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International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
A Comparison and an Implementation of Time Driven
Activity Based Costing and Activity Based Costing
Methods in Private Schools
Metin Yılmaz
Dumlupınar University, Kütahya, Turkey
metinyilmaz@dpu.edu.tr
Ali Coşkun
Fatih University, İstanbul, Turkey
alicoskun@fatih.edu.tr
Şenay Yılmaz
Dumlupınar University, Kütahya, Turkey
senay.yilmaz@dpu.edu.tr
Due to the recent increase in demand for private schools, these schools
have experienced a growth in number and in significance. Therefore, it has
been crucial for the executives of private schools to be able to gain
competitive advantage and to make strategically decisions. This increase of
demand for private schools has also increased the competition in the area.
Due to this increasing competition in private schooling, it has been more
significant to correctly calculate the costs. This study points out the
applicability of activity based costing and time based activity based costing
methods of modern costing methods and the differences between them so
that the executives of private schools could make strategic decisions. Even
though both activities based costing and time driven activity based costing
methods can be applied in private schools, it seems more advantageous to
apply time driven activity based costing since it allows a faster way to
access the information and it is easier to update, which provides a better
chance for long-lasting usage.
Keywords: Activity Based Costing Method; Time Driven Activity Based
Costing Method; Private Education; Costing; Education Institution.
208
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International Conference on Economic and Social Studies (ICESoS` 13)
"Economic Crises and European Union"
A Comparison and an Implementation of Time Driven Activity Based Costing
and Activity Based Costing Methods in Private Schools
Metin Yilmaz
Dumlupinar University, Kutahya, Turkey
metinyilmaz@dpu.edu.tr
Ali Coskun
Fatih University, Istanbul, Turkey
alicoskun@fatih.edu.tr
Senay Yilmaz
Dumlupinar University, Saphane Vocational School, Kutahya, Turkey
senay.yilmaz@dpu.edu.tr
Abstract
Due to the recent increase in demand for private schools, these schools have
experienced a growth in number and in significance. Therefore, it has been crucial for
the executives of private schools to be able to gain competitive advantage and to make
strategically decisions. This increase of demand for private schools has also increased
the competition in the area. Due to this increasing competition in private schooling, it
has been more significant to correctly calculate the costs. This study points out the
applicability of activity based costing and time driven activity based costing methods
of modern costing methods and the differences between them so that the executives of
private schools could make strategic decisions. Even though both Activity Based
Costing (ABC) and Time Driven Activity Based Costing (TDABC) methods can be
applied in private schools, it seems more advantageous to apply time driven activity
based costing since it allows a faster way to access the information and it is easier to
update, which provides a better chance for long-lasting usage.
Keywords: Activity Based Costing Method; Time Driven Activity Based Costing
Method; Private Education; Costing; Education Institution.
Introduction
The present scene of intense competition forces enterprises to seek ways to produce quality
products with the minimum cost. The goal is to increase the feasibility and to reduce the
costing due to the production of shortened time through the elimination of the unnecessary
(Yükcü, 2000; Yilmaz, 2012). The fast growing global competition and technological
development have required an alteration of approaches and practices particularly in enterprise
management. Naturally, it has been followed by the search for new approaches in accounting
management, which is the base for administrative decision making. Recently experienced
alterations and approaches, as their natural outcomes, requires an adaptation process to meet
the needs for methods of costing and administrative accounting within enterprises
(Hacirüstemoglu ve Sakrak, 2002).
Regarding the future of the enterprise, it has been crucially significant for administrators to
reach the most accurate costing data in the fastest way. TDABC, as a driver distribution, has
made ABC method even simpler through the usage of solely “time” driver. Therefore,
�International Conference on Economic and Social Studies (ICESoS` 13)
"Economic Crises and European Union"
TDABC leads to faster and more effective decision making and a better usage of institutional
performance.
Activity Based Costing Method
With technology becoming a significant factor within modern production scene, the total
costing of enterprises has experienced a change. Direct labor, the used to be basis of
production costing has been replaced by indirect factors. Therefore, it seems that loading
keys, such as direct labor, functions insufficiently in distributing general production costs into
products and services; besides that, these keys are becoming far from representing the
relationship between the general production costs and products and services (Gering, 1999;
Beheshti, 2004; Hacirüstemoglu ve Sakrak, 2002).
The goal of ABC approach is to be able to calculate product costs and services in a reliable
fashion considering the fact that an easier way of calculation is possible without being
dependent on production volume of some costing types (Rayburn, 1996).
ABC method is determined as a method to produce the most accurate data needed by the
administrators and as an alternative to traditional costing methods (Gupta and Galloway,
2003; Weetman, 2003). In addition to this, ABC method provides data on cost factors,
activities, resources, performance measurement, customer profitability, distribution chains,
merchandisers, brands, and on other fields that directly affect the profitability of an enterprise.
ABC method relies on processes, activities, and then products, services, and customers for
resource costing so that the costing can be calculated more reliably (Cooper and Kaplan,
1988; Eker, 2002; Kaplan and Atkinson, 1998). ABC method is defined as “ an attitude of
management and costing which is based on the idea that products consume the resources of
the enterprise on the level of activity thus points out that indirect expenses must be classified
among activities and which recognizes linear relationships between products and indirect
expenses without depending solely on production volume (Oker, 2003).
ABC method offers a number of advantages for the enterprises.
Among these advantages: (Innes and Mitchell, 1990; Ozer, 2004; Gokcen, 2004);
It provides a reliable indicator regarding particularly the cost of long-term variable
goods for strategic level administrative decision making.
It provides meaningful financial or non-financial data for operational level cost
management and performance assessment.
ABC, to gain competitive advantage, determines what goods, if altered, will deliver
cost saving in terms of product model.
ABC focuses on customer satisfaction on basis of demand and needs by indicating
available activity fields for cost reduction.
It provides more realistic and more meaningful costing data.
For offering more detailed and thorough data on activity costs and cost drivers it
provides assistance for administrators regarding costing management and pricing.
The phases to set up ABC method follow these steps (Garrison and Noreen, 2000; Oker,
2003):
Determining activities.
�International Conference on Economic and Social Studies (ICESoS` 13)
"Economic Crises and European Union"
Categorizing activities (determining activity cost pools).
Redistribution of indirect costs based on activities (loading cost onto activity cost
pools).
Determining suitable cost factors for transferring costs into goods.
Loading activity costs onto goods.
Despite the benefits of ABC, it never gained widespread acceptance, largely because of
problems in implementing it. ABC usually requires time-consuming surveys and high dataprocessing costs; in addition, there are significant behavioral and organizational hurdles (Oker
and Adıgüzel, 2010 ). The shortcomings of ABC method can be classified into four groups:
the complexity of the method, mistakes of computation in the method, the long time period
required to set up the method, and the difficulties of updating the ABC method (Kosan, 2007).
Time Driven Activity Based Costing Method
TDABC offers an easy-to-update and implement, transparent, and scalable method by
eliminating the difficulties faced with ABC. It offers a practical and systematic option to
enterprises for customer, products and the profitability of orders, capacity utilization and
determining costs. The most remarkable feature of TDABC approach is that it allows the
capacity to be calculated dynamically, to be added to activity costs, and to be dissociated from
unutilized capacity costs (Kaplan and Anderson, 2007; Yilmaz and Baral, 2007).
TDABC shortens and thus simplifies the process of cost calculation by shortening the
research period of implementers for time-consuming interviews and for including resource
costs within activities. Many enterprises have given up ABC method since it is costly to form,
maintain and time-consuming to implement. To solve these issues, TDABC notion has been
suggested. TDABC is a method offering a chance to define complex operations in a simple
way through the usage of time equations (Bruggeman, et al., 2005).
This method makes it possible to generate a simpler ABC method, also to easily update the
changes within model structure, and to dynamically reflect the determined capacity into
activity costs as well and at the same time it offers a chance to calculate activity key cost rates
which changes on occasion. For all the activities occurring within the enterprise, time driven
cost rates are calculated. The cost of cost objects such as customer or product is practiced
according to cost equations generated as a result of designing work process and operational
activity (Yilmaz and Baral: 2007).
The most significant feature of TDABC is to transform cost drivers into time equations.
Therefore, even though the production circumstances experience a change, these equations
will be easily updated. Besides, with TDABC method the costs of a great number of subactivities will be determined and these operations will also be less costly (Wegmann, 2007;
Silver, 2007). The only feature differentiates TDABC method from ABC method is the usage
of “time” driver as a costing driver. Therefore, it is obvious that the only difference between
two methods is operational while the basis is the same for both (Gremco and Gremco, 2007).
From this point of view TDABC method, compared to ABC method, seems as a beneficial
method for big and small businesses in terms of offering faster and simpler set-up, being easyto-update, and indicating the unutilized capacity, at the same time it is a more accurate
method which indicates the amount of unutilized capacity, provides data on the feasibility of
�International Conference on Economic and Social Studies (ICESoS` 13)
"Economic Crises and European Union"
the personnel and activities and in this regard allows administrators to make resource planning
(Carıkcıoglu and Polat, 2007).
Consequently, TDABC is based on time, notices the calculation of per minute cost. Since it is
simpler, less costly, and easy-to-implement, it eliminates the most of the shortcomings of
traditional ABC method. By focusing on the actual capacity of the unit, it emphasizes what
activities and products the capacity are related to and the cost of forming a unit with the
related capacity (Yilmaz and Baral, 2007).
Within this regard, it can be pointed out that TDABC includes these steps (Bruggeman, et al.,
2005; Everaert and Bruggeman, 2007; Carıkcıoglu and Polat, 2007):
1) To determine of cost pools where activities happen.
2) To determine the cost of each resource pool.
3) To predict the practical capacity of each resource pool.
4) To calculate the unit cost of each resource pool through dividing the total cost of
resource pool by practical capacity.
5) To determine the necessary duration for the each subdivision of the activities
depend on time drivers.
6) To determine the cost of cost objects through multiplying unit cost by the
necessary duration for the activity.
What TDABC method presents as an innovation is to predict time drivers, which is a
prerequisite for the fulfillment of the activity, separately for each subdivision (for each
featured condition) of the activities which have separate features, which is called time drivers
(Carıkcıoglu and Polat, 2007).
Within this regard, depending on the method’s structure mentioned above it seems that two
parameters are required for the operability of the duration (Kaplan and Anderson, 2003; Polat,
2011; Yilmaz and Baral, 2007);
The unit cost of the procured capacity
The capacity consumed by the activities carried out for cost objects
TDABC method, as ABC method does, launches with predicting the cost of the procured
resource (Kaplan and Anderson, 2003). The cost of these resources is the cost of the stable
factors of production. TDABC uses time equations and resource costing for activities is
automatically appointed in this method (Kaplan and Anderson, 2007).
An example of time equations as follows (Bruggeman, et al., 2005; Everaert and Bruggeman,
2007): Should order processing depend on three time drivers, customer type (new/old), the
number of input data (the number of demand entries), order type (standard/urgent).
Considering, basic order data entry takes 5 minutes, each entry requires 3 minutes and new
customer data takes 20 minutes and in case of an urgent order it takes an additional 7 minutes:
Order processing duration per data= 5+3*X1+20*X2+7*X3
X1; order processing (demand entry) number,
X2; value: in case of a new customer (1), old customer (0),
X3; value: urgent order (1), standard (0),
Thus, for a new customer, in case of 5 urgent orders, it will take (tjk)=
5+3*5+20*1+7*1= 47 minutes to process the order data.
�International Conference on Economic and Social Studies (ICESoS` 13)
"Economic Crises and European Union"
Implementation of Time Driven ABC and ABC in Private Schools
This study aims to achieve an exemplification on “Enrollment Activity”, which is the first
activity of a private school. The data on the private school has been derived from the data
indicated in a study by Yilmaz (Yilmaz, 2010).
Table 1 shows the activity centers and activities belonging to the private school. Since the
study takes “Enrollment Activity” as reference point, the table shows only the activities
within this pool. Table 2 shows the cost drivers.
Table 1:Activity Pools and Activities
ACTIVITY CENTERS
Activity–1 Enrollment
Activity –2 Teachers Training
Activity –3 Students Orientation
Activity -4 Educationlal Activities
Activity –5 Summer School
Activity –6 Students’ Clubs
Activity –7 Parent-Teacher Meetings
Activity –8 Certificate Programs for
Students
Activity –9 Students Parents Counsels
Activity –10 Administration, Accounting,
Information, Cleaning, Transportation and
Security Services
Activity -11 Maintenance
Activity -12 Graduation
ACTIVITIES
Parents and students visiting Enrollment Office
The new students to enroll at school meeting
vice principals of 9th, 10th, and 11th grades
The placement exam
Assessment and evaluation of placement exams
by data processing department
The Negotiation of enrollment conditions
between vice principals and the students
The initiation of accounting record regarding the
students of who has got the access for enrollment
who wish to enroll
School enrollment in Students’ Bureau after
completing the accounting record process
Re-registration of 9th grade and 10th grade
students in accounting
�International Conference on Economic and Social Studies (ICESoS` 13)
"Economic Crises and European Union"
Table 2: Cost Drivers
Activity Centers
Cost Drivers
Activity–1 Enrollment
The number of newly registered students
Activity –2 Teachers Training
The number of teachers
Activity –3 Students Orientation
The number of 9th graders
Activity -4 Educationlal Activities
The number of students in total
Activity –5 Summer School
The number of summer school attendees
Activity –6 Students’ Clubs
The number of Students’ club participants
Activity –7 Parent-Teacher Meetings
The number of Parent-Teacher meetings
Activity –8 Certification Programs for
Students
Activity –9 Students Parents Counsels
The number of certification program attendees
Activity –10 Administration, Accounting,
Information, Cleaning, Transportation and
Security Services
Activity -11 Maintenance
The number of students in total
Activity -12 Graduation
The number of graduates
The number of counseling activities for each grade
The number of students in total
Table 3 shows the data regarding enrollment activity. These data are the ones to be used in
ABC and TDABC implementations.
Table 3: Data Regarding Enrollment Activity
ACTIVITIES
Activity 1Enrollment
Number of
Staff
1 Enrollment
Officer
(financial
officer )
1 Bureau
Officer
3 Vice Principal
1 Typesetting
Officer
Time
Spent
Working
in
Activities
4 month
Number of
Individuals
provided
with
services
414
Costing Factors
9th
10th
11th
Grade Grade Grade
4 month
414
126
180
108
4 month
4 month
1150
1150
700
700
300
300
150
150
180
108
Newly Enrolled
126
43
11
Subsidiary datum regarding enrollment process: 414 students have enrolled in the education
season. Among those, 180 students are newly-enrolled students, 126 for 9th Grade, 43 for 10th
Grade, 11 for 11th Grade. Re-registration just requires accounting record. A staff member of
accounting department (financial office) is responsible for the enrollment during the set time
period. The Bureau officer is responsible for the final registration. The typesetter officer is
responsible for the optical mark reading of placement exams. Enrollment procedures last four
months (May, June, July, August).
�International Conference on Economic and Social Studies (ICESoS` 13)
"Economic Crises and European Union"
Yilmaz, in his study depend on ABC method, calculates the total expense of the enrollment
activity as 54.868 TL. The product group share of the expense as follows (Yilmaz, 2010).
The calculation of loading rates and the share of departments (9th, 10th, 11th Grades) as follow:
Enrollment (Activity 1): the number of newly-enrolled students in a year is 180. There are
126 students to enroll at 9th Grade, 43 students to enroll at 10th Grade, and 11 students to
enroll at 11th Grade.
Loading rate: 54.868 TL/180 newly-enrolled student number(II. Distribution loading key)=
304,82 TL/ 1 newly-enrolled student
9th Grade 126 x 304,82= 38.408 TL
10th Grade 43 x 304,82= 13.107 TL
11th Grade 11 x 304,82= 3.353 TL
Table 4: Allocating Costs using ABC
Activity Centers
Load Rates
Activity–1
304,82 TL/ newly
Enrollment
enrolled students
Activity –2 Teachers
2.969,6 TL/teacher
Training
Activity –3 Students
283,48 TL/9th
Orientation
grader
Activity -4
2.393,37
Educationlal
TL/student
Activities–5 Summer
Activity
401,1 TL/summer
School
school attendee
Activity –6 Students’ 650,8 TL/students’
Clubs
club attendee
Activity –7 Parent3.544,14
Teacher Meetings
TL/parent-teacher
meetingTL/
Activity –8
66,395
Certificate Programs
certification
for
Students
program
Activity
–9 Students
8.357,5 attendee
Parents Counsels
TL/counseling
activities
Activity –10
695,2
TL/student
Administration,
Accounting,
Information,
Activity
142,7 TL/student
Cleaning,-11
Maintenance
Transportation and
Security -12
Services
Activity
482,73 TL/student
Graduation
GRADE COSTS IN TOTAL
STUDENTS COST PER UNIT (Total
Cost/The number of graders)
9th Costs
Allocation
Key
Criteria x
Load Rate
126 x
304,82
11,59 x
2.969,6
126 x
283,48
126 x
2.393,37
-
Activity
Costs
38.408
TL
34.418
TL
35.718
TL
301.564
TL
-
72 x
650,8
4x
3.544,14
126 x
66,395
4x
8.357,5
126 x
695,2
46.859
TL
14.177
TL
8.366
TL
33.430
TL
87.595
TL
126 x
142,7
-
17.978
TL
-
10th Grade Costs
Allocation Activity
Key
Costs
Criteria x
Load Rate
43 x
13.107
304,82
TL
16,53 x
49.088
2.969,6
TL
-
11th Grade Costs
Allocation Activity
Key
Costs
Criteria x
Load Rate
11 x
3.353
304,82
TL
9,88 x
29.340
2.969,6
TL
-
180 x
2.393,37
180 x
401,1
178x
650,8
6x
3.544,14
-
430.806
TL
72.197
TL
115.842
TL
21.264
TL
-
108 x
2.393,37
108 x
401,1
-
258.484
TL
43.317
TL
-
4x
3.544,14
-
14.177
TL
-
6x
8.357,5
180 x
695,2
50.145
TL
125.136
TL
4x
8.357,5
108 x
695,2
33.430
TL
75.081
TL
180 x
142,7
-
25.686
TL
-
15.411
TL
52.135
TL
618.513 TL
903.271TL
108 x
142,7
108 x
482,73
524.728 TL
618.513 TL / 126=
4.908 TL
903.271TL / 180=
5.018TL
524.728 TL /108=
4.858 TL
�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Table 5: Comparison of ABC and Traditional Costing
Activity Centers
9th Grade
10th Grade
11th Grade
Conventional Costing Method
4.943 TL/student
4.943 TL/
student
4.943 TL/
student
Activity Based Costing Method
4.908 TL/ student
5.018 TL/
student
4.858 TL/
student
The Difference between Two Costing
Systems
35 TL/ student
(75 TL/ student)
85 TL/ student
Calculating Costs Appointed onto Product Groups through TDABC
The costs of each resource group have been calculated with the first Distribution. While
the capacity belonging to each resource group has been determined, laboring hours have
been taken into consideration. The practical capacity of the workers who work in activity
venues has been calculated (assuming daily labor lasts 6.5 hours). Then, by the division of
total costs by practical capacity, the cost rates of capacity have been indicated. Table 6
shows the cost rates of each resource group.
Table 6: Calculation of the Cost Rate of Capacity for Each Resource Group
Activity Centers
Activity–1 Enrollment
Activity –2 Teachers
Training
………
Calculation of Resource Group Capacity Cost Rates
The Practical Capacity
of the Workers who
work in activity venues
(hour)
3.120
Total Expense
(TL)
Capacity Cost
Rates= Total
Expense/Hour
54.868
17,59
…….
…….
…….
…….
…….
…….
To be able to make time equations in enrollment section, processes of the activity,
activities of the processes, time drivers need to be determined; and to be able to achieve the
amount of time drivers and activities, the necessary duration needs to be determined. Table
7 shows datum required by Enrollment section.
8
�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Table 7: Enrollment Processes, Time Drivers, Driver Amounts and Time Durations
Processes
Activities Of The
Processes
Parent–Vice
Principal Meeting
- Introduction of the
school and pre-interview
for the placement exam
Parent-Vice
Principal Meeting
Regarding the
Result of the
Placement Exam
1.
ENROLLMENT
Placement Exam
Initiation of
Account Record
for the Student
Time
Drivers
Time Driver
Amounts
The number
of parents
who
interview
for
enrollment
1.150
parent/student
(234 the number
of re-registered
students)
-Placement exam taken
Time Durations
-40 minutes
-60 minutes
-The evaluation of the
exam
-Determining discount
rate depending on the
result of the exam
-10 minutes
The number
of students
who take
the exam
-The student to enroll
visiting Accounting
Office
The number
of student /
parent who
enrolled
-Parents dealing with
legal documents
-5 minutes
-15 minutes
414
parent/student
(180 the number
of first registry)
-35 minutes
Enrollment process consists of steps of parent-vice principal meeting, students taking the
placement exam, parent-vice principal meeting regarding the exam result and the initiation
of the accounting record of the student.
The process of parent–vice principal meeting consists of pre-interview for the placement
exam and introduction of the school, which takes 40 minutes. However, in case the student
is a re-registering one, the duration is shorter and takes only 10 minutes.
Time equation for parent- vice principal meeting= 40*X1+10*X2
X1: the number of parents who interview for the first enrollment
X2: the number of parents who interview for re-registration
The process of taking the placement exam consists of testing and the assessment and all the
students already enrolled or to be enrolled take this exam. This process takes 70 minutes.
Time equation for the process of taking the placement exam= 70*X1
X1: the number of students who take the exam
The process of parent–vice principal meeting regarding the result of the exam consists of
determining the discount rate depending on the exam result and the initiation of account
record for the students who wish enrollment. This process takes 20 minutes.
Time equation for the process of parent – vice principal meeting regarding the result of the
exam= 20*X1
X1: the number of students who take the exam
The process of the initiation of account record consists of the activity of parent dealing
with legal documents. The process takes 35 minutes. However, for re-registration it takes
20 minutes.
9
�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Time Equation for the process of the initiation of account record= 35*X1+20*X2
X1: the number of students who enroll
X2: the number of students who re-register
Table 8 shows time driver amounts demanded by each product group (9th, 10th, 11th grades)
in Enrollment section.
Table 8: Time Driver Amounts in Enrollment Section
TIME
DRIVER
S
PRODUCT GROUPS
9th Grade
th
th
The number
of parents
who
interview
for the first
enrollment
700
10 Grade
11 Grade
TOTAL
The
number of
students
who take
the exam
The number
of
parent/stude
nt who
enroll
700
126
The number
of
parent/stude
nt who
enrolled for
the first time
126
The
number of
parent/stud
ent who reregister
300
300
180
43
137
150
150
108
11
97
1.150
1.150
414
180
234
-
After necessary time drivers have been determined, the durations demanded by each
product can be calculated. Durations demanded by each product group as follows:
Table 9: Calculating Durations Demanded by Enrollment Section
Parent–Vice principal
meeting
Students taking the
placement exam
Parent–Vice
principal meeting
regarding exam
result
Initiation of Account
Record
(70*X1)
(20*X1)
(35*X1+20*X2)
40*700+10*0=28.000
70*700=49.000
20*700=14.000
35*126+20*0=4.410
95.410
40*163+10*137=7.890
70*300=21.000
20*300=6.000
35*43+20*137=4.245
43.135
40*53+10*97=3.090
70*150=10.500
20*150=3.000
35*11+20*97=2.325
18.915
(40*X1+10*X2)
9th
Grade
10th
Grade
11th
Grade
TOTAL
(minute)
Then, through multiplying the durations required by each product group by capacity cost
rate, the costs appointed on product groups by the enrollment office have been calculated.
Table 10 shows these costs appointed on product groups by the enrollment office.
10
�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Table 10: Costs Appointed On Product Groups by the Enrollment Section
Products
th
9 Grade
th
10
Grade
11th
Grade
TOTAL
Duration Demand by
Enrollment office
(minute)
Duration Demand
by Enrollment
office (hour)
Capacity Cost
Rate per Hour
Costs Appointed
by Enrollment
Office
A
B=A/60
C
D= B*C
95.410
1.590,17
17,59
27.971,03
43.135
718,92
17,59
12.645,74
18.915
315,25
17,59
5.545,25
157.460
2.624,33
17,59
46.162,02
Table 11 compares the results of ABC and TDABC methods for enrollment activity in
private schools.
Table 11: Comparison of the Results of ABC and TDABC Methods
Products
9th Grade
th
10 Grade
th
Costs appointed by
Enrollment Office
through ABC method
(TL)
38.408
Costs appointed by
Enrollment Office through
TDABC method (TL)
13.107
Difference between ABC
and TDABC methods (TL)
27.971
10.437
12.646
461
11 Grade
3.353
5.545
-2.192
TOTAL
54.868
46.162
8.706
According to TDABC method, the cost load is lower than ABC method for 9th Grade
product group, with a difference of 10.437 TL, for the 10th Grade product group, the cost
load is lower in TDABC method than in ABC method with a difference of 461 TL, for the
11th Grade product group, cost load is higher in TDABC method than in ABC with a
difference of 2.192 TL. In total, it seems that TDABC offers less cost load than ABC with
a difference of 8.706 TL. This difference shows unutilized capacity for the enrollment
activity.
Conclusion
TDABC method is a modern costing technique developed to eliminate the shortcomings of
ABC method. TDABC method aim to assist administrators to determine the costs of
product groups faster and more accurately. Thus, it will contribute competition through
faster and more accurate decisions. This study points out the existing difference between
ABC method ad TDABC regarding cost load on products, which can be both positive and
negative. The difference is caused by the fact that TDABC uses “time” driver which allows
a more detailed computation and it notices cost per minute. For being simpler, less costly,
and easy-to-implement, TDABC eliminates the disadvantages of ABC method. It focuses
on the actual capacity of the sections. Compared to ABC method, TDABC seems to be a
more accurate method for allowing fast and simple set-up, being easy to update, and
indicating unutilized capacity and therefore, for being a method allowing administrators to
make resource planning by providing data on the personnel and activity efficiency.
11
�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Consequently, it seems rather possible to say that the use of TDABC method which makes
it possible to reach more accurate data in a faster way will be utmost beneficial for the
enterprises.
References
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13
�
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Title
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A Comparison and an Implementation of Time Driven Activity Based Costing and Activity Based Costing Methods in Private Schools
Author
Author
YILMAZ, Metin
COSKUN, Ali
YILMAZ, Senay
Abstract
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Due to the recent increase in demand for private schools, these schools have experienced a growth in number and in significance. Therefore, it has been crucial for the executives of private schools to be able to gain competitive advantage and to make strategically decisions. This increase of demand for private schools has also increased the competition in the area. Due to this increasing competition in private schooling, it has been more significant to correctly calculate the costs. This study points out the applicability of activity based costing and time based activity based costing methods of modern costing methods and the differences between them so that the executives of private schools could make strategic decisions. Even though both activities based costing and time driven activity based costing methods can be applied in private schools, it seems more advantageous to apply time driven activity based costing since it allows a faster way to access the information and it is easier to update, which provides a better chance for long-lasting usage. Keywords: Activity Based Costing Method; Time Driven Activity Based Costing Method; Private Education; Costing; Education Institution.
Publisher
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International Burch University
Date
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2013-05-10
Keywords
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Article
PeerReviewed
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ISSN 978-9958-834-23-3
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https://omeka.ibu.edu.ba/files/original/503075330bb975c14277699da52a7758.pdf
35a7a277d265e3a81cffbc101571959b
PDF Text
Text
A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
A comparison of ANFIS and ARIMA
techniques in the forecasting of electric energy
consumption of Tokat province in Turkey
Rüstü YAYAR
Faculty of Economics and Administrative Science
Gaziosmanpasa University, Tokat, Turkey
rustu.yayar@gop.edu.tr
Mahmut HEKIM
Tokat Vocational School
Gaziosmanpasa University, Tokat, Turkey
mahmut.hekim@gop.edu.tr
Veysel YILMAZ
Suşehri Timur Karabal Vocational School
Cumhuriyet University, Sivas, Turkey
veyselyilmaz@cumhuriyet.edu.tr
Fehim BAKIRCI
Faculty of Economics and Administrative Science
Atatürk University, Erzurum, Turkey
fehim.bakirci@atauni.edu.tr
Abstr ct
In this study, the electric energy demand of Tokat province was estimated by means of
ANFIS and ARIMA techniques. Seven different forecasting experiments were implemented for the subscriber groups and the consumption of electric energy which is the
dependent variable. The electric energy demand of the province for the first six months
of the year 2011 was estimated by means of ANFIS and ARIMA techniques. The
obtained results were compared and interpreted in order to illustrate the forecasting
success of these techniques. We showed that the ANFIS is more appropriate than the
ARIMA in point of the forecasting of electric consumption.
Keywords: Electric energy consumption, Forecasting, ANFIS, ARIMA, and Tokat.
Jel odes: C22, C45, Q47
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Introduction
Nowadays, energy is an important source of life. By entering into the life of mankind in 1880s, the electric energy gradually became an indispensable part of modern
life and industry (Şekerci Öztura, 2007).
In order to generate the electric energy, which is a secondary energy source, the
support of primary energy sources is needed. Electric energy is widely used in many
fields, and a large part of energy resources for the benefit of the people are converted
into electric energy (Demir, 1968). The electric energy demand has been continuously increasing in parallel with the growing population, urbanization, industrialization, technologic deployment, and enhancement of welfare.
The spread of the usage fields of electric energy which is one of the most important
parts of all types of economic activities increases the electric energy demand. Also,
since the distribution network provided a great deal of the electric energy of even the
smallest residential areas, the share of electric energy in the total energy consumption increased (Kılıç, 2006).
The province of Tokat is geographically located between 39-51, 40-55 North latitudes and 35-27, 37-39 East longitudes, in the inner side of middle Black Sea part
of Black Sea Region. Covering the 1.3% of mainland Turkey, elevation from the sea
level of the province is 623m and surface area of it is 9.958km² (Governorship of
Tokat, 2006). There are 12 districts of Tokat province including with the central district¹. Historical periods of the province consist of Hattie, Hittite, Phrygian, Med,
Persian, Alexander the Great, Roman, Byzantine, Arabian, Danishmend, Anatolian
Seljuk, Mongolian, Ilkhanid, Ottoman Governments and Emperors (Provincial
Department of Environment And Foresty of The Governorship of Tokat, 2007:1).
The province of Tokat became a province with the proclamation of the republic in
1923 (Turkish Statistical Institute, 2010:10). By 2010 the population of the province is 550.703 (Turkish Statistical Institute, 2010).
The province has a wide potential of both agriculture and other sectors (such as tourism). In the economic structure of the industry, agriculture, livestock sector plays
an important role. Particularly in the food industry, rock and land-based industries,
forest products industry and in recent years, textile weaving and garment sector is
the backbone of the economy in Tokat (Provincial Department of Environment
And Foresty of The Governorship of Tokat, 2007:130).
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�A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
Electric energy was firstly provided in the city center of Tokat in 1935 by the Hydroelectric power plant which was built on Aksu for the city lightening. This power
plant consists of 2 tribunes with 175 horsepower (HP), and each tribune operates
by 230 m³ water passing through the water channel. The power plant provided
electric energy of 135 kWh for 1580 subscribers. However, the electricity production was insufficient for the city. Because of Almus Hydroelectric power plant
built in 1966, Tokat had continuously the electric energy, and still it provides the
electric energy of the city. Besides, transmission lines were renewed and electric energy of every part of the city was provided by using 18 transformers (Governorship
of Tokat, 2006). The installed power plant in Tokat consists of Almus, Köklüce,
Ataköy Hydroelectric power plants within Tokat. Almus Hydroelectric power plant
became operational in 1966 and Number of Unit – Power is 3X9 MW and its
installed power is 27 MWAnnual production of the plant is 100 GWh. Köklüce
entered service in 1998 and Number of Unit – Power is 2X46 MW and its installed
Power is 90 MW. Annual production of the power plant is 588 GWh (Electricity
Generation Corporation, 2011). The construction of Ataköy Hydroelectric power
plant dam was completed in 1977. Having 5.5 MW Power, its annual production is
8 GWh (VIII. Regional Directorate of State Hydraulic Works, 2011).
In this study, electric energy demand are estimated by Adaptive Neuro-Fuzzy
Inference System (ANFIS) and Autoregressive Integrated Moving Average (ARIMA)
techniques by using the electric energy consumption data of Tokat province in the
time of period between January 2002 and December 2010. Matlab 7.04 package
program is used for the ANFIS model and Minitab 14.0 package program is used
for the ARIMA model.
Aim
This study aims at contributing to the planning of supply by estimating electric
demand in the future. The demand for electric energy was forecasted in Tokat province by means of the ANFIS and the ARIMA models. The generation planning of
electric energy is very important because it cannot be stored, and therefore must be
consumed shortly after its generation. If these kind local studies were generalized
into all country, it helps the supply planning and provides a more effective usage
of resources. Therefore we estimated the electric energy demand by ANFIS and
ARIMA models for Tokat province.
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Literature
Energy consumption and demand are among the most debated topics, and many
studies have been made available in the literature. It is seen that the studies especially
focused on the causality between the electricity consumption and economic growth
and controversial results has been achieved. There are scarcely any studies on electric energy consumption and demand through ANFIS and ARIMA models. These
models are often used in engineering studies.
There are many studies in various fields by using the fuzzy logic method. In one of
them, Tufan and Hamarat (2003) analyzed the “Aggregation of The Financial Ratios
of publicly-traded companies Through Fuzzy Logic Method”.
The first detailed study examining the demand for electricity with the help of econometric models is the work of Houthakker (1951). The study includes the econometric analysis of the household electricity demand through cross-section data from
the period of 1937-1938 for 42 residential center in England. Another study was
conducted by Fisher and Kaysen. Fisher and Kaysen (1962) using time-series and
cross sectional data, examined the demand for electricity with the help of multiple
regression and analysis of covariance. Electric demand was taken up in four components, including electricity demand, household electricity demand, industrial electricity demand and the short and long period determinant of them. Accordingly,
short run is in question if the stock of electric appliances is fixed and long run is in
question if the stock is variable. In the case of industry, short run is in question if
there is an assumption that technology is invariable and long run is in question if
there is an assumption that technology is variable (Tak, 2002).
Al-Garni and Javeed Nizami (1995) developed a model of artificial neural networks
for electric energy consumption with the data from seven years such as temperature,
moisture, solar radiation and population. After the comparison of the model of
artificial neural networks with the regression model, it was revealed the model of
artificial neural networks was a better forecasting model.
Al-Garni and Abdel-Aal (1997) estimated the Electric Energy consumption for five
years on the east of Saudi Arabia for the consumption on the sixth year, developing monthly ARIMA models by using the univariate and Box-Jenkins time-series
analysis. When ARIMA models are compared to the abductive network machinelearning models, it is seen that ARIMA models needs less data and coefficient and
give better results as well.
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�A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
Brown and Koomey (2002) examined the increase in electric demand in their work
named “Electric Use in California: Past Trends and Present Usage Patterns. They
took sector (settlement, commercial, industrial, agricultural and other) of electric
consumption from the previous period as data. They brought forward that there
had been a great increase in the electric demand in 1990, compared to 1980 and
that it stems from the increase in buildings and the tendencies in the building sector
(Enduse Forecasting and Market Assessment, 2011).
It can be seen that the studies on the modeling of the energy consumption and demand, which is also crucial for the economy of Turkey, accelerated in 2000s. There
are not many studies, done widely on the provincial (regional) electricity consumption and demand. State institutions and organizations of which subject of activity
is electricity became obliged to state the electricity consumption of the provinces
on their annual report on the basis of subscriber groups after “Legislation On The
Annual Reports Drawn Up By The Public Administrations” were published by the
Ministry of Finance on the Official Gazette dated 17.03.2006 and became effective on 01.01.2006 (Official Gazette, 2006). These institutions conduct studies also
on the monthly and yearly electric data which must be sent to Turkish Statistical
Institute (TÜİK) and Ministry of Energy and Natural Resources (ETKB) by these
institutions even though these data changes in the ensuing years.
In the work of Terzi (1998) which analyzes the relationship between the electric
consumption and economical growth for the period of 1950-1991, the relationship between the electricity consumption and of the commerce house, industry and
household and economical growth; the long period relationship between the variables were determined through the Engle-Granger cointegration method and the
short run dynamics were analyzed through the debugging tool. It was determined
through this econometric method that the income and price elasticity were in fact
inelastic. A meaningful and two-way relationship between electricity consumption
and economical growth came along in the business and industry sector.
Sarı and Soytaş (2004) employed the technique of generalized forecast error variance
decomposition and came to the conclusion that the electricity demand and variance
in national income growth are as important as employment (Lise & Van Monfort,
2005).
Çebi and Kutay (2004) used artificial neural networks while estimating the long run
electric energy consumption and compared the results to the Box-Jenkins models
and regression technique. The results revealed that using artificial neural networks
was a good forecasting method for electric energy consumption.
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�Rüstü YAYAR & Mahmut HEKIM & Veysel YILMAZ & Fehim BAKIRCI
In addition, we must specify the MAED (Model for Analysis of Energy Demand)
model study of Ministry of Energy and Natural Resources, the most important
study that was conducted in our country, which reveals the medium and long run
general energy demand and electric energy demand in this demand.
Research Method
In this study, monthly electricity consumption data of Tokat province was used.
This data covers the period between January 2002 and December 2010. The subscriber groups consist of private houses, industry, business firms, government agencies and other subscribers. The total electricity used in agricultural irrigation, fresh
water, work-sites, temporary activities, state-owned enterprises, municipalities, internal activities, prefectures, sanctuaries, and local government lightening systems
was also included in these groups. Seven different experiments were implemented
for investigating the success of the ANFIS and the ARIMA models in the forecasting
of the total electric energy consumption of all subscriber groups.
Time Series and Box-Jenkins Forecasting Model
Time Series
A time series is simply a sequence of numbers collected in regular intervals (as day,
month and year) over a period of time (Dikmen, 2009: 227). Time series monitors
the motion of a variable in a time sequence. For example, monthly unemployment
ratio, monthly increase ratio of money supply, annual inflation ratio, monthly electric use, etc. Time series can be also used as a resource of knowledge acquisition
and a method for forecasting the future. While in the evaluation process, analysis is
important in degrading the trend, growth trend, seasonality, cyclical, and irregular
fluctuations (Bozkurt, 2007). The selection of method used for forecasting the future values depends on the estimation of purpose, type and elements of time series,
amount of data, and the length of the estimation period (Asilkan & Irmak, 2009).
92
Journal of Economic and Social Studies
�A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
Box-Jenkins Forecasting Model
Box-Jenkins method is the most widely used model for stationary time series modeling. For the implementation of Box- Jenkins method, the time series must be
stationary (with constant mean, variance and autocorrelation). If the series is not
stationary, it should be made stationary by taking the difference of a few times
(Gujarati, 2009).
Box-Jenkins method is based on the principle that each time series is a function of
past values and may only be explained by means of them. Some assumptions cannot
be applied based on the econometric models, but there is not any restrictive assumption for Box-Jenkins method (Bircan & Karagöz, 2003). In this method;
• In contrast to the regression models that explain yt with a k number of explanatory variables of x1, x2, x3,…, xk,
• The dependent variable Yt can be explained by its own past or lagged values and
stochastic error terms.
The most important stage of the Box-Jenkins method is the selection of the appropriate ARMA (p, q) model by examining the autocorrelation and partial autocorrelation coefficients. Experience of the researcher is very important because of this
phase is not able to determine mechanically. If the time series is not stationary,
artificial autocorrelations will prevent the model to determine. Non-stationary time
series is transformed stationary time series by logarithmic transform or taking differences.
Autocorrelation and partial autocorrelation coefficients of the distribution can be
examined with the help of graphs (autocorrelation function (ACF) and partial autocorrelation function (PACF). When the autocorrelation coefficients are seen to
be approaching zero exponentially, AR model must be applied; while the partial
autocorrelation coefficients are realized to be approaching the same level mentioned
above, then MA model must be used; if both of these approach zero exponentially;
ARMA model must be applied in this situation.
In ARMA model, the degree of AR is determined by the number of partial autocorrelation coefficients (p), while the degree of MA is determined by the number of
autocorrelation coefficients (q) (Önder & Hasgül, 2009: 65–66).
Volume 1
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July 2011
93
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by the
number
of
partial
autocorrelatio
ARMA
models
consists
of
four
models,
are
AR, MA, ARMA
and
ARIMA.
These
coefficients
(p),
while
the
degree
of
MA
is
determined
by
the
number
of
autocorrelation
coefficients
(p),
while
the
degree
of
MA
is
determined
by
the
number
of
autocorrelation
coefficients
(p),
while the
of (Demirel
MA is determined
by the
numberautocorrelation
of autocorrelatio
In ARMA
model,
of
AR
isthese
determined
by
the
number
of
partial
models
will(Önder
bethe
explained
in
thedegree
following:
&
et
al.,MA,
2010).
ARMA
models
consists
ofdegree
models,
are are
AR,
MA,
ARMA
and
ARIMA.
These
coefficients
(q)
&four
Hasgül,
2009:
65–66).
ARMA
models
of
four
models,
these
AR,
ARMA
and
ARIMA.
These
coefficients
(q)consists
(Önder
&
Hasgül,
2009:
65–66).
coefficients
(q)
(Önder
&
Hasgül,
2009:
65–66).
coefficients
(p),
while
the
degree
of
MA
is
determined
by
the
number
of
autocorrelation
models
will
be
explained
in
the
following:
(Demirel
&
et
al.,
2010).
models
will
be
explained
in
the
following:
(Demirel
&
et
al.,
2010).
MA and coefficients
ARIMA. These
(q) (Önder
&ofHasgül,
2009: 65–66).
ARMA
models
consists
four
models,
these
areare
AR,
MA,
ARMA
andand
ARIMA.
These
ARMA
models
consists
of
four
models,
these
AR,
MA,
ARMA
ARIMA.
These
ARMA
models
consists
of
four
models,
these
are
AR,
MA,
ARMA
and
ARIMA.
The
AR
(p)
Model
AR models
(p)models
Model
bebe
explained
in in
thethe
following:
(Demirel
&&
et et
al.,al.,
2010).
AR
(p) will
Model
will
explained
following:
(Demirel
2010).
models
will consists
be explained
in the
following:
et al.,ARMA
2010). and ARIMA. These
ARMA
models
of four
models,
these(Demirel
are AR,&MA,
In
AR
(p)
model,
Y
value
is
the
linear
function
of
stochastic
error
term
and
weighted
models
will
be explained
(Demirel
al., 2010).
t in
In AR
(p)(p)
model,
Yt value
is the
the
linear
function
of &
stochastic
errorerror
term
and and
weighted
AR
Model
In
AR
(p)
model,
Yt value
is following:
the
linear
function
ofetstochastic
term
weighted
AR
Model
ARaggragates
(p)
Model
of
past
values
in
p
period
of
the
series.
AR
(p)
model
is
shown
as
follows:
aggragates
of
past
values
in
p
period
of
the
series.
AR
(p)
model
is
shown
as
follows:
aggragates
of
past
values
in
p
period
of
the
series.
AR
(p)
model
is
shown
as
follows:
error termAR
and
(p)weighted
Model
In
AR
of ofstochastic
error
term
andand
weighted
Y
Φt 1
Ymodel,
Φ1 2YYΦ
tt ...
Φ
linear
δplinear
at
(1)
Y(p)
Yvalue
...ispYisthe
Φ
δlinear
function
atfunction
(1)
In
(p)
stochastic
error
term
weighted
t AR
tΦ
11model,
t t22Y
t ppthe
hown as follows:
2 value
In
AR
(p)Yt model,
Yvalue
isYt the
function
of
stochastic
error
term
and
weighte
t
aggragates
of
past
values
in
p
period
of
the
series.
AR
(p)
model
is
shown
as
follows:
aggragates
of
past
values
in
p
period
of
the
series.
AR
(p)
model
is
shown
as
follows:
(1)
(1)
aggragates
of past
values is
in the
p period
of the series.ofAR
(p) modelerror
is shown
follows:
In AR
model,
Yt Yvalue
stochastic
term asand
weighted
Y(p)
t Φ
Yt1Y1 t
Φ
...
...ΦYpΦ
Ytplinear
δfunction
at
(1)
1Φ
Φ
Y
δ
at
t Y
2Y
t2Y
2Y
YY
ptt−
Y
Y
Φ
Y
Y
Y
Y
1t
t
2
p
Φ
Y
Φ
Φ
p
t
−
p
t
p
p
Y
Φ
Φ
Y
...
Φ
Y
δ
at
(1)the
Φ21follows:
Φ2 ,...,is(1)
tt−−22 ,...,
2 2,...,
pthe
aggragates
ofabove
values
series.
model
is shown1 , as
1in
tpast
1model,
t11, t t
2,...,
t pthe
is
values
of(p)
past
observation,
In the
In the
above
model,
istpof
the
values
ofAR
past
observation,
,...,
In
the
above
model,
, tt−−tp11t2,period
ispthe
the
values
past
observation,
,,...,
is
Φ
Ytp isthe
Φ
Φ2of
Yt 2for
...
values
Φobservation,
δδis
atδthe
(1)
the
coefficients
the
observation,
is value
the constant
and
Φ1 coefficients
1Yvalues
t 1
p Yt of
p past
observation,
and and
atvalue
isatthe
error
term.
is constant
the constant
value
is
the error
the
values
of
ation, coefficients
, Φ2 ,..., for
isfor
the
YtpYtp
Φ pΦterm.
Yt Y1past
Y1t past
Φ
Φ
Y
2
Φ
Φ
1
2
t
t
2
at
is
the
error
term.
In In
thethe
above
model,
, Y,t 1 ,...,
is
the
values
of
past
observation,
,
,...,
ispΦthethe
1Φ
2Φ
Y
Y
above
model,
,...,
is
the
values
of
past
observation,
,
,...,
t
p
theterm.
above model,
, t 2 ,...,
is the values of past observation, 1 , 2 ,..., isp is
th
e and at is the In
error
δ is
δ
Y
Φ
MA(q)
Model
coefficients
forfor
thethe
values
of
past
observation,
the
constant
value
and
at
is
the
error
term.
