What is Economic Geography?

Economic Geography is the study of the distribution of economic activities it is a sub field of geography. It also does the location of industries, economic agglomerations and even the culture environment interaction and globalization is studied by this science.

History

” Some of the first traces of the study of spatial aspects of economic activities can be found in seven Chinese maps of the State of Qin dating to the 4th century BC. Ancient writings can be attributed to the Greek geographer Strabo’s Geographika compiled almost 2000 years ago. As the science of cartography developed, geographers illuminated many aspects used today in the field; maps created by different European powers described the resources likely to be found in American, African, and Asian territories. The earliest travel journals included descriptions of the native peoples, the climate, the landscape, and the productivity of various locations. These early accounts encouraged the development of transcontinental trade patterns and ushered in the era of mercantilism.

World War II contributed to the popularization of geographical knowledge generally, and post-war economic recovery and development contributed to the growth of economic geography as a discipline. During environmental determinism’s time of popularity, Ellsworth Huntington and his theory of climatic determinism, while later greatly criticized, notably influenced the field. Valuable contributions also came from location theorists such as Johann Heinrich von Thünen or Alfred Weber. Other influential theories include Walter Christaller’s Central place theory, the theory of core and periphery.

Fred K. Schaefer’s article “Exceptionalism in geography: A Methodological Examination”, published in the American journal Annals of the Association of American Geographers, and his critique of regionalism, made a large impact on the field: the article became a rallying point for the younger generation of economic geographers who were intent on reinventing the discipline as a science, and quantitative methods began to prevail in research. Well-known economic geographers of this period include William Garrison, Brian Berry, Waldo Tobler, Peter Haggett and William Bunge.

Contemporary economic geographers tend to specialize in areas such as location theory and spatial analysis (with the help of geographic information systems), market research, geography of transportation, real estate price evaluation, regional and global development, planning, Internet geography, innovation, social networks.” Source: https://en.wikipedia.org/wiki/Economic_geography

Computational Economics? Quick Summary.

Computational economics is a discipline that is related to computer science, economics and management. Computational models are developed to predict and understand economic dynamics.

” Computational economics uses computer-based economic modeling for the solution of analytically and statistically formulated economic problems. A research program, to that end, is agent-based computational economics (ACE), the computational study of economic processes, including whole economies, as dynamic systems of interacting agents. As such, it is an economic adaptation of the complex adaptive systems paradigm. Here the “agent” refers to “computational objects modeled as interacting according to rules,” not real people. Agents can represent social, biological, and/or physical entities. The theoretical assumption of mathematical optimization by agents in equilibrium is replaced by the less restrictive postulate of agents with bounded rationality adapting to market forces, including game-theoretical contexts. Starting from initial conditions determined by the modeler, an ACE model develops forward through time has driven solely by agent interactions. The ultimate scientific objective of the method is “to … test theoretical findings against real-world data in ways that permit empirically supported theories to cumulate over time, with each researcher’s work building appropriately on the work that has gone before.”

Computational solution tools include for example software for carrying out various matrix operations (e.g. matrix inversion) and for solving systems of linear and nonlinear equations. For a repository of public-domain computational solution tools.

The following journals specialize in computational economics: ACM Transactions on Economics and ComputationComputational EconomicsJournal of Applied EconometricsJournal of Economic Dynamics and Control, and the Journal of Economic Interaction and Coordination.”  Source: https://en.wikipedia.org/wiki/Computational_economics

What is Complexity Economics?

Complexity economics is basically the application of complexity science to economics. It sees economics not as a system in equilibrium but one that is under constant construction.

Measures used in Complexity Economics

Economic complexity index

Harvard economist Ricardo Hausmann and MIT physicist Cesar A. Hidalgo introduced a spectral method to measure the complexity of a country’s economy by inferring it from the structure of the network connecting countries to the products that they export. The measure combines information of a country’s diversity, which is positively correlated with a country’s productive knowledge, with measures of a product ubiquity (number of countries that produce or export the product). This concept, known as the “Product Space”, has been further developed by MIT’s Observatory of Economic Complexity, and in The Atlas of Economic Complexity in 2011.

Relevance

The economic complexity index (ECI) introduced by Hausmann and Hidalgo is highly predictive of future GDP per capita growth. In Hausmann, Hidalgo et al., the authors show that the List of countries by future GDP (based on ECI) estimates ability of the ECI to predict future GDP per capita growth is between 5 times and 20 times larger than the World Bank’s measure of governance, the World Economic Forum’s (WEF) Global Competitiveness Index (GCI) and standard measures of human capital, such as years of schooling and cognitive ability.

Metrics for country fitness and product complexity

Pietronero and collaborators have recently proposed a different approach. These metrics are defined as the fixed point of the non-linear iterative map. Differently, from the linear algorithm giving rise to the ECI, this non-linearity is a key point to properly deal with the nested structure of the data. The authors of this alternative formula claim it has several advantages:

  • Consistency with the empirical evidence from the export country-product matrix that diversification plays a crucial role in the assessment of the competitiveness of countries. The metrics for countries proposed by Pietronero is indeed extensive with respect to the number of products.
  • Non-linear coupling between fitness and complexity required by the nested structure of the country-product matrix. The nested structure implies that the information on the complexity of a product must be bounded by the producers with the lowest fitness.
  • Broad and Pareto-like distribution of the metrics.
  • Each iteration of the method refines information, does not change the meaning of the iterated variables and does not shrink information.

