Maritime Economics Described

The question that maritime economics cover are, for instance :

• How many ships are needed in the market
• What are the influential factors on the tonnage required
• Why the prices of transport service go up and down
• What are the sub-divisions of maritime markets
• Why Some people do better than others
• What is the impact of outside changes on the shipping sector
• What is optimal size of a ship or a shipping company

The questions to which answers can be found in economic analysis can also broader in scope such as : why should shipping company be so big? why is the size important for surviving in difficult times? what are the economic implications between "spot" market and long-term contracts? why should many ship be in the spot market? what is the impact of merger, acquisition and carrier consolidation on my business? The list continues to cover the market dynamism, such as: why do freight rates fluctuate? why do they change up and down so much within 1 year? what is going on in port service? how do they cope with the changes in trade and transport?

Glancing over the current maritime press headlines, one will encounter numerous stories happening  in the industry that are comprehensible only with the help of maritime economics knowledge.

Our definition of maritime economics in the sphere of microeconomic does not preclude its close relationship with macroeconomics. On the contrary, a good understanding of macroeconomics is highly helpful for appreciating the maritime transport sector and making better decision within it, in fact, because of its particular characteristics, the maritime transport industry has a special position at macroeconomic level, not only do many countries formulate their distinct policies on maritime transportation, but there are often specialized government departments set up to deal with various matters related to international shipping.

Economics and Maritime Transport

As defined in an economics textbook (Lipsey 1992) economics concerns :

1. The allocation of a society resources among alternative uses and the distribution of the society's output among individuals and groups at a point in time;
2. The ways in which allocation and distribution change overtime;
3. The Efficiencies and Inefficiencies of economic systems.

Economics can also broadly divided into two branches: microeconomics and macroeconomics. The different between them is at the level of aggregation used.

Microeconomic deals with the determination of prices and quantities in individual market and with the relations among these markets.

Macroeconomic focused on much broader aggregate by looking at e.g. total number of people employed, the total number of national output and consumption, the balance of trade of a country, every level of prices and its changes.

One may also conclude that microeconomics is about the economic question (e.g. allocation of resources) of an industry, a sector, a firm, a family or a person, whilst macroeconomics is about the economic decision of a country, or a region or the world.

Maritime transport is in transportation sectors, maritime economics therefore belongs to the scope of microeconomics.