Y
Y
MA(q)
Model
Φ
Φ
coefficients
values
of
past
observation,
is
the
constant
value
and
at
is
the
error
term.
t
p
p
1 , t 2 ,...,
1 , at2 ,...,
In the
above model,
is the valuesδofis past
observation,
is theterm
coefficients
for the tvalues
of past observation,
the constant
value and
is the error
δ is the constant value and at is the error term.
Model
coefficients
for
the
values
past
observation,
In MA
(q)MA(q)
model,
Yt value
isofthe
linear
function
of average
pastpast
errorerror
terms
in qinperiod
MA(q)
Model
In
MA
(q)
model,
Y value
is the
linear
function
of average
terms
q period
MA(q)
Model
MA(q)
Model t
backwards.
MA
(q
)
model
is
shown
as
follows:
backwards.
MA
(q
)
model
is
shown
as
follows:
error terms
in In
qModel
period
MA (q) model, Yt value is the linear function of average past error terms in q
MA(q)
In
MA
(q)
linear
of average
past
error
terms
in in
q (2)
period
YtMA
period
t (q)
model,
at
1aYtt- 1Y1value
a(q)
t -...
is...
linear
at-function
Y
at
atMA
- 22model
athe
In
model,
value
is
average
past
error
terms
q period
tis
q
qq afunction
tY
- 1 2
2the
tas
- qfunction
backwards.
shown
follows:of of
In MA (q)
model,
is
the
linear
average
past
error
terms
in
q(2)
perio
t value
backwards.
MA
(q
)
model
is
shown
as
follows:
backwards.
MA
(q
)
model
is
shown
as
follows:
(2)
backwards.
MAYt(qvalue
) model is
asfunction
follows:of average past error terms in q period
In MA
model,
theshown
linear
Y(q)
t
a1 at1-aa1 t- 1 is
...
(2)(2)
at
a at
2 at2-a2ta
a
......q atq-aqt - aq
t Y
q (2)
2
a
a
a
1 ,21,,…
t
q
Y
at
a
a
2 , ,…
t -1
2 ,……,
t - qthe error
backwards.
MA
(qt ,) model
follows:
t , , t -1t -1,is
t
tshown
-t1-2 ,……,
2 as
t - 2is
t terms,
-q
In the
above
model,
is theq error
terms,
,is qthe
is coefficients
the coefficients (
In
the above
model,
q error
Yterms
and
at
1average
at - 1 average
2of
at - 2the
...
q at - q
(2)
isthe
series.
terms
t and
error
… , of
isofthe
coefficients
at -qaseries.
q q
aist athe
at t -1at -1at -2at -2 of the
1
2
t
q
, ,at, a,t -1 ,……,
isa the
error
terms,
,1 ,…
, , isthe
coefficients
In In
thethe
above
model,
2
at -2
error
terms,
coefficients
above
model,
- q the
q the
2, …
is the
error
terms,
the
above
,
, ,……,
,……, tis
is
the
error
terms, ,1 ,,…
, isis
is the
coefficien
In In
the
above
model,
model
ARMA
(p,q)
Model
is
the
average
of
the
series.
of
error
terms
and
ARMA
(p,q)
Model
a
is
the
average
of
the
series.
of of
error
terms
and
a
a
a
t
q
q
the
coefficients
of
error
terms
and
m
is
the
average
of
the
series.
series.
error terms
,……, of the
is the
error terms, 1 , 2 , … , is the coefficients
In the above
model,andt , t -1is, thet -2average
ismost
the
average
of
thepreocess
series.
of error
terms
andthe
ARMA
model,
the
most
stochastic
preocess
models,
is the
linear
function
of past
ARMA
(p,q)
Model
model,
stochastic
models,
is the
linear
function
of past
ARMA
(p,q)
Model
ARMA
(p,q)
Model
observations
and
error
terms.
ARMA
(p,q)
model
is
generally
shown
as
follows:
observations
and
ARMA
(p,q)error
Modelterms. ARMA (p,q) model is generally shown as follows:
linear function
of
past
ARMA
(p,q)
Model
ARMA
model,
the
most
preocess
thethe
function of(3)
past
Y
Φ
Y
Φ
YΦ
...
Φstochastic
- atδ -at
θ 1
atθ-models,
θ atθ- 22is
θ qlinear
atθ-linear
Y
Φ
Y
stochastic
...
amodels,
at -...
...
the
ARMA
model,
is
t
t 22 Y
p YΦ
t p Yt δ
11
qq a t - q
n as follows: ARMA
t 1 t 1model,
1 t 1 2the
2 most
p preocess
t -12models,
2 is
thetmost
stochastic
preocess
linearfunction
functionof (3)
ofpast
pa
observations
and
error
terms.
ARMA
(p,q)
model
is
generally
shown
as
follows:
ARMA(3)
model,
the most
stochastic
preocess
models,is isgenerally
the linearshown
function
past
observations
andand
error
terms.
ARMA
(p,q)
model
asofas
follows:
θ q at -q ARMA
observations
error
terms.
ARMA
(p,q)
model
is
generally
shown
follows:
the
most
the as
linear
of past
(3)(3)
Yt model,
Yt1Y
ΦY2error
Yt2Y2 tterms.
2Ystochastic
...
...
Φ
YtpYpt preocess
(p,q)
δ -δat
θmodels,
aθt1generally
θ aist2-shown
θfollows:
aθtq-qafunction
observations
ARMA
model
Yt Φ
1Φ
Y
Φ
...pΦ
-δat
a2θt- 2a...
...
1 tand
1is
-1a t
qΦ
1Y
1Y
Y
p
-1a2 θ
tΦ
- qa Φ p Φ p
Y
Y
Φ
Y
Φ
Φ
Φ
Y
at
θ
...
θ
t
p
Φ
t
t
2
t
p
observations
and
error
terms.
ARMA
(p,q)
model
is
generally
shown
as
follows:
1
2
t
1
t
2
t
1 ,t 1 , ,...,
2 ,...,
t 2 is the
ppast
t p past
1 t -1values,
2 t -2
q 2t ,...,
-q
observation
, 1 ,,...,
is the
In third
equation,
is the
observation
values,
is the (
In third
equation,
Φ pYt Φ1Yt 1 Φ2Yt 2 ... Φ p Yt p δ - at θ1 at -1 a θa2aat - 2a
(3)
a ... at -θ2 q at -aq t -q(3)
at -the
1 , Φ2 ,...,
t , t -1
δ is δthe
q Φ error
es, Φcoefficient
thepast
t ,, t -1t -,2 ,……,
Y
constant,
is
forisfor
past
observation
values,
Yt Y1 ,t Y1t Y2 t,...,
is
the
constant,
,……,
is
the
error
coefficient
observation
values,
Φ
Φ
Y
Φ
t
p
p
Φ
Φ
1
2
t
p
p
is
observation
values,
, 1 the
is
InaInthird
equation,
2 ,...,
Y is
Φ pisthethe
Y Y2 t,...,
thepast
past
, ,...,
third
equation,
pthe
2 Y
1 ,Φ
2 ,...,
at -2
istthe
past
observation
values,F1,values,
F2values,
,...,Fp is Φ
third
equation,
,...,
is
the
pastobservation
observation
is th
third
equation,
q q Yt-1,,t Y1t-2,, ...,
t - q InIn
t-p
,……,
is
the
error
1
2
1
2
,
,
…
,
is
the
coefficients
of
error
terms.
terms
and
at -qat -Φ
, past
, for
… past
,observation
isYthe
coefficients
of
error
terms.a , aat ,aaat t……,a
terms and
Yvalues,
Yt 1observation
-1a,t -1at -2a,……,
δ
Φ
Φ
t values,
p
p
qathe
is
the
ercoefficient
is
the
constant,
t
2
t
2
δ
1
2
is
the
constant,
is
error
coefficient
for
a
a
a
, observation
,..., values,
isvalues,
the is
past
observation
values,
,..., is
the
Incoefficient
third
equation,
thethe
constant,
, t , ,t -1t-q, ,……,
error
forfor
past
observation
t
t-1, t-2
t - q the
t -,2 ,……,
δ is
constant,
isis the
err
coefficient
past
ror
terms
and q1, qq2, … ,qq is the coefficients of error terms. a a
a
a
1
2
q
t
q
t
t
-1
t
2
δ
ARIMA
(p,d,q)
Model
, 1 ,,past
…
coefficients
of
error
terms.
terms
andand
2 , observation
ARIMA
(p,d,q)
Model
, is, the
isq the
coefficients
error
terms.
terms
isof
the
constant,
,
,……,
is the error
coefficient
for
values,
1 ,,…
2, …
is the
coefficients
of
error
terms. ,
terms
and
1 , 2 , … , q is the coefficients of error terms.
terms
and
To ARIMA
make
a non-stationary
timetime
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one one
or two
times
the the
difference-making
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To
make
a (p,d,q)
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ARIMA (p,d,q)
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the
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d.
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es the difference-making
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To
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94make
Journal
of or
Economic
and
Socialthe
Studies
Toto
make
a non-stationary
time
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oneone
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hat is applied
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To
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�A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
ARIMA (p,d,q) Model
To make a non-stationary time series stationary, one or two times the differencemaking process is carried out and the result are shown with d. The model that is
applied to the series stationary by differencing is called as non-stationary linear stochastic model or integrated model shortly (Bircan & Karagöz, 2003).
Figure 1. Box-Jenkins Procedure
Box-Jenkins process operates as follows: (Dobre & Alexandru, 2008: 157).
Plot
Series
Is it Stationary?
Static?
Identify
Possible
Model
Difference
“Integrate” Series
Seriler
Diagnostic OK?
Make
Forecast
Adaptive Neuro-Fuzzy Inference System (ANFIS)
Fuzzy Inference System (FIS) consists of three conceptual components: fuzzy rule
base, data base and inference. In this system, the fuzzy rules and membership functions of input and output variables are determined by the user. The most important
step is to set the membership degrees of input and output variables. FIS techniques
aim at providing of significant inferences by using the linguistic rules (Ross, 2004).
Fuzzy systems do not have the skill to learn things, so they heavily depend on expert
opinion. Adaptive Neuro-Fuzzy Inference System (ANFIS), a hybrid model, was
first developed by Jang in 1993 in order to overcome this problem. This system
has combined the learning skill by artificial neural networks with inference skill of
expert opinion based FIS models (Jang, 1993). It adjusts the membership functions
of input and output variables and generates the rules related to input and output,
automatically. ANFIS can produce all the rules by using the dataset and enables
the researchers to interpret these rules. Therefore, it is the widely used model in the
studies of classification and estimation.
Volume 1
Number 2
July 2011
95
�Adaptive Neuro-Fuzzy Inference System (ANFIS), a hybrid model, was first developed by
Jang in 1993 in order to overcome this problem. This system has combined the learning skill
by artificial neural networks with inference skill of expert opinion based FIS models (Jang,
1993). It adjusts the membership functions of input and output variables and generates the
rules related
to input
and output,
automatically.
can produce all the rules by using the
Rüstü YAYAR
& Mahmut
HEKIM &
Veysel YILMAZ & ANFIS
Fehim BAKIRCI
dataset and enables the researchers to interpret these rules. Therefore, it is the widely used
model in the studies of classification and estimation.
In an ANFIS
modelmodel
consisting
of two
output,the
thesetset
rules
In an ANFIS
consisting
of twoinputs
inputsand
and one
one output,
of of
rules
is as is as follows
(Jang, 1993):
follows (Jang, 1993):
Rule 1 : If x is A1 and y is B1 , then f1 p1 x q1 y r1
Rule 2 : If x is A2 and y is B 2 , then f 2 p 2 x q 2 y r2
where xxand
the the
inputs,
Ai andABand
are the
fuzzythe
sets,
fi are sets,
the outputs
the within the
Bi are
fuzzy
fi are within
the outputs
where
andy are
y are
inputs,
i i
,
q
and
r
are
the
design
fuzzy
region
specified
by
the
fuzzy
rule,
and
parameters
p
fuzzy region specified by the fuzzy rule, and parameters pi,i qii and rii are the design parameters
thatduring
are determined
duringprocess.
the training
Thearchitecture
ANFIS architecture
that areparameters
determined
the training
Theprocess.
ANFIS
to implement these
to
implement
these
two
rules
is
shown
in
Figure
2,
in
which
a
circle
indicates
a whereas
fixed
two rules is shown
in
Figure
2,
in
which
a
circle
indicates
a
fixed
node,
a square
Figure 2.
2. Structure
Structure of
of an
an ANFIS.
ANFIS.
Figure
Figure
2.
Structure
of
an
ANFIS.
node,
whereas
a
square
indicates
an
adaptive
node
(Jang,
1993).
indicates an adaptive node (Jang, 1993).
Figure 2. Structure of an ANFIS.
In the first layer, each node produces membership grades to which they belong to each
In
the first
layer,
each
node produces
membership
grades
to
which
they belong
to each
of the
In
layer,
each
produces
membership
grades
totooutputs
which
Inthe
thefirst
first
layer,
eachnode
nodesets
produces
membership
grades
whichthey
they
belong
toeach
eachof
ofthe
the
of the
appropriate
fuzzy
using membership
functions.
The
of
thisbelong
layer areto
appropriate
fuzzy
sets
using
membership
functions.
The
outputs
of
this
layer
are
the
fuzzy
appropriate
fuzzy
sets
using
membership
functions.
The
outputs
of
this
layer
are
the
fuzzy
appropriate
fuzzy
sets using
membership
Thebyoutputs of this layer are the fuzzy
the fuzzy
membership
grade
of the inputs,functions.
which are given
membership
grade
of
the
inputs,
which
are
given
by
membership
grade
of
the
inputs,
which
are
given
by
membership
grade
of
the
inputs,
which
are
given
by
1
O
(4)
(4)
OOii1i1
A
AAii i(((xxx)))
(4)
(4)
1
11 B
(
)
O
y
(5)
(5)
OOii i BBii i 222((yy))
(5)
(5)
(small, large,
etc.)
areare
the the linguistic
Where,
and the
y arecrisp
the crisp
inputs
ith
node,
Ai andBBi (small,
xx and
yx are
inputs
to
iito
th
node,
A
large,
etc.)
Where,
crisp
toto
th
AAii iand
and
large,
etc.)
Where,
xand
andyyare
arethe
the
crispinputs
inputs
ithnode,
node,membership
andBBii i(small,
(small,
large,
etc.)are
are, the
thelinguistic
linguistic
Where,linguistic
and
mB
labels
characterized
by
appropriate
functions
mA
i
i
A
and
B
,
respectively.
labels
characterized
by
appropriate
membership
functions
i and
i , ,respectively.
A
B
labels
by
appropriate
membership
functions
A
and
B
respectively.
labelscharacterized
characterized
by
appropriate
membership
functions
ii
ii
respectively.
In the
the second
layer,layer,
every
node
incomingsignals
signals
sends
the product
product out.
In the second
every
nodemultiplies
multiplies the incoming
and and
sendssends
the prodIn
In the second
second layer,
layer, every
every node
node multiplies
multiplies the
the incoming
incoming signals
signals and
and sends the
the product out.
out.
Each
node
output
represents
the
firing
strength
of
a
rule.
uct
out.
Each
node
output
represents
the
firing
strength
of
a
rule.
Each
node
output
represents
the
firing
strength
of
a
rule.
Each node
output represents the firing strength of a rule.
2
O
(6)
OOii2i2
w
wwii i
AAAii (((xxx)))
BBBii (((yyy)))
(6)
(6)
(6)
i
i
In
the third
layer, the
main objective
is to calculate the
ratio of
each iith
rule’s firing
strength
In
Inthe
thethird
thirdlayer,
layer,the
themain
mainobjective
objectiveisistotocalculate
calculatethe
theratio
ratioof
ofeach
each th
ithrule’s
rule’sfiring
firingstrength
strength
wi is
is taken
taken as
as the
the normalized
normalized firing
firing
to the
the sum
sum of
of all
all rules’
rules’ firing
firing strength.
strength. Consequently,
Consequently, w
to
wi is taken as the normalized firing
to the 96
sum of all rules’ firing strength. Consequently,
Journal of iEconomic and Social Studies
strength
strength
strength
w
Oi333
(7)
w wwii i
O
(7)
Oi i wwii i w1 w
(7)
ww11ww222
�A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
In the third layer, the main objective is to calculate the ratio of each ith rule’s firing
strength to the sum of all rules’ firing strength. Consequently, wi is taken as the
normalized firing strength
Oi3 = wi =
wi
w1 + w2
(7)
In the fourth layer, the nodes are adaptive nodes. The output of each node in this
layer is simply the product of the normalized firing strength and a first order polynomial (for a first order Sugeno model). Thus, the outputs of this layer are given by
Oi4 = wi f i = wi ( pi x + qi y + ri )
(8)
where wi is the ith node’s output from the previous layer. Parameters pi, qi and ri
are the coefficients of this linear combination and are also the parameter set in the
consequent part of the Sugeno fuzzy model.
In the fifth layer, there is only one single fixed node. This single node computes the
overall output by summing all the incoming signals as follows
f =
∑w
i
i
fi
∑w (p x + q
=
∑w
i
i
i
i
i
y + ri )
(9)
i
Accordingly, the defuzzification process transforms each rule’s fuzzy results into a
crisp output in this layer.
In this study, the ANFIS was trained by hybrid learning algorithm which is highly
efficient in training the ANFIS. This learning algorithm adjusts all parameters {ai, bi,
ci} and {pi, qi, ri} to construct the ANFIS output match the training data. When the
premise parameters ai, bi and ci of the membership functions are fixed, the output of
the ANFIS becomes as follows:
f = w1 f1 + w2 f 2
= w1 ( p1 x + q1 y + r1 ) + w2 ( p 2 x + q 2 y + r2 )
(10)
Where, p1 , q1 , r1 , p 2 , q 2 and r2 are the adjustable resulting parameters? The least
squares method is widely used to easily identify the optimal values of these parameters (Jang, 1993).
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�Rüstü YAYAR & Mahmut HEKIM & Veysel YILMAZ & Fehim BAKIRCI
ARIMA and ANFIS Applications
We benefited from autocorrelation and partial autocorrelation functions of the related series in order to obtain ARIMA models. The appropriate models for applications
were investigated based on the monthly electric data between years 2002–2010.
After choosing the models, the monthly electric values pertaining to the period between the first half of 2010 and second half of 2011 were estimated by the models.
Then, the forecasting values relating to the second half of 2010 were compared with
the real values of the same period.
Seven different models based on the subscriber groups were tested for the investigations. They are total electric use (Model 1), electric use in private houses (Model
2), electric use in industrial organizations (Model 3), electric use in business firms
(Model 4), electric use in government agencies (Model 5), electric use in other subscriptions (Model 6), and electric use in business firms-government agencies-other
subscriptions (Model 7). In the implemented experiments, we observed that there is
no ARIMA model appropriate for Model 1 and 7.
Experiment 1.
Analysis of total energy use (Model 1)
In the construction stage of an appropriate ARIMA model related to the consumption of total energy use, we determined that the change of energy consumption versus months is non-stationary. The difference of the monthly energy series was taken
once in accordance with the autocorrelation and partial autocorrelation function
graphs. When the difference was once taken, the series had got stationray character
in model validation stage. However, the ARIMA techniques generated through tests
are to pass the suitability test in order to be used for future forecastings. Thus, it is
indicated that the autocorrelation coefficients of the forecastings generated through
the ARIMA techniques show a trend of systematicity in the suitability test. Despite
all those efforts put forward, no model was detected as appropriate for this purpose.
When the ANFIS model was trained by the training dataset for 1000 iterations,
it found three rules for this experiment. The results obtained by ANFIS model are
shown in Figure 3, where the test result of the model is red line and the forecasting
of the next six month period is green line as follows:
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Journal of Economic and Social Studies
�A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
Figure 3. The ANFIS output for Model 1.
As seen in Figure 3, there is a small decrease possibility, but the stationary case will
be lasting in the next six months. The comparative results of ARIMA and ANFIS
techniques are given in Table 1:
Table 1. Forecasting of total electric use (Model 1)
Month
Jul.10
Real
ARIMA
Forecasting
ANFIS
MSE
Forecasting
42,0229
50,9282
ug.10
51,4488
50,9275
ep.10
59,9116
50,9268
ct.10
43,4847
50,9261
ov.10
46,3052
50,9254
Dec.10
48,5912
Jan.11
o appropriate model has
been found
50,9240
50,9233
Mar.11
50,9226
pr.11
50,9219
May.11
50,9212
Jun.11
50,9205
Number 2
July 2011
40,4117
50,9247
eb.11
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MSE
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�Rüstü YAYAR & Mahmut HEKIM & Veysel YILMAZ & Fehim BAKIRCI
As seen in Table 1, the ARIMA could not achieve any forecasting result. However,
when the ANFIS was tested by six-month testing dataset, its mean square error
(MSE) ratio was 40.4117. The forecasting obtained by the ANFIS for the next six
months was close to the obtained test results of the ANFIS, so it can be observed
that there was approximately a stationary case.
Experiment 2.
Analysis of the electric use in private houses (Model 2)
In the construction stage of an appropriate ARIMA model related to the consumption of electric energy use in private houses, we determined that the change of energy consumption versus months is non-stationary. The difference of the energy series is once taken in accordance with the autocorrelation and partial autocorrelation
function graphs. When the difference taken, the series showed stationary haracter
in the model validation stage. As a result of the tests, ARIMA(1,1,2) was chosen as
the model.
When the ANFIS model was trained by the training dataset for 4000 iterations,
it found eight rules for this experiment. The results obtained by ANFIS model are
shown in Figure 4, where the test result of the model is red line and the forecasting
of the next six month period is green line as follows:
Figure 4. The ANFIS output for Model 2.
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Journal of Economic and Social Studies
�A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
As seen in Figure 4, there is a constant increase in the next six months in Model
2. The comparative results of ARIMA (1,1,2) and ANFIS techniques and the real
values for the period between 2002-2010 are given in Table 2:
Table 2. Forecasting of the electric use in private houses (Model 2)
ARIMA(1,1,2)
ANFIS
Month
Real
Jul.10
18,9146
21,1999
22,0048
ug.10
22,9082
21,3377
22,4716
ep.10
32,8206
21,4178
ct.10
19,9593
21,5264
ov.10
20,9913
21,6209
23,8837
Dec.10
23,7073
21,7224
24,3547
Jan.11
21,8205
24,8256
eb.11
21,9202
25,2962
Mar.11
22,0191
25,7668
pr.11
22,1184
26,2372
May.11
22,2175
26,7077
Jun.11
22,3167
27,1781
Forecasting
MSE
24,0842
Forecasting
22,9416
23,4125
MSE
21,3410
As seen in Table 2, the MSE ratio was 24.0842 for ARIMA (1,1,2) and 21.3410 for
ANFIS in the result of forecasting implemented by the six-month testing data for
Model 2. Thus, it can be said that the ANFIS provided a more successful forecasting
than the ARIMA.
Experiment 3.
Analysis of the electric use in industry (Model 3)
We experienced that the monthly energy change is originally unsuitable for the
validation of a model in the set stage of an appropriate ARIMA model to be applied in electric use in industry. After the analysis on the autocorrelation and partial
autocorrelation function graphs of the series employed in industrial electric use, the
difference was taken twice. Then, the series was made suitable for the analysis. After
a few testing, the model was selected as ARIMA (1,2,1).
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�Rüstü YAYAR & Mahmut HEKIM & Veysel YILMAZ & Fehim BAKIRCI
When the ANFIS model was trained by the training dataset for 1500 iterations,
it found two rules for this experiment. The results obtained by ANFIS model are
shown in Figure 5, where the test result of the model is red line and the forecasting
of the next six month period is green line as follows:
Figure 5. The ANFIS output for Model
As seen in Figure 5, the next six months is constantly stationary for Model 3. The
comparative results of the real values in the period between 2002-2010 and ARIMA
(1,2,1) and ANFIS techniques are given in Table 3.
Table 3: Forecasting of the electric use in the industry (Model 3)
ARIMA(1,2,1)
Months
Jul.10
Real
Forecasting
ANFIS
MSE
Forecasting
6,5457
11,1835
6,4739
ug.10
6,6035
8,3942
6,1838
ep.10
6,7541
9,1898
ct.10
7,0919
8,2417
ov.10
6,7017
8,1281
6,1088
Dec.10
5,9649
7,6015
6,0901
Jan.11
7,2656
6,0714
eb.11
6,8283
6,0527
Mar.11
6,4308
6,0340
pr.11
6,0049
6,0153
May.11
5,5836
5,9967
Jun.11
5,1508
5,9780
102
6,1138
6,1471
6,1275
MSE
0,3079
Journal of Economic and Social Studies
�A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
As seen in Table 3, the MSE ratio is 6.1138 for ARIMA (1,1,2) and 0.0379 for
ANFIS in the result of forecasting made through the six-month testing data for
Model 3. Thus, it can be said that ANFIS provided a more successful forecasting
than the ARIMA.
Experiment 4.
Analysis of the electric use in business firms (Model 4)
While a model related to the electric use in business firms was constructed, monthly
energy change was analyzed. But, it was determined that the series was originally unsuitable to construct an appropriate model. After the analysis on the autocorrelation
and partial autocorrelation function graphs, the series was observed to be appropriate
for an analysis stage when the difference was once taken. After a few testing, ARIMA(1,1,1) was determined to be the most appropriate model for this experiment.
When the ANFIS model was trained by the training dataset for 3600 iterations,
it found four rules for this experiment. The results obtained by ANFIS model are
shown in Figure 6, where the test result of the model is red line and the forecasting
of the next six month period is green line as follows:
Figure 6. The ANFIS output for Model 4.
As seen in Figure 6, there was very quickly rise in the next six months for Model
4. The comparative results of the real values in the period between 2002-2010 and
ARIMA(1,1,1) and ANFIS techniques are given in Table 4.
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Table 4: Forecasting of electric use in business firms (Model 4)
Months
Jul.10
Real
ARIMA(1,1,1)
Forecasting
ANFIS
MSE
Forecasting
5,1655
6,6010
6,9789
ug.10
9,5100
7,1028
7,1073
ep.10
9,4926
7,0126
ct.10
5,8424
7,1121
ov.10
6,5950
7,1508
7,5016
Dec.10
7,4564
7,2089
7,6370
Jan.11
7,2608
7,7745
eb.11
7,3147
7,9142
Mar.11
7,3680
8,0561
pr.11
7,4215
8,2001
May.11
7,4749
8,3462
Jun.11
7,5283
8,4943
2,6646
7,2370
7,3683
MSE
2,8888
As seen in Table 4, the MSE ratio is 2.6646 for ARIMA (1,1,1) and 2.888 for
ANFIS as a result of the forecasting through the six month testing data for Model 4.
Thus, it can be said that ARIMA is little more successful in the implemented experiment when compared to ANFIS.
Experiment 5.
Analysis of the monthly electric use in government agencies (Model 5)
While constructing a model for the electric use in government agencies, the graphs
of monthly energy change were used in hand as a basis. It was determined that the
series was originally unsuitable for model validation. After the analysis on the autocorrelation and partial autocorrelation function graphs, the series was, then, found
to be suitable for an analysis stage when the difference was once taken. After a few
testing, the model was selected as ARIMA (2,1,1).
When the ANFIS model was trained by the training dataset for 5000 iterations,
it found four rules for this experiment. The results obtained by ANFIS model are
shown in Figure 7, where the test result of the model is red line and the forecasting
of the next six month period is green line as follows:
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Journal of Economic and Social Studies
�A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
Figure 7. The ANFIS output for Model 5.
As seen in Figure 7, there is a constant decrease in the next six months for Model
5. The comparative results of ARIMA (2,1,1) and ANFIS techniques and the real
values in the period between 2002-2010 are given in Table 5.
Table 5: Forecasting of the electric use in government agencies (Model 5)
ARIMA(2,1,1)
Month
Jul.10
Real
Forecasting
MSE
ANFIS
Forecasting
4,2125
3,3762
3,5093
ug.10
3,9930
3,6692
3,5053
ep.10
2,6223
3,4032
ct.10
3,0580
3,4401
ov.10
3,6314
3,3647
3,4604
Dec.10
4,2085
3,3635
3,4337
Jan.11
3,3431
3,4011
eb.11
3,3429
3,3627
Mar.11
3,3415
3,3184
pr.11
3,3467
3,2686
May.11
3,3531
3,2131
Jun.11
3,3620
3,1522
Volume 1
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0,3909
MSE
0,3841
3,4961
3,4812
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�Rüstü YAYAR & Mahmut HEKIM & Veysel YILMAZ & Fehim BAKIRCI
As seen in Table 5, the MSE ratio is 0.3909 for ARIMA(2,1,1) and 0.3841 for
ANFIS in the result of the forecasting made through the six month testing data for
Model 5. Thus, it can be said that ANFIS is little more successful in the forecasting
when compared to ARIMA.
Experiment 6.
Analysis of electric consumption of the others (Model 6)
Model testing named the others about the electric consumption of the subscriber
groups for six months was done. It was determined that the series was not appropriate to construct a model in its original. Thus, the series became appropriate after the
difference was once taken through the autocorrelation and partial autocorrelation
function graphs. After several tests, the model were determined as ARIMA (1,1,1).
When the ANFIS model was trained by the training dataset for 5000 iterations,
it found three rules for this experiment. The results obtained by ANFIS model are
shown in Figure 8, where the test result of the model is red line and the forecasting
of the next six month period is green line as follows:
Figure 8. The ANFIS output for Model 6.
As seen in Figure 8, there will be a little increase in the next six months for Model 6. In
Table 6, there are comparative results of the real values from the period of 2002-2010
and the techniques of ARIMA (1,1,1) and ANFIS in Model 6.
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�A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
Table 6: Electric Consumption Forecasting of the Others (Model 6)
Months
ARIMA(1,1,1)
Real
Forecasting
MSE
ANFIS
Forecasting
em.10
7,1845
8,1967
7,4670
Ağu.10
8,4338
8,2828
7,5274
yl.10
8,2217
8,3353
ki.10
7,5329
8,3873
as.10
8,3855
8,4392
7,7085
ra.10
7,2539
8,4912
7,7689
ca.11
8,5431
7,8293
Şub.11
8,5951
7,8897
Mar.11
8,6470
7,9501
is.11
8,6990
8,0104
May.11
8,7509
8,0708
Haz.11
8,8029
8,1312
0,5540
7,5877
7,6481
MSE
0,3401
As seen in Table 6, MSE ratio is 0.3401 for ANFIS whereas it is 0.5540 for ARIMA
(1,1,1) as a result of the forecasting which was done by using test data for six months
for Model 6. Thus, ANFIS provided a more successful forecasting than ARIMA for
Model 6.
Experiment 7.
The analysis of electric consumption of the Business firm, State office and others
(Model 7)
It was determined in the forecasting of modeling about the electric consumption
of the business firm, state office and others that consumed energy is non-stationary.
The series became stationary by taking the difference for once according to the autocorrelation and partial autocorrelation function graphs of the related series. The
ARIMA techniques which are obtained through several experiments must pass the
compliance test to be used as an forecasting model regarding the future. In the
compliance test which was done for this reason, it was determined that the autocor-
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�Rüstü YAYAR & Mahmut HEKIM & Veysel YILMAZ & Fehim BAKIRCI
relation coefficients of the forecasting errors of the forecastings obtained through
the ARIMA techniques shows a systematic tendency. The appropriate model could
not be determined.
When the ANFIS model was trained by the training dataset for 5000 iterations,
it found three rules for this experiment. The results obtained by ANFIS model are
shown in Figure 8, where the test result of the model is red line and the forecasting
of the next six month period is green line as follows:
Figure 9. The ANFIS output for Model 7.
As seen in Figure 9, there will be a linear increase in the next six months for Model
7. In Table 7, there are the results of ANFIS model for Model 7.
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�A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption
of Tokat province in Turkey
Table 7: Electric Consumption Forecasting of the Commerce Houses,
State Offices and Others (Model 7)
Months
ARIMA
Real
Forecasting
ANFIS
MSE
Forecasting
em.10
16,562
17,5558
Ağu.10
21,937
17,6570
yl.10
20,336
17,7583
ki.10
16,433
17,8599
as.10
18,612
17,9616
ra.10
18,918
ca.11
o appropriate model has
been found
MSE
4,8571
18,0636
18,1660
Şub.11
18,2690
Mar.11
18,3730
is.11
18,4789
May.11
18,5878
Haz.11
18,7017
As seen in Table 7, there is not any forecasting through ARIMA for Model 7. MSE
ratio became 4.8571 as a result of the forecasting through ANFIS which was done by
using test data for six months. The estimated results of the next six months are similar
to the results obtained through ANFIS but there has been an increase at the least.
Conclusions
We implemented different seven experiments for estimating and analyzing electric
energy consumption in order to plan the production, transmission and distribution of electric energy and to determine the consequences of the events occurring
in the electric market. These experiments focus on the electric energy consumption
forecasting implemented by using ANFIS and ARIMA techniques including the
analyses of total energy consumption, household electric consumption, industrial
electric consumption, commerce house electric consumption, monthly electric con-
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�Rüstü YAYAR & Mahmut HEKIM & Veysel YILMAZ & Fehim BAKIRCI
sumption in state offices, electric of the others and the electric consumption of the
commerce houses, state offices and the others. This is especially guiding key for the
investors planning the investments in the electric sector.
There has been a preparatory work for the necessary precautions regarding the
electric in Tokat, revealing the electric consumption structure of Tokat province.
The electric demand structure of Tokat regarding the previous consumption of
Tokat province and the estimated electric energy for the future has been revealed.
Although the study which was conducted through ANFIS and ARIMA techniques
in the field of electric energy consumption was conducted on regional basis, it can
be a pilot study for the extensive national and international studies on the energy
consumption.
Electric energy demands for the tested periods and the first six months of the year
2011 were estimated by using the ARIMA and the ANFIS techniques. Every forecasting experiment related to the electric consumption performed by ANFIS and
ARIMA showed that ANFIS is more successful estimator. The ARIMA was more
successful in only an forecasting experiment. In addition to this, an appropriate
ARIMA model could not have been found for two forecasting experiments. As a
result, the ANFIS is more appropriate than the ARIMA in the forecasting studies
regarding the electric consumption.
References
Al-Garni, A.Z. & Abdel-Aal R.E. (1997). Forecasting Monthly Electric Energy
Consumption in Eastern Saudi Arabia Using Univariate Time Series Analysis,
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Al-Garni, A.Z. & Javeed Nizami, S. S. A. K. (1995). Forecasting Electric Energy
Consumption Using Neural Networks, Energy Policy, Volume 23, Issue 12,
1097–1104.
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�
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Title
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A comparison of ANFIS and ARIMA techniques in the forecasting of electric energy consumption of Tokat province in Turkey
Author
Author
YAYAR, Rüstü
HEKIM, Mahmut
YILMAZ, Veysel
BAKIRCI, Fehim
Abstract
A summary of the resource.
In this study, the electric energy demand of Tokat province was estimated by means of ANFIS and ARIMA techniques. Seven different forecasting experiments were implemented for the subscriber groups and the consumption of electric energy which is the dependent variable. The electric energy demand of the province for the first six months of the year 2011 was estimated by means of ANFIS and ARIMA techniques. The obtained results were compared and interpreted in order to illustrate the forecasting success of these techniques. We showed that the ANFIS is more appropriate than the ARIMA in point of the forecasting of electric consumption.
Publisher
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International Burch University
Date
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2011-01
Keywords
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Article
PeerReviewed
H Social Sciences (General),HB Economic Theory,HG Finance
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A Comparison of Cross-Cultural Perception between English and Turkish Idioms
Author
Author
Huyuk , Nazife
Abstract
A summary of the resource.
Idioms are groups of words in a proper order that have a specific meaning bearing difference from the meanings and connotations of each word understood on its own. They are crucial elements of a language and it is difficult to imagine a language without its idioms. As understood from the definition, their meaning cannot be understood from their elements, but should be learned as a whole. In languages, it is possible to find idioms in any topic and category. The aim of this article is to compare English and Turkish idioms with food names. Five idioms of English have been chosen, and it has been searched whether Turkish has the same idioms or not. The cultural reasons of these idioms have been searched in both languages. Their meanings and connotations are given. Moreover, similarities and differences are discussed.
Date
A point or period of time associated with an event in the lifecycle of the resource
2012-05
Keywords
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Conference or Workshop Item
PeerReviewed
P Philology. Linguistics
-
https://omeka.ibu.edu.ba/files/original/0cbb60ad0f11e88653483ec1f7c7826f.pdf
63d2ff55d24d803fba35fc564c8b8f6c
PDF Text
Text
International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
A Comparison of Decision Making Models and Electricity
Energy Demand Forecasting for Turkey
Bilal Şişman
Afyon Kocatepe University, Afyonkarahisar, Turkey
bsisman@aku.edu.tr
Mahmut Nevfel Elgün
Afyon Kocatepe University, Afyonkarahisar, Turkey
mahmutelgun@aku.edu.tr
Energy is vital for industrialization and development countries like Turkey.
Energy, particularly electricity, is essential for improving quality of live and
developing as social and economic like European Countries. Projections for
Turkey demonstrate positive results from the use of energy, especially for
electricity, and identify key areas for improvement by 2023 (ESMAP
Report, 2011).
Turkey is rapidly growing with a 73 million young and confident people. So,
energy requirements have been rising with increasing population for
twenty years in Turkey. The development a country and people living of
standards is directly related to the energy utilization rate. Authors and
researchers claimed that, the Turkish economy is currently the fastest
growing economies among the European Union. In addition, there are a lot
of and different studies that were published recently on forecasting of
Turkey’s electricity demand. But the aim of this study is to compare
forecasting models each other with error estimations and estimate future
demand. This study is a proposition of a new approach by comparing grey
prediction and multiple regression models with Model of Analysis of the
Energy Demand (MAED). Turkish Ministry of Energy and Natural Resources
carry out MAED. In this study, electricity energy consumption in Turkey is
forecasting with grey prediction and multiple regression models from 1970
to 2010. In this model, we used total export, total import, population and
GDP data unlike than Akay and Atak (2007). This study also explores new
approach by using more data and suggestions regarding to electricity
consumption. As a result, proposed approaches estimates have more
accurate results than MAED model in the comparison of electricity
consumption.
Keywords: Turkey’s Electricity Consumption Forecasting; Grey Prediction;
Multiple Regressions.
58
�
https://omeka.ibu.edu.ba/files/original/fb63c91bdfb805e1f620f202c4ac9fc3.docx
432d696aeac1f50674ed4b6f939c5e12
https://omeka.ibu.edu.ba/files/original/b92322d7120012677b07bb9d12efa4fe.pdf
052a63aaf476fa5d5f64012746e348cc
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A Comparison of Decision Making Models and Electricity Energy Demand Forecasting for Turkey
Author
Author
SISMAN, Bilal
NEVFEL ELGUN, Mahmut
Abstract
A summary of the resource.
Energy is vital for industrialization and development countries like Turkey. Energy, particularly electricity, is essential for improving quality of live and developing as social and economic like European Countries. Projections for Turkey demonstrate positive results from the use of energy, especially for electricity, and identify key areas for improvement by 2023 (ESMAP Report, 2011). Turkey is rapidly growing with a 73 million young and confident people. So, energy requirements have been rising with increasing population for twenty years in Turkey. The development a country and people living of standards is directly related to the energy utilization rate. Authors and researchers claimed that, the Turkish economy is currently the fastest growing economies among the European Union. In addition, there are a lot of and different studies that were published recently on forecasting of Turkey’s electricity demand. But the aim of this study is to compare forecasting models each other with error estimations and estimate future demand. This study is a proposition of a new approach by comparing grey prediction and multiple regression models with Model of Analysis of the Energy Demand (MAED). Turkish Ministry of Energy and Natural Resources carry out MAED. In this study, electricity energy consumption in Turkey is forecasting with grey prediction and multiple regression models from 1970 to 2010. In this model, we used total export, total import, population and GDP data unlike than Akay and Atak (2007). This study also explores new approach by using more data and suggestions regarding to electricity consumption. As a result, proposed approaches estimates have more accurate results than MAED model in the comparison of electricity consumption. Keywords: Turkey’s Electricity Consumption Forecasting; Grey Prediction; Multiple Regressions.
Publisher
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International Burch University
Date
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2013-05-10
Keywords
Keywords.
Article
PeerReviewed
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ISSN 978-9958-834-23-3
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https://omeka.ibu.edu.ba/files/original/aa9d4d0c25aeb18e61ecf6d8e410d54e.pdf
f61e4a5d537271f3cb34de9802f89eee
PDF Text
Text
2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
A Comparison of Ethical Perspectives in Business in Turkish Ahilik Society
and American Marketing Association
Muhammet Said DĠNC
International Burch University
Department of Economics
Bosnia and Herzegovina
sdinc@ibu.edu.ba
Teoman DUMAN
International Burch University
Department of Economics
Bosnia and Herzegovina
teomanduman@yahoo.com
Abstract: “Ahilik‖ is the name of a society which had played a crucial role on
social, economic and cultural life of Anatolian people from 13th century to today.
The ethical principles established by this society have had significant effects on
commercial life in Turkish territories throughout history. The teachings of Ahilik
can be found in ‗Futuvvetnames‘ which are the books that include basic moral
rules and principles of commerce such as fellowship, helpfullness, honesty and
tolerance. These set of principles are still significant in today‘s business life in
Turkey. On the other hand, today‘s widespread ethical business principles in the
world are mainly rooted in well-known marketing and business organizations. The
Ethical Codes of American Marketing Association are one of the most well known
ethical codes in current business terminology. The purpose of this study is to
analyze the similarities and differences between the moral rules of ‗Ahilik‘ and
ethical norms and values of American Marketing Association.
Keywords: Business Ethics, American Marketing Association, Ahilik Society,
Turkish Culture
Introduction
Ethics is ―a philosophy or a science of morality that investigates how human beings should manage their
individual and social relationships in order to determine good and bad with respect to their behaviors‖ (Demir and
Acar, 1997, p.14). Morality can be described as ―a guide that navigates the person and the society within the
framework of good and bad‖ (Torlak, 2007, p.84-85). Although morals and ethics seem to have the same meaning,
essentially they are different. While ethics, as a field of philosophy, is a philosophical thought about problems of
moral judgements, morals are a sum of rules of behaviors in a society (Torlak, 2007) These rules of behaviors have
always been very important for many societies in human history. It is commonly believed that societies that
protected and applied ethical rules in governence and daily lives had reached higher social and economic standards
for a long period of time, while those who did not apply these rules soon disappeared. Turks who had come from
Middle Asia to Anatolia are one people that succeded to implement ethical rules based on morals of Islam in every
segment of society. They founded the well-known Ottoman Empire that reigned 600 years in major parts of the
world. Ottoman ruling was effective in three continents for about 600 years and this ruling shaped business life of
many nations under them. The ethical bases of commerce in Ottoman State was largely determined with the effects
of a society called ―Ahilik‖ (Demir, 1994). This society had certain norms and values that shaped business life in
Ottoman Empire. Ahilik society has played a crucial role on social, economic and cultural life of Anatolian people
from 13th century to today. Although ethical teachings established by Ahilik still have effects in lands where
Ottoman State reigned in the past, ethical norms and values are changing fast all over the world especially with the
effects of technology.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Well-known approaches to today‘s business ethics all over the world is largely shaped by worldwide business
organizations. These organizations, which represent great number of academics and business people, issue codes of
ethics and ask its members to obey these rules in their business practices. One of most popular codes of ethics is
issued by American Marketing Association (AMA), which has high credibility in today‘s business world (Kotler,
2009). AMA is the largest marketing organization in North America that represents most powerful academics,
researchers and practitioners from a wide variety of industries. Its roots go back to 1900‘s and has been effective in
American and worldwide business life since then (American Marketing Association, 2009). From this point, a
comparison of the ethical understandings of Ahilik society and AMA will shed light into the historical evolution of
ethical teachings in human history. Accordingly, the purpose of this study is to analyze the similarities and
differences between the ethical principles of Ahilik and the American Marketing Association.
Literature Review
Since the beginning of the last century, the concept of ethics has gained much significance in academia and
in social life. Ethics is becoming even more important as technological advances allow businesses to manipulate
most aspects of production and marketing of goods and services. Philosophical bases of ethics goes back in history
but scientists put ethical approaches into two categories, one of which is the utilitarian approach and the other is the
deontological approach (Beauchamp, 1980).
In a brief discussion about these two approaches to ethics, Nantel and Weeks (1996, p.12) explain that the
utilitarian approach relates the concept of ethics with the consequences of an action while the deontological approach
relates the ethical behavior with the act itself without looking at the consequences of an action.
According to utilitarian approach, managers attempt to maximize possible positive value or minimize possible
negative value of their actions for the people they serve and manage. In that sense, most business actions directed
toward certain positive outcomes are utilitarian in nature. These practices are largely evaluated based on their
consequences. A typical example is that consumer satisfaction and loyalty are the two main outcomes of good
business practices that represent a utilitarian perspective to business ethics. Deontological approach to business
ethics, however, focuses on the act itself and value the way the act is taken. In a general sense, for example, lying
and stealing are unethical practices regardless of their consequences. Similarly, the way the products are produced
and presented to consumers reflect a deontological approach to business ethics. Nantel and Weeks (1996) argued that
more and more companies are issuing codes of ethics and this shows the formalization of a deontological approach.
Not only companies but also respected business organizations such as American Marketing Association publish
codes of ethics in their web sites.
Despite the popularity of ethics as a concept, companies today are accused of many unethical practices by
the public. Some of these practices include harming consumers through high prices, deceptive practices, high –
pressure selling, shoddy, harmful or unsafe products, planned obsolescence and poor service to disadvantaged
consumers (Kotler (2009).
Other writers categorized ethical problems studied in marketing under six categories (Murhy and Laczniak,
1981; Nantel and Weeks, 1996). These include ethical problems studied in the study of consumer behavior, in the
product and services management, in advertising management, in marketing research, in price management and in
international marketing. Misuse of consumer perception theories by some managers (Nason and Della Bitta, 1983),
production of products with limited life span in order to able to benefit from premature repurchasing (Laczniak and
Murhy, 1985), appearance of prestigious actors in advertising to endorse products that have little inherent value,
abusive use of surveys in marketing research (Tybout and Zaltman, 1974), distortion of the perception of product‘s
price and marketing practices of large tobacco firms towards adolescents were some examples of ethical problems
studied previously by marketing researchers (Nantel and Weeks, 1996).