The metrics for country fitness and product complexity have been used in a report of the Boston Consulting Group on Sweden growth and development perspectives.” Source: https://en.wikipedia.org/wiki/Complexity_economics

What are Behavioral Economics?

Behavioral economics studies the effects that emotional, social and cognitive factors cause in the economy. They change variables in different scenes in order to determine generally how these factors affect the economy.

” Behavioral economics is primarily concerned with the bounds of rationality of economic agents. Behavioral models typically integrate insights from psychology, neuroscience, and microeconomic theory; in so doing, these behavioral models cover a range of concepts, methods, and fields.

The study of behavioral economics includes how market decisions are made and the mechanisms that drive public choice. The use of the term “behavioral economics” in U.S. scholarly papers has increased in the past few years, as shown by a recent study.

In 2017, economist Richard Thaler was awarded the Nobel Memorial Prize in Economic Sciences for his contributions to behavioral economics and his pioneering work in establishing that people are predictably irrational in ways that defy economic theory.

Three prevalent themes in behavioral finances:

  • Heuristics: Humans make 95% of their decisions using mental shortcuts or rules of thumb.
  • Framing: The collection of anecdotes and stereotypes that make up the mental emotional filters individuals rely on to understand and respond to events.
  • Market inefficiencies: These include mispricings and non-rational decision making.” Source: https://en.wikipedia.org/wiki/Behavioral_economics.

Summary of Applied Economics

Applied economics is the application of economic theory and econometrics in certain settings. The ample range of theories where they can be applied is demographic economics, business economics, industrial organization, education economics and monetary economics.

How did the term applied economics originated?

“The origin and meanings of Applied Economics have a long history going back to the writing of Say and Mill. Say wrote about “applying” the “general principles of political economy” to “ascertain the rule of action of any combination of circumstances presented to us.” The full title of Mill’s (1848) work is Principles of Political Economy with Some of Their Applications to Social Philosophy.

J. Keynes discussion

John Neville Keynes was perhaps the first to use the phrase “applied economics”. He noted that the “English School” (John Stuart Mill, John Elliott Cairnes, and Nassau William Senior) believed that political economy was a positive, abstract, deductive science; and that this school made a clear distinction “between political economy itself and its applications to practice” (1917, 12). This School thought that a general body of theory could be established through abstract reasoning – not relying on a wide knowledge of economic facts. From this point of view applying this theory involved making allowances for some of the factors ignored in building the abstract theories. Keynes wrote about applying the political economies hypothetical laws to interpreting and explaining of “concrete industrial facts.” The issue of conceptual distinction between political economy as a science (involving formulating laws which govern the production and distribution of wealth) and political economy as an art (using the laws to tackle practical problems).

Whilst noting the rival view of the historical economists, who believed that the goals being pursued by policy makers and the means to pursue them were an integral part of the science of economics, J.N Keynes believed in the desirability of the “English School’s” distinction between the discovery of principles and their application (1917, 54).

Indeed, it was he who proposed using the phrase “applied economics” instead of “the art of political economy”. Keynes further discussed the uses of the phrases applied political economy and applied economics noting three different uses:

  1. in the sense suggested in the text [in association with the art of political economy];
  2. to designate the application of economic theory to the interpretation and explanation of particular economic phenomena, without any necessary reference however, to the solution of practical questions;
  3. to mark off the more concrete and specialized portions of economic doctrine from those more abstract doctrines that are held to pervade all economic reasoning. (1917, 58–59) and applying theories of the economy on what we have in reality to get a healthy enterprise and business prosperity.” Source: https://en.wikipedia.org/wiki/Applied_economics

 

What is Agricultural Economics?

Agricultural economics is one of the applied areas of economics which is focused on optimizing production and distribution of food. Land usage is also a theme that agriculture economics is concerned about its study.

“Agricultural economists have made substantial contributions to research in economics, econometrics, development economics, and environmental economics. Agricultural economics influences food policy, agricultural policy, and environmental policy.

Origins of agricultural economics

” Economics has been defined as the study of resource allocation under scarcity. Agricultural economics, or the application of economic methods to optimizing the decisions made by agricultural producers, grew to prominence around the turn of the 20th century. The field of agricultural economics can be traced out to works on land economics. Henry Charles Taylor was the greatest contributor to the establishment of the Department of Agricultural Economics at Wisconsin in 1909.

Another contributor, 1979 Nobel Economics Prize winner Theodore Schultz, was among the first to examine development economics as a problem related directly to agriculture. Schultz was also instrumental in establishing econometrics as a tool for use in analyzing agricultural economics empirically; he noted in his landmark 1956 article that agricultural supply analysis is rooted in “shifting sand”, implying that it was and is simply not being done correctly.

One scholar summarizes the development of agricultural economics as follows:

“Agricultural economics arose in the late 19th century, combined the theory of the firm with marketing and organization theory, and developed throughout the 20th century largely as an empirical branch of general economics. The discipline was closely linked to empirical applications of mathematical statistics and made early and significant contributions to econometric methods. In the 1960s and afterward, as agricultural sectors in the OECD countries contracted, agricultural economists were drawn to the development problems of poor countries, to the trade and macroeconomic policy implications of agriculture in rich countries, and to a variety of production, consumption, and environmental and resource problems.” Source: https://en.wikipedia.org/wiki/Agricultural_economics