of the drug on human beings and if it succeeds, the company will get an opportunity to earn high in the long-run. However, there are various disadvantages of human trial like life risk, adaptability and chances are there that the trial will make the situation worse (Meister 2014). Equity method: Under this strategy, the company can sign up with the investor who has expressed their willingness to invest in the project. They already pledged amount of $2 Billion as initial investment to own the majority of share in the company. However, the major issue under this method is that if majority of the share goes to the investor, the company will lose its ownership as well as the earnings (Ammer et al. 2012). Philanthropy: The philanthropic pledge involves a pledge to dedicate assets, money, property or anything to needy people without any cost, that is, as charity. At the time of establishment, the company pledged a philanthropic promise that if they ever find out heal for a chronic sickness, then it will be made accessible to everyone who requires it despite of their economic condition (Jones Christensen, Siemsen and Balasubramanian 2015) From the above-discussed factors, it is concluded that if the company goes for the cash out strategy, they have to sell the technology to any third party for a consideration of large amount of cash. Using those amount, the company can pay off their debt amounting to 10 million dirham and carry on their research for other chronic diseases like AIDS, Alzheimers and Diabetes. However, selling the technology to other company will result in loss of long-term earnings opportunity for the company. Therefore, it is not suggested to adopt the cash out strategy. On the other hand, adopting being human testing strategy has its own disadvantages; However, without adopting this strategy they cannot proceed further to make the drug a success. Therefore, the company can go for this strategy and to fulfil this strategy, they can sign with the major hospital from US. If the technology works on human, it can be proved as a boom in the industry and can shake the whole industry. The company will then be in a far better position to pay off their debts and carry on their business in a better way. However, there are chances that the project will not succeed and company will be in a worst position, but keeping in mind the companys present position they have nothing to lose. So the company shall take some risk and must go for this strategy. If the company goes for equity method, they have the offer from the investors who are willing to pay $2 billion as initial investment (Markus, M.L and Loebbecke 2013). However, at the same time, they will lose their ownership also. Thus, if profits arise in the near future, maximum part of the profits will go to the stakeholders and the company will not be able to pay off their debts and the company will not be able to improve their position to a better one. Therefore, this strategy is not suitable for the company, considering their current position. Lastly, about the philanthropic pledge strategy, as the company made a promise at the time of establ ishment, the company pledged a philanthropic promise that if they ever find out heal for a chronic sickness, then it will be made accessible to everyone who requires it despite of their economic condition. Every company have some responsibilities towards the environment and society in which they are conducting their business. Therefore, to fulfil the social obligation, the company must contribute a part of their drug to fulfil the promise made at the time of their establishment. References: Ammer, J., Holland, S.B., Smith, D.C. and Warnock, F.E., 2012. US international equity investment.Journal of Accounting Research,50(5), pp.1109-1139. Jones Christensen, L., Siemsen, E. and Balasubramanian, S., 2015. Consumer behavior change at the base of the pyramid: Bridging the gap between for?profit and social responsibility strategies.Strategic Management Journal,36(2), pp.307-317. Markus, M.L. and Loebbecke, C., 2013. Commoditized digital processes and business community platforms: new opportunities and challenges for digital business strategies.Mis Quarterly,37(2), pp.649-654. Meister, D., 2014.Human factors testing and evaluation(Vol. 5). Elsevier. Popelka, P. and Hopkinson, C., 2015. Business Strategies and Adaptation Mechanisms in Family Businesses during the Era of the Industrial Revolution: The Example of the Klein Family from Moravia.The Hungarian Historical Review, pp.805-833. Walker, J.S., Tedesco, R.C., Jorasch, J.A., Tedesco, D.E. and Patterson, M.W., Igt, 2015.Method and apparatus for enabling a player to simultaneously control game play on multiple gaming devices. U.S. Patent 9,039,534.