Turkish Ahilik Society
Turkish Ahilik Society was a public institution composed of voluntery members from general public whose
main interest was to practice moral and ethical behavior in business. Although it is not active as it used to be, the
society is still known well and respected in certain parts of Anatolia. From 13th to 19th century, the society had
significant contributions to social life in Anatolia, in Balkans and in Turkistan. The society is known for developing
its members in the fields of arts and profession (Demir, 1994). The main properties of Ahilik as a society were
showing hospitality to others, giving charity to the poor, teaching profession to youngsters, and enlightening its
446
�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
members socially and morally in benches and workshops at work during the day and in dervish lodges at night
(Ekinci, 2001). The social norms of Ahilik society is largely rooted in the religion of Islam and they were published
in the books called ''Fütüvvetname''. The basis of Ahilik society and its codes of business ethics were recorded in
these books. There are two types of rules in Ahilik society: formal and informal rules. Formal rules, which are
shaped by the 'futuvve' principles are reflection of Islamic values. For example, 'Striving to be truthful and trusty in
work and life' is one example of these rules. As for informal rules, they are behavioral in content and they emerged
from the necessity of professional solidarity and relationships within the society. These behavioral norms were
determined by the authorities of customs and traditions (Gullulu, 1992). One example of informal rules is that 'Ahi
should be honest and not deviate to the way in which he earns more than he deserves.' A person who would join this
society had to obey religious and ethical norms that were written in these books.
Methodology
Ethical norms and values of AMA and Ahilik society were content analyzed and compared to each other in
their respective meanings. Content analysis is used in qualitative data analysis to identify themes and recurring
patterns of meaning (Merriam, 1998). The purpose of the comparison was to identify similarities and differences
between ethical norms and values of AMA and Ahilik society. To achieve this purpose, ethical norms and values
were cross-tabulated and items with similar meanings were matched in a table by the researchers. Table 1 shows
ethical norms and values of AMA and Ahilik society. The ethical norms and values of AMA were downloaded from
AMA website (American Marketing Asociation, 2010) while norms and values of Ahilik society were received from
Futuvvetnames. As Table 1 shows AMA has 2 ethical norms and 6 ethical value dimesions with 24 value items in
these dimesions. On the other hand, Ahilik society has 4 ethical norms and 39 value items in 6 ethical dimesions.
The 39 ethical norms and values of Ahilik society were matched to those of AMA in Table 1 by the researchers
based on their similarities in content. Following the categorization of these norms and values, expert opinion was
received from 5 researchers as part of an internal validity analysis. Merriem (1998) proposes six methods to check
internal validity of qualitative data one of which is peer examination. Researchers who are familiar with both English
language and culture and Turkish language and culture were requested to measure similarities and differences
between items in Table 1 according to a seven-point scale that ranged from completely the same in content (7) to
completely different in content (1). Expertise of reviewers in both language and culture is necessary for valid scale
adaptions (Savasir, 1994). The mean values from this analysis is given in Table 1. Finally, the items in ethical norms
and values in Ahilik society were translated in English and are given in the last column of Table 1. To assure correct
translation expert opinion on these translation were received and necessary adjectments were made.
Results
Table 1 shows the results of comparison between AMA ethical norms and values, and Ahilik society norms
and values. As shown in the Table, items 1a and 1d in honesty dimension were considered similar in content with
items 1a1and 1d in Ahilik society respectively (mean= 6,20; 6,00) whereas items 1b and 1c were found similar with
none of the honesty values in Ahilik society. In responsibility dimensions, item 2d and 2d6 were found highly similar
(mean= 6,00) while 2c was not found similar with 2c (mean 3,80). Items 2a, 2b and 2e were not found similar with
any of the Ahilik society values. In fairness dimension, item 3a was found similar in content with 3a3 and 3a4
(mean= 5,20) as 3b was found highly similar with 3b2 (mean= 6,60). Furthermore, item 3c was found similar with
3c1 and 3c2 (mean= 6,40). In respect dimensions, items 4a, 4b, 4c and 4d were found highly similar with 4a, 4b, 4c
and 4d2 respectively (means= 6,00; 6,20;6,00;6,20) while item 4e was found similar with item 4e (mean= 5,40). In
transperacy dimension, item 5c was found highly similar with item 5c2 (mean= 6,40) whereas items 5a, 5b, 5d were
found not similar with any of the items in Ahilik values. Finally, in citizenship dimension, item 6b was found highly
similar with item 6b2 (mean= 6,20) while 6c was found somewhat similar in content with item 6c (mean= 4,80).
Item 6a was not found similar with any of the items in Ahilik society.
447
�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
ETHICAL NORMS
AHĠLĠĞĠN ETĠK NORMLARI
ETHICAL NORMS OF AHILIK
1. Gözü haram olan Ģeylere,ağzı günah olan
sözlere , eli zulümlere bağlanır .
2 Ahi görenek ve otoriteye bağlı olmalıdır.
3. Örf, adet ve törelere uymak.
4. Kapısı konuklara, kesesi kardeĢlerden
ihtiyacı olanlara, sofrası ise bütün açlara
açılır.
1. Ahi‘s eyes are closed to forbidden things, his
mouth to sinful words, and his hands are tied to
tyranny.
2.Ahi should be loyal to customs and authority.
3. To obey customs, habits and traditions.
4. His door opens to guests, his wallet to the needy
and his table to all hungry.
As Marketers, we must:
1. Do no harm. This means consciously avoiding
harmful actions or omissions by embodying high
ethical standards and adhering to all applicable
laws and regulations in the choices we make.
2. Foster trust in the marketing system. This means
striving for good faith and fair dealing so as to
contribute toward the efficacy of the exchange
process as well as avoiding deception in product
design, pricing, communication, and delivery of
distribution.
Means AHĠLĠĞĠN ETĠK DEĞERLERĠ
ETHICAL VALUES
1.Honesty – to be forthright in dealings with
customers and stakeholders. To this end, we
4,67
will:
1.a.Strive to be truthful in all situations and at all
times.
6,20
4,40
4,00
ETHICAL VALUES OF AHILIK
1.Ahi‘s interior, exterior, essence and words
should be same.
1.Ġçi, dıĢı, özü, sözü bir olmak.
1.a.1. ĠĢinde ve
güvenilir olmak,
hayatında
doğru,
1.a.1. Strive to be truthful and trusty in his
work and his life.
1.a.2. Ahi doğru olmalı, emeğinin hakkı 1.a.2. Ahi should be honest,and should not deviate
olandan
fazlasını
kazanma
yoluna to the way in which he earns more than he
sapmamalıdır.
deserves.
1.a.3. Bir baĢkasının malını taklit etme.
1.a.3. Do not imitate somebody else‘s merhandise.
1.b.Offer products of value that do what we claim
in our communications.
1.c.Stand behind our products if they fail to deliver
their claimed benefits.
1.d.Honor our explicit and implicit commitments
and promises.
6,00
1.d.Ahdinde, sözünde ve sevgisinde vefalı 1.d. Strive to be loyal to his promises, his words
olmak.
and his love.
Table 1: A comparison of Ethical Principles of American Marketing Association and Turkish Ahilik Society (Continued)
448
�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
2.Responsibility – to accept the consequences of
our marketing decisions and strategies. To this
end, we will:
2.a.Strive to serve the needs of customers.
2.b.Avoid using coercion with all stakeholders.
2.c.Acknowledge the social obligations to
stakeholders that come with increased marketing
and economic power.
3,80
2.d.Recognize our special commitments to
vulnerable market segments such as children,
seniors, the economically impoverished, market 3,60
illiterates and others who may be substantially
disadvantaged.
4,00
2.c.Emri altındakileri ve hizmetindekileri 2.c. Strive to protect and to look after his
korumak ve gözetmek.
employees and people under his service.
2.d.1.Yapılan iyilik ve hayırda hakkın
2.d.1. Should not observe anything other than
hoĢnutluğundan baĢka bir Ģey gözetmemek.
God‘s contentment in charity and kindness.
2.d.2.Herkese iyilik yapmak, iyiliklerini 2.d.2. Strive to help everybody and want their
istemek.
well-being.
3,60
2.d.3.Yapılan
kakmamak.
5,20
2.d.4.Ahilerden ihtiyaç sahibi olanlara ihsan 2.d.4. Strive to help and be generous to the needy
ve keremde bulunmak.
among Ahis.
4,20
2.d.5.Aza
dağıtmak.
6,00
iyilik
kanaat,
ve
yardımı
çoğa
449
2.d.3. Not to taunt kindness and assistance done.
Ģükrederek 2.d.5. Strive to be content with less and distribute
plenty with gratitude.
2.d.6.Cömert ve kerem sahibi olmak.
2.e.Consider environmental stewardship in our
decision-making.
baĢa
2.d.6. Strive to be genereous and kind.
�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Table 1. A comparison of Ethical Principles of American Marketing Association and Turkish Ahilik Society (Continued)
3.Fairness – to balance justly the needs of the
buyer with the interests of the seller. To this
end, we will:
3.a.Represent products in a clear way in selling,
3.a.1.Hakka, hukuka uymak, hak ölçüsüne 3.a.1. To obey law, justice and to observe the
advertising and other forms of communication;
riayet etmek,
measure of law.
this includes the avoidance of false, misleading 4,60
and deceptive promotion.
3.a.2. Hileli ve çürük mal satma.
3.a.2. Not to sell fake and spoilt goods.
4,60
5,20
5,20
3.b.Reject manipulations and sales tactics that
harm customer trust. Refuse to engage in price
fixing, predatory pricing, price gouging or ―bait- 6,00
and-switch‖ tactics.
6,60
3.c.Avoid knowing participation in conflicts of
interest. Seek to protect the private information of 6,40
customers, employees and partners.
6,40
3.a.3.Noksan tartmayacaksın,
terazi kullanmayacaksın.
bozuk 3.a.3. Should not measure deficiently and use
broken scale.
3.a.4.Hakkı korumak, hakka riayetle 3.a.4. Strive to protect justice and prevent
haksızlığı önlemek,
injustice by being loyal to it.
3.b.1.Hakkı korumak,
haksızlığı önlemek,
hakka
riayetle 3.b.1. Strive to protect justice and prevent injustice
by being loyal to it.
3.b.2.Ahilik, mal biriktirme ve yığma
peĢinde koĢan haris istirmarcı ticarete
karºıdır.
3.c.1.Ayıp ve kusurlarını örtmek,
gizlemek ve affetmek,
3.b.2. Ahilik is against goods accumulation and
the ambitious and
exploiter trade which
attemps to heap up.
3.c.1. Strive to hide shame and faults and to
forgive.
3.c.2. Strive to keep secrets and not to reveal
3.c.2.Sır tutmak, sırları açığa vurmamak,
them.
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Table 1. A comparison of Ethical Principles of American Marketing Association and Turkish Ahilik Society (Continued)
4.1.Küçüklere sevgili, büyüklere karĢı
4.Respect – to acknowledge the basic human
4.1. Strive to love younger, to behave decently and
edepli ve saygılı olmak,
dignity of all stakeholders. To this end, we will:
respectfully towards elders.
5,00
4.2.Kötü söz ve hareketlerden sakınmak,
4.2. Strive to avoid swearings and insults .
6,00
4.3.Ġnsanların iĢlerini içten, gönülden ve
güler yüzlü yapmak,
4.3. Strive to serve people sincerely and cheerfully.
5,50
4.4.Hiç kimseyi azarlamamak,
4.4.Strive not to scold anybody.
6,25
4.5.Kötülük ve kendini bilmezliğe iyilikle
4.5.Strive to respond evil with goodness.
4,75
karĢılık vermek,
4.a.Value individual differences and avoid
stereotyping customers or depicting demographic
4.a.Hizmette
ve
vermede
ayırım 4.a. Strive to avoid discrimination in serving and
groups (e.g. gender, race, sexual orientation) in a
yapmamak.
donating.
negative or dehumanizing way.
6,00
4.b.Listen to the needs of customers and make all
4.b.Ġnsanların iĢlerini içten, gönülden ve
reasonable efforts to monitor and improve their
4.b.Strive to serve people sincerely and cheerfully.
güler yüzlü yapmak,
satisfaction on an ongoing basis.
6,20
4.c.Make every effort to understand and
4.c.Dost ve arkadaĢlara tatlı sözlü, samimi, 4.c. Strive to be cheerful,soft-spoken and sincere
respectfully treat buyers, suppliers, intermediaries
güler yüzlü ve güvenilir olmak,
and honest towards friends.
and distributors from all cultures.
6,00
4.d.Acknowledge the contributions of others, such
4.d.1.Ahiler yanlarında çalıĢan çırak ve 4.d.1. Ahis treat apprentices and foremen not as
as consultants, employees and coworkers, to
kalfalara emekleri sömürülecek varlıklar assests whose labour should be exploited but see
marketing endeavors.
gibi değil yetiĢtirilecek ve ileride iĢyeri them as human beings who should be trained and
temin edilecek birer insan olarak bakarlar.
set up a workshop in future.
6,00
6,20
4.e.Treat everyone, including our competitors, as
we would wish to be treated.
5,40
4.d.2.Emri
altındakileri
ve 4.d.2. Strive to protect and to look after his
hizmetindekileri korumak ve gözetmek,
employees and people under his service.
4.e.Daima iyi komĢulukta bulunmak, 4.e. Strive to be a good neighbour and to have
komĢunun eza ve cahilliğine sabretmek,
patience against neigbor‘s torment and illiteracy.
Table 1: A comparison of Ethical Principles of American Marketing Association and Turkish Ahilik Society (Continued)
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5.Transparency – to create a spirit of openness in marketing
operations. To this end, we will:
5.a.Strive to communicate clearly with all constituencies.
5.b.Accept constructive criticism from customers and other
stakeholders.
5.c.Explain and take appropriate action regarding significant 6,20
product or service risks, component substitutions or other
foreseeable eventualities that could affect customers or their
6,40
perception of the purchase decision.
5.d.Disclose list prices and terms of financing as well as
available price deals and adjustments.
6.Citizenship – to fulfill the economic, legal, philanthropic 5,40
and societal responsibilities that serve stakeholders. To this
end, we will:
6.a.Strive to protect the ecological environment in the execution
of marketing campaigns.
6.b.Give back to the community through volunteerism and 4,60
charitable donations. Contribute to the overall betterment of
marketing and its reputation.
6,20
5,80
5,80
5,20
6.c.Encourage supply chain members to ensure that trade is fair 4,80
for all participants, including producers in developing countries.
5.c.1.Hileli ve çürük mal satmayacaksın. 5.c.1. Not to sell fake and spoilt goods
5.c.2.Sahte
ve
üretmeyeceksin.
kalitesiz
mal 5.c.2. Should not produce fake and
poor-quality goods.
6.Ahi, kazancının geçiminden arta 6. Ahi should help poor and unemployed
kalanının tümüyle yoksullara ve people with the earnings that remain
iĢsizlere yardımda bulunmalıdır.
apart from his livelihood.
6.b.1.Yapılan iyilik ve hayırda hakkın
hoĢnutluğundan
baĢka
bir
Ģey
gözetmemek,
6.b.2.Cömert ve kerem sahibi olmak
6.b.3.Ahi, kazancının geçiminden arta
kalanının tümüyle yoksullara ve
iĢsizlere yardımda bulunmalıdır.
6.b.4.Ahilerden ihtiyaç sahibi olanlara
ihsan ve keremde bulunmak.
6.b.5.Aza kanaat, çoğa Ģükrederek
dağıtmak.
6.c.BaĢkasının malına hıyanet etmemek
6.b.1. Should not observe anything other
than God‘s contentment in charity and
kindness.
6.b.2. Strive to be genereous and kind
6.b.3. Ahi should help poor and
unemployed people with the earnings
that remain apart from his livelihood.
6.b.4. Strive to help and be generous to
the needy among Ahis.
6.b.5. Strive to be content with less and
distribute plenty with gratitude.
6.c. Should not betray the property of
others.
Note 1: Mean values are calculated based on the following seven point scale: Completely the same in content 7; For the most part, similar in content 6; Similar in content 5;
Undecided 4; Different in content 3; For the most part, different in content 2; Completely different in content 1.
452
�Discussion and Conclusion
This research analyzed similarities and differences between the ethical norms and values of Turkish Ahilik
Society and those of American Marketing Association. Research results show that ethical norms applied by these two
perspectives are very similar to each other as these norms set what is right and what is wrong for the members. In
general, both perspectives set norms about avoiding harmful actions, instilling trust in business and adhering to
authority in business conduct. In terms of ethical values, there are some similarities and differences between the
perspectives. Similar values include, being truthful all the time, commitment to promises, helping vulnerable market
segments, avoidance of false promotion, wrong sales tactics, protecting private information, valuing individual
differences, treating customers respectfully, acknowledging others‘ works, producing best quality products and
giving back to the community.
Values that are stated in AMA principles but not found in Ahilik principles are related to issues such as
practicing truthful marketing communications, meeting the needs of the consumers, avoiding using coersion with the
stakeholders, showing concern for physical environment and disclosing list prices and terms of financing for
customers. These issues may be considered as related to other ethical values of Ahilik society but they are not stated
openly as done in AMA ethical principles. The differences found between the two perspectives may be related to
time frame they are practiced as AMA guidelines represent values for the current century while Ahilik guidelines
represent values of past centuries. Modern issues that affect population at large such mass communication, concern
for environment, use of technology in business are considered part of business ethics by AMA and explicitely stated
in the codes. Ahilik codes, on the other hand, are more related to business transactions at a personal level and
directed toward self behavior.
This research attempted to bring two perspectives of ethics in business coming from different cultures and
show similarities and differences between them. Future studies can exemplify how these principles were and are
practiced in business environments to better explain the similarities and differences between these two approaches to
business ethics.
References
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Beauchamp, T.L. (1980), ―Ethical theory and its application to business‖, in Beauchamp, T.L. and
Demir, G. (1994). Ahilik. Ahilik Yolu Dergisi, 86, Nisan, p.22.
Demir, Ö and Acar, M (1997) . Sosyal Bilimler Sözlüğü, 3. Baskı. Ankara: Vadi Yayınları.
Ekinci, Y. (2001). Ahilik. Talat Matbaası: Ġstanbul.
Güllülü, S. (1992). Ahi Birlikleri. Ötüken Yayınları: Ġstanbul.
Kotler P. (2009). Principles of Marketing Management. Pearson: New Jersey, USA.
Laczniak, G.R. and Murphy, P.E. (1985). Incorporating marketing ethics into the Organization,
in Laczniak, G.R. and Murphy, P.E. (Eds), Marketing Ethics: Guidelines for Managers, 97-105.
Lexington Books, Lexington, MA.
Merriam, S. B. (1998). Qualitative Research and Case Study Applications in Education. Jossey-Bass: CA, USA.
Murphy, P. E. And Laczniak, G. R. (1981). Marketing Ethics: A review with implications for managers, educators and
researchers. In Kenneth and Roering, (Eds), Review of Marketing, 251-266.
Nantel, J. And Weeks, A. W. (1996). Marketing ethics: Is there more to it then utilitarian approach? European Journal of
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Nason, R.W. and Della Bitta, A.J. (1983). The incidence and consumer perceptions of quantity surcharges. Journal of Marketing,
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Savasir, I. (1994). Ölçek uyarlamasındaki sorunlar ve bazı çözüm yolları. Türk Psikoloji Dergisi, 9(33), 27-32.
Torlak, Ö. (2007). Pazarlama Ahlakı, 4. Baskı, Ġstanbul: Beta Yayınları.
Tybout, A. and Zaltman, G. (1974). Ethics in marketing research: their practical relevance, Journal of Marketing Research, 11,
November, 357-68.
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A Research On Consumer Ethnocentrism and Consumer Boycotts
HurĢit Ertuğrul DERE
Afyon Kocatepe University
Sultandağı Vocational School
Turkey
hursitdere@yahoo.com
Abstract: The objective of this study is to investigate the consumer ethnocentric tendency and
consumer boycotts. Participiants who are consumers upper 18 age in 8 different cities of Turkey
formed the sample for this study. For the emprical investigation consumer ethnocentric tendency
and a new improved consumer boycott scales were used. Data collected were analyzed by using
Anova, t-test and descriptive statistical techniques. Considerable findings in the matter of
understanding consumer ethnocentric tendency and consumer boycot in Turkey market.End of this
study it is found that significiant relationship between age and consumer ethnocentric tendency
and significiant relationship between marriage status and consumer boycot tendency.
Keywords: Consumer ethnocentrism, Consumer boycott behaviour, CETSCALE
Introduction
The aim of this study is to examine the correlation between the ethnocentric tendencies of the consumers and
consumer boycott behavior. Consumer ethnocentrism provides emotional perception of the consumers towards
national goods. On the other hand, it is seen that even ethnocentric consumers prefer the cheaper goods even if they
are foreign originated ones when they are comparing the goods in terms of prices which is a rational qualification.
Today, the increase of the competition, transformation of the world into a common market by transportation
and information technologies, and the encountered economical difficulties have
made the consumers more
conscious and caring more about rational factors compared to old days. In fact, even consumer boycotts that are
mostly done with emotional base don‘t last long because of the rational factors. Consumers end the boycott for the
brand, good, or the country when they realize that they will get the maximum benefit from these goods. Although
national goods which are bought as a substitution to the foreign ones, reach a high number of sales income during the
boycott, they have dramatical decreases of sales income when the boycott ends. National manufacturers can have a
constantly increasing sales income if they focus on the issues such as quality development and basing the market,
rather than taking advantage of the cases like these.
Consumer Ethnocentrism
The concept of ethnocentrism means the tendency of the individuals to see their groups as the center of the
universe and judging of the other groups that have cultural differences and blindly acceptance of the groups that are
similar. In this context, the symbols and values of their own group are seen as a resource of pride while the values of
the other groups are scorned. As a result of relating ethnocentrism with the consumer behaviors, the consumer
ethnocentrism has appeared. In general concept, consumer ethnocentrism expresses the effects of consumers‘
national emotions on purchasing intentions. ( Uzkurt & Özmen,2004).
Many scientific researches, mostly foreign, have been conducted about consumer ethnocentrism recently.
In the research which was conducted in 2004 in EskiĢehir by Uzkurt and Özmen, data was obtained by
interviewing the customers who were chosen using convenience sampling method. Analysis has been conducted over
172 surveys in total. As a result of the analysis, the old compared to the young, ones with a lower education level
compared to the higher ones, ones who have lower income compared to the higher ones and married people
compared to the bachelors have higher ethnocentric tendencies.
In the research which is conducted by Güneren and Öztüre (2005) in Cyprus using CETSCALE ( Consumer
Ethnocentric Tendencies Scale), data is obtained from the survey applied to 114 people who were chosen with
convenience sampling method. As a result of the survey, the participants with a high level of ethnocentrism were
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
mostly amongst women, people with lower education level and lower income. No remarkable correlation has been
seen with the age of the participants and ethnocentrism.
In the research which was conducted by Orth and Firbasova in 2002 in Brno, the second biggest city of the
Czech Republic, and which was on ethnocentrism and yoghurts produced in Czech Republic, data was obtained
using a survey applied to 297 people who were randomly chosen and four different correlation model were formed.
As a result of the analysis it has been seen that, old consumers who have a high level of ethnocentric tendency, like
Czech yoghurts more than the young costumers who have a lower level of ethnocentric tendency. It makes it hard to
generalize the research that the number of the participants is low and it was only about yoghurt.
Fang Liu and others examined the correlation between the brand names from different languages and
customers‘ ethnocentric tendencies in 2007 in Guangzhou, the capital city of Guandog state in China. As a result of
the research it has been found that there is a remarkable correlation between the ethnocentric tendencies of the
customers and their ages and education levels.
In the research that was conducted by Chakrabarty and Conrad in 1995, a survey was applied on the phone
to 315 people who were chosen randomly. It has been found that ethnocentric tendencies decrease for good quality
products.
Consumer Boycotts
The tendencies of consumers on not buying a brand or none of the brands of a country is called consumer
boycott (Balıkçıoğlu and others, 2008). Consumer boycotts can be divided into various kinds considering the
duration, scope, organization type and reasons to do.
However, it is very difficult to consider a boycott in one class. For example, a boycott that is started because
of political reasons may last for a long time or in contrast it may last for a short time.
According to Balıkçıoğlu and others‘ statements, Friedman (1999) and Smith (2000) divide the consumer
boycotts into four considering their functions. These are: instrumental, expressive, punitive and buycott.
When boycotts in Turkey are examined, it is seen that products of Denmark were boycotted as the last one.
As a result of the publication of Hz. Mohammed‘s cartoons one after the other negatively, not only in Turkey but
also in the whole Islamic World they had confronted with enormous reaction and a boycott towards Danish products
was started. However, the very little trading volume between Turkey and Denmark was resulted this boycott not to
be so effective. Besides this boycott which was done as a result of religious exploitation, Italy and France were
boycotted because of political reasons and enterprises in the public towards boycotting the products of these
countries were started. Just like it was in Denmark sample, the little trading volume between Turkey and these two
countries and employment of thousands of Turkish citizens in Italian and French originated corporations in Turkey
with their national partners resulted these two boycott enterprises to fail.
Besides country boycotts also brand boycotts have been made. Especially in 2005, an organized boycott on
the Internet was started against Danone that is one of the biggest food companies, with messages distributed on the
Internet telling that additional substances that cause mental deficiencies are used in the child-oriented products of
this company and these statements caused dramatical decreases in the sales of the company.
Danone firm, that had great damage because of this case, has started legal process for the responsible ones
who distributed these messages on the Internet and for the next marketing works focused on the message that its
products include no additional substances that may damage human health transmitting it in various medias.
Research Method
In the research data is obtained using a survey. Surveys were applied to consumers who live in eight
different cities by interviewing them. 900 survey copies for consumers who live in 8 different cities were prepared
and 514 of them returned, thus the analysis has been made using these 514 survey copies. The distribution of the
participants according to the cities is given below.
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Province
Ġstanbul
Ankara
Ġzmir
Adana
Afyonkarahisar
Konya
Samsun
Gaziantep
Frequency
98
99
85
71
63
49
20
29
%
19.1
19.3
16.5
13.8
12.3
9.5
3.9
5.6
Table 1: The Distribution of the Participants According to the Cities
The survey used in the research has four parts. In the first part the participant‘s city, his/her attitude related
to consumer behaviors and if he/she is a member of any kind of consumer organization or not are asked. In the
second part basing on the February 2008 data of Turkish Statistical Institute (TSI) ten countries are given from
which Turkey imported goods and the participants are asked to state their attitude towards these countries. In this
part a fivefold likert scale has been used and attitudes are listed from (1) the country from which I can buy products
with peace of mind, to (5) the country which must be boycotted the most.
In the third part, five scales, which are in ―I certainly agree‖ and ―I certainly disagree‖ interval, are given for
19 attitude items that are prepared in accordance with likert scale. Six of these items are taken from CESTSCALE
which was developed by Shimp ve Sharma (1987). 10 items are related to consumer boycott and final 3 items are
asked in order to find out the attitudes of the consumers towards foreign goods and EU.
In the fourth part the demographic features of the participants have been tried to evaluate. In addition, it has
been asked the participants how do they defined themselves and whether they had any foreign product on at the
moment when the survey was being applied.
Research Findings
Demographic Structure of the Participants
64.6 % of the participants are male and 31.3 % of the participants a female. According to the 2008 TSI data
male-female rationale is equal in total population but it has been a limit of the study that female rationale is less than
male one. Besides according to the 2007 TSI data, the ratio of the university graduates to the total population is C
(vocational schools+faculties+masters degree and Phd) about 10%. In the sample the rato of the university graduates
is 39.7%. This situation is the other limit of the research.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Demographic Structure
Gender
Male
Female
Marital Status
Married
Single
Widow-divorced
Education
Primary education
High education
University
Age
18-24
25-31
32-40
40-50
51-60
Over 60
Income (YTL)
Below 580
581-800
801-1200
1201-2000
Over 2000 YTL
Occupation
Officer
Laboring
Tradesman
Retired
Self-employed
Housewife
Student
Frequency
Current %
332
161
66,7
32,3
292
190
14
58.9
38.3
2.8
79
221
204
15.7
43.8
40.5
138
102
121
89
43
6
27.7
20.4
24.2
17.8
8.6
1.2
107
84
136
71
42
24.2
19
30.8
16.1
9.5
95
120
72
33
33
21
81
20.9
26.4
15.8
7.3
7.3
4.6
17.8
Table 2: Demographic Structure of the Participants
The World View of the Participants
At the end of the survey it has been asked the participants how they defined themselves and to choose one
option out of six ones. 37% of the participants have defined themselves as patriots.
View
Leftist
Social Democrat
Conservative
Religious
Nationalist
Liberal
None
Frequency
40
92
59
59
183
36
23
%
8.1
18.7
12
12
37.2
7.3
4.6
Table 3: The World View of the Participants.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
67% of the participants have stated that they had foreign products on at the moment of replying the survey.
It has been found out that the most common foreign product that the participants have on is the mobile phone.
Research Findings About Consumer Boycott Behavior
46.5 % of the participants have stated that they had boycotted a country or a brand.
In table 4 that is given below, the product groups that the consumers had boycotted are shown. As a result
of the analysis it has seen that the product group which is boycotted the most is food group with a ratio of 44.7 % and
the least is medical group with a ratio of 2.5%.
Product Group
Food
Confection-textile
Automative
Personal care products
Cleaning products
Whiteware
Newspaper-magazine
Furniture-carpet-home products
Banking-insurance group
Medical Group
Frequency
106
36
21
16
11
13
11
9
8
6
Current %
44.7
15.2
8.9
6.8
4.6
5.5
4.6
3.8
3.4
2.5
Table 4: Boycotted Product Groups.
When the boycott durations are analyzed, 61.3 of the participants have stated that they have been still going
on with the consumer boycotts.
Boycott duration
Below 3 mounths
3-6 mounths
6-12 mounths
1-2 years
Over 2 years
Still going on
Frequency
25
25
19
14
8
144
Current %
10.6
10.6
8.1
6
3.4
61.3
Table 5: Boycott Duration
Boycotted Countries and Brands
With a ratio of 35.7% it has been found out that mostly boycotted country is USA and 39% of the
participants believe USA to be boycotted constantly. Five of the participants have stated that they boycott Turkey.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Country
U.S.A
France
Israel
Italy
China
Russia
England
Denmark
Netherland
Germany
Iran
Turkey
Sweden
Japan
Frequency
74
38
28
16
13
1
4
16
12
6
1
5
1
2
Current %
35.7
18.4
13.5
7.7
6.3
0.5
1.9
7.7
1
2.9
0.5
2.4
0.5
1
Table 6: The Boycotted Countries
It has been found out that the participants boycott 41 different brands. According to the results of the
analysis mostly boycotted brand is Coca-Cola. As Coca-Cola is a food company that belongs to the USA, it is seen
that research findings about the boycotted product group, country and brand are consistent. It has been found out that
11different Turkish brands are boycotted by the participants.
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Brand
Coca-Cola
Ariel
Danone
Mc Donalds
Nestle
Nescafe
Rodi
Motorola
Gucci
Ġpek shampoo
Colgate
Bosche
Benetton
Newspaper of Turkey
Ülker
Rosche
Profilo
Adidas
Pınarsüt
Fruko
Leke
Knorr
Converse
Amway
Telefunken
Vestel
Ġstikbal
Avon
Beta
Leman
Newsweek
Peugeot
Renault
Ford
Fiat
Scharzkopf
Siemens
Ġpana
Philips
Toyota
Loreal Paris
Frequency
49
10
5
3
7
2
1
5
1
1
1
1
3
1
1
5
1
1
1
1
2
1
1
2
3
1
1
2
3
1
1
1
4
1
1
2
1
2
1
1
1
Current %
36.6
7.5
3.7
2.2
5.2
1.5
0.7
3.7
0.7
0.7
0.7
0.7
2.2
0.7
0.7
3.7
0.7
0.7
0.7
0.7
1.5
0.7
0.7
1.5
2.2
0.7
0.7
1.5
2.2
0.7
0.7
0.7
3
0.7
0.7
1.5
0.7
1.5
0.7
0.7
0.7
Table 7. The Boycotted Brands
34.3 % of the participants have stated that they bought a product again later which once they had boycotted.
16.1 % of the participants have replied the question. The reasons of the re-purchasing these products are shown in
Table 8.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Reasons for Repurchasing
Quality
Chepness
Obligation
Reason of the boycott
disappeared
was
Frequency
18
12
43
10
Current %
21.7
14.5
51.8
12
Table 8: Consumers Reasons for Repurchasing The Brands That They Boycotted.
More than half of the participants who have replied to the question have stated that they re-purchased the
products that they once boycotted because they had to do it. 21.7 of the participants have re-purchased the products
because of its good quality.
The attitudes of the participants towards ten countries from which Turkey had imported goods according to
the February 2008 data of TSI have been evaluated. A fivefold scale has been used starting from the country from
which you can buy goods in peace of mind (1) to the country that must be boycotted the most (5) In table 9 attitudes
of the participants towards these ten countries are shown.
Countries
The counrty
which shoul
be boycotted
most (%)
The counrty
which should
be boycotted
(%)
Russia
Germany
China
Italy
U.S.A.
France
England
Switzerland
Ukrain
Iran
9.7
8
35.6
10.9
55.6
42.8
28.8
12.5
5.4
10.5
17,3
13.6
24.7
22
24.5
26.1
19.8
11.5
8.4
5.1
The country
which
doesn‘t need
to
be
boycotted
(%)
27
28
15.6
27.4
7
11.9
19.5
30.5
35
29.4
The country
which should
be
cooperated
(%)
27
23.2
10.9
14.2
4.5
6.4
12.5
17.5
22.8
30.5
The country
which we get
their
products with
peace
of
mind (%)
3.5
13.6
1.8
3.5
1.9
1.6
2.7
7.2
5.8
8.6
The
participants
that have no
informed
(%)
15.4
13.6
11.5
22
6.4
11.3
16.7
20.6
22.6
16
Table 9: View of the Participants About Ten Selected Countries
Only 1.8 % of the participants have been a member of any kind of a consumer organization.
Evaluation results about the 19 items which are located in the third part of the research and which are
prepared using a fivefold likert scale about the attitudes of the participants towards consumer boycotts are given in
Table 10.
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Statement
1. Domestic products should be taken at any time instead of
imported products.
2. The products not only in our country should be imported.
3. Foreign products should‘nt be bought because this will cause
unemployment.
4. I prefer to support my country‘s product, even if the cost
burden to me.
5. Access of the foreign products to Turkish market should be
complicated
6. Consumer boycotts are effective on companies.
7. Local businesses organizate the boycotts that against to the
foreign products.
8. Media orientate the consumer boycotts.
9. I boycott the products of companies which exploited my
religious beliefs.
10. I boycott the products of companies which damaged my
country‘s political interest.
11. People around me effect met to do consumer boycott.
12. I boycott the products with my own volition.
13. I never purchase a product of a country or firm which I
boycotted before.
14. I try to orientate the other consumers to boycott.
15. Boycott is an individual reaction against the negative
bahaviour.
16. Importation sholud be prevented because it is a big threat
for domestic production.
17. Quality product should been in my country even if it is
foreigner
18. I believe that EU membership would be useful for our
country.
19. Imported products increases our quality of life.
Mean
4.18
S.D.
1.03
3.94
3.64
1.03
1.14
3.72
1.15
3.71
1.07
3.73
3.26
0.92
0.92
4.01
0.87
4.19
4.33
0.99
0.89
2.35
4.04
1.15
1.61
3.85
3.57
1.02
1.1
3.96
0.94
3.97
1.02
3.49
1.12
3.35
1.34
2.82
1.24
Table 10: Average Values Related to the Participants‘ Ethnocentric Tendencies and Consumer Boycott
Behaviors
The correlation between the demographic characteristics of the participants and consumer ethnocentric and
consumer boycott behaviors has been examined. T-test and variance analysis results are separately given in Table 11
and Table 12.
Demographic
Structure
Gender
Age
Marital status
Income
Calculated Value
14.684
2.297
0.601
2.548
Significicance
Level
0.188 (t)
0.048
0.549
0.02
(P= 0,05)
Table 11: The Examination of the Correlation Between Ethnocentric Tendencies and Demographic Features of the
Participants
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As a result of the T-test it has seen that ethnocentric tendencies don‘t change according to the gender. As a
result of the variance analysis no remarkable correlation is found between the consumer ethnocentric tendencies and
marital status. Besides that it is seen that consumer ethnocentric tendencies differ according to age and marital status.
Demographic
Structure
Gender
Age
Marital status
Income
Calculated Value
1.073
0.843
3.076
0.676
Significicance
Level
0.451
0.519
0.047
0.669
(P= 0,05)
Table 12: The Examination of the Correlation Between Consumer Boycott Behavior of the Participants and Their
Demographic Features.
In the result of the T-test it has been found out that consumer boycott behaviors tendencies don‘t differ
according to the gender. In the results of variance analysis it has been found out that consumer boycott behavior
tendencies differ according to the marital status. In addition to that it has been found out that consumer boycott
behavior tendencies don‘t differ according to the age and income.
Conclusion and the Limits of the Research
Inadequate quantity of the sample group and because available sample group doesn‘t reflect the
demographic features of the main group prevent the research results from generalization. Another limit of the
research is because of the disparity of the number of the participants from 8 different cities compared to the number
of each city‘s population.
As a result of the T-test it has been found out that consumer ethnocentric tendencies don‘t differ according
to the gender. As a result of the variance analysis no remarkable correlation has been found out between consumer
ethnocentric tendencies and consumer marital status. However, it has been found out that consumer ethnocentric
tendencies change according to the age and income.
As a result of the research, the upper location of the countries and brands that are mostly boycotted in the
list in terms of Turkey‘s exporting volume and intensifying of consumer boycotts in especially some definite
countries and brands can be subjects of future researches.
References
Balıkçıoğlu, B., Koçak, A., Özer, A.(2008). Process of indirect consumer boycott as a non-violence movement and evolvations
for Turkey. Journal of Faculty of Politic Sciences of Ankara University, 63(2), 79-100
Güneren, E.& Öztüren, A. (2005). A Pilot Survey on Effect of Consumer Ethnocentric Tendencies to Buying Trend of Domestic
and Foreign Products of TRNC Citizens. 10th Marketing Congress, 2005, 169-188
Lui F., Murphy, J., Li, J., Liu, X. (2007). English and Chinese? The role consumer ethnocentrism and country of Chinese attitudes
towards store sings. Australasian Marketing Journal, 14(2), 5-13
Orthu, R. & Firbasova, Z.(2002). Ethnocentrism and Consumer Evaluations of Czech Made Yoghurt. Agric. Econ.48(4),175-181
Turkish Statistical
(10.05.2008)
Institute.(2008).
National
Data
Release
Calendar.
http://www.tuik.gov.tr/PreTablo.do?tb
id=11.
Uzkurt, C. & Özmen, M. (2004). The Effects of Consumer Ethnocentrism and Country-origin to Consumer Attitudes of Domestic
and Foreign Products. Proceedings Books. Faculty of Administrative and Economic Sciences of Gazi University, 2004, 261-274
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Data Warehousing (DW) - Models and Business Application
Aida HABUL
Prof. Dr., Sarajevo University,
Faculty of Economics
Sarajevo, Bosnia and Herzegovina
aida.habul@efsa.unsa.ba
Merdžana OBRALIģ
Res. Assist., International Burch University,
Faculty of Economics
Sarajevo, Bosnia and Herzegovina
mobralic@ibu.edu.ba
Abstract: Fighting with competition requires innovative ways of achieving the
advantages in the market. Creating long-term policy of doing business with the possibility
of adjustment to unpredictable phenomena requires an enormous amount of quality
information about the condition of the company, market, trends of state policies,
international trends, etc. This is a huge amount of different data. In the DW this
information is extracted, transformed, at the same time detailed and aggregated, processed
in a format that suits the user and is available in real time.
The Data Warehouse is a unique picture of business reality and ensures the
comprehensiveness of the whole business system; coverage of external and internal data is
the basis for defining the business strategy. The DW promotes the business of the
company by enriching the business processes and their participants with information
needed for making business decisions. It is forced to accurately define and describe the
business processes that need to be rejected, imported or innovated. The DW contains
rapid, accurate, aggregated, visually accessible information that contains a time
dimension, which represents an important managerial resource.
Introduction
In the market there is growing competition that day by day globalizes. At the same time, buyers are more
and more selective. All this is forcing manufacturers to constantly check their competitiveness in the market and to
find a successful business strategy. Strategic advantage over competitors is sought by achieving the proper planning
of market, product innovation, and proper relationships with customers and clients. It is necessity to have timely and
relevant information on all aspects of the business and market situations.
Data Warehousing is an important concept of effective decision support systems that are intensively
developing in recent years. With this concept and the methods is wanted to achieve ''intelligent'' business of company
in complex market conditions. For this already there is the name ''business intelligence''.
The company, which analyzes the behavior of their customers, behaves ''intelligently''. For example, it has
all the necessary customer data and captures every activity which is connected to that customer in the database. With
the analysis of this data, for example; by analyzing what and when the customer purchased, how many complaints
and for which products he had, all these analysis make the customer profile, or can be put into some category.
With the analyses of their own business data and external factors, we get the information used in making optimal
business decisions, and at the end make profit and ensure the further existence.
Data Warehousing
Data Warehousing is a set of data organization on which a decision support system is based. A small data
warehouse that contains the data of only one area is called a regional data warehouse (eng. Data March). Data
Warehouse is defined as a set of information organized so can be analyzed, extracted, merged and otherwise be used
to understand their essence.
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Data Warehousing is also a database, provided that the information in it is organized in a special way. A Data
Warehouse has a large amount of data that is organized into small logical units called March Data. Data Warehouse
systems use abnormal (relaxed) data. Executing a query over the data organized this way is much faster. This kind of
work is called OLAP (On Line Analytical Processing). Data that is embedded in the data warehouse is usually
accessed through the March data. March Data usually represent a subset of logically related data from the data
warehouse, which refers to a specific area.
Business Intelligence is taken from data generated during the everyday business of firms. Because of the
perimeter, this data is archived each year, deleted and only the data of the next year remains in the database. In
addition, the data in the database must be updated so that old data is replaced with new data (e.g., old price, the old
quantity in warehouses or in stores they are being replaced by new ones), and then the trail of the old data is erased
in the database. For operational management of the old values businesses, for example, quantity in warehouse are not
important, but they are important for the business intelligence that tracks the time sequence of events of individual
business events. As a conclusion we can say that transactional bases are no longer enough, there is a need for data
warehouse.
Table 1. view of database and data warehouse
Features of Database
The data in related databases is organized into twodimensional tables that are mutually connected. The
database contains information for each business period.
After this period the data is archived and deleted from the
current database. The data is constantly being updated and
the old values cannot be seen.
What is differet beteen a warehouse and a
database?
A warehouse does not accumulate all the data from the
database in recent years. Only the data from the database
that is thought to be important for the analysis is archived
in the warehouse. The data in the warehouse is organized in a multidimensional cube, it is permanent and is related
to the time of emergence. The aim of the data warehouse is not operational business, it is to create a richer sourse of
information for various short and long term analysis and for forecasting.
P
W
r
a
o
r
p
e
e
h
r
o
t
i
u
e
s
s
o
f
D
a
t
a
e
The properities of the Data Warehouse are integration of Data Warehouse systems, the orientation of the Data
Warehouse system threads, the time dependence of the Data Warehouse system and the permanence of the Data
Warehouse system.
Orientation of DW System on Topics
The data is categorized and organized according to topics of business and not as a functional unit.
Examples of possible themes are Sales-information about products, customers, spatial and organizational structure;
Marketing-data about markets, products, customers, technologies, plans; Production-data about products, customers,
technologies, plans; Financial operations; and Transportation.
Time Dependence of DW System
The data is organized by a series ''cross of state‘‘ of operational data; each cross refers to a time interval.
How appear Data Warehouse ?
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Table 2. Data Warehouse
Basic Models of Data Warehouse
When creating a data warehouse today in practice we face three basic models or basic architecture of data
warehouse:
(1) two-layer architecture with a common data warehouse (original data + data warehouse);
this model is characterizing a single common centralized data warehouse. Data are received from various sources
inside of the organization and external data sources available via the Internet or other means. Characteristic of twolayer architecture is that it serves a large number of organizational units of company as individual users. Such
warehouses are large scale and very complex, and they are usually stored vast amounts of data. And the scheme of
data that are used for storing data should support a wide range application request. From the above it is evident that
the costs of maintaining such architecture are high and assume a substantial commitment and time of a certain
number and profiles of experts.
(2) two-layer architecture with multiple independent local data warehouse (original data + data march);
Characteristics of this data warehouse architecture is the existence of large number of independent local data
warehouse intended for support individual applications in the organizational units of companies. The result of this
architecture is the large number of systems which each of them submitted their data from various transactional
databases. The advantage of the above model of data warehouse is simpler construction and easier to use. But this
model also has disadvantages such as: (1) Difficulties in communication among organizational units of companies.
This model is not suitable for companies whose business requires the support of applications and projects that
assume mutual communication and cooperation of a larger number of organizational units of companies. (2)
Increasing the number of mutually independent data warehouse, slow growth and load themselves transactional
systems. (3) Data Marches are designed to support only one application and subsequent addition of new applications
in a specific warehouse represent difficulties. (4) Limited scalability of platform. And, (5) Uvid into actual state of
information at the company level became difficult.
(3) three-layer architecture with a common data warehouse and several affiliated local warehouses (original data
+ data warehouse + data march);
This model consists of large number of local data warehouse and a common data warehouse that is located
between the data warehouse and various data sources within and outside the company. Data warehouses rely on
central data warehouse that delivers information in a form that provides uniform access to all segments of company
business. Compared to the previous two models the advantages of three-layer architecture are higher accuracy of the
information freely from which sources are affected, communication among organizational units is easier, the burden
on IT specialists is reduced, stability and scalability of data warehousing platform is increased, and at the end, this
architecture is offering possibility of using foreign applications allowing connection of all entities in the chain of
value.
This three-layer warehouse architecture, that is known as the most used one has it owns advantages and
disadvantages. The advantages are: (1) The work load of IT specialists is reduced (because the data is already
coordinated in the warehouse, so they are just taken in the warehouse); (2) More opportunities to add new
application; (3) Improves the accuracy and precision of information (because everything is derived from one
warehouse); (4) Less difficulty in communication and cooperation between organizational units and parts that has to
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
be performed together; and (5) The possibility of the use of applications that goes beyond the framework of
operations (connecting with buyers and suppliers in the value chain). The disadvantages are: Relatively high cost of
establishing a common warehouse at corporate level (to eliminate this disadvantage we have to make a gradual
incremental construction of warehouses: first we have to create the first warehouse, then the mini-warehouse, than
gradually add new warehouses and activate new applications, and finally comes the independence of the ''real''
warehouse).
Implementation of Data Warehouse
There are many ways to implement the Data Warehouse in a company. The implementation can be seen
from several aspects:
(1) An area that covers the data warehouse; DW can contain all the information of one company and for a period of
several years. Also, DW can carry a personal character for a specific manager and can contain information from a
short period of time (one year).
(2) Volume of data redundancy; there are three levels of data redundancy that companies should consider when
designing their own DW. (1) Virtual or ''Point to Point'' DW; (2) Central DW; and (3) Distributed DW.
(3) Types of final users; when we look at the DW from the final user point, we can establish three categories of
users: (1) CEOs and managers; (2) ''Powerful'' users (business and financial analysts, engineers, etc.); and (3) Users
for support (operational and administrative staff)
Levels of Analysis of Data in Warehouse
1. Generate static reports - If we only need a report in tabular or graphical format on the existing data from
the data warehouse, report generators are sufficient tools (e.g. Microsoft Crystal Reports or Oracle Reports), which
simply display data that is filtered, sorted or summarized by some criteria from the database.
2. OLAP (on-line processing analytical) - More complex, analytical processing of data by different
dimensions is done at the relational base on OLAP technology (e.g.: if you want to get information about Mazda 323
cars for sale in Osijek Friday afternoon). To view OLAP we have to use the most frequent three-dimensional cubes.
3. Data Mining - The most complex part of data processing, means sophisticated Métis for searching hidden
laws in data.
Selection of DW Strategies
Before the DW system is developed, it is necessary to choose a strategy that is as far as possible a guarantee
that the ultimate solution will meet the specific demands at the time.
Who are the final users? Which areas should be covered? What kind of information should the DW
provide? These are just some of the issues raised in the selection of implementation strategies of a DW in a company.
We should not ignore the fact that man is the main factor in the decision making process.
Business Application of Data Warehouse
Databases can be seen as the area where the company partners (customers, clients, service users) leave clues
about their business relationship with the company. Every transaction, purchase, invitation addressed over the call
center, seeking bids for certain set of items is being recorded in database.
Company that are using Data Warehouses
1) Volkswagen AG - uses Business Object tools for monitoring all data - from finance, manufacturing, development,
research, sales, marketing and purchasing. Users at all levels can access the statements in BI tools.
2) MasterCard International – uses the BI tools for monitoring data in the area of advertising and authorization and
fraud detection.
3) Magma uses OLAP and BI tools to improve the reporting system on the sale of goods.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Example of Applying DW in Textile Trades
A typical retail shop sells textiles to a large number of customers whose needs are significantly different.
Without adequate resources for the analysis of numerous data about clients, the shop would be doomed to failure.
The biggest benefits for a business are functions, the contact point through which insight into the characteristics and
behavior of clients is created.
The development of information technology has enabled us to be informed about clients and also to fill our
database with useful information.
The value of a customer is very important data. During their entire life cycle, the value of the customers is
always changing. All clients are not equally profitable, so the profitability of customers also changes over time.
These are the reasons why it is important to identify the clients whose value during their entire life cycle is great and
to establish close relationships with them. Our database should also contain answers to important questions about
customers, such as customer loyalty, cross selling, determining target prices, but also about suppliers, the efficiency
of suppliers, stock control, product flow, forecasting demand. The emphasis on the importance of logistics leads to
specialization in providing logistics services exclusively.
Textile makers are faced with the traditional approach of material offers which a user can feel and with the
new generation of customers that manage in the virtual world almost as much as in the real.
A well-made database enables the rapid development and progress in every sense. Also, the path from the
manufacturer to the final consumers is reduced to the minimum.
However, the possibilities of keeping the customer in this market are far greater than in others. Today we
are witnessing estimates that the market of direct selling as it was known in years past will completely disappear,
work on the DW and the content that is offered to customers with quality procurement and distribution channels can
ensure the stability of textile makers in new times. Therefore we should not neglect the potential of the Internet, but
we should consider target regional environment.
Decisions taken should be closely connected with the database. The database should be well designed,
created and filled with good information. That is the only way to guarantee life and successful business.
Conclusion
Fighting competition requires innovative ways of achieving the advantage in the market. Creating a longterm policy of doing business with the possibility of adjustment to unpredictable phenomena requires an enormous
amount of quality information on the condition of the company, market, trends of state policies, international trends,
etc. This is a huge amount of different data. In a DW this information is extracted, transformed, at the same time
detailed and aggregated, processed in format that suits the user and available in real time.
The Data Warehouse is a unique picture of business reality and ensures the comprehensiveness of the whole
business system; coverage of external and internal data is the basis for defining the business strategy. The DW
promotes the business of the company by enriching the business processes and their participants with information
needed for making business decisions. It is forced to accurately define and describe the business processes that need
to be rejected, imported or innovated. The DW contains rapid, accurate, aggregated, visually accessible information
that contains a time dimension, which represents an important managerial resource.
The DW is an information technology that simply imposes cooperative team work of professional
information experts and economists, and links the technical and business worlds. Perhaps this will lead to better
cooperation between designers and users of information systems and thus to greater success in the project of building
company information systems.
References
Bojan C., Poslovna inteligencija, Beograd, 2006.
Hanic H., Sistem informacija za upravljanje marketingom, Beogradska banarska akademija, Beograd, 2008.
http://www.infotrend.hr/clanak/2009/7/temelj-procesa-odlucivanja,41,810.html
John P., Model-Driven Data Warehouse, Integrate Burlingame, CA, 2003
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Kellet A., Integrated Business Intelligence, Butler Group, April 2003
Mladen V., Skladiste podataka.
Mrsic L., Poslovna inteligencija kroz poslovne slucajeve, Zagreb, 2003
Mrsic L., Primjena metoda rudarenja podataka u trgovini tekstilnim i srodnim proizvodima, Magistarski rad, Zagreb, 2004.
www.skladistenje.com
www.znanje.org
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Public Expenditure and Political Business Cycles inTurkey
Recep TARI
Faculty of Economics and Administrative Sciences,
Department of Economics, Kocaeli University, Turkey
rtari@kocaeli.edu.tr
Filiz ÖZKAN
Kaynarca Vocational School, Department of Economics and Administrative Sciences
Sakarya University, Turkey
fozkan@sakarya.edu.tr
Abstract: According to the theory of ―Political Business Cycles (PBC)‖, politicians prefer to
pursue opportunistic policies in order to increase their chance of election. For this reason, they
apply expansionary policies before the elections. Hence, they start to do this by increasing public
expenditures. There is an increase in the indicators of money parallel to the increase in public
expenditures. In this study it is examined that whether there have been appropriate developments
in terms of PBC theory during the elections of six congressmen in the period after 1980. In order
to determine the effect of PBC ―the traditional opportunistic model‖ from Nordhaus is used to test
the PBC effect. ―The opportunistic model‖ from Nordhaus is tested through the autoregressive
analysis method which is used by Alesina, Cohen and Roubini (1991,1992) in their studies for the
OECD countries and industrial countries. The results obtained as a result of the empirical analysis
support the PBC theory.
Introduction
The history of economics is the history of debates between the ones who claim that the government
intervention is necessary and who claim that it is unnecessary. In the framework of these debates, applications of
both of these approaches are observed due to the economic conditions of each period. However, there is a fact which
should be accepted that every day the state intervenes in the economic life with different reasons and through various
legal and institutional regulations. If the economists are not able to put their developed theories into the application,
then they just do brain gymnastic. Thus, this situation is seemed during many years and this distinction between
economics and politics give the idea to the politicians that they can arrange the economic life according to their own
vote calculations. This idea becomes widespread along with the economists isolate themselves from the legal and
institutional structure of the society (SavaĢ, 1997). Especially in the developing countries with a less institutional and
legal structure, the public share in the economy is more than others. Through the political instabilities it is
understood that the financial issues are not the only reason of this situation. In the beginning the state is seem as
maintaining the social order and it is associated with the Leviathan which is a superhuman being, whereas later it is
seen that the state is transformed to a monster that gives harm to its environment. Especially, after the Second World
War the rapid increase in the contribution of state in the economic life is defined as a very big danger (Erim, 2007).
If being away from the economic life is impossible for the state, at least there should be a limit of this contribution.
Politics and political institutions should be accepted as endogenous rather than exogenous in the economic theories.
After the long historical development process from this view, the Political Economic Theory (PET) is developed.
According to the PBC theory economy is manipulated by policy makers during the electoral periods since
politicians behave with political interest mostly in these periods. If the politicians are not restricted enough with the
laws in terms of their usage of economic policy tools, they prefer to pursue opportunistic policies instead of policies
for the interest of the public. In order to affect electorates, they mostly increase public expenditures. The financing of
the increased public expenditures is funded through increasing the money supply instead of increasing taxes since
taxes are not pleased by the electorates (Azgün, 2006). In this study, it is examined that whether the PBC has an
effect on the money variables of public expenditures, money supply and money in circulation during the general
elections of six congressmen in the period after 1980 in Turkey. ―The traditional opportunistic model‖ of Nordhaus
is used in order to test the effect of PBC. ―The opportunistic model‖ from Nordhaus is tested through the
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
autoregressive analysis method which is used by Alesina, Cohen and Roubini (1991, 1992) in their studies for the
OECD countries and industrial countries.
Political Business Cycles Models
The concept of Political Business Cycles is firstly used by Nordhaus. According to Nordhaus, by aiming
vote maximization politicians pursue expansionary policies before the elections in order to boost the economy
whereas they pursue contractionary policies after the elections in order to remove the effects of these expansionary
policies. Therefore, a cycle occurs in economy due to the electoral periods (Nordhaus, 1975).
When the studies related with Political Business Cycles is examined it is observed that the literature
regarding to this issue is developed on two cycles. The first one is ―traditional model‖ that is considered in two
categories and the first of these is the opportunistic model developed by Nordhaus and the second one is the
partisanship model developed later by Hibbs (Hibbs, 1977). According to opportunistic model, politicians do not
have partisan objectives, they just appeal all kinds of manipulations in order to win elections. According to
partisanship model, politicians try to gain votes of their own electoral group by implementing ideological policies.
Secondly, in the framework of ―rational expectations theory‖ which is popular in 1980s, the PBC theory has been
developed as a ―modern approach‖. With the acceptance of rational expectations theory, the PBC theory is criticized
at the beginning. However, as a result of the empirical studies positive findings are obtained regarding to that the
PBC theory can still be explanatory even though the rational expectations theory is valid. According to the modern
PBC theory, because of the asymmetric information between the governments and citizens governments continue to
exhibit opportunistic or partisanship behaviors.
Methodology
In this study, in order to determine whether the politicians pursue opportunistic policies or not in the
electoral periods, the autoregressive analysis method is used which is applied by Alesina, Cohen and Roubini
(1991,1992) in their studies for the OECD countries and industrial countries (Alesina, 1991). The autoregressive
models are preferred instead of the structural models regarding each macroeconomic indicator which is due to the
reason that by testing each variable with the same model it is aimed to decrease the probability of difference that can
be arisen from modeling error in the determination of the effect of electoral periods. Furthermore, in the literature it
is emphasized that structural models are mainly valid in the developed countries with strong economy whereas their
validity is questionable in the less developed and developing countries with fragile economic system (Özkan, 2005).
General notation of the autoregressive model which is used in this study is as in the following:
Yt = α0 + α1 Yt-1+ α2 Yt-2+……+ αn Yt-n+PBCDUMMY + εt
(1)
Here, Yt represents each macroeconomic indicator. PBCDUMMY is the dummy variable that indicates the
dynamic implications of the theory of political business cycles. PBCDUMMY is defined as ―1‖ for the election
quarter and three quarters before the election, and defined as ―0‖ for other periods. εt represents the error terms.
The lagged values of autoregressive model is determined through the ―from general to special theory‖. The
stability of series is examined through the ADF unit root test (Dickey and Fuller, 1990). The Jarque-Bera(JB) test is
used in order to test whether the normality assumption, which is one of the necessary assumptions to perform
autoregression analysis, is satisfied or not (Bera and Jarque, 1981). After these models are tested, through the
Breusch Godfrey (LM) test it is checked whether there is an autocorrelation between the error terms or not (Godfrey,
1988). For error terms having constant variance is another necessary condition for autoregression analysis. The
ARCH LM test is used in order to determine whether the error terms have constant variance or not.
Test Results
Unit Root Analyses Result
When the graphic of public expenditures series in real terms is examined, seasonal effects are observed in the series. It
is observed that the coefficients are significant in the regression analysis which is performed with the seasonal dummy variables.
The seasonality effects are removed from the series and the stability of the series is checked with the ADF test. As seen on Table
1, the real public expenditures series which does not include seasonal effects is not stable as its degree. It is seen that the yearly
percentage change of series is stable with 0.05% significance level according to the ADF model which has a constant term and
trend.
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12000000
150
10000000
100
8000000
50
6000000
0
4000000
-50
2000000
0
-100
88
90
92
94
96
98
00
02
04
06
08
88
90
92
KAMUHARREEL
94
96
98
00
02
04
06
08
KAMUHARREELSAYD
Figure 1: Degree of Public Expenditures and Its Yearly Percentage Change Graphics
When the graphic of public expenditures series in real terms is examined, seasonal effects are observed in
the series. It is observed that the coefficients are significant in the regression analysis which is performed with the
seasonal dummy variables. The seasonality effects are removed from the series and the stability of the series is
checked with the ADF test. As seen on Table 1, the real public expenditures series which does not include seasonal
effects is not stable as its degree. It is seen that the yearly percentage change of series is stable with 0.05%
significance level according to the ADF model which has a constant term and trend.
50000000
60
40
40000000
20
30000000
0
20000000
-20
10000000
-40
88
90
92
94
96
98
00
02
04
06
08
88
90
92
94
96
RELM1
98
00
02
04
06
08
RE LM1YD
Figure 2: Degree of Real M1 and Its Yearly Percentage Change Graphics
When the graphic of Real M1 series is examined, at first it is observed that the series is not stable.
Furthermore, it appears that there can also be seasonal effect. It is seen that the coefficients are significant as a result
of the regression analysis done with the seasonal dummy variables. However, when the yearly percentage change is
considered the seasonality effect disappears. Furthermore, when Table 1 is examined it is seen that while the real M1
series is not stable, the percentage change is stable in all ADF models in terms of various significance levels.
24000000
60
20000000
40
16000000
20
12000000
0
8000000
-20
4000000
-40
88
90
92
94
96
98
00
02
04
06
08
88
90
REELDOLPARA
92
94
96
98
00
02
04
06
08
RE ELDOLPARA YD
Figure 3: Degree of Real Money in Circulation and Its Yearly Percentage Change Graphics
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When the graphic of real money in circulation is examined, it is understood that the series is not stable,
however it is not certainly understood whether there is a seasonal effect or not. As a result of the regression analysis
done with the seasonal dummy variables it is seen that the coefficients are insignificant, therefore it is understood
that there is no seasonality effect. When the results of the unit root test is examined, it is observed that the series of
real money in circulation is not stable in degree of level whereas the percentage change is stable in all ADF models
in terms of various significance levels.
The results of ADF unit root test, which is performed to determine the stability structures of series, are
shown on Table 1.
with constant
term
Public expenditures
-2,04
Public expenditures % -1,80
M1
0,03
M1%
-2,70***
Money in circulation
1,62
Money in circulation % -2,85***
%1 -3,51
Kritical values,
%5 -2,89
%10 -2,58
Lag.
3
8
4
4
6
4
constant
and trend
-1,47
-3,79**
-1,00
-4,08*
0,37
-4,90*
-4,06
-3,46
-3,15
term
Lag.
3
3
4
7
6
3
without constant
term and trend
-0,91
-0,76
0,98
-2,02**
2,12
-2,44**
-2,59
-1,94
-1,61
Lag.
4
4
4
8
6
4
Table 1: ADF Test Results
Autoregressive Model Analyses Results
The summary of statistical values for autoregressive model examining public expenditures, money supply
and money in circulation is shown on Table 2. The autoregressive models which are estimated by lagged values are
as in the following:
Pub.Expen. = 2,53+ 13,6 Pub.Expen. (-2) + 0,18 Pub.Expen. (-4) + 0,39 PBCdummy
(0,00) (0,03)
(0,08)
(0,00)
M1 = 7,47
(0.05) (0.00)
+0,79 M1(-1)
(0,01)
+0,42 M1(-5)
(0,00)
+ 0,21 M1(-7)
(0,04)
– 0,22 M1(-8)
(0,03)
+8,22PBCdummy
(0,06)
M.Cir. = 2,95+ 0,49 M.Cir.(-1) + 0,20 M.Cir.(-2) - 0,33 M.Cir.(-4) + 26 M.Cir.(-5) + 11,79 PBCdummy
(0,41)
(0,00)
(0,07)
(0,00)
(0,01)
(0,00)
Independent
Varieble
PBC
2
R
Dummy
DW
F probably
JB
LM
ARCH
Dependent Variable
Public
Money Supply
α
t
ist.
t
pro
αi
t ist. t ol.
Harcamaları
i
13,6 2,17 0,03 8,22
1,87 0,06
**
***
0,25
0,62
2,07
2,07
0,00
0,00
47,47 (0.00)
1,40 (0,49)
0,85 (0,47)
0,53(0,58)
0,92 (0,40)
0,30(0,73)
Money Circulation
αi
t ist.
t prob
11,79*
3,07
0,00
0,44
2,05
0,00
17,10 (0,00)
0,56(0,56)
1,27(0,27)
Table 2: Autoregressive Analyses Results
According to the regression estimate results on Table 2, it is observed that there is no autocorrelation and
changing variance problems in the LM and ARCH tests. Even the normality assumption is not satisfied in the model
regarding money supply since the number of observation (80) is sufficient enough and since there is no changing
variance problem the regression is highly confidential.
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When coefficient estimate results regarding to the examined variables are concerned, it is seen that
PBCDummy coefficient is positive and significant as appropriate to the theory. This acquired result confirms the
argument of the PBC theory that when the politicians try to affect the electorates they mostly use the ―public
expenditures‖ as fiscal policy tool. As a result of the increase in public expenditures there is an increase in money
supply and money in circulation.
Conclusion
Manipulating the macroeconomic policies in the direction of politic interests is one of the significant
problems of Turkish economy as in the economies of many countries. In order to come to power and to establish
government, politicians do not avoid using macroeconomic policies as instruments. In this study it is aimed to
determine whether politicians have opportunistic behavior or not. Therefore, it is analyzed that being appropriate to
the PBC theory whether there is a significant change in policy instrument variables such as public expenditures,
money supply and money in circulation during the electoral periods. When the obtained results are examined it is
observed that the election dummy variable regarding public expenditures, money supply and money in circulation is
positive and statistically significant which is appropriate to the theory. These findings assert that governments pursue
opportunistic policies in electoral periods in Turkey.
References
SavaĢ, V.F., (1997), Anayasal Ġktisat, Ġstanbul: Avcıol Basım Yayım.
Nordhaus, W,(1975), The Political Business Cycle, The Review of Economic Studies, 42(2), 169-190.
Alesina, A., Cohen G.D. & Roubini, N., (1991), Makroeconomic Policy and Elections in OECD Democracies,
NBER Working Paper, National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge.
Özkan, F., (2005), Döviz Kuru Öngörü Yöntemleri: Türkiye Uygulaması, Y. Lisans Tezi, Zonguldak Karaelmas Üniversitesi,
Sosyal Bilimler Enstitüsü.
Erim, N., (2007), Ġktisadi DüĢünce Tarihi, Ankara: Palme Yayıncılık.
Azgün, S., (2006), Kamu Açığı ve DıĢ Açıkların GeliĢimi: 1980–2004 Dönem Analizi, E-Akademi Hukuk, Ekonomi ve Siyasal
Bilimler Dergisi, 53(7).
Hibbs, D.G., (1977), Political Parties and Macroeconomic Policy, The American Political Science Review, 71 (4), 1467-1487.
Dickey, D.A. & Fuller, W.A., (1979), Distribution of the Estimators for Autoregressive Time Series with a Unit Root, Journal of
the American Statistical Association, 74, 427–431.
Perron, P., (1990), Testing for a Unit Root in a Time Series With a Changing Mean, Journal of Business Economic Satistics, 8(2),
19-25.
Godfrey, L.G. (1988), Spesicification Test in Econometrics, Cambridge, UK: Cambridge.
Bera, A. & Jarque, C. (1981), Efficient est for Normality, Heterosedasticity and Serial Indepence of Regression Residuals: Monte
Carlo Evidence, Economics Letter, 7, 313-318.
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Comparison of Islamic, Traditional and Alternative Utility Theories
Sümeyye DEMĠRSOY
International University of Sarajevo
Bosnia and Herzegovina
Mehmet CAN
International University of Sarajevo
Bosnia and Herzegovina
mcan@ius.edu.ba
Abstract: Decision making under uncertainty is always trying to be explained by utility
theory. And utility theory‘s roots rely on moral philosophy. Moral philosophy is
concerning concepts about good and bad, right and wrong, virtue, justice, etc. It can be say
that utilitarianism, which is a field of moral philosophy, is more directly about utility
theory. Throughout the human history, from Prophet Abraham to Greek philosophers;
Socrates, Aristotle, Epicurus, to Islam scholars al Kindi, al-Farabi, al-Razi, Ibn-i Sina, Ibni Rushd, Ibn-i Haldun, all discussed about ethics and utility concept.
1. Introduction
Although utility is an economic term which measures the satisfaction or desirability in terms of the
consumption of goods and services, its roots rely on moral philosophy which deals with the concepts about good and
bad, right and wrong, virtue, justice, and happiness. On the other hand, concepts of good and bad, right and wrong,
virtue, justice, and happiness was constituents of ethichs throughout history of humanity.
Human concepts like good and bad, right and wrong, virtue, justice, and happiness were the concern of
human civilizations through millenniums. Historically the foundations of human ethics are laid by divine revaliations
through prophets.
Muslims identify the prophets of Islam as those humans chosen by Allah to teach mankind. Humans may
rely on revelation or tradition to identify prophets. Each prophet brought the same basic ideas of ethics. They brought
the belief in a single God and in the avoidance of idolatry and sin.
Muslims regard Adam as the first prophet and Muhammad as the last. Islamic theology recognises as many
as 124,000 prophets. The Qur'an identifies 25 prophets by name, starting with Adam and ending with Muhammad.
Five of them, Rasuls, receive the highest reverence for their perseverance, Ibrahim (Abraham), Moosa (Moses),
Dawud (David), Isa (Jesus), and Muhammad.
1.1 Prophet Ibrahim (Abraham)
Ibrahim was born in a house of idolaters, in the kingdom of Babylon. He announced to his people: O my
people I turned my face towards Him Who created the heavens and the earth, and never shall I give partners to Allah.
He has the power to make the stars rise and set.
1.2 Prophet Musa (Moses)
Musa the son of Imran, was born in Egypt in which at that time the kings were known as Fir‘awns. First
statement about working ethics in Torah is in Genesis part. ―In the sweat of thy face shalt thou eat bread, till thou
return unto the ground; for out of it wast thou taken: for dust thou art, and unto dust shalt thou return.‖ (Torah,
Genesis 3/19)
In Torah it is suggested to respect neighbour rights and to behave in good way to them: ―When thou dost
lend thy brother any thing, thou shalt not go into his house to fetch his pledge. Thou shalt stand abroad, and the man
to whom thou dost lend shall bring out the pledge abroad unto thee. And if the man be poor, thou shalt not sleep with
his pledge: In any case thou shalt deliver him the pledge again when the sun goeth down, that he may sleep in his
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own raiment, and bless thee: and it shall be righteousness unto thee before the Lord thy God."(Torah, Deureronomy
24/10-13)
Another statement about poor is as following and in this statement Torah mentioning about living together
with brothers: ―And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him: yea,
though he be a stranger, or a sojourner; that he may live with thee. Take thou no usury of him, or increase: but fear
thy God; that thy brother may live with thee.‖ (Torah, Levitucus 25/35-36)
―If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither
shalt thou lay upon him usury. If thou at all take thy neighbor's raiment to pledge, thou shalt deliver it unto him by
that the sun goeth down: For that is his covering only, it is his raiment for his skin: wherein shall he sleep? and it
shall come to pass, when he crieth unto me, that I will hear; for I am gracious.‖ (Torah, Exodus, 22/25-27)
―And when ye reap the harvest of your land, thou shalt not wholly reap the corners of thy field, neither shalt
thou gather the gleanings of thy harvest. And thou shalt not glean thy vineyard, neither shalt thou gather every grape
of thy vineyard; thou shalt leave them for the poor and stranger: I am the LORD your God.‖ (Torah, Levitucus 19/910)
―And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him: yea, though
he be a stranger, or a sojourner; that he may live with thee.‖ (Torah, Levitucus 25/35)
1.3 Prophet Dawud (David)
Dawud (David) was not only an illustrious Prophet of the Israelites but he was also their king. The Holy
Qur'an affirms: "And Allah gave him the kingdom! and wisdom and taught him of that which He willed." (2: 251).
And it was said unto him: ― 0' Dawud!To! We have set you as a vicegerent in the earth, therefore, judge aright
between mankind and follow not desire." (38:26)
He lived in Bait-ul-Lahm which was situated at the distance of ten miles from Jerusalem. He prayed: "Our Lord!
Pour out constancy on us and make our steps firm and help us against those who are disbelievers." (2:249)
Allah revealed the Zabur (Book of Psalms) to Prophet Dawud. It contains lessons for the guidance of his people.
1.4 Buddha
The evidence of the early texts suggests that the Buddha was born in a community that was on the
periphery, both geographically and culturally, of fifth century BCE northeast India. This community seems to have
had two categories of people, masters and servants.
The Four Noble Truths of Budhism:
1.
2.
3.
4.
Life as we know it ultimately is or leads to suffering/uneasiness (dukkha) in one way or another.
Suffering is caused by craving. This is often expressed as a deluded clinging to a certain sense of existence,
to selfhood, or to the things or phenomena that we consider the cause of happiness or unhappiness. Craving
also has its negative aspect, i.e. one craves that a certain state of affairs not exist.
Suffering ends when craving ends. This is achieved by eliminating delusion, thereby reaching a liberated
state of Enlightenment (bodhi);
Reaching this liberated state is achieved by following the path laid out by the Buddha.
2. The Greek Philosophers
For ancient Greek philosophers the question ‗how should I live?‘ took a fundamentally prudential or selfregarding form. It amounted for them an inquiry searching how a man could secure his own happiness, fulfilment or
perfection. Benevolence, altruism, philanthropy, a concern for happiness of others occupied a secondary position in
their ethical recommendations. It is conceived as a condition of self-realisation of the individual. In general Greek
philosophers, Plato and Aristotle in particular, found a place for restricted benevolence by emphasising the role of
friendship in a fully satisfying life. Aristo somewhat made a disdainful liberality part of his conception of the
ethically ideal or ‗magnanimous‘ man.
It can be said that utilitarianism, which is a field of moral philosophy, is more directly about utility theory.
Utilitarianism can be understood as a movement for legal, political and social reform that flourished in the nineteenth
century. It can also be understood as the ideology of that movement. It is also a general ethical theory. As a theory of
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ethics, it provides a criterion for distinguishing between the right and wrong action, an account of nature of the moral
judgements that characterise action as right and wrong.
Utilitarianism can be expressed as the combination of two principles: (i) the consequentialist principle that
the rightness, or wrongness of an action is determined by the goodness, or badness of the results that flow from it and
(ii) the hedonist principle that the only thing that is good in itself is pleasure and the only thing bad in itself is pain.
The doctrine can be expressed in the form of a single principle, the greatest happiness principle: the rigthness of an
action is determined by its contribution to the happiness of everyone affected by it. (Quinton, 1973).
Greek moralists unreflectively assumed a consequentialist position in developing their more or less
prudential life-styles. The only way in which they conceived it to be possible to justify a type of conduct was by
reference to the results to which it gave rise (Quinton, 1973).
2.1
Socrates (BC 470-399)
Socrates' ethical intellectualism has an eudaemological character in which he asserted that the highest good
for any human being is happiness. According to Socrates, people‘s true happiness is promoted by doing what is right.
When people‘s true utility is served (tending own soul), people are achieving happiness. Happiness is evident from
the long-term effect on the soul.
According to him, whatever action a man chooses is motivated by his desire for happiness. All the concepts
like knowledge, virtue, and wisdom are the same and man chooses an action according to what he thinks will bring
him the greatest happiness. Therefore the more a man knows, the greater his ability to reason out the correct choice
and the greater his ability to choose those actions which truly bring happiness to him.
According to Socrates, to answer the question ‗what is happiness‘, the first question should be asked to an
individual by himself: If all his needs were completed, or he had enough power to do anything, would he really be
happy? When individual observe and attract attention to him, even all these needs mentioned above are completed,
he sees that he is not happy enough. On the contrary he sees that he witnessed many disappointments, only when he
is in harmony with himself he will really be happy. People who are not in harmony with themselves never be happy
properly.
Socrates believes that psychic harmony is the greatest good, and that the result of it is moral behavior. He
also believes that if you have a healthy body and soul then you are in psychic harmony with yourself. In the ideal
soul, the reasoning part and the feelings (desires for honour) rule over the appetitive part (desires for wealth, food,
etc). A properly ordered soul experiences a sense of well-being or psychological health. Thus, psychological health is
something distinct from psychological stability since it depends on psychic harmony.
According to Socrates, immoral behavior is a result of an unbalanced personality and leads people to
irrational behavior. Psychic harmony is a psychological condition and makes someone moral and this harmony has
no motivation. Moral behavior comes from people‘s own beliefs and desires. If one is bad or unjust in the social
sense it is because of his sensuality, greed, or vanity. According to Socrates where there is psychic harmony, the
motives for injustice in the social sense will be eliminated.
Socrates did not surpass the prejudice of Greek intellectualism in ethics. It is enough to know virtue in order
to be virtuous. Everyone wishes to be happy and if someone does not attain happiness, it is because he does not know
the way that leads to happiness. Consequently, so-called evil men are in reality only ignorant. Thus, vice is
synonymous with ignorance, so knowledge of the good is synonymous with virtue. That is why Socrates, who
intended to form a virtuous youth, restricted his teaching to the search for moral concepts.
The foundations of Socratic system of ethics can be summarised as;
i.
a choice is rational if and only if it is a choice of what is best for the agent
ii.
something is good for an agent if and only if it is morally right.
The cornerstone of Socratic ethics is the self-interested concern for happiness, that is, one's own good. But
this concern requires that we act in accordance with what is just and noble, that is the moral good. The identity of
one's own good with the moral good is the basis for specific Socratic foundations. Socrates shows in the book
Gorgias that one's own good coincides almost completely with the moral good, since the utility of nonmoral goods,
for example, wealth, depends on the possession of moral excellence.
According to Socrates, the content of goodness/benevolence covers utility and pleasure. That is why some
of the historians of ethics assume that Socrates is Epicurean, so he is utilitarian. However, pleasure, which Socrates
implies, is not harmfull to intellect and soul. Here intellect has a role of being informative and determinant. Thus
Socrates‘ pleasure is under control of intellect. And also Socrates‘ utility view is not individualistic, but public.
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2.2
School of Cyrene – Aristippus (BC 435-366)
Cyrene school of philosophy is a kind of discipline of Socrates, founded in the 5th century by Aristippus.
He was a hedonist and urging the pre-eminent claims of bodily pleasure as an end.
This philosopher explains his thought, which he starts with a question ‗what is a happy life‘, by answering
‗life, which has as much as possible pleasure and as little as possible suffering, is a happy life‘. To make life happy,
someone should include as much as possible pleasure and as little as possible suffering to his/her life. For to do this,
he/she should decrease needs, so it will be adjusted to life with limited needs. So by doing with limited needs, it can
be benefited from all pleasures of life.
Aristippus teaches us kind of a life art that should be lived wisely. And this art can be gained by giving up
desires which make people slaves of themselves. Thus, school of Cyrene derived hedonism from Socrates‘
eudaimonism. Later on, school of Cyrene‘s this hedonism concept was accepted by Epicurus (Aster, 2005)
2.3
School of Cynicism – Antisthenes (BC 455-365)
Antisthenes, who outlined the themes of the school, is the first philosopher of school of cynicism. He had
been a pupil of Socrates in the late 5th century BC. Antisthenes has severe discussions to Aristippus‘ pleasure
assumption.
According to Antisthenes, people should look for real happiness in desire of freedom and liberty inside.
People, who reach to real happiness, know how to stay insensitive and disregarding in relation to either pleasure or
suffering. This staying indifferent in relation to pleasure or suffering brings freedom from inside.
2.4
Plato (BC 427-347)
Plato, founder of Academy in Athens, is a classical Greek philosopher. His mentor was Socrates and his
student was Aristotle. According to Plato, nothing is fine without moderation, and the thing which is pleasant
becomes as pleasant with this moderation. He also mentiones about moderation in between organic pleasures and
intellectual benevolence.
Unlike Aristotle‘s developed concept of happiness (will be mentioned below), Plato‘s happiness concept is
more obscure. According to Plato, the Good is the source of intelligibility. He asserted that the highest goal in all of
education is knowledge of the Good. According to him, human beings aim at the good, nobody voluntarily chooses
evil.
Plato thinks that the masses are incapable of grasping the truth. He illustrated this in his the allegory of the
cave where Plato suggests that the masses cannot see the truth directly but they are satisfied with an illusion of
reality. According to Plato, the good is the source of intelligibility and happiness is the attainment of intelligibility.
Thus, Plato describes his happiness concepts as the goal of life.
There is an important difference between Socratics and Plato. Both Aristippus and Antisthenes are
individualists. For both of them, origin is individual. Both of them don‘t deal with super-individual fact as state,
history, society. If people want to be really happy, they should be on their own, they should not depend on other
people. In this point, Plato has disagreement with his other two schoolmates. According to Plato, people never be on
their own but always live with other people. If we isolate an individual from the society he lives in, we exclude him
from his own resources. Moreover, the institution called ‗state‘ is like a human. What condition social entire is in,
individual lives in the same condition. Thus to understand human being, it should be looked into the state which he
lives. Therefore Plato rejects Socratics‘ (Aristippus and Antisthenes) thoughts. Although they seem like the followers
of Socrates, Plato thinks that they are not thinking in similar perspective. According to Plato, contrary to Aristippus
and Antisthenes‘ individualistic tendency, Socrates did not only show his skillfulness about living, but he also
became the first example of moral principle which took socialization as a base (Aster, 2005).
2.5
Aristotle (BC 384-322)
Aristotle is a Greek philosopher who is student of Plato and teacher of Alexander the Great. His teaching
about virtue and ethics is set forth in his Nicomachean Ethics.
Greek philosophy accepts that human life‘s main purpose is ‗happiness‘. However they differentiate from each other
about ‗what is happiness‘. Aristotelian method is different from others because, according to him, each existence has
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its own activity. Knowing specific activity of human shows us that what kind of an objective this human wants to
reach. So it will be learned what is the ‗real happiness‘.
According to Aristotle, happiness (eudaimonia) is an activity of the soul in accordance with virtue and it is
the highest of all goods. Happiness is the first principle and cause of all goods and it is a self-sufficient activity
always chosen for itself. Unlike other virtues, happiness is the only thing chosen only for itself and not for the sake
of other things. Aristotle believes that amusement is not self sufficient like happiness and he distinguished between
the life of amusement and the happy life.
Aristotle proposes two possible paths to happiness as a life of virtuous activity and a life of theoria and asks
which of the two is the best. The former path defines happiness as a practical vitue and in need of external goods.
And the latter path theoria is contemplation of eternal truths for an entire lifetime which is the highest activity of
reason. Aristotle chooses theoria. Becuase the life of practical virtue achieves happiness in a lesser sense because of
the necessity of material goods in this life and the life of the theoria limits the need for material goods and perfect
happiness (eudaimonia) is enjoyed by the Gods.
According to Aristotle, human being is rational as his nature. If a rational man behaves rationally and
moderate, he will be behaved parallelly to his nature. ‗Thinking‘ and ‗knowing‘ are human‘s highest activities. But
what can be ratio/intellect‘s activity in practical life? Each of the virtues is a state of being that naturally seeks its
mean. All virtues are in between of two extremes, virtues are means of the two extremes. This mean is not
mathematical but it is a border which can be found by ratio/intellect. The virtuous habit of action is always an
intermediate state between the opposed vices of excess and deficiency. For example; with respect to the enjoyment
of pleasures, temperance (sophrosúnê) is a mean between the excess of intemperance and the deficiency of
insensibility. Greek thought always searches for harmony and moderation, dislikes extremes. Aristotle is an opposer
to all kind of extremes, too. Thus, Aristotle is against the thoughts that reject possessions like Cynics. Aristotle
emphasizes on possessions‘ relative values. By using them moderately, they can bring even sense and value. One
another thought of Aristotle is not to ignore desires and urges totally, they should not be ignored totally, but to keep
them down by ratio.
According to Aristotle, there is no direct connection between good/benevolence and pleasure. These three
points should be taken into account: First pleasure is not main principle for a moral life, second pleasure occurs as a
result of an action which targets virtue. And third virtue is in the action which results in pleasure.
2.6
Epicurus (BC 341-271)
Two more schools joined to the list of schools of philosophy in about BC 300s. One is school of Stoa and
the other one is Epicureanism that took its name from the founder Epicurus. These two schools have contradictory
opinions about life and knowledge.
As it is mentioned in former parts of this work, school of Cynicism and Cyrene have contradictory opinions
about ethics, too. According to Cynics, it is important to exert perfect dominance on desires. After Cynics, we see
some similar thoughts are repeated by Stoa. It is virtuous to exert dominance on excitements, desires because virtue
gives us staying apathetic to life and death. School of Cyrene perceives life‘s real purpose as catching pleasure and
escaping from pain. Kind of a dissidence, like between Cynics and Cyrenes, later on was seen in between Stoa and
Epicureanism.
These two schools, Stoa and Epicureanism, sustained their existence by keeping alive dispute among them.
However at the same time they have some similar or common opinions. The first point they agree is that human
being is subject of philosophy. First they draw portraits of ‗superman‘. However all these ‗superman‘ concepts were
interpreted differently. For Stoa school, superman is man who beats demands and desires, knows to disregard to both
life and death. They show apathy (lack of interest or concern) as a purpose to human. On the other hand
Epicureanism finds its purpose on ataraxie (freedom from worry). However it can be noticed that there is no big
difference between ataraxie and apathy.
According to Stoa school, first principle is people‘s need to understand that they are organs of the unity
called world. Second principle is people‘s need to know their own stand in the world and so to adopt themselves to
destiny which is chosen for themselves. However Epicurus thinks that world processes with respect to blind and
spontaneous necessity. If people‘s destinty is determined by coincidences which can not be seen before, then they
can have interest in products which are their own will-power. Thus, people will stay disregard in respect to life and
death and by behaving rationally they will know how to distinguish things which give happiness.
Epicurus adopted the principle to attain pleasure and to escape from pain in ethics. But human should do
this wisely. He should avoid from intense pleasures which bring pain at last. Human should not interest in anything
more than its necessity because extremes cause to pain. People should know to keep away from temporary and
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specious values such as fine and glory. Temporary values always direct people to more, and this more never ends,
that is why people always stay in unrest. Thus, people should be interested in ―moral pleasures‖ which won‘t cause
to dissatisfaction. According to Epicurus, for to be happy, it is necessary to live moderate, to tend pleasures which
are moral, and to behave in accordance with all these.
Epicurus established his school in Athens in 306 BC. In the surviving writings of Epicurus, there is little of
direct relevance to the connection between utility and justice. However, virtue including justice, was not intended to
limit pleasure. According to Bailey (Bailey 1928) Epicureanism is ‗a system of uncompromising egoistic hedonism‘.
Scarre (Scarre 1994) put it, ‗just as the Epicurean community practiced economic self-sufficiency within the walls of
its garden, the Epicurean man cultivates an inner self-sufficiency, a contentment in his own physical and mental
states and a suppression of unnecessary desires‘. The only perfect pleasure was a condition of ataraxie where one
lives quietly in bodily health and with little physical and psychological distress. (Rosen, 2003).
Although none of the pleasure is bad, some (involving less pain) are purer than others. Epicurus made
connection between pleasure and health, pain and disease. All pleasures were good in the sense that health was good,
even though some pleasures were mixed. If health was good, with disease of body or soul it becomes greatest evil.
In Epicureanism the greatest pleasure was defined by the removal of all pain, and hence the Epicurean lived
quietly and peacefully in the real or metaphorical Garden (Rosen, 2003). The important virtue for Epicurus was
prudence, and a considerable emphasis was placed on the egoistic pleasures connected with friendship. On the other
hand, little attention was given to social values and instincts.
When it comes to ‗justice‘ in Epicurus‘ system, it can be said that ‗justice‘ means achieving security from
the attacks of other people. Epicurus‘ state on a conception of justice is that; a pledge of mutual advantage to restain
men from harming one another and save them from being harmed (Epicurus,1926). At another point, Epicurus wrote
about justice in terms of being of advantage in the requirements of men‘s dealings with one another (Epicurus,
1926). Epicurus used here a Greek phrase, ‗sumpherei en tais chreiais‘, for ‗advantage in the requirements‘. Rosen
claims that Greek noun, ‗chreia‘, also possessed a range of meanings and might be translated as ‗need‘, ‗use‘ or
‗utility‘.
For all societies in which to make compacts not to harm one another is not possible, nothing was either just
or unjust. Although justice was applied potentially to all requiring, where contracts for one should not harm others,
such a justice might be applied differently in different societies and under different circumstances. Where a law,
which was previously considered, just, had no longer had usefulness or secured advantage, there was no longer just
(Epicurus, 1926). According to Alberti (Alberti 1995) ‗justice is the realization of utility by means of a contract‘. The
emphasis on utility allows for the separation of law from justice by rejecting the view found in Plato and Aristotle,
that all law is just. And emphasis on utility leads to a notion of justice which is different from nomos (legal justice)
and physis (natural justice) (Rosen, 2003).
Justice was an invention of the wise for their own good. Epicurus summed up matters with brutal directness
and claimed that the laws exist for the sake of the wise, not that they may not do wrong, but that they may not suffer
it (Bailey,1928). Law and justice were matters of convenience which the wise person devised and approved.
Epicurus had no reason to make justice a positive part of the human condition except enabling people to obtain
‗peace of soul‘ (DeWitt, 1954). ―It represented a painful burden, and in its application as punishment justice could be
extremely painful. All that could recommend it was its utility to the wise. Other members of society might have less
invested in justice, as they were not cultivating their gardens as were Epicureans, and might well gain less from rules
concerning not harming others. However, so long as they accepted the compact, they would be assisting themselves,
as well as not harming the wise in society.‖(Rosen, 2003).
3. Medieval Times Islam Philosophers
In the seventh century, translation movements from Greek to Arabic language started and in the time of
Caliph al-Mansur this movements reached its peak. The study of Islamic ethics began to take shape in the third
century of Islam‘s emerge, with the influences from Greek ethics including Stoicism, Platonism and Aristotelianism.
Al-Kindi, the first philosopher of Islam, influenced by Socrates and Diogenes the Cynic as seen in his ethical
writings. Other influences can be seen in the work of Platonists such as Abu Bakr al-Razi or Neoplatonists such as
al-Farabi, Aristotelian influences can be seen in the works of al-Farabi, Ibn Sina and Ibn Rushd.
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3.1 Al-Kindi (d.873)
Abu Yusuf Ya‘qub ibn Ishaq al-Kindi (d.873) was the first philosopher of Islam and also the first author on
philosophical ethics. In Baghdad, al-Kindi was involved in the scientific movement of the translation of Greek texts
into Arabic. His starting point was Greek philosophy and he is reported by the classical bibliographers that he has a
number of ethical treatises reflecting an interest in Socratic and Cynic thought.
In al-Kindi‘s writings, the personalities of Socrates and Diogenes the Cynic are united and both emerge as
ideal instances of virtue and asceticism (Fakhry, 1998). Moreover, the Stoic idea of apatheia (freedom from passion)
and the indifference to the vicissitudes of fortune are set out in fluent terms. According to al-Kindi, the antidote of
pain is to consider that pain results either from our actions of from doing the actions of others. In the former case, it
is individual‘s duty to avoid from doing which is the cause of pain. In the latter case, averting the pain is either in our
power or it is not. If it is in our power then we certainly ought to avert it, if it is not, we should not suffer at the
prospect of injury with the hope that it might somehow be turned away. The suggestion, to avoid material
possessions as temporary acquisitions, reflects the influences of the Stoic philosophers.
3.2
Abu Bakr al-Razi (d. 925)
Another philosopher Abu Bakr al-Razi (d. 925), who is influenced by Plato, refers to Plato as ‗the master of
the philosophers and their leader‘ and to Socrates as ‗the ascetic and spritual‘ sage in his book al-Tibb al-Ruhani
(The Spiritual Physic).
A Socratic-Platonic theme which takes place in al-Razi‘s writings is the foolishness of the hedonistic life
which turns man into a slave. People‘s many of pleasures are temporary and unattainable and people are attacked by
anxiety or pain. But according to al-Razi, true philosopher will not succumb to pain, because philosopher
understands that nothing is permanent in this world. And that whatever cannot be turned away should be ignored,
since it is the product of passion and not of reason. al-Razi says in his book al-Falsafiya that: 'For reason summons us
only to what is susceptible of bringing about profit sooner or later; grief does not bring any advantage... That is why
the perfectly rational man will only follow the summons of reason ... and will never follow the summons of passion
or allow himself to be led by it or get close to it.
Like Socrates and Plato, al-Razi believes that the soul, leaving the body, will return to its original residence
in the intelligible world, after passing through an endless cycle of purifications. Death is a logical consequence of our
being human and essential part of the definition of man. However, al-Razi adds another argument which derives
from Epicurus that death is the deprivation of sensation and with his death man will be stripped of the sensations of
pleasure and pain. Thus this is a better condition than living in pain. That is why 'according to the judgment of reason
the condition of death is better than the condition of life' (Rasa‘il al-Razi al-Falsafiya).
3.3
Al-Farabi (d. 951)
Abu Nasr al-Farabi (d. 951) was known as the ―second master‖ (muallim-i sani) amongst his peers,
Aristotle being the first (muallim-i evvel). Al-Farabi was the first systematic writer on philosophical questions in
Islam. He also contributed to ethical discussions and wrote a commentary on some parts of the Nicomachean Ethics
which is translated into Arabic by Ishaq bin Hunayn.
Al-Farabi follows Aristotle in ethics like dividing the virtues into moral and intellectual (Fakhry, 1998).
According to him, moral virtues are perfections of the lustful part of the soul whereas perfections of the intellectual
part are practical reasoning, good judgement, wisdom and sound understanding. Al-Farabi also follows Aristotle‘s
arguments about justice which consists in the equitable distribution of ‗common goods‘ in the city or in the state.
Every member of city or state is entitled to share this ‗common goods‘ such as security, wealth, dignity, public
office, etc.
Al-Farabi deflects from Aristotle and other Greek phlosophers believing in the life hereafter in Qor‘anic
way. Accoring to al-Farabi, nations and citizens of cities attain happiness, worldly in here and supreme in the life
hereafter, when four human needs are met. These are; theoretical virtues, deliberative virtues, moral virtues and
practical arts. Worldly happiness is necessary for the attainment of supreme happiness in the hereafter. According to
him, happiness is the absolute good and achieving happiness is the purpose of life. Whenever the soul of the person
reaches perfection, then happiness is achieved. According to al-Farabi, if individual‘s desire for happiness is weak
and he/she has other purposes in his/her life, then the result will be evil.
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Theoretical virtues, the first one of the four themes mentioned above, consist of the sciences. The purpose is
to have understanding of all the beings on these sciences. Deliberative virtues are voluntary intelligibles that vary
across time and place such as events occuring accidentally or willingly, such as disasters or war. An individual
cannot possess deliberative virtue without possessing moral virtue. A person has to have virtuous moral character
who wishes the good for himself/herself or for others. And according to al-Farabi, theoretical virtues, deliberative
virtues, moral virtues and practical arts are all inseparable.
The his famous work al-Madina al-Fadila (virtuous city), in which people cooperate and help each other for
the purpose of attaining happiness, al-Farabi reflects again his devotion to Islamic utility perception. To him, on the
other hand, non-virtuous city is the city whose people do not know happiness. Al-Farabi discussed these two cities‘
souls of the citizens and he believed that the souls of the citizens of the virtuous city are immortal. However, the
souls of the citizens of the ignorant city are mortal and their destiny is to suffer. As a result, al-Farabi believed that
political association should be directed towards the attainment of happiness.
Generally, it can be said that al-Farabi was greatly influenced by both Aristotle and Plato in his philosophy
and his concept of happiness particularly. On the other hand, his thought was framed by Islam. He selected portions
from each of these three different influences to form a complete description of happiness. So his concept of
happiness is a product of his understanding of Greek philosophy and Islam. With his concept of happiness, he
combines Plato‘s concept of the good, Aristotle‘s concept of eudaimonia (happiness) and Islamic concept of Jihad Al
nafs (struggle of the soul).
Plato and Aristotle‘s concepts were given above. On the other hand, the Islamic concept of Jihad Al nafs
means the struggle of the soul. According to Islam, God created man to achieve bliss (happiness) in the next life
through a clearly defined struggle in this life called Jihad. By the Quranic definition, ―And whosoever strives
(jahada), strives (yujahidu) only for himself. Surely Allah is self sufficient, above need of His creatures.‖ (Quran
29:6). The person who struggles with turning his inner self into a new way of living that understands the true reality
where material is only a small portion.
3.4
Ibn Sina (Avicenna) (d. 980)
Ibn Sina (Avicenna) (d. 980) is one of the foremost philosophers in the Medieval Hellenistic Islamic
tradition and one of the most important practitioners of philosophy. He exercised a strong influence over the other
Islamic philosophers and medieval Europe as well. Al-Farabi‘s successor Ibn Sina is the author of a very short tract
on ethics and he follows closely the Platonic model in psychology.
Ibn Sina speaks about the laws which are needed to be laid down as the moral habits (akhlaq) and traits
(adat) which lead to justice. He divides the soul into different parts like rational, irascible, and concupiscent which
correspond to the virtues of wisdom, courage and temperance respectively. Finally justice is the ‗summation‘ of all
these three. According to Ibn Sina, enforcement of justice within the state (with the existence of caliph) is necessary
as the sovereign of the world and God‘s vicegerent on earth. The virtues of temperance, courage, and wisdom are for
the well-being of human beings in this world. They can be followed adequately without theoretical wisdom. Ibn Sina
presents theoretical wisdom as being so important that one can attain happiness only by acquiring it as well as these
three virtues, all of which add up to justice. Ibn Sina distinguishes himself from Farabi by insisting on the possibility
of acquiring temperance, courage, and practical wisdom-or justice-without possessing theoretical wisdom. In other
words, unlike Farabi, Ibn Sina does not perceive all the virtues to be intellectual or to be grounded in sound
intellectual understanding.
Make separation between the practical virtue and the theoretical virtue does not fully account for Ibn Sina's
moral teaching. From what appears in his treatises that moral habits are directed to the liberation of the soul from the
body. Thus they serve the ultimate goal of theoretical virtue, that is the soul achieving a free perception of God and
the divine intelligences. It is not clear, however, how the moral habits lead to justice. The only explanation that
comes to mind is that insofar as some human beings center their thoughts and activities on other worldly concerns.
Ibn Sina differs here from al-Farabi too since he starts with the basic human needs and ascends from them to the
larger issue of law- giving and providing for justice. On the other hand, Al-Farabi begins by thinking about ultimate
human happiness. Ultimate human happiness is about the highest ends of human beings rather than their humblest
beginnings or it is about their noble concerns rather than about their basic needs.
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3.5
Ibn Rushd (Averroes) (d. 1198)
Ibn Rushd (Averroes) (d. 1198) is regarded as one of the important Islamic philosophers. He set out to
integrate Aristotelian philosophy with the Islamic thought in the twelfth-century of Islamic Spain. He produced
commentaries on Aristotle‘s Nicomachean Ethics and also Plato‘s Republic which is relevant to his ethical theory as
well.
According to Ibn Rushd, the principal virtues correspond to the perfection of the three parts of the soul are
the rational, the irascible, and the concupiscent. Then he describes justice along Platonic lines as the ‗harmony‘ of
the three corresponding virtues of wisdom, courage and temperance. As Aristotle stated in the Nicomachean Ethics,
it has two subdivisions which are common or universal, corresponding to ‗perfect virtue‘, and particular. However,
Ibn Rushd does not identify happiness with the contemplative life, but rather with conjunction (ittisal) to the active
intellect, which the Muslim Neoplatonists had regarded as man‘s ultimate goal.
In Muslim thought, everything they need to know about moral behaviour is encapsulated in Islam.
However, Ibn Rushd argued that a distinction should be drawn between moral notions and divine commands and
here he follows an Aristotelian approach (Leaman). According to Ibn Rushd, the answer of question ―what is the
purpose of a human being?‖ is that; one of the ultimate aims is to be happy and to avoid actions which lead to
unhappiness. Moral virtue leads to happiness. If people do what they should do in accordance with their nature,
people will be able to achieve happiness. This happiness may be interpreted as a mixture of social and religious
activities or as an entirely intellectual ideal. However, neither religion nor philosophy would approve of entirely
intellectual ideal as the ultimate aim for the majority of the community. It is possible for someone that he/she would
try to live apart from the community with concentrating entirely on intellectual pursuits, but this way of living is
inferior to a life in which there is a concentration upon intellectual thought but combined with integration within the
practices of a particular society.
Ibn Rushd, inspite of working within an Islamic context, does not identify happiness and misery with some
aspect of the afterlife since he was unable to accept the traditional view of the afterlife. Here Oliver Leaman, who
has many works about Ibn Rushd, claims that without religious imagery, ordinary believers may find it difficult to
understand that our moral actions affect not only ourselves but the happiness of the whole community, not just at a
particular time or in a particular place but as a species. With our bad behaviours, we damage our own chances of
human flourishing, and this damage affects our personal opportunities for achieving happiness and maturing as
people. It is also resulting to the weakening of society. According to Leaman, while it is possibly true that the misery
of evil-doing may not follow us personally after our death, it may well follow the community. The notion of an
afterlife points to the wider terms of reference in which moral action has life.
3.6
Ibn Khaldun
Another philosopher Ibn Khaldun, who lived in 14th century, centred his economic ideas generally around
the ideas of justice, hardwork, cooperation, moderation and fairness. He emphasises Al-adl (justice) as the bedrock
of the economy, and lack of justice leads to the breakdown of the state. Some of his writings may appear as secular.
For instance; ―Civilisation and its well-being as well as business prosperity depends on production and people‘s
efforts in all directions in their own interest and profit‖ (Muqaddimah, Volume 2). However, Ibn Khaldun insisted
that man must avoid from evils, must improve himself, and must give preference to matters of the next world against
this world (Muqaddimah, Volume 1).
According to Ibn Khaldun, extravagance and luxurious living lead to the destruction of the state. ―Sedentary
people are much concerned with all kinds of pleasure. They are accustomed to luxury and success in worldly
occupations and indulgence in worldly desires. Therefore, their souls are adored with all kinds blameworthy and evil
qualities‖(Muqaddimah, Volume 1, 225).
Another issue Ibn Khaldun emphasises is cooperation. He says that ―the power of the individual human
being is not sufficient for him to obtain the food he needs through cooperation, the needs of a number of persons,
many times greater than their own number can be satisfied‖ (Muqaddimah, Volume 1, 69) ( Ibn Haldun, 1977).
Above the economic philosophy of Ibn Khaldun was mentioned shortly, but, his Muqaddimah covers a
large number of other areas about economy like money, value, market, population, growth, international trade, etc.
When dealing with micro or macro economic issues, he demonstrated perfect competence in generating theories. In
his work, Ibn Khaldun synthesises the ideas learnt from the Qur‘an and Sunnah, and from other sources which were
converted into powerful theories.
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4. Conclusion
Human concepts like good and bad, right and wrong, virtue, justice, and happiness were the concern of
human civilizations through millenniums. Historically the foundations of human ethics are laid by divine revaliations
through prophets. Then Greek phlosophers and Muslim scholars contributed to the theory till the begining of the
modern times.
With the begining of the 20th century industrial society began to transform into information society and risk
and uncertainty became prior and diagnostic feature of human behaviour. And now with these changes new structure
of society is multi-dimensional, more complicated and uncertain. While this theory became accepted and is using in
economics, criticism voices started to become louder. Critics to economics‘ deductive, abstractive and pure
rationalist method focused especially on uncertainty and risk that propelled from that analysis. Among them only one
was seem as an strong alternative to expected utility theory: Prospect theory which was found by Daniel Kahneman
and Amos Tversky in (Kahneman and Tversky 1979). They dealt with utility concept from the cognitive point of
view, Daniel Kahneman and Amos Tversky‘s studies were the earliest studies of human decision-making by
cognitive psychologists. Development of the theory through modern times may be the subject of another work.
References
Alberti, A., (1995). The Epicurean Theory of Law and Justice, in A. Laks and M. Schofield (eds) Justice and Generosity, Studies
in Hellenistic Social and Political Philosophy, Cambridge: Cambridge University Press.
Bailey, C. (1928). The Greek Atomists and Epicurus, Oxford: Clarendon Pres.
DeWitt, N.,W., (1954). Epicurus and his Philosophy, Minneapolis: University of Minnesota Press.
Epicurus, (1926). Epicurus, the Extant Remains, trans. C. Bailey, Oxford: Clarendon Press.
Ibn Haldun, (1977). Mukaddime, Ankara: Onur Yayinlari.
Ibn Khaldun, (1967). An Introduction to History: The Muqaddimah, London: Routledge and Kegan Paul.
Kahneman, D., Tversky A., (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-291.
Quinton, A., (1973). Utilitarian Ethics, London: Open Court
Rosen, F. (2003). Classical Utilitarianism from Hume to Mill, New York: Routledge
Scarre, G. (1994). Epicurus as Forerunner of Utilitarianism, Utilitas, 6:219-31.
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Contribution of University on Economic Development
Ahmet DĠNC
Economics Department
Ishik University, Erbil, Iraq
da29tr@yahoo.com
Abstract: Economic development refers to economic growth accompanied by changes in
output distribution and economic structure. These changes: improvement in material, a decline in
an agriculture‘s share of gross national product(GNP), increasing share of industry in GNP,
increasing education level, substantial technical advance and etc. Human Development Index is
one of the measurement of Economic development. Economist need skillful labor force is
provided by universities to ensure qualified more production with value added for economic
growth and development. We saw that universities contributed innovation to become monopol in
world market, relationship between domestic private companies and foreing ones, ensuring
sustainable development, to become guide for foreign and domestic firms. In addition, universites
contributed as information office. In this study, we analyzed contribution of technology and
internet to the university and contribution of universities to economic development of country.
We have worked and searched in private university in foreign country for 12 years. So, we aimed
productive study with work experience abroad, observing and interactive study with
academicians in other universities. We analyzed our study under three main titles; Functions of
universities and categorize of countries. How to improve level of economic lesson by using
internet among countries. Contribution of universities to level of economic development
Introduction
During the last few centuries the western economies have experienced an economic growth never before
seen in history. This change has mainly been caused by knowledge, compared to previous history where land, natural
resources, labor or machines were the factors determining economic growth and development. Long run economic
performance during the last few decades, known as the knowledge economy or the information age, has
consequently been driven by innovation and technological change instead, so, The production of new knowledge
plays an important role in economic growth, international trade and regional development. (Rindeskar, 2005) The
central purpose of this study is to analyze the importance of human capital are educated by university for generation
of economic development through its effect on knowledge production in the innovation. A key driver to achieve the
economic, social and physical regeneration of city and region University makes environment where science and
business work together. (Goddard, 2009) It was seen that there is impact of universıty on economic development.
Innovation and research which are studied by universities are the main argument on development of any country.
These are the key of ensuring welfare.
Functions of University and Classification of Countries
Functions of University
The Universities are schools of education as well as research. But, main reason for their existence is not to
be found either in the just knowledge conveyed to the students or in the just opportunities for research afforded to the
academicians in faculty. These functions could be performed at a cheaper rate. ( www.jstor.org/pss/40218022) When
we pay attention definition of economics we see two major topics: unlimited human wants and limited resources.
The twenty-first century is universally recognized as a time for developing knowledge-based economies and digital
information technologies. With the rapid socia-economic changes, the democratization of government, structural
shifts in production and the rapid growth of value systems of recent years, serious new challenges have presented
themselves, with regards to the maintenance and function of higher education. In order to meet these challenges,
higher education must continue to advance through innovation, effective adjustments, planning and ability to predict
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the future or vision. Universities are not only a school of knowledge, culture and technological innovation but they
are also important centers for the cultivation of a nation's resources. Therefore, by bringing the university's function
into full play, can it provide an essential foundation for motivating academic and technological innovation and assist
with the economic development of a country. It is also clear that university competitiveness is a major indicator of a
nation's competitiveness and that the excellence of a nation's universities is an important key to increasing a nation's
sense of competitiveness. (Mu-lin, 2002) The two poles of the social function of universities are the academics
inherent in universities and the more diverse demands from society, which are dialectic unity. Academics are
inherent in universities and the function of universities that focused on social demands is the sociality of universities.
Academics are the internal cause of multiple functions of universities while social demands are the external one. The
potential of universities finds expression in the external cause of social demands, without which the potential is only
potential elements and will never turn into reality. On the contrary, without the potential of universities social
demands cannot make the products which society is in need of. Exchange between universities and society is the
bridge that connects the two parts. Universities as a social organization have basic characteristics of all social
organizations. Sociality is one feature of human organizations, being that ―organizations composed of human all
exist in society as part of it and for the sake of it.‖ The potential that enables universities‘ exchange is their academic
activities, which underlie the functions of universities. Universities‘ function of criticism is closely linked with the
objective, fundamental, and pioneering academic activities. ―It is the characteristic of universities‘ serving society
that in addition to paying attention to the immediate demands of society, universities should be pioneers to be ahead
of social progress and provide new thoughts and opportunities for sustained development.‖ It is the objective and
pioneering academic activities that enable universities to correct the defects resulting from the pursuit of self-utility
on the part of other social organizations and to criticize society. The university function of international
communication is the product of the objective academic activities, which makes it possible for people from different
countries and with different ideologies to make discussions and exchanges on objective issues in the contemporary
world. (Liu, 2005)
Classification of Countries
We believe that there is a close relationship between function of university and economic development. We
think that you will no doubt about the importance and broad applicable of economics after reading and studying this
study. Let‘s take an example one branch in university as faculty of economics and administrative sciences. Our aim
is to allow students to understand economic environment, And to show you how to apply economic principles to
actual events. We tried to show most of our examples applications, and extensions are drawn from the real world.
We can count some way to define economics:
- is the social science that deals with such problems
- is a study of mankind in the ordinary business of life
- is a broad-ranging discipline
- is the study of the use of scarce resources to satisfy unlimited human wants.
Also we can count some definition of economists: are innovators, tinkers, and inventors in their own way.
Societies face lots real world problems, and history shows that economic ideas can produce waves to solve these
problems. When we categorize countries in the world we see three ones. These are:
1-Developed Countries
2-Developing Countries
3-The Least Developed Countries
Each society requires to past upper level to live comfortably. For that Economic Growth and Economic Development
should be at level required. The economy sometimes grows and sometimes shrinks. World faced with global crisis
and reduced production speed, so, global GDP fell down from 3.7 per cent in 2007 to 2 per cent in 2008 (UN,
2009)When we compare developed and least developed countries we see that there is big gap each other. It is said
that per capita income in developed country can be over 12 000 $ yearly. On the other hand a dollar a day means
365$ yearly. In addition society experiences such problems: Such as unemployment, price stability, unproductive
production, unfair competitive, inequity distribution income, maximizing profit, shut-down point etc. to solve these
problems economists use some instruments. To produce more and more production we increase input but this is not
enough. We need time and high level technology. Latest technology gives a hand to understand easily. High level
technology is ensured and used to reproduce by universities. For example let‘s analyse relationship between internet
and a faculty. I mean university innovates technology then uses it to improve teaching‘s quality.
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How to Improve Level of Economic Lesson by Using Internet Among Countries
When you study economics, you are probably wondering, why should we study economics? Actually,
people study economics for a number of reasons. Many people study economics because they hope to make money.
Some of them are worry that they will be illiterate if they don‘t know or understand the laws of supply and demand.
People are also concerned to learn about how we can improve our environment or why countries such as Russia and
china are moving from a planned to a market economy. As a voter we are interested about economy. Because which
party‘s way is better for us. By using our vote we become to select party‘s prior investment. At the same time if we
understand economy we can put forward an idea about meaning of economic growth, per capita income, distribution
of income, foreing direct investment, exchange rate, economic crisis (Faced with the current economic crisis, many
governments have identified enhanced ICT use as a strategy to quicken recovery), and etc.
The word economy comes from the Greek word oikonomos, which means ―one who manages a household.‖
At first, this origin might seem peculiar. But in fact, households and economies have much in common. Economics is
social science concerned with the production, distribution, exchange, and consumption of goods and services.
Economists focus on the way in which individuals, groups, business enterprises, and governments seek to achieve
efficiently any economic objective they select. Lesson of economy is presented at Universities, institutions of higher
education that offer programs beyond the high school level. Colleges and universities provide necessary training for
individuals wishing to enter professional careers. They also strive to develop students‘ creativity, insight, and
analytical skills. To train good economist at universities, we can benefit from internet for teaching, systematic
presentation of facts, ideas, skills, and techniques. (Samuelson & Nordhaus, 2001)
Although human beings have survived and evolved as a species partly because of a capacity to share
knowledge, teaching as a profession did not emerge until relatively recently. The societies of the ancient world that
made substantial advances in knowledge and government, however, were those in which specially designated people
assumed responsibility for educating the young. Internet or computer-based global information system is composed
of many interconnected computer networks. Each network may link tens, hundreds, or even thousands of computers,
enabling them to share information with one another and to share computational resources such as powerful
supercomputers and databases of information. The Internet has made it possible for people all over the world to
communicate with one another effectively and inexpensively. Unlike traditional broadcasting media, such as radio
and television, the Internet does not have a centralized distribution system. Instead, an individual who has Internet
access can communicate directly with anyone else on the Internet, make information available to others, find
information provided by others, or sell products with a minimum overhead cost. The Internet has brought new
opportunities to government, business, and education. (UN, 2005)
Many individuals use the Internet for communicating through electronic mail (e-mail), for news and
research information, shopping, paying bills, and online banking. Educational institutions use the Internet for
research and to deliver courses and course material to students, for example distance learning (Distance services,
dispensed by cell-phone, internet telephony or websites, can allow skills that are in short supply to benefit larger
numbers of people.) (UNDP 2009) Scientists and scholars use the Internet to communicate with colleagues, perform
research, distribute lecture notes and course materials to students, and publish papers and articles. As we look
internet users by level of development 2000-2004 (see Table) we can see that developed countries is 73% in 2000
57% in 2004 years, developing countries are 25% in 2000 years 38% in 2004, South-East Europe and CIS 2% in
2000 years 5% in 2004 years. At the end of 2008, there were an estimated 1.4 billion Internet users around the world.
In developing countries, the number of users grew by a quarter, or almost five times faster than in developed
countries. As a result, developing countries now account for more than half the world‘s Internet users. A little over
one fifth of the world‘s population used the Internet in 2008. (UN, 2009)
Classification
Developed Countries
Developing countries
South-East Europe and CIS
2000
285 429 829
96 367 167
5 982 116
2001
344 585 162
137 712 413
8 963 563
2002
402 012 514
204 925 742
13 653 481
2003
433 307 644
256 845 766
23 745 186
Table 1: Internet users by region and level of development
Contribution of Universities to Level of Economic Development
488
2004
501 756 193
332 998 292
40 877 486
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Economic development refers to economic growth accompanied by changes in output distribution and
economic structure. These changes: improvement in material, a decline in an agriculture‘s share of GNP, increasing
share of industry in GNP, increasing education level, substantial technical advance and etc. Human Development
Index (HDI) is one of the measurement of Economic development. As we pay attention table below we see that HDI
contains three parts such as life expectancy, adult literacy, and GDP. GDP measures the total output and total
income of an economy. If we care about the happiness of a typical individual in an economy, it makes more sense to
look at GDP per capita. We can understand whether income is shared equally between its citizens.(Begg & Fischer &
Dornbusch 1997)We can measure level of country‘s economic development by looking HDI too. All three units in
this index are related directly with education, talent, knowledge, and learning. All these activities happend and occur
in university. According to Human Development Report 2009, all countries are classified if HDI of country is higher
than 0.900 it is very high human development country, if HDI of country is between 0.899 and 0.800 it is high
human development country, if HDI of country is between 0.799 and 0.500 it is medium human development coutry,
if HDI of country less than 0.499 it is low human development. (UNDP, 2009) When we see table below we can say
that Turkmenistan is medium human development country in 1998.
Turkmenistan/ Human Development Index (HDI)
Life
Adult
Combined Real
Expectancy literacy gross
GDP
years
above
enrolment per
15 (%) ratio (%)
capita
$
Life
Expectancy
Index
Educational
Attainment
Index
Real
GDP
per
capita
$
HDI
1997
1998
0.690
0.665
0.897
0.875
0.427
0.493
0.671
0.678
64.7
64.9
98.8
98.8
71.0
65.0
2683
3162
Table 2 :Turkmenistan HDI
It is accepted as inevitable that we live in a world accelerated change. As people, we can see creative
opportunity, or we can be demoralized as we watch companies and people come and go. As a region, we are always
going to be in the position of retention -- companies, people, and capital -- as we also search economic development
opportunities for expansion and attraction. The reality is that regions like Central Upstate New York compete with
regions around the world that are already organized to attract capital investment and jobs. If we look at regions that
are considered economic powerhouses, it‘s easy to see a pattern of success. Such as; the availability of skilled labor,
access to capital, investment in R&D, proximity to colleges and research institutions, transportation and information
links to markets, networks of suppliers, favorable tax and cost of business structures, business-friendly local
government climates and regulatory environments, and a high quality of life. They are also places that project
success because they have mounted highly effective regional marketing programs based on their unique strengths.
(Hartsock 2007) Most universities‘ primary economic roles are the training of highly qualified personnel and the
production of new knowledge. While these roles are more important than ever in today‘s knowledge economy,
universities have also moved to occupy a new and central role in regional innovation ecosystems. (TRRA
2007)Universities need to focus upon innovative research activities which improve the quality of the regional
environment. This includes research that impacts the traditional areas such as tourism, or more broadly, the service
sector, biomedical research, coastal/environmental issues, and oil and gas. (Trumbach & Lundberg p.3) None of this
serves to prove that universities are unimportant. In fact they are crucial. The government has acknowledged that the
most successful technology grouptas in the USA and UK are located in geographical proximity to centres of research
excellence in universities, such as Stanford, University of California, Massachusetts Institute of Technology in
Cambridge Massachusetts, Austin in Texas and Cambridge, UK. (Fazackerley, Smith &Massey 2009) New roles
require new approaches. Universities are starting to move away from a narrow focus on patents and licensing to
acknowledge knowledge flows out into the market, and to establish supportive policies, programs and infrastructure
to make these processes more efficient. Universities are also starting to support entrepreneurship and to lead or
partner with other regional stakeholders in regional economic development efforts.
It was seen that universities have lots contributions, but here we will study three main key roles. The
following sections provide a sample of the different roles universities can play with respect to innovation and
economic development.
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First; Development of highly qualified personnel
Providing skilled graduates is one of the primary economic contributions of universities and a highly
effective means of transferring knowledge and increasing the absorptive capacity of firms for innovative ideas and
discoveries. Firms are attracted to the large pools of talent that universities generate and the availability of highly
qualified R&D personnel is a key factor in R&D site selection. Regionally, the concentration of creative, highly
skilled talent is a critical factor in cluster development and dynamic urban economies. Universities that are effective
generators of technology-based growth are able to recruit and/or retain star researchers. Universities also play an
important role through industry education and training partnerships, delivering non-degree educational programs
targeted to different industry sectors. These may include graduate certificate programs in technical or management
areas, executive development programs, weekend MBA programs, and corporate-focused distance education. (TRRA
2007) The increased importance of human capital is most evident in the well developed economies where the
structure has undergone considerable changes since the 1980’s. According to Romer (1990) the output per worker
increase that characterizes the western world during the last decades is explained by both technological progress
and a more effective labor force. Some economists stress that a well functioning higher educational system is one of
the most important elements of the modern economies. Not only because of the development and growth in the long
run but also because of the necessity of being competitive in the globalized world and international market of today.
(Gerdne, 2005) Also we should pay attention that economic growth and development is spreading to the east of
world because of skillful labor force. Nations who understand importance of education improve their standard of
living.
Second; Research and knowledge production
Universities benefit regional firms through knowledge spillovers – knowledge generated by universities at
lower cost than firms can produce it themselves. As firms located by universities tend to obtain knowledge at lower
cost than firms farther away, firms concentrate around universities creating beneficial cluster economies. While
universities are not the main source of external knowledge for firms, high-technology regional economies are usually
attached firmly by great research universities. These contribute patents, licenses, contract research, consulting and
problem solving for industry, design, engineering and testing services, often early in the innovation cycle when firms
and industries are seeking ideas.
Strong industry-university connections are needed, however, to connect a region‘s research and industry
strengths. Industry is rarely involved in the choices universities and their faculty make when it comes to building
research strengths. Some state governments fund R&D, technology applications, and other programs to foster
emerging industries or build stronger relationships between industry and universities. Overall, though, efforts to
create critical mass in research areas critical to industry are important and do have an effect.
Third; Technology transfer
Most universities in North America today have some form of technology transfer office (TTO). However,
commercialization indicators (patents, licenses, university spin-offs) show that significant and sustained
commercialization success is concentrated among only a small number of institutions. Most technology transfer is
actually informal, involving publications, conferences, and informal exchanges. Patents rank low in most industries
except for pharmaceuticals, therefore, indirect mechanisms for the transfer of new ideas and innovations may be
more important. Most favour licensing for cash, followed by licensing for an equity stake and sponsored research.
This revenue maximizing approach tends to encourage a ―home run‖ mentality, focusing limited time and resources
on the technologies that seem to promise the greatest and fastest payback. Technologies with longer-term potential or
diffuse public benefit tend to be overlooked.
Most universities experience technologies ―going out the back door.‖ Many researchers circumvent their
TTO when they patent and patents with greater value are taken directly to the private sector more often. Firms
express difficulty in dealing with TTOs, citing staff inexperience, lack of business knowledge, and a tendency to
inflate the commercial potential of patents. As a result of this dynamic, the more fundamental goal – to maximize the
potential for university-based inventions to result in commercialized new products and innovations – remains unmet
in many cases. Successful universities seek to maximize commercialization volume and speed rather than revenue,
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although their revenues often remain substantial. They have begun to codify a broader range of technology transfer
pathways and to redefine the role of their TTO. There are different volume models of technology transfer but all:
Provide rewards for moving innovations into the marketplace
Focus on faculty as the key agents of innovation and commercialization
Emphasize greater standardization in faculty and industry interactions.
Universities are only one side of the technology transfer equation, however. Firms need the absorptive capacity to
realize the commercial benefits of basic research. (TRRA, 2007)
Universities in different countries
Recent changes in the universities of developed countries suggest the emergence of an entrepreneurial
model of academic research. The key feature of this model is acceptance by universities that they have a
responsibility not only to provide teaching and carry out research, but also to contribute directly to economic growth
of the society. This new model is being presented to developing countries as a way of encouraging entrepreneurship
among their researchers, of making an awareness of the needs of businesses, and of attracting industry funding.
Some successful examples to which this model has been applied in Mexico, and in Brazil. There are various
obstacles to the widespread adoption of the entrepreneurial model of a university in the developing word. For
example, universities can introduce changes to facilitate and promote relationships with industry, and indeed many
have already done so. But if the demand from industry for local knowledge production is weak and unchallenging,
the result will probably be an underdeveloped entrepreneurial university. Another source of difficulties, (see table 3),
is that developing countries have few researchers, and, given the general lack of resources in such countries, these
have to work with tight budgets. (http://www.scidev.net/en/policy-briefs/the-role-of-universities-in-knowledge production-.html)
Developed countries
Developing countries
GDP
61.1%
38.9%
Population
22.3%
77.7%
R&D spending
84.4%
15.6%
Researchers
71.6%
28.4%
Table 3. Distribution of the world's GDP, population, research and
development spending and academic researchers
There are some 3 300 higher education establishments in the European Union and approximately 4 000 in
Europe as a whole, including the other countries of western Europe and the candidate countries. They take in an
increasing number of students, over 12.5 million in 2000, compared with fewer than 9 million ten years previously.
They employ 34% of the total number of researchers in Europe, with significant variations from one Member State to
another (26% in Germany, 55% in Spain and over 70% in Greece). In order for European universities to play a key
role in achieving the strategic goal set at the Lisbon European Council, i.e. to make the European Union (EU) the
most competitive and dynamic knowledge-based economy in the world, this Communication is intended to start a
debate on the role of European universities in the knowledge society and economy.
(http://europa.eu/legislation_summaries/education_training_youth/lifelong_learning/c11067_en.htm)
Conclusion
There is a close relationship between universities and economic development. It was analyzed that to reach
high level standard of living and to produce qualified goods and services country needs skilfull labor force and high
level techonology. Those who pay attention HDI see three main legs ; production, education, and life expectations
which are related with university and development. People in this century knew importance of competition and to be
succeed in that race they are using latest technology for example rate of using internet is rising year by year. Perhaps,
rate of using internet in developing countries is higher than developed countries. It is clear that the role of
universities in innovation is great too. Universities that are active at the heart of successful technology groups do not
just spin out companies. They develop highly-skilled people who move between industry and academia; they
develope businesses and provide expertise; they produce knowledge that is used by technology businesses; they
provide public space in which people from various overlapping branches of research meet. It was seen that
universities contribute directly nations‘ economy, especially this impact was more in developed countries than
developing countries. It is clear that the following sections provide a sample of the different roles, universities can
play with respect to innovation and economic development.
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First; Development of highly qualified personnel
Second; Research and knowledge production
Third; Technology transfer
Time and technology is the main factor to produce more but both of these factors are used by skillful labor force who
is talented in university. Secondly innovation can be done in university too and transfered to company or/and market.
These functions of universities above should be reachable and cheaper too. Because this implements spirit of
definition of economics.
References
Begg, D. & Fischer,S. & Dornbusch, R. (1997), Economics, McGraw-Hill, London,1997. P. 503
Cherie Courseault Trumbach, C.C.& Hartman, S.J. & Lundberg, O. The role of universities in attaining regional competitiveness
under adversity – a research proposal, Research in Higher Education Journal, University of New Orleans, PDF, p.3
Discussion Document Prepared for Toronto region research alliance (TRRA) (2007). Research Working Group, The Role of
Universities in Regional Economic Development,
Fazackerley, A. & Smith, M. & Massey, A.
www.policyexchange.org.uk
(2009). Innovation and Industry: The Role of Universities,
Gerdne, T.(2005), The Impor tance of Human Capi tal in Export Performance, Thesis in Jönköping University, Sweden
Goddard, L. (2009), The Role of Universities in City and Regional Development, Newcastle University
Hartsock, L.D. (2007). The Role of Universities in Regional and Local Economic Development, Cornell University Symposium –
April 6,
http://english.moe.gov.tw/content.asp?cuItem=315&mp=2
http://europa.eu/legislation_summaries/education_training_youth/lifelong_learning/c11067_en.htm
http://www.jstor.org/pss/40218022
http://www.scidev.net/en/policy-briefs/the-role-of-universities-in-knowledge-production-.html
Mu-lin, L. (2002). Vice Minister of Education 21st Century University Education March 20,
Rindeskar, M. (2005) The Importance of Human Capi tal in the Product ion of New Knowledge, Master‘s Thesis in Jönköping
University, Sweden
Samuelson, P.A., & Nordhaus, W. D. (2001), Economics, McGraw-Hill Irwin, Boston, p.xxıı
Turkmenistan Human Development Report, (1999). p. 72
UN, (2005). Information Economy Report 2005, Newyork and Genova, p.2
UN, (2009). Information Economy Report, p.27
UN, (2009). Trade and Development Report 2009, Newyork, p. 1
UNDP, (2009). Human Development Report 2009, New York, 2009, p.169
Zhiyun Liu, (2005). Mission of Modern Universities and Development of Modern Society, Volume 2, No.3(Serial No.4) USChina Education Review,ISSN1548-6613,USA, Wuhan University of Technology
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The Importance of Numerical Flexibility In
Turkish Labor Market and Competition Policy
M. Akif ARVAS
Res. Assist.(PhD candidate), Economics,
Hacettepe University, Ankara, Turkey
aarvas@hacettepe.edu.tr
Suleyman ĠÇ
Dr., Department of Business, Gaziantep University, Gaziantep, Turkey
icsuleyman@yahoo.com
Mehmet AYGÜN
Assoc. Prof., Department of Business, 100. Yıl University, Van, Turkey
maygun@yyu.edu.tr
Abstract: Numerical flexibility, which has been common since Atkinson (1984), can be defined
as a situation where the number of staff and the number of hours worked can be increased or
decreased depending on the demand for labour. Within the "flexible firm model", numerical
flexibility is seen as being designed to facilitate a rapid adjustment in headcount, in line with
short-term changes in the level of demand for labour so that the number employed equals the
number required at any time. Based on Labour Law no 4857, Turkey has adopted this approach as
a competition policy in order to provide flexibility into labor market and to promote the
competition of Turkish firms. Therefore, in this study, flexibility-based tools are discussed and
evaluated in terms of competition policy.
Introduction
The flexible firm model developed by Atkinson (1984) resulted from studies carried out on the changing
nature of employment in the UK during the 1980s. Atkinson concluded that changes in technology, training costs,
working time and labour supply were the factors influencing and driving change in UK employment policies and
strategies. The changes in employment policies and strategies, Atkinson believed, resulted in the formation of two
employee groups―the core and peripheral. The core group consisted of full-time permanent workers and the
peripheral group consisted of part-time, temporary and contract workers ( collectively termed ―atypical‖ by
Atkinson).
Today, flexibility in labor market has been a new competition strategy for firms and there has been a
significant growth in flexible or ―non-standard‖ forms of employment. Since laborforce is a variable factor of
production and because of impossibility of perfect substitution of investment goods for laborforce using today‘s
technology, forces dynamic conditions in goods and factor markets to have a more flexible structure in terms of
employment forms of firms and restructuring the job schedule. Hence, flexibility in labor market as a competition
strategy can be expressed in two ways; external flexibility and internal flexibility.
External flexibility, which allows firms to adjust demand for labor to workload, and numerical flexibility
which is called employment flexibility are strategic methods and policies for firms to harmonize to rapidly changing
economic conjuncture. Firms who adjust the number employed to workload are defined as ―flexible firm‖ and
together with core laborforce of these firms, they―depending on business conditions― employ other kinds of
employment such as temporal worker, part-time worker and external service act, and peripheral labor (Felstead,
1999, p.10). Therefore, numerical flexibility will be obtained by firm from employment of peripheral laborforce.
Numerical flexibility is defined an employment type which enables employment of part-time and temporary worker
according to fixed-term non-standart employment contracts as well as full-time workers with open-ended
employment contracts (Kutal, 2002, p.33). This aspect of numerical flexibility has been taken into consideration and
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flexibility in competitive market economies means the required use of workers when needed (TĠSK, 1999, p.23).
This definiton puts forward the importance of numerical flexibility to firms.
On the other hand, it has been stated that the diffusion of flexible employment types helps developing
countries to employ low-waged laborforce to accelerate their economic growth.
Working hours flexibility known also as internal flexibility creates another dimension of labor market
flexibility as a competition strategy. Flexibility in working hours, in case when normal work period does not
response to labor supply and demand, is defined as flexibility in the period worked in response to a change in work
load of employer and in workers‘ demand for income-leisure time―within normal working hours limits ( OECD,
1990, p.23-24).
It is stated that working hours short-cut is a different application of working hours flexibility (Bosch, G, P.
Dawkins and F. Michon, 1994, p. 25–27). This method enables firm to adjust its labor demand to a fluctuation in
demand for its goods produced. According to the labor demand model, it is assumed that firm has to adjust its labor
demand to a change in economic conditions ( Borjas, 1996, p.138). it is further assumed that working hours
flexibility is a strategy in which firm aims to protect its competitive power accross firms (Kuzgun, 2005, p.34).
Based on a OECD regulation in 1985, it is pointed out that flexible working hours constitutes the numerical
aspect of laborforce flexibility and comes to the same manner with the flexibility in labor input costs (Bosch, G, P.
Dawkins and F. Michon, 1994, p. 25). In the same point of view, flexibility in working hours gives an advantage to
firm to give a quick response with a minimal input cost to fluctuations in demand in goods market. Further, while
working hours flexibility allows firm to feasible use of laborforce in number and time needed ( Centel, 2002, p.239).
On the other hand in terms of workers it means that ―...it is an aggrement between employer and employee so that
working hours needs to be adjusted to employee‘s conditions‖ (Centel, 2002, p.243).
2. Flexibility in Turkish Labor Market As A Competition Strategy
2.1. Flexibility As a Firm’s Competition Strategy
It has been seen that factors which determine managerial strategy of a firm are aggregated under the two
headings as external and internal; across external factors the state of markets, competitive conditions, economic
fluctuations and legal regulations are mentioned, as for internal factors the human source is pointed out (Ergin, 1992,
p.50-56). In this respect, within the context of new Turkish Labor Law, regulation neccessity for numerical
flexibility and flexible working hours constitutes the legal framework of firms‘ new competition policies.
Within this framework, part-time working, on-call working, compensatory working, short working,
temporary secondment and labor subcontractor applications are considered. Among these, though temporary working
has been expensively applied in Turkish labor market, it had not been legaly arranged. On the contrary, on-call
working, compensatory working and temporary secondment have found place within the new labor law context.
In Turkey, the factor that improves the effectiveness of labor market flexibility on determining firm‘s competition strategy has
been the legal permittance given to private employment aggencies to be established. In order to shorten the temporary
unemployment period, importance is attached to the matching of unoccuppied jobs with the people looking for a job. Thus, the
private employment agencies have been accepted as instruments of active employment policy for the improvement of the
matching capability of the labour market besides the public employment institutions. ― The aim of the employment service is to
enable employers to identify and employ workers who are equipped enough to perform their jobs, and to help individuals find
their first jobs, change jobs during their career, and to find new jobs when they become unemployed.‖
(http://www.oas.org/udse/esponal/documentos/cancun/01developingefectivES-D,Fretwell-docum.pdf).
As of April 2010, 277 private employment agencies have started to operate and they have been distributed among 19 provinces in
Turkey. These provinces are Adana, Ankara, Antalya, Balıkesir, Bursa, Denizli, Diyarbakır, EskiĢehir, Gaziantep, Hatay,
Ġstanbul, Ġzmir, Kayseri, Kocaeli, Konya, Muğla, Sakarya, Tekirdağ and Trabzon (http://statik.iskur.gov.tr/0252/iller/01T%c%3bcm%20Liste.pdf). Meanwhile, 126 of these private employment agencies have been closed and the licences of five
agencies have been cancelled by ISKUR (http://www.iskur.gov.tr/loadExternalPage.aspx?uicode=statozeisthdamburodagi).
These data show that private employment agencies in Turkey have created a new sector within the service sector.
While there is no data on how many people are employed by private employment agencies in Turkey, it is supposed that they
have created labor opportunities at a specific rate. The indirect contribution of private employment agencies appears at the stage
of providing matching services. Structural unemployment is one of the features of the labor market in Turkey. It is considered
that thanks to these agencies, the decrease in the period of looking for a job is a partial solution for the structural unemployment.
It is possible to say that 1.5% of those applying to private employment agencies in Turkey are already engaged in a business
(Kuzgun,2008:12). Life time of a firm is the outcoming factor and it is based on the economic activities in the effects on the
employment level.
It is observed that the fact that employment service is provided by private sector firms as well as public institutions has
led to creation of a sub-sector within the service sector and to creation of new job opportunities. This sector has been accepted as
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an emerging market by the EU countries and it is stated that new employment opportunities have been created for 1,3 million
people in the European Union in this way and that this figure corresponds to 1,9% of total employment. (http://www.eurociett.org/fileadmin/templates/eurociett/docs /position_papers/EurociettPositionPaper_Lisbon_Staregy_March_2006.pdf)
2.2. The Reasons For Adoption of Flexibility in Labor Market As a Competition Strategy in Turkey
These reasons can be classified into two sub-headings.
2.2.1. External Factors
The first external factor is globalization and its effect on the decisions regarding productive organizations of
firms in Turkey. The second is to adopt the flexible labor market approach as it did in EU in the adaptation process
of Turkey to EU.
2.2.1.1. Globalization
Since competition in domestic and international market has gained big importance, recent atypical or nonstandart job contracts are emerged as well as typical/standart or normally interpreted job relations and job contract
concepts. It is pointed out that, in process of globalization, the effect of international trade on employment has been
more improved ( Liemt, 1997: s.240). In terms of competition, in the short-run, benefiting from the nature of labor
force being variable factor of production in order to enhance the competitive power , firms use peripheral labor force
in which they employ labor force in accordance with the workload. In this regard, it is agreed that the types of PostFordist organizations has been recently appeared in developed and developing economies by the result of coercive
nature of international trade (Felstead,1999, s.9). Taking into consideration further the fact that the pressure of
globalization and competition leads firms to seek for reducing the costs, it is stated that flexibility in the general level
of labor force costs is one aspect of flexibility in labor market ( Elliot, 1997, s.301). Notably in the stage of economic
crisis, providing flexibility in adjusting the employment costs is critically important for competing firms.
Furthermore, a relationship is constituted between the use of labor force and having a flexible position and, it is
emphasized the importance of possessing a flexible structure during the crisis (Arıkboğa, 2001, s.54). In terms of
Turkey, it is expressed that the flexibility in labor force has risen as a system driven by globalization (DPT, 2001b,
p.38).
2.2.1.2. The Adaptation Process of Turkey to European Union (EU)
According to Kuzgun (2004), another reason of introducing different types of flexible employment into the
new Labor Law is the adaptation process of Turkey to EU and it plays an important role during this process. The
same approach has also been followed in the Eight Five-Year Development Plan (DPT, 2001, p. 145). This adoption,
globally, has proved the fact that the EU is influential in individualizing the work relationships by the case in Turkey.
Besides that, together with some types of flexible employment, absence of legal regulations seemed to be a lack in
Turkey. This lack is first put on the agenda in the project of improving employment and efficiency in labor markets.
2.2.2. Internal Factors
These factors resource from the structural futures of Turkish economy and labour market.
2.2.2.1. The Ever-Growing Unemployment
In the aftermath of World War II, the numerical flexibility concept in the labor market in industrialized
economies is another factor in determining different types of flexible employment and subcontracting which enables
labor market to become flexible. On the other hand, it has claimed that the oil crisis in the mid of 1970s had
strengthened the relationship among flexible types of employment producing a new unemployment wave ( Tuncay,
1995, p.57)
Therefore, a tie between widespreading flexible types of employment and unemployment is constructed and
at the end of the 20th century, as types of flexible employment become widespread, so does the employment
possibilities ( Felstad, 1999, p.3). Likewise the idea that holds that there is a linear correlation between flexibility and
levels of unemployment rates and that reforms need to be done for a flexible labor market (Rodriguez, 2003, p.37)
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runs parallel with the idea that maintains that reforms in job law which should make labor market more flexible in
2003 in Turkey comparing with the high level of unemployment rates. The reason of the ever-growing
unemployment in Turkey is the long-lasting economic crisis as an influential factor stimulating unemployment (
Kazgan, 2002, p.19).
Years
Unemployment rate %
Underemployment rate %
Underutilisation rate %
(Unemployment + Underemployment)
1995*
1999*
2008**
6.9
7.3
11
6.7
6.9
3,1
13.6
14.2
14,1
Source: * Obtained from 8th –Year Development Plan, DPT, p. 102, ** Obtained from
Turkish Statistical Institute (TÜĠK) News Bulletin.
Table 1: Changes in Unemployment and Underemployment rates in Turkish Labor
Market (1995-2008) (15+ Age)
As it can be seen from the Table 1, in the period of 2005-2008, as a consequence of effects of the global
crisis and economic instability on Turkish economy, while unemployment rate was 6,9 % in 1995, it increased to
7.3% in 1999, and to 11% at the end of 2008. But, in contrast to realized rates of underemployment in 1995 and
1999―6.7% and 6.9%―, it decreased to 3.1% in 2008. Under these conditions, underutilisation rate of work force,
which is the sum of unemployment rate plus underemployment rate, increased to 13.6 % and to 14.2 %, in 1995 and
1999 respectively, but in spite of a considerable decrease in 2008, it slightly decreased to 14.1 % at the end of 2008 (
due to increasing unemployment rates).
2.2.2.2. The Share of Service Sector in Total Employment
It is stated that there is a linear correlation between flexibility and increasing share of service sector in total
employment (Felstead, 1999, p.12). In Turkey, in the sectoral distribution of employment in urban areas, service
sector ranks first and it is followed by industry and agriculture sectors. On the other hand, if we look at the long-run
expectations of employment in Turkey, it is seen that service sector is leading sector which will create an
employment capacity for labour suppliers (ĠġKUR, 2003, p.13).
According to Household Work Force Survey results, in both 2008 and 2009, considerable part of
employment is engaged in service sector. As of 2009, the share of service sector employment in total employment
reached to 50 %. The economic crises has led industry sector to provide less employment comparing to the numbers
of 2008 (Table 2).
2008
2009
Sectors
Employment
Share (%)
Employment
Share (%)
5016
23.7
5254
24.7
Agriculture
5682
26.8
5379
25.3
Industry
10495
49.5
10644
50.0
Service
21194
100
21277
100
TOTAL
Source: http://bulten.tuik.gov.tr/PreHaberBultenleri.do?id=6198&tb_id=2, 19 April 2010
Table 2: Sectoral Distribution of Employment, 2008-2009 (in thousands, 15+ age)
2.2.2.3. The Share of Unregistered Employment in Total Employment
Unregistered employment is generally keeping the workers away from awareness of the government,
employing unskilled workers, violating the regulations such as minimum age level (child labour), minimum wage,
overtime, workplace standards, health and security of workers.
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It is generally agreed that, in Turkey, there is an informal economy as well as the informal one and an unregistered
employment beside the registered. Today, it is obvious that one of the most challenging problems economies have
faced is informal economy and unregistered employment (TUSIAD, 2002, p.96).
In 2009, According to the latest published survey results, the ratio of persons who worked without any
social security related to the main job inclined to 42.3 % with 1.5 percentage point increase. The share of persons
who did not have any social security in agriculture increased from 84.5 % to 85.8 % and that in non-agriculture
increased from 28.6 % to 28.7 % compared to the same period of the previous year
(http://www.turkstat.gov.tr/PreHaberBultenleri.do?id=6229, 20 April 2010). By the expansion of types of flexible
employment, employment of women, retired, young and handicapped labour force who are considered as secondary
labour force have been increased, to participate in economic activities, in work place or at home. Besides that, it is
observed that types of flexible employment are accumulated in product lines with low-demand of capital. For
example, as a consequence of creating new job opportunities being restricted in Turkey, the labour force as
unregistered are employed in product lines which do not require too much capital such as piece-rate wages system in
return for producing at home (DPT, 2001a, p.46)
Shifting production out of plant within the context of the organization of production means flexibility in
organizing the job and provides an opportunity of reducing the production costs in terms of firm. Henceforth,
flexibility in organization is seen by firm as a dominant competition strategy against its rivals (Ġġ KUR, 2003, p.35).
In this respect, flexibility in production and in employment is an inevitable result of competition and is defined as
realization of production out of plant employing outsider workers (TĠSK, 2004, p.34).
Subcontractor application is another method to shift the production out of plant. The factors bringing about
this application are changes in production process, expansion of small and medium-sized firms and the focus on
privatization (Ekin, 2002, p.59). Since small and medium sized firms hold a near-position of subcontractor firm, they
have a considerable share in total number of firms and in total employment and they emphasize the relationship
between informal economy and firm size in Turkey. So, reshaping the subcontractor application within Labor Law
carries considerable importance.
Existence of small and medium-sized firms (SMEs) and shifting the production out of plant; are supported
with the view of which classifies the capital system as dualist―primary and secondary― in acceptance of flexibility
in labor market (Tai, 1994, p.16-17). When taking into consideration that subcontractor application enables firms to
offset labor demand and to shift their production line into secondary sector, it would not be false to see the informal
economy and subcontractor firms operating in this economy as secondary sector in Turkey. Furthermore, allowing
for the operation of private employment agencies within this sector will speed up the tendency of firms towards the
sector.
In Turkey, basically, though subcontractor application became widespread in private sector, it also is
becoming widespread in public sector. Among the reasons, decreasing the production costs in State Economic
Enterprises (KĠT), willingness to work with problem-free worker groups and the thought in which easily privatizing
the State Economic Enterprises are mentioned. Therefore, subcontracting is described the other way of privatization
in public sector (Ekin, 2002, p.35).
On the other hand, it is pointed out that subcontractor application is a key concept in international trade
(Liemt, 1997, p.240). When looking at the examples of subcontractor applications in international field, it is
observed that 32 percent of employers in excessively industrialized countries such as France, Germany and United
Kingdom have shifted their own works to the subcontractors in the last three years and, in Turkey, the number of
subcontractor employers and workers in the lines of business accounts for 15% of total labor force (Ekin, 2002, p.34)
2.2.2.4. Firm Size in Turkey
Since small-sized firms have a more flexible structure, it possible to construct a relationship between
flexibility in labor market and firm size. Firms having a flexible structure, in general, are small and medium sized.
Owing to this structural feature, Firms in this size easily respond to changes in demand of goods and services. In this
respect, the types of flexible employment as competition strategy are more important for these firms.
According to the EU standards, firms employing 1 to 9 workers are defined as micro enterprise; and those
employing 10 to 49 as macro enterprise (Kuruüzüm, 1998, p.37). But in Turkey, there is not a common standard on
determining firm size taking number of workers employed as a basis. According to some determination, firms who
employ 1 to 49 workers are considered small sized firms (http://www.kosgeb.gov.tr/kos.htm). Firms in this size, have
a notably place in Turkish economy. In the same way, the abundance of small-sized firms in number is considered
among structural features of Turkish economy (Bulutay, 1995, p.65).
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Size of Work Places (based on
the Number of Compulsory
Insured Person)
1-3 persons
4-6 persons
7-9 persons
10-19 persons
20-29 persons
30-49 persons
50-99 persons
100-499 persons
500-999 persons
1000+ persons
TOTAL
Number
Compulsory
Insured Person
1,228,315
855,295
613,074
1,198,952
699,524
898,516
848,127
1,753,236
408,122
371,805
8,874,966
of
Share (%)
13.8
9.6
6.9
13.5
7.9
10.1
9.6
19.8
4.6
4.2
100
Source: www.ssk.gov.tr, Insured Person Statistics, January 2010, Table SS15, page 27,
Table 3: Compulsory Insured Person Numbers According To Activity
Branches and Work Place Size (4/a)
According to Table 3, Firms, who employ 1-49 persons and defined as small sized in Turkey, account for 61
percent of total insured labor force. This founding shows, within the new Labor Law, the importance of arranging the
types of flexible employment in terms of labor market in Turkey. Thus, in determining of employers‘ commitments,
firm size is taken as basis and in general small firms have been legally protected ( Kuzgun, 2004, p.5-14).
2.2.2.5. Frequency of Cyclical Fluctuation
In terms of firm, providing working hours to become more flexible during economic crises is crucial in
relation with minimizing the labor costs. Because an anticipated crisis weakens the firms‘ adaptation and prevention
mechanisms of cyclical fluctuations and threats firms‘ operational goals, values and predictions regarding sales and
returns (Dinçer, 1998, p.385).
The economic crises within the context of new Labor Law is accepted being one of the reasons of
flexibilizing working hours and is arranged in scope of the article 65 in case of bringing short working in practice. In
doing that, it is thought that cyclical and intense fluctuations experiencing in economic activities have been
influential on this arrangement (Bulutay, 1995, p.87).
In order to adopt a resolution for short working according to Labor Law, an economic crisis must be a
general crises affecting the whole economy. By this approach, in paragraph (3) of article (3) in the act which
regulates short working and the payment for short working, an economic crisis is defined as ―a situation in which
events occurred in national and international economies give shock to the whole economy and establishments‖
(www.iskur.gov.tr/mydocu/mevzuat /yonetmelik45.html).
A general economic crisis brings about changes in overall economic conditions in terms of firms. In this
respect, it is argued that short working provides facilities to firms to cope with crisis and that short working during
crisis is a key for feasible solutions in terms of firms (MESS, 1999, p.180).
When analysing the demands for short working to Ministry of Labor and Social Security, as of 30
September 2004, it has seen that the whole demands have been made by firms operating in private sector, and that
those firms according to the KOSGEB classification are mostly small and medium-sized (Kuzgun, 2005, p.45-46).
According to Arıkboğa (2001), there is a relationship between the number of employees employed and firms‘
flexible structure and particularly in crisis period, flexibility is a feasible strategy. But, in arrangement of short
working, firm size has not been taken a criterion (Kuzgun, 2005, p.47). This policy, regardless of how big firms are,
is a result of the opinions to protect firms against economic crisis.
While it has been aimed, by short working, to adjust firm‘s demand for labor to shrinking in the level of
economic activities; the negative effects of employee‘s income loses caused by implementing of short working has
been considered to be compensated by the payment for short working. The main determinant in employee‘s
acquiring the rights of short working is the condition in that premium payment must be paid within the prescribed
time limits.
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Conclusion
Today, being connected to globalization, flexibility in labor market is adopted as a new competition strategy
in terms of firm. By external and internal factors, the introduction of new regulations into the new Labor Law aiming
at flexibilizing labor market has constituted the legal framework in determining firm‘s competition strategy in
Turkey. The importance of new regulation based on numerical flexibility and flexibilizing labor market is vital in
respect to determining competition policies.
Labour market flexibility is seen as an important characteristic of a modern economy. Labor market
flexibility decribes how labour markets function. A flexible and efficient labour market implies higher employment,
and so an economy that is fairer (in terms of, for example, reducing social exclusion), as well as more competitive
and more productive. It also implies an economy that is better able to adapt to the changing economic environment.
External numerical flexibility refers to the adjustment of the labour intake, or the number of workers from the
external market. This can be achieved by employing workers on temporary work or fixed-term contracts or through
relaxed hiring and firing regulations or in other words relaxation of Employment Protection Legislation, where
employers can hire and fire permanent employees according to the firms‘ needs. Internal numerical flexibility,
sometimes known as working time flexibility or temporal flexibility. This flexibility achieved by adjusting working
hours or schedules of workers already employed within the firm. This includes part-time, flexi time or flexible
working hours/ shifts (including night shifts and weekend shifts), working time accounts, leaves such as parental
leave, overtime.
Arranging the both types of flexibility within the new Labor Law enables firms to determine their new
competitive strategies. This arrangement, especially in private sector, will lead employment strategies based on the
distinction between core and peripheral labor force to be emerged, and also will help this distinction to become
common. Besides that, operations of private employment agencies and in general the demand for temporary
employee by firms, both, will bring about a new expansion to the competition among rivals and will expand the
application of the fixed-termed temporary working contracts. In this context, private employment agencies also will
facilitate the applications of numerical flexibility as competition strategy. In the next stage, it is expected that
expansion of flexibility would bring about a fragmented and more informal labor market in Turkey.
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Economics of Boron Mining in Turkey
Bayram KAHRAMAN
Dokuz Eylül Üniversitesi, Müh. Fak., Maden Müh. Bölümü, Izmir, Turkey
bayram.kahraman@deu.edu.tr
Abstract: Boron minerals are one of the most important richness of Turkey. Turkey has a great
potential in boron minerals regards to the reserves and the quality of these minerals. Boron
minerals have an intensive and increasing usage ranging from glass to detergent industry and in
metallurgical, agricultural and nuclear applications. Despite the important potential, Turkey gains
only an average of 300 million US Dollars per year. Therefore, this income should be increased
proportionally to the potential. In this study, production and export of ETĠBOR A.ġ. since 1978,
future targets are reviewed.
Introduction
Boron, which has the world's most common application, is one of the most important elements.
This is why the industry is one of the most important foundation stones. Boron minerals are structures in
different proportions of boron oxide (B2O3) which are naturally formed. There are over 200 naturally
occurring boron containing minerals which have major commercial importance; tincal, colemanite,
kernite, ulexite, pandermite, boracite, szaibelyite and hydroboracite (Table 1). Boron minerals in Turkey,
which are widely available, are tincal, colemanite and ulexite. These minerals are sodium, calcium and
sodium+calcium boron-based compounds. First of these minerals can be physically processed enriched
(concentrated boron) can be refined later converted to a variety of boron chemicals (Köse et al., 2002).
Mineral
Tincal (natural borax)
Kernite (rasortie)
Ulexite (boronatrocalcite)
Probertite (kramerite)
Colemanite
Priceite (pandermite)
Boracite (stassfurite)
Szaibelyite (ascharite)
Hydroboracite
Table 1:
Chemical composition
Na2B4O7 .10H2O
Na2B4O7 .4H2O
NaCaB5 O9 .8H2O
NaCaB3O9.5H2O
Ca2B6O11.5H2O
CaB10O19.7H2O
Mg3B7O13Cl
MgBO2OH
CaMgB6O11.6H2O
% B2O3
36.5
51.0
43.0
49.6
50.8
49.8
62.2
41.4
50.5
Production Place
Kırka, Emet, Bigadiç, A.B.D
Kırka, A.B.D., Argentina
Bigadiç, Kırka, Emet, Argentina
Kestelek, Emet, A.B.D
Emet, Bigadiç, Küçükler, A.B.D
Sultançayır, Bigadiç
Germany
B.D.T. (Old S.S.C.B.)
Emet
Boron mineral which are commercially important [2]
Boron is consumed mostly in the form of boron chemicals. Moreover, the concentration of boron
can be consumed directly. Boron products are used in many areas including aerospace and aircraft, nuclear
applications, military vehicles, fuel, electronics and communications industry, agriculture, glass industry,
chemical and detergent industries, ceramic and polymeric materials, nanotechnology, automotive and
energy sector, metallurgy and construction. Nearly 75% of boron products are consumed in glass, ceramic,
agriculture and detergent industry (Figure 1).
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Figure 1.
World Boron Consumption in Sectors
The important boron deposits are located in Turkey, USA and Russia. Turkey has 72 percent of world reserves of
boron (Table 2).
Total Reserve
Turkey1
USA2
Russia2
China2
Chile3
Bolivia3
Peru2
Argentina2
Serbia5
Iran2
Kazakhistan4
TOTAL
Table 2:
866,000
80,000
100,000
47,000
41,000
19,000
22,000
9,000
16,200
1,000
1,201,200
Percent in Total
(%)
72
7
8
4
3
2
2
1
1
0
100
World Boron Reserve (x103 Ton - B2O3) [Boron Sector Report 2009]
1.
2.
3.
4.
1. Eti Mine reserves information was used in 2006.
USGS Mineral Commodity Summariers, January 2009, was taken.
USGS Mineral Commodity Summariers, January 2002, was taken.
Satimola region of Kazakhstan on the basis of reserves of 102 million tonnes B 2O3 at www.borates.co.uk is given as the other
sources are given very different and contradictory figures, these figures reflected in the table. Given this value is 67 percent of
ETI shares.
5. http://www.riotinto.com/whatweproduce/17056_inferred_resource_at_jadar_lithium_project.asp
The borate deposits known in Turkey are especially located in EskiĢehir-Kırka, Balıkesir-Bigadiç,
Bursa-Kestelek, and Kütahya-Emet (Figure 2). From two main ores, tincal and colemanite, boron and
boron compounds are obtained. The important tincal deposits are in Kırka while the colemanite deposits
are around Emet and Bigadiç. Ulexite is located in Bigadiç. Since the boron minerals in Turkey are only
run by Eti Mine Works General Management. Eti Mine‘s operating base consists of five competitive
mining operations: Kırka, Emet, Bigadiç and Kestelek (Table 3).
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Production Place
Natural Borates
Kırka, EskiĢehir
Bigadiç, Balıkesir
Emet, Kütahya
Kestelek, Bursa
TOTAL
Tincal
Colemanite, Ulexite
Colemanite
Colemanite
Total Reserve
(Million Ton)
750,620
623,459
1,682,562
6,995
3,063,636
Grade
%B2O3
26
29-31
28-30
29
Table 3: Turkey Boron Reserves and Types [BOREN web pages, 2010]
Figure 2:
Sources of boron distribution in Turkey
Trade of Turkey’s Boron Products
Turkey owns the biggest and highest quality boron reserves in the world. Turkey is the largest
boron producer and seller of the world. The entire boron demand in the domestic market is met. The most
important countries in the world production of boron are Turkey, USA, Argentina, Russia, China, Chile,
Bolivia and Peru. In 2008, global boron production was about 1.91 million tons of B2O3. The production
of these countries is given in Table 4 (BOREN web pages, 2010).
Countries
Market ratio (%)
Turkey
42
USA
35
Chile, Argentina, Bolivia and Peru
11
Russia and China
12
Table 4: Position of Turkey in World Boron Market
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Boron ore in the country is converted to concentrated boron (colemanite, ulexite, Tincal) and
refined boron (boric acid, borax pentahydrate and borax decahydrate) products are sold to domestic and
foreign markets. Boron concentrate production is done in Emet Kestelek and Bigadiç. Refined boron
products are made in Kırka Bandırma and Emet (EMW, 2009).
In Turkey, selling high value-added product (boron chemicals and equivalent) was identified as
the main policy. As a result, while reducing the share of exports concentrated boron, increasing constantly
share of boron chemicals and equivalent products. In 1998, 53 percent of total sales consisted of the sales
of concentrated boron and 47 percent of total sales consisted of from the sales of boron chemicals and
equivalent boron (Figure 3).
In 2009, 96 percent of Turkey's total borax products sales revenue consisted of foreign sales.
Borax pentahydrate has the highest share in boron chemicals exports. Boric acid is the second coming one.
Covering the period 2002-2009 in Turkey concentrated boron and boron chemicals and equivalent
products export sales are given in Figure 4 (EMW, 2008).
Figure 3.
Concentrated boron and boron chemicals and equivalent products sales of percentage in total sales
Figure 4.
Turkey Concentrate Boron, Boron Chemicals and Equivalent Products Exports (as the value US$)
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Conclusions
Boron ore is easily and economically obtained in Turkey. Even the B2O3 grade of boron stored in waste
dams is higher than the B2O3 grade in lake waters of world‘s locomotive countries. For this reason, high grade and
easily mineable boron ores make Turkey an advantageous country.
While the boron market share of Turkey in the world during 1980‘s was 25% in terms of production, it has
been achieved as 37 % in the year 2009.
As Turkey and USA meet the boron demand of the world at a rate of 65-70 %, in the forthcoming years
countries like Russia, China, Chile and Argentina have begun to take share in the international boron market. In the
year 2009, Turkey has met the need at a rate of 37 % whereas USA met the need at a rate of 28 %. On the other
hand, Turkey has sustained its leadership in the past year which it gained back in 2005.
The total sale income of Turkey from boron products in 2009 was achieved as 451 million US$, 435 million US$ of
which were in the form of export. The sale income of exported boron chemicals and equivalence has increased by
232 % when compared to 2002 and happened as 402 million US$.
The revenue of world boron market is 1.5 billion US $ annually. Turkey, which owns 72% of the world
boron reserves, get revenue of an average of 300 million US $. Turkey aims to increase its capacity and profit with
the help of new investments.
References
EMW (Eti Mine Works General Management), web pages, http://www.etimaden.gov.tr
EMW (Eti Mine Works General Management) (2009), Boron Sector Report 2009
EMW (Eti Mine Works General Management) (2008), Activity Reports 2008.
BOREN (National Boron Research Institute) web pages, http://www.boren.gov.tr/
KÖSE, H., BATAR, T., KAHRAMAN, B. (2002), Dünya Bor Statejisi ve Bor‘un Türkiye için Önemi, EGĠAD GiriĢimcilikYönetim-Ekonomi AraĢtırmalar Dizisi.
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The Effect Of Capital Movements Liberalisation On Economical
Development: Boundary Test Approach
Mehmet MERCAN
ADÜ. Social Science Institute
mmercan48@hotmail.com
Osman PEKER
Dr., ADÜ. Nazilli ĠĠBF
ottopeker@Yahoo.com
Abstract: In this study, liberalization of capital movements‘ impact on economic growth in
Turkey has been investigated by the approach of the bounds testing. According to the empirical
findings of study, in both long and short-term, capital movements impact on economic growth is
statistically insignificant. This result is far from meeting our theoretical expectations.
Key Words: Turkey, Capital Movement, Libarelization, the Bound Test Approach.
1. Introduction
The view about that financial liberalisation would cause much higher economical development has been
expressed firstly by Mc Kinnon and Show. According to this view known as Mc Kinnon and Show hypothesis in
literature, the maximum rates applied to the deposit rates will cause a decrease in real interest rates in an economy
repressed as financially. Considering the possibility of a decrease in real interest rates to the minus degrees in an
inflationist atmosphere, the house hold could direct its savings to the unproductive investments like real estate, gold
and hard goods instead of financial havings. By limiting the loanable fonds of banking sector, this situation will
cause the credits pass to the preferred sectors and firms without being predicted on the objective criteria instead of
their expected returns and will prevent the use of sources effectively. If the press on the interest rates is removed, it
will be provided to be used the sources in productive areas via trending of savings to the banking sector. As the bank
deposit will expand by this, much more credit possibility for investment will occur and economical growth will
increase.(Mathieson, 1980; Melo ve Tybout, 1986; Dornbush ve Reynoso, 1989).
In international capital flows mutual profits exist for the countries. As the direction of capital flows is
generally from the country that have more capital to the country that have less capital, marginal product of the capital
is in higher rates than the country that has the capital.Thus, the capital is directed to more productive and effective
fields. In this process that means much more production will happen per capital unit, a welfare increase occurs also
in the country giving the capital.(Eichengreen vd., 1998:12; Bacchetta, 1992: 474). When evaluated on this point of
view, for the poor countries capital movements liberalisation can be seen as an economic policy that is necessary to
use for increasing the investment possibilities and decreasing the capital costs. (Fischer, 1998; Summers, 2000).
By the liberalasation of capital movements the market structure in financial sector changes in the direction
of weaking the monopoly power of institutions. As this provides the chance to act in more suitable conditions in
credit markets, it causes an increase on realizable real estates and a decrease on borrowing costs. (Kenen, 1976: 31).
In this process that means the specializing in the financial services, the increasing specialization causes a
development in international economic benefits. (Mathreson ve Suarez, 1992: 41).
However, when the recent developments considered we can see that capital movements gradually act more
independently than real ecenomy. While most of the total transations in currency markets consists of short period
profit making commercial transations, very little part of this is directed to the commercial activities. This transactions
is the main reason for the the weekness in the international currency capital markets. (Verghese, 1985). So in 1980‘s
the foreign capital lost its function in the 1950‘s and in general it tended to speculative short termed portfolio
investments.
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In this term portfolio investments contained most parts of the transations in financial markets. Much growth
in portfolio investments caused some risks to occur in the economies of the countries firstly by decreasing the real
investment possibilities. Especially the possible great fluctuations on the currency rates and financial asset prices
resulted in crises by negatively affecting the macroeconomical balance. Since the capital flows occuring as portfolio
investments can move fast and in a short time,UNCTAD warns for the possible risks. For instance, the determining
factor in capital flows tended to Latin America wasn‘t economic and since it was shaped according the others‘
behaviors, it was speculative. In other words, investment owners behaved speculatively instead of behaving
according to the economical reasons. This increased the prices of real estates while it made the currency of the
country valuable irrationally. With this point of view the Mexican crisis was not a surprise. (Akyüz, 1995: 14).The
Ex post point has revealed that some proofs of Ortodox economy is not realist. Today the countries having much
financial crisis experience especially find it hard to pay their depts. It is anticipated to apply a program for depts in
order not to delay in the system.
In fact Bhagwhati (1998), Rodrik (1998) and Stiglitz (2002), draw attention that capital account
liberalisation doesn‘t improve the growth as it is said; even it may cause crisis. Kaminsky and Reinhart (1999),
Detragiache and Demirguc-Kunt(1998) and Glick and Hutchinson also have expressed the similar views (2001) and
added that financial liberalisation has a tendency in increasing bank and money crisis.According to UNCTAD
(1990) , in a system that has no exchange controls, credit allocation can not be directed to the fields to increase the
effectivity.Because a banking system based on liberal market is less sensible to the persuasion and sources tend to
the short term profits instead of the use for the economical development.
As it is evaluated by the different poinf of views, it is difficult to say that there is an agreement about the
effects of capital movements liberalisations on the econimical growth. Eichengreen and Leblang (2002: 1) point that
it can‘t be estimated weather capital account deficit increases or prevent the growth and in general the proofs are not
enough eventhough many researches are made on the subject.
2. Data And Methods
This survey covers 1998:01 and 2009:09 variables have been used and all variables have been calculated in
percentages. The variable vektör of the survey is: yt=[it, m2t, opent, tkt] y stands for Gross National Product (GNP), i
stands for Treasury domestic borrowing interest rates, m2, stands for Money supply, open stands for
opennes(export+import), tk stands for total capital movement liberalisation All data have been taken from the
website of the Central Bank of Republic of Turkey(electronic data delivery system)( http://evds.tcmb.gov.tr).
In this survey boundary test approach which was developed by Pesaran vd.(2001) has been used in order to
study the effect of capital movement liberalisation over economic growth. This method is considered to be more
usable when comperad to cointegration method developed by Engle-Granger. Series have to be stable in the first
differnce in the Engle-Granger and Johansen. Series can be in different stability levels in ARDL method. Another
advantage of boundary test approach is that analysis can be made with only a few data. (Narayan and narayan,
2004:25) More over as the regresive variables included in analysis. The level and regressive values of independed
veriables can be observed on depended variables. In boundary test apprach firstly whether series move together in
long-term is analysized by means of ARDL cointegration method. Ġf there is conĢntegration relationship betwen
series the coefficient and statistic of regression carried out with this serries will be meaningfull and reliable. If
relationship can be pointed out whit be serries lon an short term analysis are held by means of ARDL method.
3. Analysis And Empirical Findings
Before analysis, the certain tests and procedures relation variables used in the study are needed. tk,
open ve y series have seasonal effect. Series were purifed from seosanal effect by means of Moving
Avarage Methods. Stationary of series were tested with Augmented Dickey Fuller: ADF
3.1. ADF Unit Root Test
If time serries is not stable, medyan, variance and covariance changeble in time. Shocks take place in a term
can effect the others and it becomes permanent. The analysis carried out in this case includs fake regression and F
and t statistics loos their meaning (Gujarati, 1999:2.712).
The stability levels of serries and unitroot test have been studied with ADF test.
DF test is carried out based on three regression equation (Dickey and Fuller, 1979).
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Simple situation:
Yt Yt 1 ut
(1)
Intercept:
Yt 0 Yt 1 u
(2)
Trend and intercept:
Yt 0 1 t Yt 1 ut
(3)
As a result of this tests the DF statistic been compared Mac Kinnon crtitical values zero hypotesis is tested
against the lternative hypotesis. Zero hypotesis showes that serries is not stable alternative hypotesis. Ġf error
correction term is autocorrelated equation (3) is regulated as:
m
Y 0 1 t Yt 1 i Yt i u t
(4)
i 1
Here m stands for regression length and stands for difference operator. Regression number depends on
obtaining model without autocorrelation. A test which is carried out this way is called ADF test in short. Tests
results obtained accordingly are shown in Table 1.
Table 1: ADF Test Results Expanded for Dickey-Fuller Variables (ADF)
Variables
ADF Test
Critical Values
Y
-1,06[11]
-3,48
Δy
-7,04[10]
-3,48
İ
-2,14[2]
-3,47
Δi
-9,86[1]
-3,47
m2
-6,02[3]
-4,02
o p en
-3,14[12]
-3,48
Δo p en
-5,69[10]
-3,48
Tk
-3,07[5]
-3,47
Δtk
-10,39[4]
-3,47
Note:The values in [ ] points out teh lag number. By taking the lag lenght which Akaike Lag is the lowest. Mac
Kinnon test values pointed out without trend and intercept test values. In this test were used trend and intercept for
m2 ve open variables, intecept other variables. For first difference of variables(Δ) were used intercept.
3.2. Co-Integration Test
The level values of many macroeconomic variables are not stable. If there is a co-integration relationship
between series in other words if series move together in the long term, a fake regretion trouble will not be faced in an
analysis to be carried out with level values(Pesaran etc, 2001:290;Gujarati 1999). However, the dynamic behaviors
of variables moving together in the long term cause some deviations in the balance equation(Enders, 1996:151).
This is one of the basic characteristic of co-integration variables and plays an important part in the short term
dynamic. The dynamic model appearing along with this process is called error correction model(Enders, 1995: 365).
An unrestricted error correction model is setup so that boundary test approach can be applied. (unrestricted error
correction model: UECM) This model can be applied to our survey as fallows:
m
m
m
i 0
i 0
yt 0 1i yt i 2i i t i 3i m2t i
i 1
m
m
i 0
i 0
4i opent i 5i tk t i 6 yt 1 7 i t 1 8 m2 t 1
9 opent 1 10tk t 1 ut (5)
Here, m; stands for optimum lag length, ∆ stands for difference operator, ut stands for error correction term,
those which are given with other letter abbreviation stands fort he meanings in variable definitions. In this survey
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optimum lag lenght has been determined by means of Akaike Criterion. According to Kamas ve Joyce (1993) there
musn‘t be autocorelation between error terms of model‘s optimum lag length so that the test can give healthy result.
If there is autcorolation in the lag lenght which Akaike Criteria lowest. One has to next lag.
The test result of lag lenght are presented in Table 2. Maksimum lag lenght is 2 since the data in this survey is
monthly.
m
1
2*
3
4
5
6
7
8
AIC
4.86
4,71
4,77
4,80
4,86
4,86
4,91
4,96
LM Test
0,00
0,66
0,66
0,62
0,12
0,32
0,32
0.51
Table 2: The lag length is point out for boundary test
The optiumum lag length determined as a two in the Table 2. In this lag length hasn‘t autocorelation. After
lag length determined it passed testing process cointegration relationship between variables. In boundary
cointegration relationship between values is made by mines of testing ziro hypotesis. (H 0:α4=α5=α6=0) Zero
hypotesis accept or reject is determinated with F test. Calculate value contrasted Table conpered and contrast min
and max value in Pesaran etc. 2001 Table. In the fisrt case if calculated F statistic value lover than min critic value. It
is decided that there is coengration relation between series. In the second case if calculated F statistic value in
between max and min critice value no definite commend can be made. In this case must be tried alternative
coentegration methots. Finaly calculated F statistic value bigger than Table max critic it is decided that there is
cointegration relationship between series.
For testing H0 calculated F statistic value compared with critic value which taken Pesaran etc 2001 in Table
3. This critic values given fort 4 independed variable and mining full %1.
k
Calculated F
Alt Sınır
Üst Sınır
4
6,46
3,74
5,06
Note: k stands for variable number. Critical values are extracted from Table CI (iii) in Pesaran etc.
Tablo 3: Boundary Test Results
It is observed that calculated F statistics is higher than utmost critical value. In this case H0 hypothesis is
denied and it is concluded that there is a co-integration relationship between variables. Since the existence of cointegration relationship between series is remarked, ARDL models started to be estimated to search the long and
short term relationships between variables.
3.3 Long Term Analysis
ARDL model which is used in order to analyse long term relations is formulated as:
m
n
p
i 0
i 0
yt 0 1i yt i 2i i t i 3i m2t i
i 1
r
k
i 0
i 0
4i opent i 5i tk t i ut (6)
Here m, n, p, r ve k is Lag length and determined with AIC. This transaction has been carried out with the
method that Kamas and Joyce(1993) proposed in their causality analyses so as to determine Lag length. Therefore;
first of all, regression according to dependent variables‘ own regressive values is made and the lag length of without
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otecorelation model which gives the lowest AIC value. Then, regression models were formed by keeping the
identified lag length of the dependent variable stable and all possible regressions of foreign direct investment
variable which is the first independent variable and the regressive number of independent variables was found by
taking AIC values into consideration. Optimum regression number was obtained by repeating similar transactions for
other variables. As a result of the transaction carried out, it was decided that ARDL(7.1.1.0.0) was the long term
ARDL model to be estimated and results are presented in Table 4.
AIC
m
1
2
3
4
5
6
7*
8
5,10
5,12
4,75
4,76
4,78
4,78
4,70
4,72
LM Test
0,00
0,00
0,21
0,08
0,00
0,00
0,76
0,39
n
0
1*
2
3
4
5
6
7
8
r
0*
1
2
3
4
5
6
7
8
AIC
LM Test
4,65
4,58
4,60
4,61
4,61
4,62
4,64
4,65
4,67
0,72
0,97
0,97
0,97
0,77
0,85
0,84
0,84
0,44
p
0
4,60
0,38
4,58
0,62
1*
4,59
0,47
4,59
0,61
2
4,61
0,39
4,60
0,68
3
4,62
0,38
4,61
0,70
4
4,64
0,33
4,62
0,81
5
4,64
0,37
4,63
0,83
6
4,65
0,24
4,64
0,81
7
4,65
0,97
4,66
0,71
8
4,67
0,97
4,67
0,79
k
0*
4,59
0,62
1
4,60
0,49
2
4,61
0,47
3
4,62
0,50
4
4,64
0,47
5
4,64
0,66
6
4,65
0,66
7
4,66
0,57
8
4,66
0,88
Tablo 4: Determination of Lag Length for Long Term Boundary Test
The estimate results of long term ARDL(7.1.1.0.0) and long term coefficients calculated based on the
results mentioned are available in Table 5.
In Table 5; variables of Money supply, opennes and capital movement coefficient‘s signs accord with our
teoric expects.
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Variables
C
i
m2
open
tk
Diagnosis Tests
R2=0.45
Coefficient
0,3481
0,0259
0,2049
0,0538
0,0005
t-statistic
0,8154
3,4533
1,3995
2,0456
0,7142
2BGAB(2 )=0,51(0.60)
2WDV=0,63(0.90)
2JBN=239,78(0.00)
2RRMKH(2)=0,73(0.48)
2
R =0.39
F ist.=7,71(0,00)
DW=2,00
Note: Here, 2BGAB, 2WDV, 2JBN and 2RRMKH are respectively Breusch-Godfrey successive dependence, White
changing variance, Jarque-Bera normality test and Ramsey model establishment error statistics in regression. The
figures in parentheses reflect p-probability values
Tablo 5: The Results of Calculated Long Term Coefficient of ARDL (7.1.1.0.0) Model
Taking the results in Table 5 into consideration, capital movement and money supply can‘t be interpreted so
that Theirs coefficient is meaningless as regards statistic value. Coefficient of interest variables increased positive
unlike our teoric expectations.
3.4 Short Term Analysis
Short term relation between variables again investigated by means of ARDL Error Correction Model based
on boundary test approach. ARDL model which is used in order to analyse short term relations is formulated as:
m
n
p
i 1
i 0
i 0
yt 0 1ECt 1 2i yt i 3i i t i 4i m2t i
r
k
i 0
i 0
5i opent i 6i tkt i ut (7)
Here ECt-1 is error correction terms and it stands for one term lagged of error terms series which it is
obtained from long term relationship. Coefficient for this variable is point out duration of sort term deviation. If
this sign of coefficient is negative, deviations happen in short term between series is convergences to long term
balance value. If this sign of coefficient is positive, not convergences to long term balance value.
In this model lag length of veriables determineted just like long term. As a result of the transaction carried out, it
was decided that ARDL(5.1.0.0.0) was the short term ARDL model to be estimated and results are presented in
Table 6.
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AIC
m
1
2
3
4
5*
6
7
8
5,29
4,71
4,71
4,72
4,69
4,70
4,70
4,68
LM Test
0,00
0,05
0,07
0,02
0,29
0,41
0,36
0,00
n
0
1*
2
3
4
5
6
7
8
r
0*
1
2
3
4
5
6
7
8
AIC
LM Test
4,68
4,64
4,65
4,66
4,67
4,69
4,70
4,71
4,73
0,25
0,46
0,43
0,35
0,36
0,30
0,35
0,39
0,42
p
0*
4,65
0,52
4,61
0,48
1
4,66
0,44
4,62
0,50
2
4,65
0,43
4,63
0,60
3
4,69
0,42
4,64
0,15
4
4,69
0,48
4,65
0,65
5
4,71
0,45
4,66
0,66
6
4,69
0,41
4,68
0,63
7
4,71
0,31
4,68
0,70
8
4,73
0,27
4,70
0,67
k
0*
4,63
0,44
1
4,64
0,44
2
4,65
0,47
3
4,66
0,40
4
4,67
0,44
5
4,68
0,43
6
4,69
0,45
7
4,68
0,53
8
4,70
0,34
Table 6: Determination of Lag Length for Short Term Boundary Test
The result of estimated ARDL (5.1.0.0.0) model given in Table 7. Coefficient of ECt-1 (error correction
terms) is -0,72 in Table 7. This coefficient is negative and meaningful like expected. If coefficient‘s signs of error
correction terms is negative, model is convergences to long term balance level.
If this sign of coefficient is negative, deviations happen in short term between series is convergences to long
term balance value. If this sign of coefficient is positive, not convergences to long term balance value (Narayan ve
Smyth 2006). Therefore error correction of model is works. Although capital movements impact on economic
growth, like long term effect, is positive and according with theoritical expectation, statistically insignificant.
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Variables
yt-1
yt-2
yt-3
yt-4
yt-5
it
it-1
m2t
opent
tkt
ect-1
C
Diagnosis Tests
R2=0,70
R 2 =0,68
Coefficient
-0,3538
-0,3392
0,0961
-0,1636
-0,1825
-0,0319
0,0509
0,0152
0,0380
0,0002
-0,7274
-0,0587
t-statistic
-2,0340
-1,8955
0,5281
-1,4758
-2,2912
-1,9067
2,9609
0,1873
2,5170
0,4738
-3,6701
-0,2843
2BGAB(2 )=2,56(0,08)
2WDV=0,62(0,89)
2JBN=228,78(0,000)
2RRMKH(2)=0,13(0,87)
DW=1,98
F=26,80(0,00)
Note: Here, 2BGAB, 2WDV, 2JBN and 2RRMKH are respectively Breusch-Godfrey successive dependence, White
changing variance, Jarque-Bera normality test and Ramsey model establishment error statistics in regression. The
figures in parentheses reflect p-probability values
Table 7: The Results of ARDL (5.1.0.0.0) Model
Results
In this survey, capital movement impact on economic growth in Turkey has been investigated by using
monthly datum term of 1998:01-2009:09. In survey, boundary test approach which was developed by Pesaran has
been obtained cointegration findings between variables and based on this has been formed long and short term
ARDL models
According to obtained ampirical evidence, although in long and short term capital movement impact on
economic growth is positive, meaningless as regards statistic value. Therefore Coefficient of capital movement can‘t
be interpreted.
It is determined that opennes and interest variables positive effected on economic growth in the in long
term. It is observed that effect of interest one term lagged and opennes on economic growth is positive in short term.
In this study the relation between capital movement liberalisation and economic growth meaningless and
this is not according with economic literature.
This may be due to different reasons. Therefore this subject must be with other ampirical studies. So, It is
thought that be made open to the outside of the capital account‘s effect in financial crisis happen Turkey is
important.
References
Akyüz, Y. (1995). GloballeĢme: Risklerin Belirlenmesi, ĠĢletme ve Finans, 110(5): 12-7.
Bacchetta, P. (1992). Liberalization of Capital Movement and of the Domestic Financial Sistem, Economica, 59(11): 465-74.
Bhagwati,J.(1998). The Capital Myth: The Difference Between Trade in Widgets and Trade in Dollars, Foreign Afairs,77, 1998,
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Determining the Districts That can be a Province in Turkey Using Analytic
Hierarchy Process
Ġbrahim GÜNGÖR
Prof. Dr., Akdeniz University
igungor@akdeniz.edu.tr
Hakan BAKAN
Research Asistant, Mugla University
hkn_bkn@mu.edu.tr
Muharrem AKSU
Lecturer, Akdeniz University
muharremaksu@akdeniz.edu.tr
Serap KĠREMĠTCĠ
Research Asistant Ġstanbul University
serapy@istanbul.edu.tr
Ali GÖKSU
Assist. Prof. Dr., International Burch University
Faculty of Economics
Department of Business Administration
goksu@ibu.edu.ba
Abstract: It is very important problem objectively determining districts which will become
province. It will be appropriate to use AHP to search an efficient solution to this problem. In this
study. In this study, AHP is used to determine priority ranking of districts which is eligible to
become a province in Turkey. According to the result of this AHP application, Alanya is the most
eligible candidate district with 33% importance degree. The following districts based on the
ranking are; Bandırma, Fethiye, Elbistan, Ereğli, Bergama, ÖdemiĢ and ErciĢ.
Introduction
There are many districts that desire to become a province in Turkey. Districts' desire for becoming a
province have been continuing for a long time. This demand is also used for election argument by politicians and
political parties before the elections. Some of these districts achieved their wants, and finally became a province.
With the rapid development of Turkey, some districts growed much more than some cities. As a result of this
growth, these districts have the potential of being a province. However, there are some criterias which districs must
have in order to become a province. Factors, such as socio-economic development, population, geographical
structures of districts, need to be taken into consideration.
The aim of the study is to compare 10 candidate district which desire to become a province according to the
criterias that researchers has determined, and to choose the best candidate based on this comparison by using The
Analytic Hierarchy Process.
According to 126. article of The Constitution of the Republic of Turkey 1982, in terms of central
administrative structure, Turkey is divided into provinces on the basis of geographical situation and economic
conditions, and public service requirements; provinces are further divided into lower levels of administrative
districts.
In accordance with the provisions of constitute article, in Province Administration Law 5442 criterias are
determined to established provinces while stating that Turkey divided into provinces, provinces divided into districts,
and districts divided into sub-districts. But there are not defined criterias about the issue of administrative status
change of a place in Turkey. And also status change of provinces, particularly change to provinces, is not mostly
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
based on the detailed social, economical and demographical researchs . It was based generally on some properties of
the places that were made provinces during the years 1989-1999, such as the economical development or
undevelopment, geographical positon, the historical background, the migration, the population density, and the
security of the place. But like all these and other factors also are valid for the districts38.
As there are not clear and obvious laws concerning with establishing new provinces in Turkey, the
reasoning of establishing new provinces mostly based on the mentioned Constitution Article, and related articles of
Province Administration Law. Since mentioned articles state only three criteria which are on the initiative of the
government, it is the role of the government to fill the content of those unclear concepts. Although the desire of the
people, geographical position, transportation and security factors generally play very crucial role on establishing
provinces in Turkey, some places which come to the position of being a province according to economical situation,
and population have forced governments which have voting concerns. Those governments change administrative
position of the places mainly based on their political objectives. It is asserted that the use of the demand of becoming
a province in recent years as a political pressure and gain on politicians have much more influence on the increasing
number of the provinces than the public service requirements in Turkey 39.
It is very important problem objectively determining districts which will become province. The evaluation
of this subject without making it as a domestic political argument, will be easier and more convincing for both
political parties and governments. It will be possible to show more fairly, scientifically and objectively behavior
with the use of AHP at the solution of this problem.
In the second part of this study, a brief information was given about AHP. In the third part, how the
application was implemented, how the data was prepared, how the criterias were determined, and the results of the
study were explained and reported.
Analytic Hierarchy Process
When decision makers face with a multicriteria problem, they decompose it in hieararchic levels acccording
to importance of criterias. The decision making process involves developing priorities for alternatives based on the
decision maker's judgements and selecting the best alternative that satisfies the objective. One of the techniques used
for this process is Analytic Hierarcy Process (AHP) which allows pairwise comparisons.
AHP is widely used as one of the major methods in solving a wide range of problems that involve complex
criteria accross different levels where the interaction of criteria is common (Hsu ve Pan, 2009, p. 2311). AHP,
developed by Saaty, is a decision aiding method provides a way to rank the alternatives of a problem by deriving
priorities (Saaty, Peniwati ve Shang, 2007, s. 1041). It is a very useful tool for multicriteria decision making where
the objective is to select the best alternative taken into consideration.
AHP performs pairwise comparisons to measure relative importance of the elements in each level of the
hierarchy and evalutes alternatives in the lowest level of the hierarcy in order to make the best decision among
multiple candidates ( Sipahi and Esen, 2010, p. 300)
In AHP, the hierarchic structure must be built by determining important criterias and subcriterias belonging to
each criteria according to the decision maker's objective. First of all, the objective is determined and then the criterias
for this objective will be pointed out. After this, alternatives for each criteria will be determined. In this way the
hierarchic structure for decision making has been constructed. (Scholl et all., 2005, p.763)
AHP is a mathematical method which considers group's or individual's characteristics, and evaluates quantitative
and qualitative variables together in the decision making process (Dağdeviren et all., 2004, p.132). At the same time,
it provides more efficient decision making oppurtunities ( Ecer and Dündar, 2008 , p. 198). This method has been
widely used in solving real life complex decision making problems in recent literature, especially in effectiveness
analysis and performance measurement problems (Peters and Zelewski, 2008, p.1040).
38
Gökçen KILINÇ, Yeni Ġl Kurulması ve Siyaset, http://www.istanbulburda.com/haber_author.php?id=1967; Gökçen KILINÇ ve Nuran ZEREN
GÜLERSOY, ―Türkiye‘deki Ġlçelerin KentleĢme Derecelerine Göre Ġl Olma Potansiyellerinin Değerlendirilmesi‖, ĠTÜ Dergisi, Cilt 6, Sayı 1,
Mart 2007, s.72.
39
Selçuk YALÇINDAĞ, ―Yönetsel Etkililik, Demokrasi ve Ġl Sayısının Artırılması‖, Amme Ġdaresi Dergisi, Cilt 30, Sayı 1, 1997, s.12; Yasin
SEZER, ―Merkezi Yönetimin Ġl ve Bölge Ölçeğinde Örgütlenmesi‖, Ġktisadi ve Ġdari Bilimler Fakültesi Dergisi, C.I, S.I, Afyon, 1999, s.205.;
Yasin SEZER, ―Kamu Yönetimi Temel Kanunu Tasarısı Çerçevesinde Ġl Genel Yönetimi Hakkında Bir Ġnceleme‖, (Ed.), Nagehan Arslan,
Türkiye‘de Kamu Yönetimi Sorunları Üzerine Ġncelemeler, Seçkin Yayınları, Ankara, 2005, s.22.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
The AHP approach was developed in the early 1970s in response to military contingency planning, scarce
resources allocation, and the need for political participation in disarmament agreements (Yang and Shi, 2002, p. 30).
AHP is not only a decision making method that decomposes a complex multi-criteria decision problem into a
hierarchy but also a measurement theory that prioritizes the hierarchy and consistency of the judgmental data
provided by a group of decision makers agreements (Hsu ve Chen, 2008, p. 46)
The use of AHP in order to solve a decision making problem involves the following steps (Al-Harbi, 2001,
p. 20):
1. Define the decision making problem and determine its goal.
2. Structure the hierarchy from the top (the objectives from a decision-maker's point of view) through the
intermediate levels (criteria on which subsequent levels depend) to the lowest level which usually contains
the list of alternatives.
3. Construct a set of pair-wise comparison matrices ( n x n square matrix) for each of the lower levels with one
matrix for each element in the level immediately above by using the relative scale measurement shown in
Table 1 The pair-wise comparisons are done in terms of of which element dominates the other.
4. The number of judgements equals to n(n-1)/2. Judgements required to develop the set of matrices which
should be both transitive and reciprocal in step 3.
5. Hierarchical synthesis is now used to weight the eigenvectors by the weights of the criteria and the sum is
taken over all weighted eigenvector entries corresponding to those in the next lower level of the hierarchy.
6. Having made all the pair-wise comparisons, the consistency is determined by using the eigenvalue, max , to
calculate the consistency index, CI as follows:
CI = (max - n)/(n- 1), where n is the matrix size. Judgement consistency can be checked by taking the
consistency ratio (CR) of CI with the appropriate value in Table 2. The (CR) is acceptable if it is less than
0.10. Otherwise the the judgement matrix is inconsistent. To obtain a consistent, judgements should be
reviewed and improved.
7. Steps 3-6 are performed for all levels in the hierarchy.
Intensity of
Importance
1
3
5
7
9
2,4,6,8
Definition
Explanation
Equal Importance
Two activities contribute equally to the objective
Moderate
Experience and judgment slightly favor one activity over another
Ġmportance
Strong importance
Experience and judgment strongly favor one activity over another
Very strong or
An activity is favored very strongly over another; its dominance
demonstrated
demonstrated in practice
importance
Extreme
The evidence favoring one activity over another is of the highest
importance
possible order of affirmation
Intermediate values when compromise is needed
Table 1: The Fundamental Scale of Absolute Numbers ( Saaty, 2008, p. 125)
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
n
Average random
index
1
0
2
0
3
0.52
4
0.89
5
1.11
6
1.25
7
1.35
8
1.40
9
1.45
10
1.49
Table 2: Random Consistency Index ( Saaty, Vargas and Dellmann, 2003, p. 174)
The Study
People have troubles while making decisions about any issue in the time of they living. Contradictory
results may also appear on the decisions about same issue made by people. The most important reason of for this is
the intention of selecting best decisions over the alternatives. Same situation is also valid for the decisions taken by
the government. Since the government must make the best decision for its public. Because of demand of individuals
that live in the country about changing their districst in which they live to provinces, one of the most important
decisions is which districts will become province. At this time, this decision is very important as it burden additional
expenses to the budget.
In this study, AHP is used to determine priority ranking of districts which is eligible to become a
province in Turkey. Candidate districts are determined by preselection with this application. Above mentioned
criterias are taken into consideration for preselection:
-
Population of the center must be greater than 50 000,
-
Population of district must be greater than 100 000,
-
Distance from the province must be greater than 100 km.
Values of above mentioned criteria for each of the candidate districts determined by preselection, are
obtained from municipality‘s and governer‘s official websites and shown in Table 3.
CRITERIAS
DISTANCE
(KM)*
CENTER
POPULATION**
DISTRICT‘S
POPULATION**
SURFACE
AREA(KM2)
NUMBER OF
VILLAGES
NUMBER OF
CONNECTED
DISTRICTS
CON.TOTAL
POPULATION.**
TEMPORARY
POPULATION****
REAL WAGE***
ALANYA
FETHĠYE
ERCĠġ
EREĞLĠ
ELBĠSTAN
ÖDEMĠġ
BANDIRMA
BERGAMA
138
100
102
124
103
153
158
113
134056
113851
58570
72003
74858
95056
85642
73310
241451
132077
100802
183184
158795
135008
135386
129260
1827
690
1688
3055
2115
2260
2546
1082
3
0
0
3
3
0
0
2
5
4
7
3
3
3
7
6
152649
208340
332353
95653
238131
63563
238450
312937
1377146
74548
21186
252726
3440
9500
5934
2935
84714
123754
21024
83628
91169
85191
558996
706831
Table 3: Quantitative values of criterias for each of the districts
*http://www.kgm.gov.tr/Sayfalar/KGM/SiteTr/Uzakliklar/ililcelerArasiMesafe.aspx
** http://tuikapp.tuik.gov.tr/adnksdagitapp/adnks.zul
*** http://ekutup.dpt.gov.tr/bolgesel/gosterge/2004/ilce.pdf
**** http://www.turizm.gov.tr
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
DISTRICTS
DISTANCE
NORMALIZED VALUE OF DISTANCE
ALANYA
138,0000
0,1393
BANDIRMA
100,0000
0,1009
BERGAMA
102,0000
0,1029
ELBĠSTAN
158,0000
0,1594*
ERCĠġ
103,0000
0,1039
EREĞLĠ
153,0000
0,1544
FETHĠYE
124,0000
0,1251
ÖDEMĠġ
113,0000
0,1140
TOTAL
991,0000
1,0000
Table 4: Distance Criteria
According to distance criteria most appropriate district to become a city is Elbistan with approximately
%16. Bandırma district is in the last rank with % 10.
DISTRICTS
ALANYA
CENTER‘S
CENTER‘S POPULATION NORMALIZED VALUE
POPULATION
134056,000
0,1895*
BANDIRMA
113851,000
0,1610
BERGAMA
58570,000
0,0828
ELBĠSTAN
85642,000
0,1211
ERCĠġ
74858,000
0,1058
EREĞLĠ
95056,000
0,1344
FETHĠYE
72003,000
0,1018
ÖDEMĠġ
73310,000
0,1036
TOTAL
707346,000
1,0000
Table 5: Center‘s Population Criteria
Alanya district is in the first rank with %19 accoding to the center‘s population criteria and Bergama is the
last with %8.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
DISTRICTS
ALANYA
DISTRICT‘S
NORMALIZED VALUE OF DISTRICT‘S POPULATION
POPULATION
241451,000
0,1986*
BANDIRMA
132077,000
0,1086
BERGAMA
100802,000
0,0829
ELBĠSTAN
135386,000
0,1113
ERCĠġ
158795,000
0,1306
EREĞLĠ
135008,000
0,1110
FETHĠYE
183184,000
0,1506
ÖDEMĠġ
129260,000
0,1063
TOTAL
1215963,000
1,0000
Table 6: District‘s Population Criteria
For district‘s population criteria the most important district is Alanya and the least is Bergama.
DISTRICTS
SURFACE AREA
NORMALIZED VALUE OF SURFACE AREA
ALANYA
1827,000
0,1197
BANDIRMA
690,000
0,0452
BERGAMA
1688,000
0,1106
ELBĠSTAN
2546,000
0,1668
ERCĠġ
2115,000
0,1386
EREĞLĠ
2260,000
0,1481
FETHĠYE
3055,000
0,2002*
ÖDEMĠġ
1082,000
0,0709
TOTAL
15263,000
1,0000
Table 7: Surface Area Criteria
According to surface area criteria most appropriate district to become a city is Fethiye with approximately
%20. Bandırma district is in the last rank with % 4.
DISTRICTS
NUMBER OF
NORMALIZED VALUE OF VILLAGE NUMBERS
VILLAGES
ALANYA
3,000
0,2727*
BANDIRMA
0,000
0,0000
BERGAMA
0,000
0,0000
ELBĠSTAN
0,000
0,0000
ERCĠġ
3,000
0,2727*
EREĞLĠ
0,000
0,0000
FETHĠYE
3,000
0,2727*
ÖDEMĠġ
2,000
0,1818
TOTAL
11,000
Table 8: Number of Villages Criteria
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Alanya , Fethiye and ErciĢ districts together are in the first rank with %27 accoding to the number of villages
criteria.
DISTRICTS
ALANYA
NUMBER OF
NORMALĠZED VALUE OF NUMBER OF DISTRICTS TO
DISTRICTS TO BE
BE CONNECTED
CONNECTED
5,000
0,1316
BANDIRMA
4,000
0,1053
BERGAMA
7,000
0,1842*
ELBĠSTAN
7,000
0,1842*
ERCĠġ
3,000
0,0789
EREĞLĠ
3,000
0,0789
FETHĠYE
3,000
0,0789
ÖDEMĠġ
6,000
0,1579
TOTAL
38,000
1,0000
Table 9: Number of Districts to be Connected Criteria
According to this criteria, Bergama and Elbistan have the highest importance percentage with
approximately %18.
DISTRICTS
CONNECTED TOTAL
POPULATION
NORMALIZED VALUE OF CONNECTED TOTAL
POLULATION
ALANYA
152649,000
0,0930
BANDIRMA
208340,000
0,1269
BERGAMA
332353,000
0,2024*
ELBĠSTAN
238450,000
0,1452
ERCĠġ
238131,000
0,1450
EREĞLĠ
63563,000
0,0387
FETHĠYE
95653,000
0,0583
ÖDEMĠġ
312937,000
0,1906
TOTAL
1642076,000
1,0000
Table 10: Connected Total Population Criteria
According to connected total population criteria, Bergama has the highest importance percentage with
approximately %20 and the last is Ereğli.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
DISTRICTS
ALANYA
TEMPORARY
NORMALIZED VALUE OF TEMPORARY POPULATION
POPULATION
1377146,000
0,7926*
BANDIRMA
64548,000
0,0372
BERGAMA
21186,000
0,0122
ELBĠSTAN
5934,000
0,0034
ERCĠġ
3440,000
0,0020
EREĞLĠ
9500,000
0,0055
252726,000
0,1455
2935,000
0,0017
1737415,000
1,0000
FETHĠYE
ÖDEMĠġ
TOTAL
Table 11: Temporary Population Criteria
According to the temporary population criteria, the most eligible candidate is Alanya with % 79 and the last
is ÖdemiĢ.
DISTRICTS
REAL WAGE
NORMALIZED VALUE OF REAL WAGE
ALANYA
558,9960
0,3185
BANDIRMA
706,8310
0,4027*
BERGAMA
84,7140
0,0483
ELBĠSTAN
91,1690
0,0519
ERCĠġ
21,0240
0,0120
EREĞLĠ
83,6280
0,0476
FETHĠYE
123,7540
0,0705
ÖDEMĠġ
85,1910
0,0485
1755,3070
1,0000
TOTAL
Table 12:Real Wage Criteria
According to real wage criteria, Bandırma has the highest importance percentage with approximately %40,
Alanya is in the second rank with %32 and the last is ErciĢ.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
GENERAL
DISTANCE
CENTER‘S
DISTRICT‘S SURFACE
POPULATION POPULATION
AREA
NUMBER
OF
VILLAGES
NUMBER
OF
DISTRICT‘S
TO BE CON
TOTAL
POPULATION
TO BE CON.
TEMPORARY
POPULATION
REAL
WAGE
DISTANCE
1,0000
0,3333
0,5000
1,0000
0,5000
0,5000
0,3333
0,2500
0,1429
CENTER‘S
POPULATION
3,0000
1,0000
2,0000
4,0000
3,0000
3,0000
2,0000
0,3333
0,2000
DISTRICT‘S
POPULATION
2,0000
0,5000
1,0000
3,0000
2,0000
2,0000
1,0000
0,3333
0,2000
SURFACE
AREA
1,0000
0,2500
0,3333
1,0000
0,3333
0,3333
0,2500
0,2500
0,1429
NUMBER OF
VILLAGES
2,0000
0,3333
0,5000
3,0000
1,0000
1,0000
0,3333
0,3333
0,1667
NUMBER OF
DISTRICT‘S
TO BE CONN.
2,0000
0,3333
0,5000
3,0000
1,0000
1,0000
0,3333
0,2500
0,2000
TOTAL
POPULATION
TO BE CON.
3,0000
0,5000
1,0000
4,0000
3,0000
3,0000
1,0000
0,5000
0,2500
TEMPORARY
POPULATION
4,0000
3,0000
3,0000
4,0000
3,0000
4,0000
2,0000
1,0000
0,2500
REAL WAGE
7,0000
5,0000
5,0000
7,0000
6,0000
5,0000
4,0000
4,0000
1,0000
19,8333
19,8333
Total
25,0000
11,2500
13,8333
30,0000
11,2500
7,2500 2,5524
Table 13: Pair-wise Comparison Matrix of Criterias
These values are obtained from expert view of a vice governer.
Consistency Ratio (CR) is acceptable if CR is less than 0,10 . Otherwise the judgements of the decision maker are
inconsistent.
T1
Distance
Center‘s Population
District‘s Population
Surface Area
Number of Villages
Number of Districts to be connected
Connected Total Population
Temporary Population
Real Wage
Weights
0,0344
0,1213
0,0791
0,0295
0,0542
0,0543
0,1032
0,1715
0,3525
Table 14: Weights of criterias
After calculating weights for criterias, it is come to stage of solving decision problem, in other words last
stage of the AHP. At this stage, a matrix consists of calculated relative priority values (table 14) was created and then
by multiplying with Matrix of Weighted Criteria (Table 16), Decision Matrix (Table 17)was created.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Distance
Center‘s
Population
District‘s
Population
0,1895
0,161
0,0828
0,1211
0,1058
0,1344
0,1018
0,1036
0,1986
0,1086
0,0829
0,1113
0,1306
0,111
0,1506
0,1063
0,1393
0,1009
0,1029
0,1594
0,1039
0,1544
0,1251
0,114
Table 15:Final Table
Number
Number
of
of
villages
Districs
to be
conn.
0,1197
0,2727
0,1316
0,0452
0
0,1053
0,1106
0
0,1842
0,1668
0
0,1842
0,1386
0,2727
0,0789
0,1481
0
0,0789
0,2002
0,2727
0,0789
0,0709
0,1818
0,1579
Surface
area
Total
Population
to be
conn.
Temporary
Population
0,093
0,1269
0,2024
0,1452
0,145
0,0387
0,0583
0,1906
0,7926
0,0372
0,0122
0,0034
0,002
0,0055
0,1455
0,0017
Real
Wages
0,3185
0,4027
0,0483
0,0519
0,012
0,0476
0,0705
0,0485
Weight
Points
0,0344
0,1213
0,0791
0,0295
0,0542
0,0543
0,1032
0,1715
0,3525
.
Sij
Eligibility ranking for becoming a
province
1
2
3
4
5
6
7
8
x
T
Districts
Coefficients
Alanya
Bandırma
Fethiye
ÖdemiĢ
Elbistan
Bergama
ErciĢ
Ereğli
% 33
% 18
% 11
%8
%8
%7
%7
% 6
Table 16: Order of Preference
Results
AHP is a mathematical method, which evaluates quantitative and qualitative variables together in the
solution of decision problems and enables efficient decision making . This method has been widely used in solving
real life complex decision making problems in recent literature, especially in effectiveness analysis and performance
measurement problems.
It is an important problem to determine the districts which are eligible to become province. To handle this
issue without makig it a domestic politics material will be more easy and persuasive for both of the political parties
and goverments. More fair, scientific and objective attitude can be possible by using AHP in the solution of this
problem. Therefore in this study, AHP is used to determine priority ranking of districts which are eligible to become
a province in Turkey. According to the result of this AHP application, Alanya is the most eligible district with %33
importance degree and Bandırma is in the second place with a 15 point difference. Fethiye has the third rank and
ÖdemiĢ has the forth rank.
Suggestions
It is shown with this study that AHP method can be applicable to determine the priority ranking of districts
to become province. When new provinces are in agenda, more current data and criterias must be used in a Project
with Ministry of Interriors and other relevant govermental institutions in order to help political authorithy on
decision making about this subject.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
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ADIGÜZEL, O., ÇETĠNTÜRK, Ġ. and ER, O., (2009) , ‗ Konaklama iĢletmelerine olan MüĢteri Tercihinin Analitik HiyerarĢi
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
The Determination of University Selection Based Upon Analytic Hierarchy
Process
Orhan ADIGÜZEL
Assistant Prof., University of Suleyman Demirel
Isparta, TURKEY
orhanadiguzel@gmail.com
Ali Cüneyt ÇETĠN
Assistant Prof., University of Suleyman Demirel
Isparta, TURKEY
ccetin@iibf.sdu.edu.tr
Abstract: The most important factor in career planning of a person is to direct him depending
upon his features. The best way of choosing career is to compare the wishes of a person with the
requirements of that career so that he can decide the best one. Particularly, those who think to have
a university education for their careers come across difficulties while deciding on their career path
on account of the fact that the global world can offer various opportunities for education in a great
many places. The student must choose by taking into account some criteria. As an example,
several factors play a crucial role in this process such as the academic success of the university, the
working opportunities provided, the distance of the university to the hometown of the student, the
economic status of that city, the facilities of accommodation. Considering all these factors, the
student should give an optimal decision. In this context, the common decision including both the
personal different opinions and convincing for all is strongly needed. AHP (Analytic Hierarchy
Process) has gained a very big momentum at these kind of situations.
Introduction
The key to help to a student in the process of career planning is to give him an encouragement that will have
an impact in the future for the career planning activities (Laker & Laker, 2007, p.138). The fact to be known about
career is that the person is responsible for the career development himself (Walker & Levesque, 2006, p.28). The
reason is that in terms of career development and management in the literature, much has been emphasized personally
gained and experienced career instead of organization based career development .( Kidd & Green, 2006, p.229). The
person in the personal planning stage while choosing his career, he has been affected by a number of factors. The best
career choice is, to reach the best by comparing what he wants and what he needs. The matter is to decide upon the
best among the alternatives and upon the methods by which the decisions will be taken.
The selection of the department in high schools until the university exam, even the selection of the type of
the high schools and the private courses for the preparation of the university exam is determined by the selections
following the decisions. The selection of the university after high school is particularly significant for the students
who are at the beginning of their careers. In this term, the students are a little bit confused due to the efforts to choose
the best among a number of alternatives. In this case, the most important moment for decision is to choose the best
alternative of the university.
The student is supposed to choose by taking into account some criteria such as the academic achievement
of the university, the chance of the graduates in having jobs, the distance of the university to the homeland, the
economic status and the opportunities for accommodation of the city. Considering all these factors, the student
should give an optimal decision. By means of this, throughout undergraduate study, some of the regrets should be
prevented and motivation and concentration should be used for the productivity and the efficiency of the education.
In this case, a common decision is needed by means of which both the differences of personal opinions can be
assessed and everyone can be persuaded at the same time.
From this perspective, AHP is a mathematical method which lays emphasis on the features of a person as
well as group, and which assesses both the qualitative and quantitative variables together (Dağdeviren et al., 2004,
p.132). At the same time, it provides opportunity for deciding effectively in the solution of decisional problems
(Dündar & Ecer, 2008, p.198). AHP enables to modeling in a hierarchical way showing the relationship between
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
decision makers with complex problems, the ultimate goal of the problem, criteria, sub criteria, and the alternatives
(Kuruüzüm & Atsan, 2001, p.84). Recently, this problem has captured attention a lot, and it is used in the solution of
decision making problems in real life. Particularly, in the efficiency analysis, in the productivity analysis, and in the
problems of performance asessment, the AHP is seen to be widely used.
The Determination of University Selection
There are many application processes all around the world in the higher education system. Recruitment
structures and college admissions vary widely from country to country. For example, mostly, all British higher
education institutions are members of the UCAS, therefore, nearly all those wishing to study for their first degrees in
the UK have to apply through the UCAS. In the USA, students apply to one or more colleges or universities by
submitting an application which each college evaluates according to its own criteria. For the graduate education,
virtually all graduate programs require applicants to submit scores on standardized tests. In Turkey the Student
Selection and Placement Center (ÖSYM) prepares the centralized University Entrance Examination (Yamamato,
2006, p.59).
In addition to the differences of the applications depending upon the countries, there are also some
differences in the selection of the university of a student. In occurrence of these differences, the impacts of the
opportunities are effective. While some of the universities bring forth the the quality of their education, the others
mention about the technological facilities. At the same time, some of the universities are boastful about the employed
students, but the others are important for their social opportunities in the campus. The students on the verge of
choosing the university will be affected from all these differences and will need to search the reality of these
opportunities and they will focus on the criteria and the factors determined well in advance. These factors and the
criteria become more clear after collecting informations from many sources about the universities (Veloutsou et al.,
2005, p.281). The location of the the university, local social life and campus, the future career prospects and
opportunities, financial considerations, the quality of education, the institutions‘ infrastructure, job prospects,
personal motives have impacts on selection (Keskinen et al., 2008, p.639-640; Soutar & Tourner, 2002, p.40-41;
Veloutsou et al., 2005, p.161-162)
The Analytic Hierarchy Process
The Analytic Hierarchy Process is decision-making process that breaks complex problems down into levels
of decision criteria that can be managed more readily. The AHP synthesizes information and evaluates decision
criteria in a way that enables the use of both real data and qualitative evaluations of factors in one model (Liu et al.,
2008,p. 437). As Saaty mentions that it also organizes the basic rationality by breaking down a problem into its
smaller constituent parts and then guides decision makers through a serious of pairwise comparison judgments to
express relative strength or intensity of impact of the elements (Varma et al., 2008, p.346).
The AHP method can support managers in a broad range of decisions and complex problems including
supplier-selection decisions, facility-location decisions, forecasting, risks and oppurtunities modeling, choice of
technology, plan and product design, and so on. Further more the AHP approach also shows some interesting
advantages (Costa & Evangelista, 2008, p.71):
Effectiveness also in presence of descriptive and evaluative lacks;
Effectiveness when there is a co-presence of qualitive and quantitive;
It overcomes the diffuculty of the evaluation of decisional factors;
Control of the answers consistency and the final results coherence;
Possibility to focus on every aspect of the problem always going down to a greater level of detail
and stratifying the analysis; and
Dynamism and adaptability of the method
The calculation procedure of AHP is presented below (Hsu and Chen, 2008, p. 46):
Establishment of pair-wise comparision matrix A. Let C1,C2,C3,…..,Cn be the set of criteria, while aij represents a
quantified judgement on a pair of criteria Ci, Cj. The relative importance of two criteria is rated using a scale with
the digits 1, 3, 5, 7 and 9, where 1 denotes ―equally important‖, 3 for ―slightly more important‖, 5 for ―strongly more
important‖, 7 for ―demonstrably more important‖ and 9 for ―absolutely more important‖. The digits 2, 4, 6 and 8
areare used to facilitate a compromise between slightly differing judgments. A n-by-n matrix A is derived as fallows
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
a11 a12 ... aj
a
21 a 22 ... aj
.
.
A
.
.
.
.
ai1 ai 2 ... aij
(1)
Where aij = 1 and aji = 1/ aij, i,j = 1, 2, …..,n.
In matrix A, the problem involves assigning a set of numerical weights W1, W2, W3, ……Wn to the n
criteria C1, C2, C3, …….Cn that ―reflects the recorder judgments‖. If A is a consistency matrix, the relations
between weights Wi and judgments aij are simply given by Wi / Wj = aij (for i,j = 1, 2, 3, ……n)
Eigenvalue and eigen vector. Saaty suggested that the largest eigenvalue λmax
If A is a consistency matrix then eigen vector X can be calculated by the equation (2):
(A – λmaxI) X = 0
(2)
Consistency test. Saaaty proposed utilizing consistency index (CI) and consistency ratio (CR) to verify the
consistency of the comparison matrix. Additionally, CI and CR are defined as fallows:
CI = (λmax – n) / (n – 1)
(3)
CR = CI / RI
(4)
Where RI denotes the average consistency index over numerous random entries of same order reciprocal
matrices. If CR ≤ 0,1 the estimate is accepted; otherwise, a new comparison matrix is solicited until CR ≤ 0,1.
The Study
Imagine that any high school graduate student determined some of the criteria about the university planned
by means of the decision either collectively or individually. These criteria are such as the image and the prestige of
the university, the knowledge in education and the technological opportunities, the career opportunities, the
possibility of employment of the university graduates, the atmosphere of the campus and the social life, the
opportunities for accommodation, and transportation, yet still, let‘s consider that the student gives more paramount
importance to the five of them more than the others. Let‘s say these are the criteria like ―the image and the prestige
of the university‖, ―the knowledge in education and the technological opportunities‖, ―the career opportunities in the
university‖, ―the possibility of employment of the university graduates‖, ―the atmosphere of the campus and the
social life‖. The university alternatives and the results of these alternative universities out of 100 point in terms of the
criteria are shown below in Table 1:
1.
1. UNIV. 2.
2. UNIV.
3. UNIV.
4. UNIV.
5. UNIV.
80
100
70
60
90
IMAGE-PRESTIGE
90
70
80
100
80
KNOWLEDGE-TECH.
50
80
90
60
70
CAREER
70
70
60
60
80
EMPLOYMENT
60
60
100
90
90
CAMPUS
Table 1
In this stage of the application, initially, the comparison of the criteria was done in accordance with the method of
AHP and indicated in Table 2. In the process of the determination of the level of importance, the opinion of the
student and the environment left impacts, and comparisons were made depending upon these opinions.
I-P
K-T
CAR
EMP
CAM
I-P
K-T
CAR
EMP
CAM
Table 2
1
2
1/2
1
3
2
1/3
1/4
5
4
1/3
3
1/5
1/2
4
1/4
1
5
1/3
1/5
1
1/7
3
7
1
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
1 1/ 2 3
2
1
2
1 / 3 1 / 2 1
A
4
5
3
1 / 5 1 / 4 1 / 3
1/ 3
1/ 4
1/ 5
1
1/ 7
5
4
3
7
1
0.184
0.195
0.094
W
0.481
0.044
The Consistency Ratio of Matris A = 0.0545
The calculated vector in the column W shows values of numerical importance. In the framework of these
results, the most important criteria with the percentage of 48 % is ―employment‖ whereas the least criteria is ―the
atmosphere of campus‖ with the percentage of 5 %. In the Table 3 below, the criteria‘s values of importance in
percentage are given sequently.
The Sequence of The Assessment Criterium
Approximate
Values
of
Importance
Importance in Percentage
Employment
% 48
1
2
Knowledge-Technology
% 20
3
Image-Prestige
% 18
4
Career
%9
5
Campus
%5
Table 3
The formula used while finding W is, at the same time, used to compare and contrast the criteria of all the
candidates with one another. In this context, the stages of finding out matris C such as C1, C2, C3, C4, and C5 in the
results of all the contrasts in every criterium is in the following:
3. UNIV.
4. UNIV.
5. UNIV.
1. UNIV.
2. UNIV.
1
1/5
3
5
1/3
1.UNIV.
5
1
7
9
3
2. UNIV.
1/3
1/7
1
3
1/5
3. UNIV.
1/5
1/9
1/3
1
1/7
4. UNIV.
3
1/3
5
7
1
5. UNIV.
1
5
1 / 3
V1
1 / 5
3
1/ 5 3
1
7
1/ 7 1
1/ 9 1/ 3
1/ 3 5
5
9
3
1
7
1/ 3
3
1/ 5
1/ 7
1
0.134
0.502
0.067
C1
0.034
0.260
The Consistency Ratio of Matris C1= 0.0541
The Comparison of the University in terms of “Image and Prestige”
531
�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Assessing from the perspective of ―Image and Prestige‖, it can be stated that the university in the second
order is much more preferable with the percentage of 50.2 %.
1. UNIV.
2. UNIV.
3. UNIV.
4. UNIV.
5. UNIV.
1
5
3
1/3
3
1. UNIV.
1/5
1
1/3
1/7
1/3
2. UNIV.
1/3
3
1
1/5
1
3. UNIV.
3
7
5
1
5
4. UNIV.
1/3
3
1
1/5
1
5. UNIV.
1
1/ 5
1/ 3
V2
3
1/ 3
5 3
1/ 3
1 1/ 3 1/ 7
3 1 1/ 5
7 5
1
3 1
1/ 5
3
1 / 3
4
5
1
0.245
0.046
0.105
C2
0.497
0.105
The Consistency Ratio of Matris C2= 0.0284
The Comparison of the University in terms of “Knowledge and Technological Opportunities”
As for the criteria of ―Knowledge and Technological Opportunities‖, the university in fourth order is
leading the others with the percentage of 49.7 %.
The Comparison of the University in terms of “The Opportunites of Career in the Unıversity”
1. UNI.
2. UNI.
3. UNI.
4. UNI.
5. UNI.
1. UNI.
2. UNI.
3. UNI.
4. UNI.
5. UNI.
1
7
9
3
5
1/7
1
3
1/5
1/3
V3
1
7
9
3
5
1/ 7
1
3
1/ 5
1/ 3
1/9
1/3
1
1/7
1/5
1/ 9
1/ 3
1
1/ 7
1/ 5
1 / 5
3
5
1 / 3
1
1/ 3
5
7
1
3
1/3
5
7
1
3
1/5
3
5
1/3
1
0.034
0.260
0.502
C3
0.067
0.134
The Consistency Ratio of Matris C3= 0.0541
According to the criterium of ―The Career Opportunities in the University‖ the university in the third order
is in a better state with the percentage of 50.2 %.
The Comparison of the University in terms of “The Possibility of the Graduate Employment”
1. UNI.
2. UNI.
3. UNI.
4. UNI.
5. UNI.
1
1
3
3
1/3
1. UNI.
1
1
3
3
1/3
2. UNI.
1/3
1/3
1
1
1/5
3. UNI.
1/3
1/3
1
1
1/5
4. UNI.
3
3
5
5
1
5. UNI.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
1
1
1
1
1 / 3 1 / 3
V4
1 / 3 1 / 3
3
3
3
3
1
1
5
3
3
1
1
5
1/ 3
1/ 3
1/ 5
1/ 5
1
0.195
0.195
0.073
C4
0.073
0.462
The Consistency Ratio of Matris C4= 0.012
The university in the fifth order is much more successful in the criterium of ―The Possibility of Graduate
Employment‖ with the percentage of 46.2 %.
The Comparison of the University according to the criteria of “The Atmosphere of Campus and Social Life”
1. UNIV.
2. UNIV.
3. UNIV.
4. UNIV.
5. UNIV.
1
1
1/9
1/7
1/7
1. UNIV.
1
1
1/9
1/7
1/7
2. UNIV.
9
9
1
3
3
3. UNIV.
7
7
1/3
1
1
4. UNIV.
7
7
1/3
1
1
5. UNIV.
1
1
9
V5
7
7
1
1
9
7
7
1/ 9 1/ 7
1/ 9 1/ 7
1
3
1/ 3 1
1/ 3
1
1/ 7
1 / 7
3
1
1
0.038
0.038
0.476
C5
0.222
0.222
The Consistency Ratio of Matris C5= 0.025
The results of the last criterium of ―Campus Life and Social Life‖ are as in the Matris of C5. In this
criterium, the university in the third order is more likely to be preferred with the 47.6 % percentage.
After this point, to calculate the sequence is of great significance. Depending upon the values, it can be
mentioned that the decision about the university selection will be optimal. In this way, the decisions of the students
would be rational, not regretful.
The decision matris is seen in the last part of this application through this Formula [ Cij ] m×n ×[ Wi ]n×1.
0.134
0.502
0.067
0.034
0.260
0.245
0.046
0.105
0.497
0.105
0.034
0.260
0.502
0.067
0.134
0.195
0.195
0.073
0.073
0.462
0.038 0.184
0.171
0.221
0.038 0.195
0.476 × 0.094 D= 0.136
0.222 0.481.
0.154
0.312
0.222 0.044
When the values in the Matris D are assessed regarding the Table 4, 5 th university is in the first sequence
with the percentage of 32%. And this choice is the best and optimal one for the student.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
The Sequence
Importance
1
of
Universities
5th UNIVERSITY
Approximate
Values
Importance in Percentage
31%
2
2nd UNIVERSITY
22%
3
1st UNIVERSITY
17%
4
4th UNIVERSITY
16%
5
3rdUNIVERSITY
14%
of
Table 4
Conclusion and Suggestions
All of us wants to have a very prestigous job at the end of our education for which we spend a great amount
of time on account of the fact that a job that makes us happy enables our life meaningful and productive. The
efficiencies of a certain job, perhaps, are presented to a great number of students in many universities. However, the
universities have some ups and downs in terms of the opportunities. Even this is the case for the same faculties of the
same university. To say in another way, the university that can offer opportunities should be prefered, not an
ordinary one. From this perspective, the decision of university selection which is the most critical stage of the
education should be given rationally. AHP is the method of mathematical decision by means of which the qualitative
and the quantitative cases can be assessed together.
As in the example of here, the university candidate ascertains some certain criteria both with group and
individual decisions. These criteria are ―the image and the prestige of the university‖, ―the knowledge in education
and the technological opportunities‖, ―the career opportunities in the university‖, ―the possibility of employment of
the university graduates‖, ―the atmosphere of the campus and the social life‖. The candidate student decides the
university of 5th university among the five university alternatives through the AHP method. It can be demonstrated
that this result is the most optimal and rational one. This method enables the student to reach the most liked
occupational efficiencies in the best and useful atmoshere.
AHP can be used not only in the university selection, but also in all of the management and the
organizational activities as the solution to the decisional problems. By means of this, the interested people, the
workers, and the managers can find the opportunity to reach the most suitable decision in a shortest way and thanks
to the consistency of the decisions, the unnecessary repetitions of the same procedures will be prevented.
References
Costa, R. & Evangelista, S. (2008). An AHP approach to assess brand intangible assets, Measuring Business Excellence, Vo.12,
No.2, 68-78.
Dağdeviren, M.,Akay, D., Kurt, M. (2004). ĠĢ değerlendirme sürecinde analitik hiyerarĢi prosesi ve uygulaması, Gazi Üniversitesi
Müh. Mim. Fak. Dergisi, Vol.19, 131-138.
Dündar, S. & Ecer, F. (2008). Öğrencilerin GSM operatörü tercihinin analitik hiyerarĢi süreci yöntemiyle belirlenmesi, Celal
Bayar Üniversitesi Ġ.Ġ.B.F Yönetim Ekonomi Dergisi, Vol.15, No.1, 195–205.
Hsu, P. F. & Chen, B. Y.(2008). Integrated analytic hierarchy process and entropy to develop a durable goods hain store
franchisee selection model, A Pacific Journal of Marketing and Logistics, Vol.20, No. 1, 44-54.
Keskinen, E., Tiuraniemi, J., Liimola A. (2008). University selection in Finland: How the decision is made, International Journal
of Educational Management, Vol. 22, No.7, 638-650
Kidd,
J. M. & Green, F. (2006). The careers of research scientists: Predictors of three dimensions of careeer commitment and
intention to leave science, Personnel Review , Vol. 35, No.3, 229-251.
Kuruüzüm, A. & Atsan, N. (2001). Analitik hiyerarĢi yöntemi ve iĢletmecilik alanındaki uygulamaları‖ Akdeniz Ġ.Ġ.B.F. Dergisi,
No.1, 83-105.
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Laker, D. R. & Laker, R. (2007), The five- year Resume: A career planning exercise, Journal of Management Education, Vol.31,
No.1, 128-141.
Liu, L.B., Berger, P., Zeng, A., Gerstenfeld, A.(2008). Applying the analytic hierarchy process to the offshore outsourcing location
decision, Supply Chain Management: An International Journal, 13(6), 435-449.
Soutar, G. N. & Turner, J. P.(2002). Student‘s preferences for university: A conjoint analysis, The International Journal of
Educational Management, 16(1), 40-45.
Varma, S., Wadhwa S., Deshmukh S.G.(2008). Evaluating petroleum supply chain performance, A Pacific Journal of Marketing
and Logistics, Vol.20, No.3, 343-356.
Veloutsou, C., Lewis J. W., Paton R. A.(2004). University selection: Information Requirements and importance, The International
Journal of Educational Management Vol.18, No.3, 160-171.
Veloutsou, C., Lewis J. W., Paton R. A.(2005). Consultation and realibility of information sources pertaining to university
selection, International Journal of Educational Management Vol.19, No.4, 279-291.
Walker, H. F. ve Levesque, J. /2006). Climbing the career ladder : It is up to you , Quality Progress , Vol 39, No.10, 28-32.
Yamamato, G. T. (2006). University evaluation-selection: A Turkish case, International Journal of Educational Management,
Vol.20, No.7, 559-569.
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AHP Modeling in Selection of Students for a Part-Time Work: International
Burch University Case
Ali GÖKSU
Assist. Prof. Dr., International Burch University, Faculty of Economics
Department of Business Administration
goksu@ibu.edu.ba
M. KürĢad ÖZLEN
Research Assistant, International Burch University, Faculty of Economics
Department of Business Administration
kozlen@ibu.edu.ba
Murat ÇUHADAR
Assist. Prof. Dr., Süleyman Demirel University, Turkey
mcuhadar@sdu.edu.tr
Abstract: Making the right decision for an enterprise is very important for its profit, efficiency,
and effectiveness. For these reasons, Decision making in an organization takes a very important
place. In this paper, the most appropriate selection of a student for a particular part time work in a
university will be examined. There are several methods to make a decision. A multi-criteria
Decision Making method will be used to select the most suitable student. The method for this
selection will be Analytic Hierarchy Process (AHP). While making a decision many factors should
be considered. And Analytic Hierarchy Process is a quite useful method to cover many
determinants.
Keywords: Multi-Criteria Decision Making, AHP, Part-Time work,
1. Introduction
Decision Making is a very hard and complicated procedure in many cases through the life of human being.
There are usually many factors affecting the decision problem. So some methods have been developed. These are all
‗Multi-criteria Decision Making‘ methods.
1.1. Multi-Criteria Decision Making
Parallel to the progress of the science and technology, it is a well-known reality that one dimensional or one
variable analysis is not enough to solve more complex problems. In one dimensional analysis, the most important
assumption is to suppose all the other variables constant except the one which was analyzed. However, all the events
in the universe happen with the influence of many inside and outside effects, and this forms a very complex
structure. So the events and the objects should be defined with respect to many variables and collective effects of
them (DaĢdemir, Güngör, 2002-2003-2004 Vol. I-II). Therefore the importance of Multi-Criteria Decision Making
cannot be questioned. AHP is one of Multi-Criteria Decision techniques.
1.2. Personnel Selection
Human Resources in an organization has an extremely important place (Werther and Davis, 1994). So the
preliminary condition is to detect the need for qualified personnel and select them efficiently and effectively. This is
the most crucial issue for the organization and the procedure should work fast and correctly (Özgörmüs, Mutlu, and
Güner, 2005). And the scientific approach to the problem has a great account. So in this study for giving the decision
scientifically Analytic Hierarchy Process will be used.
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1.3. Part Time Work in a University
As a result of Both Economic developments in the world and changes on the necessities of work
environment, the need for and the importance of ‗Part-Time work‘ have been increased. Organizations employ
regular and part-time workers at the same time. While employing a Part-time student, there are some points which
should be taken into consideration. And both the university and the student should get benefit from this procedure.
2. Research Background: Analytic Hierarchy Process
Analytic Hierarchy Process (AHP) was developed by Thomas L. Saaty in 1977. It is one of the methods
which are used for Multi-criteria Decision Making. The main advantage of this method is that the multi-criteria can
easily be managed. Additionally, AHP can be understood easily and it does not contain unnecessary mathematical
operations (BaĢligil, 2005). Through AHP, The observations of Decision Maker‘s in different psychological and
sociological situations can be taken into account and his decision making mechanism will be tried to define. So, the
aim is to provide a better environment to Decision Makers (Dağdeviren, Akay and Kurt, 2004).
The required steps to be satisfied via AHP are given below. The necessary explanations with formulas are
done in each step.
2.1. Defining the Decision Problem
This step is also known as Decomposition Phase. This phase is the process of decomposition of the problem
into sub-problems. In short, this is the formulation of the decision hierarchy. First, the objective of the study is
identified. Then the suitable criteria of the objective are indicated. There may be more than one criterion or suncriteria related with the problem. These criteria should be clear and understandable. At the top of the Decision
Hierarchy, there is the main goal. At the bottom, there are decision alternatives. The hierarchy may contain more
than one phase according to the degree of the details related to the criteria.
2.2. Comparison
The pair-wise comparison matrix is formed by evaluating each criteria and sub-criteria with respect to each
other (Kuruüzüm, 2001). There is a comparison matrix shown in Table 1 for four criteria.
1 1/a21 1/a31 1/a41
a21 1 1/a32 1/a42
1 a43
a31 a32 1
a41 a42 a43 1/
1
a21
a31
a41
1 / a21 1 / a31 1 / a41
1
1 / a32 1 / a42
a32
1
1 / a43
a42
a43
1
Table 1. Pair-wise Comparison matrix for four criteria
While comparing the alternatives a comparison scale which is called Analytic Hierarchy Scale is used. It is
given in Table 2.
Intensity of Importance
1
3
5
7
9
2,4,6,8
Reciprocals of the above
1.1 – 1.9
Definition
Equal importance
Weak importance of one over other
Strong Importance
Demonstrated Importance
Absolute Importance
Intermediate Values
If activity i has one of the above numbers assigned to it when compared
with activity j, then j has the reciprocal value when compared with i.
When elements are close and nearly indistinguishable
Table 2: Analytic Hierarchy scale
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2.3. Synthesis
After developing pair-wise comparison matrices, the calculations are done for the relative order of the
criteria among each other. This section is called ―Synthesis Section‖. If the number of the criteria is five or more, the
calculations are very hard in this step. While setting up the priority vectors, Linear Algebra techniques are used.
This phase contains the steps: The calculations of maximum eigen-value and corresponding eigen-vector and
normalization. There are several methods for normalization. According to the literature most common method is,
first the percentages of each element according to its column are calculated and the average of each row is taken.
Thus for every criteria priority vectors are found (Kuruüzüm, 2001).
2.4. Consistency Ratio
An important subject for the quality of the resultant decision is the consistency of the evaluation of the
decision maker. Being consistent is accepted as a prerequisite for rational thinking. But it is almost impossible to be
fully consistent. To get new knowledge is possible by allowing some amount of consistency. AHP does not request
perfect consistency. It permits consistency, but in each decision it measures the consistency level. To measure the
consistency of the decisions, the Consistency Ratio which was developed by Saaty, is used. The formula for
consistency is, CI
max n
n 1
To get consistent results, consistency ratio should be smaller than 0,1. The Random Index for 15 criteria is
shown in Table 3. If the number of the criteria is greater than 15, then the probability of getting healthier results will
be lessened (Kwiesielewicz and Uden, 2004).
Number
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
R. Index
0
0
0.58
0.9
1.12
1.24
1.32
1.41
1.45
1.49
1.51
1.48
1.56
1.57
1.59
Table 3: Random Index
3. Application
In this study, the aim is to select the most appropriate student for a part time work by using a multi-criteria
decision making method AHP.
The selection is done among Economics Department students which applied for the work. The applied
students have filled out application forms at first. The conditions in the application form are determined by the
Administration of the university and also the criteria of Higher Education Committee of Turkey were considered.
The information in the forms has been used in the selection. In addition to this, a survey was applied on the members
of the administration. And the results of this survey were inserted to the decision matrix. Hence the criteria which
have been considered in this study are,
Economic Situation
Psychological and Medical Situation
Mental problems
Medical problems
Good mannered
Clean wear and neat appearance
Work Qualifications
Work experience
Adaptability to the group-work
Adaptability to the work environment
Work discipline
The hierarchical structure is shown in the Figure 1. At the top of the hierarchy, there is the decision
problem. Then in the second step, there are the main criteria. And in the last step, there are sub-criteria.
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The selection of the most
appropriate student
Economic Situation
Psychology and Medical
Situation
Clean wear and neat appearance
Work qualifications
Work Experience
Mental
Adaptability to groupwork
Medical
Adaptability to work
environment
Good Mannered
Work discipline
A
B
C
D
Figure 1: The hierarchical Structure of the model
The following tables are obtained after the calculation of the means of the survey results. In Table 4, there
are the normalized results of the main criteria and their weight vector. It can be easily observed that the most
important criterion is Work quality.
Criteria
Economic
Situation
Psychology
and
Medical Situation
Clean wear and
neat appearance
Work
qualifications
Weight
Vector
Economic Situation
0,136
0,313
0,214
0,083
0,187
Psychology
and
Medical Situation
0,136
0,313
0,357
0,417
0,306
Clean wear and neat
appearance
0,045
0,063
0,071
0,083
0,066
Work qualifications
0,682
0,313
0,357
0,417
0,441
Consistency Ratio
% 9,887
Table 4: The normalized matrix of the main criteria and their weights
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Then the rank of the criteria according to the importance is as follows.
1. Work qualifications
2. Psychology and Medical Situation
3. Economic Situation
4. Clean wear and neat appearance
The results in the tables are obtained by using Microsoft Office 2007 Excel. But for easy calculations for
AHP problems The Software program Expert Choice may be used.
In Table 5, the sub-criteria of Psychology and Medical Situation are examined and accordingly, the
importance of ‗Mental problem‘ is seen.
Psychology and Medical
Situation
Mental Problem
Mental Problem
Medical Problem
Good Mannered
Weight Vector
0,714
0,714
0,714
0,714
Medical Problem
0,143
0,143
0,143
0,143
Good Mannered
0,143
0,143
0,143
0,143
Consistency Ratio
% 0,000
Table 5: The normalized matrix of the criterion Psychology and Medical Situation and its weights
In Table 6, the weights of sub-criteria of the criterion ‗Work qualifications‘ can be seen. ‗Work discipline‘
is the most important criterion and the least important criterion is ‗Adaptability to work environment‘.
Work qualifications
Work
experience
Adaptability
to the groupwork
Adaptability
to the work
environment
Work
discipline
Weight
Vector
Work experience
0,125
0,188
0,125
0,107
0,136
Adaptability to the groupwork
0,125
0,188
0,375
0,179
0,217
Adaptability to the work
environment
0,125
0,063
0,125
0,179
0,123
Work discipline
0,625
0,563
0,375
0,536
0,524
Consistency Ratio
% 7,030
Table 6: The normalized matrix of the criterion Work qualifications and its weights
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In the conclusion part, the pair wise comparison of alternative students according to the criteria was done.
And the result which is shown in Table 7 appeared. As seen in the table, the most appropriate alternative is the
alternative B.
0,187
0,306
0,714
0,143
0,143
ES
MNP
MDP
GM
A
0,229
0,491
0,25
B
0,343
0,291
C
0,326
D
0,103
0,066
0,441
Weight
Vector
0,136
0,217
0,123
0,524
CWA
EW
AG
WE
WD
0,283
0,323
0,231
0,208
0,200
0,252
0,298
0,25
0,418
0,295
0,231
0,525
0,200
0,554
0,379
0,067
0,25
0,082
0,214
0,231
0,109
0,333
0,097
0,169
0,151
0,25
0,217
0,168
0,307
0,158
0,267
0,097
0,154
1,000
Table 7: The normalized matrix of the students and their weights
4. Result And Evaluation
Decision making takes place in every part of the life. Especially in large organizations, there are many
criteria to select staff. When the number of the criteria is increased, then it would be hard to select the worker. So the
selection should be done in a more scientific way. AHP method offers the decision maker an alternative. A software
program using AHP can be developed, to do multi criteria decisions.
The same type of study can be applied on many decision cases in the life. The study shows that in many
specific and complicated situations, Analytic Hierarchy Process can be easily done. And it can offer the best decision
alternative to the Decision Maker.
References
BAġLIGĠL Hüseyin, 2005, ‗‗The Fuzzy Analytic Hierarchy Process For Software Selection Problems‘‘, Yıldız
Teknik Üniversitesi Mühendislik ve Fen Bilimleri Dergisi, C.3, Istanbul
DAĞDEVĠREN Metin, AKAY D., KURT M., 2004, ‗‗ĠĢ Değerlendirme Sürecinde Analitik HiyerarĢi Prosesi ve
Uygulaması‘‘, Gazi Üniversitesi Mühendislik ve Mimarlık Fakültesi Dergisi, C.19, No.2, Ankara
DAġDEMĠR Ġsmet, GÜNGÖR Ersin, 2002-2003-2004 Vol. I-II, Çok Boyutlu Karar Verme Metotları Ve
Ormancılıkta Uygulama Alanları ZKÜ, Bartın Orman Fakültesi Dergisi
GÖKSU Ali, Güngör Ġbrahim, 2008, ―Bulanık Analitik HiyerarĢik Proses ve Üniversite Tercih Sıralamasında
Uygulanması‖, Süleyman Demirel Üniversitesi Ġktisadi ve Ġdari Bilimler Fakültesi Dergisi, S 3.
GÜNGÖR Ġbrahim, ISLER BÜYÜKER Didar, 2005, ‗‗Analitik HiyerarĢi YaklaĢımı ile Otomobil Seçimi‘‘,
Zonguldak Karaelmas Üniversitesi Sosyal Bilimler Dergisi, C.1, S.2, Zonguldak
KURUÜZÜM AyĢe, 2001, ―Analitik HiyerarĢi Yöntemi ve Ġsletmecilik Alanındaki Uygulamaları‖, Akdeniz
Üniversitesi Ġktisadi ve Ġdari Bilimler Fakültesi Dergisi, C.1, S.1, Antalya
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KWIESIELEWICZ Miroslaw, UDEN Ewa Van, 2004, ―Inconsistent and Contradictory Judgments In Pair wise
Comparison Method In The AHP‖, Computers & Operations Research 31
MANAP Gonca, 2006, Tourism Centre Selection with Analytic Hierarchy Process, Journal of Commerce & Tourism
Education Faculty
ÖZGÖRMÜS Elif, MUTLU Özcan, and GÜNER Hacer, 2005, Personnel Selection by Fuzzy AHP, V. Ulusal Üretim
AraĢtırmaları Sempozyumu, Ġstanbul Ticaret Üniversitesi
SAATY T. L., 1980, ―The Analytic Hierarchy Process‖, McGraw-Hill Inc.
SAATY T. L., 1994, How to Make a Decision: The Analytic Hierarchy Process, Decision Analysis—
Systems/Decision Analysis—Applications.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
An Application of Fuzzy Pairwise Comparison to Farmer Attitude toward
Advertisement Techniques Used for Farm Tractors in Turkey
Murat CANKURT
Dr., Adnan Menderes University, Faculty of Agriculture,
Dept of Ag Econ, Aydın, Turkey
mcankurt@adu.edu.tr
Bülent MĠRAN
Prof.Dr., Ege University, Faculty of Agriculture,
Dept of Ag Econ, Bornova/Izmir, Turkey
Cihat GÜNDEN
Dr., North Carolina University, North Carolina A&T State University, USA
Ahmet ġAHIN
Asist. Prof., Sütçü Ġmam University, Faculty of Agriculture,
Dept of Ag Econ, KahramanmaraĢ, Turkey
Abstract: It is the purpose of this study to elicit the priorities of advertisement methods in which
the farmers takes into account while buying farm tractor. The data was gathered through a survey
that is covering randomly chosen farmers in Aydın. Fuzzy pairwise comparison was used as the
analysis technique. Mostly benefited advertisement methods such as field demonstrations, media
commercials, fairs, brochures and factory trips were assumed to impact the farmers during their
tractor buying process. The study showed that the most important advertisement method that
stimulates the farmers to buy tractor is field demonstrations with a weight of 0.87. The subsequent
methods are factory trips (0.50), exhibitions at fairs (0.41 and media commercials (0.15).
Introduction
The decision making mechanism of the farmers for buying has been the aim of many studies so far. A great
amount of theories in regard with farmer attitudes were forwarded and discussed up to now. The most attractive
theory which is also quite simple and applicable is the one suggested by Kurt Lewin, a psychologist (Figure 1)
(Cankurt, 2008). This theory argues that attitudes are the function of personal and environmental factors which leads
to developing a model so-called ―black box‖ or ―stimulation-response‖ (OdabaĢı ve BarıĢ, 2003).
FigPicture1: The Black Box (Consumer Mind) Model (OdabaĢı ve BarıĢ, 2003).
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It is presumed that a customer reacts to the events under the effect of a number of individual and
surrounding factors. For the ease of analysing the mechanism, grouping of the effective factors on farmer behaviour
was the widespread approach in the presumed models. The grouped factors are assumed to influence the decision
making process of farmers and give rise to a final behaviour, either buying or non-buying (Çabuk ve Yağcı, 2003).
The factories are as follows (OdabaĢı and BarıĢ, 2003):
Psychological factors,
Socio-cultural factors,
Demographic factors,
Conditional factors,
Marketing factors
This study aims at eliciting the influences of advertisement methods on the tractor buying behaviour of
farmers.
As in many areas, marketing studies mostly compare alternative ways that may lead to the ranking of them
with their weights or priorities. It has been an important goal for researchers to rank the objectives, products or
information sources properly.
There have been some techniques that the researchers used in determining the priorities or rankings of
elements in question. One technique that was first used by the researchers is simple ranking in which respondents are
simply asked to give rank numbers to the elements while 1 represents the most preferred element and n the least
preferred one. Ranking or rating scales are used in areas such as preference list and consumer satisfaction. They
typically let individuals rank a product or performance via a numerical scale. While ranking scales can make it easy
to assemble and tabulate the results, there are some inherent disadvantages in the gathering of the information.
Ranking scales allow for consistency in the tabulation of responses. Each subject is rated using the same standards,
so there is fairness in the evaluation process. The results are measurable, which makes for easy comparison. Since
ranking scales are numerical, the results obtained are completely objective. Those who examine the results are not
swayed by subjective comments or opinions, and there is no way for personal prejudices to factor in. Several
different methods can be employed to gather information through ranking scales. In product evaluation, surveys can
be done over the phone, in person or by postal mail. In-person surveys can also be conducted at a location where a
product is purchased by giving out free samples. In the age of the Internet, information from ranking scales can even
be gather via email or online survey. A possible weakness of ranking systems is that the evaluator may rank based on
perception. Although those who interpret the results use objective methods, the actual evaluators may rate the subject
based on their opinions or prejudices without basing them on fact. The evaluators may also interpret the rating scales
differently. For example, with a rating scale that assigns a number based on criteria such as "good," "average" or
"occasionally" room is left for interpretation as to what those terms actually mean, which can result in inaccurate
ratings. An individual using a ranking scale may be influenced by how a survey is conducted. If a survey is
conducted in person, the responder be swayed by the survey taker's personal appearance or tone of voice. They
survey taker may also have a personal agenda which influences how they ask the questions..
In fact, studies indicated that more than five information sources can not be efficiently compared by nonpreeducated minds (Baran, 2002). Another technique without such disadvantages that can be used in ranking is
simple pairwise comparison. Simple pairwise comparison is a sort of divide-and-conquer problem-solving method. It
allows one to determine the relative order (ranking) of a group of items (products). This is often used as part of a
process of assigning weights to criteria in question. Pairwise comparison generally refers to any process of
comparing entities in pairs to judge which of each pair is preferred, or has a greater amount of some quantitative
property. The method of pairwise comparison is used in the scientific study of preferences, attitudes, voting systems,
social choice and public choice. In psychology literature, it is often referred to as paired comparison.
This study deals with eliciting how much farmers pay attention to each of the advertisement techniques while
making decision on buying a farm tractor. The results from the study is expected to serve as a tool for using most
effective advertisement techniques to get the best selling levels of farm tractors.
Material And Method
The data was gathered through a survey that is covering randomly chosen farmers in Aydın. The province of
Aydın has 17 counties, including itself as Central County. There is a poli-cultural production structure in Aydın.
Total sample size was computed as 121 by estimating the population proportion with 90% confidence level and 7.5%
error (Newbold, 1995). Three of the 17 counties of Aydın were selected to represent Aydın and total sample size
was distributed to these counties according to their respective shares.
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The data was analyzed by the FPC in which the farmers made pairwise comparisons of the five
advertisement techniques. FPC presented weighted scores for each of the advertisement methods that enabled us to
rank them. In the FPC, a farmer was asked to compare two advertisement techniques. The comparison includes not
only a preference of one technique over the other technique but also drawing out the level or power of the preference.
Fuzzy Pair-Wise Comparison
Fuzzy theory began with a paper on ―fuzzy sets‖ by Zadeh in 1965. Fuzzy set theory is an extension of crisp
set theory (Tanaka, 1997). Fuzzy sets are sets with boundaries that are not precise. Thus, fuzzy sets describe ranges
of vague and soft boundaries by degree of membership (Lai and Hwang, 1994). The membership in a fuzzy set is a
matter of a degree (Klir and Yuan, 1995). Fuzzy set is characterized by a membership function, which is allowed to
choose an arbitrary real value between zero and one.
FPC was first used by Van Kooten, Schoney and Hayward (1986) to study farmers‘ goal hierarchies for use in
multiple-objective decision making. The first step of FPC approach in this study is data collection by using a unit
line segment as illustrated in Figure 2. Two advertisement methods, D (field demonstration) and T (factory trips), are
located at opposite ends of the unit line. Farmers are asked to place a mark on the line to indicate the degree of their
affected advertisement method. A measure of the degree of preference for advertisement method D over T, rDT, is
obtained by measuring the distance from the farmer‘s mark to the D endpoint. The total distance from D to T equals
1. If rDT<0.5, advertisement method D is preferred to D; if rDT=0.5, the farmer is indifferent between D and T and if
rDT>0.5, then advertisement method D is preferred to T. RDT=1 or rDT=0 indicates absolute preference for
advertisement method D or T. For example, if rDT=1, then advertisement method D is absolutely preferred to T (Van
Kooten et al, 1986).
Neutral
D
T
Figure 2. Fuzzy method for making pair-wise comparison between advertisement methods
(D)Demonstration and (T)Trip.
The present study employs five advertisements used tractor advertisement. The number of pair-wise comparisons, λ,
can be calculated as follows:
n n 1 / 2
(1)
where n = the number of advertisement methods. Thus, a farmer made ten pair-wise comparisons in a personal
interview.
In the second step of FPC, for each paired comparison (i,j), r ij (ij) is obtained. rij‘s values is collected directly from
farmer. Also rij (ij) is a measure of the degree by which the farmer prefers advertisement method i to advertisement
method j and rji=1- rij represents the degree by which j is preferred to i. Following Van Kooten at al (1986), the
farmer‘s fuzzy preference matrix R with elements can be constructed as follows:
0 if i j i, j 1,..., n
Rij
rij if i j i, j 1,..., n
(2)
Finally, a measure of preference, μ, can be calculated for each advertisement method by using farmer‘s preference
matrix R. The intensity of each preference is measured separately by the following equation:
1/ 2
n
j 1 Rij2 / n 1
i 1
(3)
μj has a range in the closed interval [0,1]. The larger value of μj indicates a greater intensity of preference for
advertisement method j. As a result, farmer‘s advertisement methods are ranked from most to least preferable by
evaluating the μ values.
To analyze advertisement methods derived from FPC, nonparametric statistical tests are used (BaĢarır and Gillespie,
2003). Friedman test is employed to establish whether the advertisement methods are equally important within a
block which is a farmer‘s advertisement method rankings according to his/her preferences. Since five advertisement
methods are presented to farmers, each row includes five values which are the degree of the preferences for the
advertisement methods exposed from a farmer. The null hypothesis is that there is no difference in preferences over
545
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Title
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A Comparison of Ethical Perspectives in Business in Turkish Ahilik Society and American Marketing Association
Author
Author
DİNC, Muhammet Said
DUMAN, Teoman
Abstract
A summary of the resource.
“Ahilik‖ is the name of a society which had played a crucial role on social, economic and cultural life of Anatolian people from 13th century to today. The ethical principles established by this society have had significant effects on commercial life in Turkish territories throughout history. The teachings of Ahilik can be found in ‗Futuvvetnames‘ which are the books that include basic moral rules and principles of commerce such as fellowship, helpfullness, honesty and tolerance. These set of principles are still significant in today‘s business life in Turkey. On the other hand, today‘s widespread ethical business principles in the world are mainly rooted in well-known marketing and business organizations. The Ethical Codes of American Marketing Association are one of the most well known ethical codes in current business terminology. The purpose of this study is to analyze the similarities and differences between the moral rules of ‗Ahilik‘ and ethical norms and values of American Marketing Association.
Date
A point or period of time associated with an event in the lifecycle of the resource
2010-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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3rd International Symposium on Sustainable Development, May 31 - June 01 2012, Sarajevo
A Comparison Of Futures Prices On Turkdex With Conventional Pricing Theory
Kusakci Ali Osman, Kusakci,Sumeyye
International University of Sarajevo, Ilidza, Bosnia and Herzegovina
E-mails: akusakci@ius.edu.ba,skusakci@ius.edu.ba
Abstract
Derivatives are very sophisticated financial innovations and require highly sophisticated
financial markets before they are introduced successfully. The well-known arbitrage free
pricing theory applied when pricing derivative securities is based on some assumptions,
which may not be verified in many of the emerging markets. Therefore, the applicability of
the conventional theory to the emerging markets must be studied in details. This paper
questions conformity of conventional arbitrage free pricing theory for emerging markets and
discusses efficiency on newly organized Turkish derivative exchange (TURKDEX). Based on
the market data in Turkey a comparison will be made between daily market prices and
theoretical prices of 43 futures contracts. The results show that currency futures in
TURKDEX are evaluated by market players fairly but ISE-30 and ISE-100 contracts offer
arbitrage opportunities. Additionally, this work shows that theory and market differences rely
mainly on inexperienced market players and newly established market regulations.
Conservative regulations on short-selling are another problem to be solved.
Keywords: futures, TURKDEX, cost of carry, arbitrage theory, emerging markets, pricing
1.INTRODUCTION
Forward and future contracts are two basic types of derivatives, where they referred in the
literature as unconditional derivatives (Daniel Siegel & Diane Siegel 1990).While evaluating
them, the basic pricing approach is “cost of carry” approach (CC). CC is derived from an
arbitrage-free market theory, while an arbitrage-free market is characterized as follows
(Rudolph & Schäfer 2010);
There is no taxes, transaction and information cost
Short selling is allowed
All market players have the same opportunities on the market
A cash flow stream and a derivative instrument can be arbitrarily divided.
However, the above mentioned assumptions are only valid for a well-developed market and
can be justified only under the well-known efficient market hypothesis (EMH) according to
which the current price of a stock fully reflects, at any time, available information exploited
by traders. As new information becomes available, any imbalance is immediately detected
and accounted for by a counteracting change in stock market price (Fama 1965). Thus, the
prices follow random walk and there are no clear arbitrage opportunities on an efficient
market (Malkiel 2003; Atsalakis & Valavanis 2009). This, however, requires high liquidity,
sufficient depth and well informed market participants. On the other hand, emerging financial
markets, like Turkish capital market, may exhibit a different profile and may suffer from low
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�3rd International Symposium on Sustainable Development, May 31 - June 01 2012, Sarajevo
liquidity and poor information dissemination which bears arbitrage changes and speculations
on the market.
After each financial crisis many researchers blamed derivatives and questioned their presence
(Buckley 2011). Most developing countries are still skeptical of positive effects of the
derivative markets on the financial markets as a whole and apply strict regulations, which
complicate trading and discourage international investors.
This paper questions conformity of conventional arbitrage free pricing theory for emerging
markets and discusses efficiency of newly organized Turkish derivative exchange
(TURKDEX). Based on the market data in Turkey a comparison will be made between daily
market prices and theoretical prices of 43 futures contracts, which had been traded on
TURKDEX in years 2005 and 2006.
2.RELATED WORK
Although derivatives started to be traded on over-the-counter markets and on Istanbul Stock
Exchange (ISE) in 2001, the TURKDEX formally became the only entity authorized by the
Capital Markets Board (CMB) to offer financial derivatives in 2005 (Kusakci 2010). Clearing
is handled by the Istanbul Stock Exchange (ISE) Settlement and the Custody Bank Inc.
(Takasbank) (Kasman 2009). Given its short history there are not many scientific work
addressing TURKDEX and its effect on Turkish capital market.
Bektaş et al. (2010) tested the price efficiency of TRYUSD and TRYEUR futures contracts
and utilized a random walk model. Low level of coefficient of determination for TRY/$ and
TRY/€ contracts supports the existence of random walk for TRY/€ contracts. They mentioned
also that TRY/€ contracts are more volatile than TRY/$ contracts in TURKDEX. Thus, EMH
cannot be falsified for TRY/$ and TRY/€ contracts. Thus, conventional pricing theory is
applicable to these financial instruments.
Avci and Çinko (2010) studied hedging effectiveness of the ISE-30 index futures contract and
the effect of hedging period length on hedging effectiveness. The results of the study
presented that the ISE-30 index futures contract is effective in hedging the risks associated
with the Securities Investment Trusts (SITs) traded in ISE. Their study indicates that the
weekly hedges are more effective than daily hedges (Avci & Çinko 2010).
Kasman (2009) examined long memory property of the Turkish futures market. For modeling
the volatility, the GARCH and FIGARCH models have been employed. The estimation
results provide evidence supporting the FIGARCH models. The results of the FIGARCH
model show that estimates of the long memory parameters are significantly different from
zero, suggesting that volatility series are long memory processes in the Turkish futures
market.
Doğru and Bulut (2012) investigated relation between daily closing prices and trading volume
of USD futures contracts in the TURKDEX. The results show no significant relation between
prices and trading volume in the short run, but a clear price-volume relation in the long run.
Their work showed that the data concerning trading volume affect prices. They conclude that
the trading volume changes might be used in price forecasts and thus the futures market in
Turkey is not efficient. We should point out that this study analysis only TRY/USD futures
contracts from January 2, 2009 to December 30, 2011. Hence, the findings cannot be
generalized to all derivative instruments traded on TURKDEX.
Another question arising while analyzing derivative markets is how efficient they are as
hedging tools during financial crisis. Kalayci and Zeynel (2009) addressed hedging
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�3rd International Symposium on Sustainable Development, May 31 - June 01 2012, Sarajevo
effectiveness through the index contracts in the Turkish Derivatives Exchange. The analysis
employs a dynamic hedging at the short position against the risk of the fall in prices, and ISE30 Index contracts are found hedge effective.
Yılmaz and Kurun (2007) presented empirical evidence from the Turkish capital market by
investigating the risk perception of the companies and discussed the impact of derivatives on
the financial stability in Turkish economy. They focused on non-financial companies that play
a vital role in foreign trade operations and have close relations with the banking industry. The
results showed that most of the companies give priority to currency risk, followed by
commodity price risk. Surprisingly, they do not pay much attention to interest rate risk.
Although the firms know derivative products traded on TURKDEX, most of them are
reluctant to use them because of the lack of education and experience.
3.COST OF CARRY APPROACH
Based on the aforementioned assumptions in introduction section, CC secures a simple
evaluation idea, which equates price of a futures contract to cost of holding a spot market
position on the underlying asset, as in (1).
F0,T S 0 e rT
where
S0
Spot price at time 0
F0,T
Futures/Forward price at time 0 with a settlement at time T
e rT
Annual interest factor with interest rate of r for a time period of (0-T)
(1)
The arbitrage-free market, which is the underlying assumption in equation (1), rests upon a
smoothly running market mechanism and foresees that each arbitrage opportunity will be
detected and utilized. Two possible strategies, namely cash and carry and reverse cash and
carry strategies, to take advantage of this arbitrage profits explains this market mechanism
(Luenberger 1998).
Under the assumption of an arbitrage free market the theoretical price of a futures contract
paying dividends with a continuous rate of q can be calculated as (Hull 2008);
Ft ,T St e ( r q )(T t )
(2)
where
St
Index value at time t
Equation (2) relies on an implicit assumption that a stock basket representing perfectly the
ISE-30 and ISE-100 Indices can be rebuilt and this stock basket is paying dividends (Rudolph
& Schäfer 2010).
The evaluation of currency futures relies on arbitrage opportunities when same money
invested in the foreign currency. A TRY/$ or TRY/€ futures contract can be evaluated as
follows;
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�3rd International Symposium on Sustainable Development, May 31 - June 01 2012, Sarajevo
Ft ,T St e
( r r f )( T t )
(3)
where
Interest rate of the corresponding foreign country
rf
4.EMPIRICAL STUDY ON FUTURES IN TURKDEX
4.1.Dataset and Methodology
In this part an empirical analysis is conducted on the futures contracts written on ISE-30 and
ISE-100 Indices and TRY/$ and TRY/€ exchange rates traded in TURKDEX in the years
2005 and 2006. This time period is selected because it covers developing phase, first two
years, of the TURKDEX. The number of contracts covered in this period and number of
dataset is given in Table 1. Here we will present only the results on annual basis due to the
limited space of the paper.
Number of contracts
Number of dataset
ISE-30 Index futures
12
1314
ISE-100 Index futures
7
747
TRY/$ Futures
12
1392
TRY/€ Futures
12
1392
Table 1: Dataset used in empirical study
While pricing the contracts transaction costs are not considered. Additionally, no physical
delivery of the underlying asset takes place. Dividend rate q is taken as 2% in 2005 and 1.8%
in 2006 based on the interview made with the market makers on TURKDEX.
The condition for efficiency of ISE-Index futures can be defined as follows: the expected
value of and arbitrage profit following a Cash and Carry or Reverse Cash and Carry-strategy
must be zero. Thus, the Null-Hypothesis and its alternative can be formulated as:
H 0 : f r
H1 : f r
(4)
f
Expected value of fair price F
r
Expected value of market price P
When the results are analyzed, the difference between fair price and market price increases in
2006 when compared with 2005. This indicates more volatile prices in 2006. Table 2 shows
the market price, fair price and differences between both prices as well as the related statistics.
As indicated by the given t-values of 4.653 and 7.801 for 2005 and 2006 respectively, the null
hypothesis must be rejected. Thus, there exist arbitrage opportunities for ISE-30 contracts on
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�3rd International Symposium on Sustainable Development, May 31 - June 01 2012, Sarajevo
TURKDEX. The results can be observed also for ISE-100 futures contracts based on the
given values in Table 3.
Mostly futures price at the market lies under the expected spot price for both types of
contracts in TURKDEX. This phenomena is called Normal Backwardation (Hull 2008).
The arbitrage opportunities on the market can be justified with following arguments:
There is no practical way of short selling.
Individual expectations are given more weight than theoretical analysis by market
participants. As volatility of underlying asset increases, mispricing increases.
US Dollar and Euro spot prices are quoted with a bid-ask spread. For cash and carry strategy
ask-prices are taken spot prices. The expected value of arbitrage opportunity for the futures
must be not positive. Thus, the null-hypothesis and its alternative for cash and carry read as;
H 0 : E ( Ft ,r Ft , f ) 0
H1 : E ( Ft ,r Ft , f ) 0
(5)
On the other hand the reverse cash and carry strategy requires a long position in the futures
market. In order that there exists no arbitrage opportunities, the null-hypothesis and its
alternative for reverse cash and carry read as;
H 0 : E ( Ft , f Ft ,r ) 0
H1 : E ( Ft , f Ft ,r ) 0
(6)
all
F
2005
ISE-30
P
St. Dev.
8,221 8,614 1,383 4,381 4,558 1,138 5,539 5,444 1,404
(n)
1314 1314 1314 566
Mean
43,500 45,294 1,795 36,065 37,302 1,237 49,127 51,341 2,214
Min
29,825 30,036 -1,574 29,825 30,036 -1,574 38,775 40,492 -1,167
Max
60,350 63,890 8,282 50,625 50,637 4,512 60,350 63,890 8,282
t-value
F-P
P
F
2006
566
5,464
F-P
566
P
749
F
749
4,653
F-P
749
7,801
Table 2: Market price, fair price and difference of both prices with related t-statistics for ISE30 index futures
all
F
2005
ISE-100
P
St. Dev.
4,056 4,082 1,521 2,151 1,793 0,489 4,094 4,092 1,545
(n)
747
747
F-P
747
P
F
2006
41
254
41
F-P
41
P
706
F
706
F-P
706
�3rd International Symposium on Sustainable Development, May 31 - June 01 2012, Sarajevo
Mean
39,149 40,691 1,542 36,636 37,318 0,682 39,295 40,887 1,592
Min
31,325 31,993 -4,163 32,025 33,445 -0,120 31,325 31,993 -4,163
Max
50,275 50,366 5,829 39,875 39,851 1,560 50,275 50,366 5,829
t-value
7,326
1,560
7,310
Table 3: Market price, fair price and difference of both prices with related t-statistics for ISE100 index futures
Table 4 summarizes the results of the study for TRY/$ futures contracts. The average price
differences are 0.002 and -0.009 for cash and carry and reverse cash and carry strategies
respectively. This value is almost zero in 2005 while a slight increase is observable due to the
highly volatile exchange rates in 2006. TRY/€ contracts give a similar picture as given in
Table 5.The results indicate that there is practically no arbitrage opportunities to be exploited
for both currency futures.
5.CONCLUSION
For certain, the derivative products as one of the main triggers of deep recession we
experienced must be examined more precisely, especially in developing economies like
Turkey. Since their presence reflects not only huge potentials but also huge risks for an
emerging market. This study compared the market prices on TURKDEX with theoretical fair
prices under arbitrage-free market assumption.
The results showed that the index futures on ISE-30 and ISE-100 are undervalued and exhibit
reverse cash and carry arbitrage opportunities. However, this is not entirely feasible, as the
market does not allow short-selling of ISE-30 and ISE-100 indices or any stock basket
recreating the indices.
The currency futures contracts, TRY/$ and TRY/€, do not offer any practical arbitrage profit
as the market prices and fair prices are not moving beyond the arbitrage-free band.
255
�3rd International Symposium on Sustainable Development, May 31 - June 01 2012, Sarajevo
TRY/$ P
Fask Fask- P Fbid Fbid- P P
Fask Fask- P Fbid Fbid- P P
Fask Fask- P Fbid Fbid- P
St. Dev. 0.096 0.092 0.016 0.091 0.017 0.032 0.035 0.009 0.035 0.009 0.110 0.104 0.020 0.103 0.020
(n)
1392 1392 1392
Mean
1.430 1.428 0.002 1.421 -0.009 1.381 1.382 0.000 1.375 -0.006 1.464 1.461 0.003 1.454 -0.010
Min
1.284 1.284 -0.051 1.278 -0.152 1.284 1.284 -0.039 1.278 -0.037 1.313 1.318 -0.051 1.311 -0.152
Max
1.882 1.772 0.143 1.763 0.043 1.477 1.482 0.031 1.475 0.032 1.882 1.772 0.143 1.763 0.043
t-value
0.487
1392 1392
570
570
-2.421
570
570
-0.126
570
823
823
-3.203
823
823
0.587
823
-1.921
Table 4: Pricing of TRY/$ contracts for cash and carry and reverse cash and carry strategies and their comparison with market price.
TRY/€ P
FaskFask P
Fbid Fbid- P P
FaskFbidFask P
Fbid P
P
FaskFask P
Fbid Fbid- P
St. Dev. 0.154 0.148 0.020 0.148 0.020
0.0740.076 0.013 0.076 0.013 0.179 0.172 0.023 0.171 0.024
(n)
1393 1393 1393 1393 1393
570 570
Mean
1.789 1.788 0.002 1.779 -0.010 1.7291.731 -0.002 1.723 -0.006 1.831 1.827 0.004 1.818 -0.013
Min
1.559 1.562 -0.062 1.554 -0.148 1.5951.598 -0.052 1.590 -0.051 1.559 1.562 -0.062 1.554 -0.148
Max
2.357 2.248 0.138 2.237 0.052
t-value
0.266
-1.767
570
570
570
823
823
823
823
823
1.9071.934 0.042 1.925 0.043 2.357 2.248 0.138 2.237 0.052
-0.503
-1.374
0.476
-1.492
Table 5: Pricing of TRY/€ contracts for cash and carry and reverse cash and carry strategies and their comparison with market price.
256
�REFERENCES
Atsalakis, G.S. & Valavanis, K.P., 2009. Forecasting stock market short-term trends using a
neuro-fuzzy based methodology. Expert Systems with Applications, 36(7), pp.10696-10707.
Available at: http://linkinghub.elsevier.com/retrieve/pii/S0957417409001948 [Accessed April
18, 2012].
Avci, E. & Çinko, M., 2010. THE HEDGE PERIOD LENGTH AND THE HEDGING
EFFECTIVENESS : AN APPLICATION ON TURKDEX-ISE 30 INDEX FUTURES
CONTRACTS. Journal of Yasar University, 18(5), pp.3081-3090.
Bektaş, C., Karan, M.B. & Arslan, Ö., 2010. Price efficiency in option markets: An empirical
study on Izmir derivatives exchange. The 6th International Scientific Conference “Business
and
Management
2010”.
Selected
papers,
pp.9-14.
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at:
http://www.vgtu.lt/leidiniai/leidykla/BUS_AND_MANA_2010/Finance_Engineering/002.htm
l [Accessed April 22, 2012].
Buckley, A., 2011. Financial crisis: causes, context and consequenses 1st ed., Prentice Hall.
Doğru, T. & Bulut, Ü., 2012. The Price-Volume Relation in the Turkish Derivatives
Exchange. International Journal of Business and Social Science, 3(8), pp.313-318.
Fama, E.F., 1965. The behavior of stock market prices. The Journal of Business, 38(1), pp.34105.
Hull, J.C., 2008. Options, Futures and Other Derivatives 7th ed., Prentice Hall.
Kalayci, Ş. & Zeynel, E., 2009. HEDGING IN FUTURES MARKETS : HEDGE RATIO
AND HEDGING EFFECTIVENESS BASED ON THE USE OF TURKDEX-ISE 30 INDEX
CONTRACTS. Suleyman Demirel University The Journal of Faculty of Economics and
Administrative Sciences, 14(3), pp.39-63.
Kasman, A., 2009. Estimating Value-at-Risk for the Turkish Stock Index Futures in the
Presence of Long Memory Volatility. Central Bank Review, pp.1-14.
Kusakci, A.O., 2010. Bewertung von an TURKDEX gehandelten Futureskontrakten: Wie gut
ist die konventionelle Bewertungstheorie am Türkischen Finanzmarkt anwendbar?, VDM
Verlag Dr. Müller.
Luenberger, D., 1998. Investment Science, New York: Oxford Unıversity Press.
Malkiel, B.G., 2003. Passive Investment Strategies and Efficient Markets. European Financial
Management, 9(1), pp.1-10.
Rudolph, B. & Schäfer, K., 2010. Derivative Finanzmarktinstrumente - eine
anwendungsbezogene Einführung in Märkte, Strategien und Bewertung 2nd ed., Berlin:
Springer.
Siegel, Daniel & Siegel, Diane, 1990. The Futures Markets -Arbitrage, Risk Management and
Portfolio Strategies, London: McGraw-Hill.
Yılmaz, M. & Kurun, E., 2007. The Impact of Derivatives on Financial Stability in Turkish
Economy Evidence from the Istanbul Stock Exchange and TurkDEX. International Research
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257
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Title
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A Comparison Of Futures Prices On Turkdex With Conventional Pricing Theory
Author
Author
Kusakci , Ali Osman
Abstract
A summary of the resource.
Derivatives are very sophisticated financial innovations and require highly sophisticated financial markets before they are introduced successfully. The well-known arbitrage free pricing theory applied when pricing derivative securities is based on some assumptions, which may not be verified in many of the emerging markets. Therefore, the applicability of the conventional theory to the emerging markets must be studied in details. This paper questions conformity of conventional arbitrage free pricing theory for emerging markets and discusses efficiency on newly organized Turkish derivative exchange (TURKDEX). Based on the market data in Turkey a comparison will be made between daily market prices and theoretical prices of 43 futures contracts. The results show that currency futures in TURKDEX are evaluated by market players fairly but ISE-30 and ISE-100 contracts offer arbitrage opportunities. Additionally, this work shows that theory and market differences rely mainly on inexperienced market players and newly established market regulations. Conservative regulations on short-selling are another problem to be solved. Keywords: futures, TURKDEX, cost of carry, arbitrage theory, emerging markets, pricing
Date
A point or period of time associated with an event in the lifecycle of the resource
2012-05-31
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
H Social Sciences (General),HB Economic Theory,HG Finance,HJ Public Finance
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A Comparison of Pre-Service Foreign Language Teachers’ Beliefs about Self-Efficacy in
Terms of Some Variables
Tertemiz Neşe & Agildere Suna
Gazi University/ Ankara, Turkey
Key words: teacher training, pre-service teachers, self-efficacy about foreign language teaching
ABSTRACT
Pre-service teachers have beliefs about many varied topics, including their professional roles, their academic
performance, correct and incorrect classroom practices (Raths, 2001). Self-efficacy in teachers refers to their beliefs
and judgments about their teaching performance in regard to effective teaching. Expectation of outcomes in teachers
is their belief and judgment about increasing the student achievement through effective teaching methods (Savran
and Çakıroğlu, 2001). Studies on teachers’ self-efficacy (Gibson ve Demo, 1984; Riggs ve Enochs, 1990) conclude
that those students with higher levels of self-efficacy are much more diligent, willing and enthusiastic in the
teaching process and make immediate decisions about teaching. They are also reported to be more successful in
implementing the program and less stressful.
The data of the study will be collected through the use of “The scale of teachers’ self-efficacy” developed by Gibson
and Dembo (1984). The scale that includes 31 items was adapted into Turkish. The participants of the study are
senior pre-service foreign language teachers attending to a public university in Ankara during the academic year of
2012-2013. Firstly, their mean scores on the scale will be revealed, indicating their self-efficacy levels. Then their
mean scores will be analysed and compared based on some variables, indicating the department they are attending,
gender, and the high school they graduated from. ANOVA will be employed to see whether or not the mean scores
of the participant groups differ significantly. Then the Scheffe test will be used to see which group leads to
significant difference. The findings will be discussed in the light of previous findings.
�
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1938
Title
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A Comparison of Pre-Service Foreign Language Teachers’ Beliefs about Self-Efficacy in Terms of Some Variables
Author
Author
TERTEMIZ, Neşe
AGILDERE, Suna
Abstract
A summary of the resource.
Key words: teacher training, pre-service teachers, self-efficacy about foreign language teaching ABSTRACT Pre-service teachers have beliefs about many varied topics, including their professional roles, their academic performance, correct and incorrect classroom practices (Raths, 2001). Self-efficacy in teachers refers to their beliefs and judgments about their teaching performance in regard to effective teaching. Expectation of outcomes in teachers is their belief and judgment about increasing the student achievement through effective teaching methods (Savran and Çakıroğlu, 2001). Studies on teachers’ self-efficacy (Gibson ve Demo, 1984; Riggs ve Enochs, 1990) conclude that those students with higher levels of self-efficacy are much more diligent, willing and enthusiastic in the teaching process and make immediate decisions about teaching. They are also reported to be more successful in implementing the program and less stressful. The data of the study will be collected through the use of “The scale of teachers’ self-efficacy” developed by Gibson and Dembo (1984). The scale that includes 31 items was adapted into Turkish. The participants of the study are senior pre-service foreign language teachers attending to a public university in Ankara during the academic year of 2012-2013. Firstly, their mean scores on the scale will be revealed, indicating their self-efficacy levels. Then their mean scores will be analysed and compared based on some variables, indicating the department they are attending, gender, and the high school they graduated from. ANOVA will be employed to see whether or not the mean scores of the participant groups differ significantly. Then the Scheffe test will be used to see which group leads to significant difference. The findings will be discussed in the light of previous findings.
Publisher
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IBU Publishing
Date
A point or period of time associated with an event in the lifecycle of the resource
2013-05-03
Keywords
Keywords.
Article
PeerReviewed
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716b7310d30416f7fd743c80e9aef36d
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92ba67814d68084084ec130d67d4bd91
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Text
A Comparison of Turkish and French Teachers in Terms of Teacher Roles of Status Quo
and Progressive Approaches
Ayşe Ottekin Demirbolat
Gazi University/ Ankara,Turkey
Key words: Teacher roles, status quo roles, progressive roles, inter-cultural comparison
ABSTRACT
Teacher roles pertaining to status quo approach include provision of institutional authority, attaching importance to
academic standards, and provision of effective teaching. However, teachers should also pay attention to progressive
roles as a result of globalization. Those teachers performing global roles are interested in events at the local, national
and global levels, actively try to be informed about these events, have a skeptical approach towards sources of
information and exhibit an equitable and supportive approach. On the other hand, these two categories of teacher
roles are mostly in opposition. Such a contradiction may lead to role conflict, which is significantly affected by the
political, social, and cultural conditions of each society.
The purpose of the study is to compare the adaptation level of Turkish and French teachers concerning the teacher
roles of status quo and progressive approaches. Through this comparison, the effects political, social, and cultural
conditions on the teachers’ professional role orientations will be revealed. The reason for choosing these two groups
teachers is that in both countries education is administered at the central level.
The study was designed as a qualitative study. Both groups contained twenty teachers. Their views were collected
through semi-structured interview forms. The data were analyzed with content analysis.
�
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A Comparison of Turkish and French Teachers in Terms of Teacher Roles of Status Quo and Progressive Approaches
Author
Author
OTTEKIN DEMIRBOLAT, Ayse
Abstract
A summary of the resource.
Key words: Teacher roles, status quo roles, progressive roles, inter-cultural comparison ABSTRACT Teacher roles pertaining to status quo approach include provision of institutional authority, attaching importance to academic standards, and provision of effective teaching. However, teachers should also pay attention to progressive roles as a result of globalization. Those teachers performing global roles are interested in events at the local, national and global levels, actively try to be informed about these events, have a skeptical approach towards sources of information and exhibit an equitable and supportive approach. On the other hand, these two categories of teacher roles are mostly in opposition. Such a contradiction may lead to role conflict, which is significantly affected by the political, social, and cultural conditions of each society. The purpose of the study is to compare the adaptation level of Turkish and French teachers concerning the teacher roles of status quo and progressive approaches. Through this comparison, the effects political, social, and cultural conditions on the teachers’ professional role orientations will be revealed. The reason for choosing these two groups teachers is that in both countries education is administered at the central level. The study was designed as a qualitative study. Both groups contained twenty teachers. Their views were collected through semi-structured interview forms. The data were analyzed with content analysis.
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Date
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2013-05-03
Keywords
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Article
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d9374e5a9673f0f3c5815f90116cc08f
https://omeka.ibu.edu.ba/files/original/5ed6142f2e3654be82c8df0c9abef72e.pdf
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A Competent English Language Teacher in Bosnia and Herzegovina: A Lifelong Journey
Larisa Kasumagić- Kafedžić
Sarajevo University/ Sarajevo, Bosnia and Herzegovina
Key words: competences of foreign language teachers, intercultural communicative competences, teacher
development
ABSTRACT
This paper tries to propose a holistic approach to the areas of competences within which English language teachers
to very young, young and teenage learners in Bosnia and Herzegovina should professionally evolve. The defined
areas from subject specific to educational and life-long learning competences, with special attention given to
intercultural communicative competences, and thus shifting away from merely focusing on the linguistic skills and
broadening the scope of skills relevant for a competent 21st -century teacher. Such a holistic approach aims to raise
the awareness of the roles and accountability of all institutions responsible for the individual integral parts of teacher
education (from the beginning steps in pre-service to life-long, in-service teacher training programs). The defined
competences point to the necessity of the mutual collaboration and orientation of all institutions responsible for
professional teacher development to work towards the common goal, which should be to achieve and nurture high
levels of professional commitment and excellence, pedagogical and psychological knowledge, intercultural
competences, and motivation for life-long learning.
�
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A Competent English Language Teacher in Bosnia and Herzegovina: A Lifelong Journey
Author
Author
KAFEDZIC, Larisa Kasumagić
Abstract
A summary of the resource.
Key words: competences of foreign language teachers, intercultural communicative competences, teacher development ABSTRACT This paper tries to propose a holistic approach to the areas of competences within which English language teachers to very young, young and teenage learners in Bosnia and Herzegovina should professionally evolve. The defined areas from subject specific to educational and life-long learning competences, with special attention given to intercultural communicative competences, and thus shifting away from merely focusing on the linguistic skills and broadening the scope of skills relevant for a competent 21st -century teacher. Such a holistic approach aims to raise the awareness of the roles and accountability of all institutions responsible for the individual integral parts of teacher education (from the beginning steps in pre-service to life-long, in-service teacher training programs). The defined competences point to the necessity of the mutual collaboration and orientation of all institutions responsible for professional teacher development to work towards the common goal, which should be to achieve and nurture high levels of professional commitment and excellence, pedagogical and psychological knowledge, intercultural competences, and motivation for life-long learning.
Publisher
An entity responsible for making the resource available
IBU Publishing
Date
A point or period of time associated with an event in the lifecycle of the resource
2013-05-03
Keywords
Keywords.
Article
PeerReviewed
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2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
A Competitive Analysis Of Ski Resorts In Bosnia And Herzegovina Using
Differential Advantage Proforma
Mohammad HAMAD
International Burch University
Faculty of Economics
Bosnia and Herzegovina
Edin SMAJIC
International Burch University
Faculty of Economics
Bosnia and Herzegovina
esmaijc@ibu.edu.ba
Adisa MUJKIC
International Burch University
Faculty of Economics
Bosnia and Herzegovina
Armin BECIC
International Burch University
Faculty of Economics
Bosnia and Herzegovina
Armin SABOTIC
International Burch University
Faculty of Economics
Bosnia and Herzegovina
Çetin YURT
International Burch University
Faculty of Economics
Bosnia and Herzegovina
Teoman DUMAN
International Burch University
Faculty of Economics
Bosnia and Herzegovina
tduman@ibu.edu.ba
Abstract: The purpose of this paper is to conduct a competitive analysis of ski resorts in Bosnia
and Herzegovina using differential advantage proforma. Bosnia and Herzegovina has a strong
brand image due to Winter Olympics conducted in Sarajevo in 1984. This image has been
weakening due to lack of marketing efforts, especially following the war between former
Yugoslav republics. Competitive analysis is an important part of marketing strategy for companies
to identify strengths and weaknesses among various competitors. In this study, differential
advantage proforma is used as a technique of competitive analysis to identify comparable positions
and key customer values of ski-resorts in Bosnia and Herzegovina. To identify competitive
positions, a series of qualitative techniques (focus groups, personal interviews, site visits –
observation) are used. Research results indicate that five competing ski-resorts have unique
differential advantages that can be used in marketing of these resorts.
Keywords: Competitive Strategies, Differential Proforma Analysis, Ski Industry, Bosnia and
Herzegovina
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Introduction
Bosnia and Herzegovina (BH) is located in the central part of the Balkan and holds strategic seat in the
eastern part of Europe. BH is a country in south-east Europe with an estimated population of four million people. BH
is a country that measures just over 50,000 km2. Its diverse climate, contrast geographic landscape and multicultural
and multi religious society may serve as magnet for tourist from around the Globe. The country is located in a
beautiful mountainous location with many scenic vistas. Wilderness and untouched nature make it an ideal
destination for adventurers and nature lovers. The central part of the country is covered with range of mountains and
is a hikers and walkers paradise. Enchanted by both Mediterranean and Alpine climates, the range of diverse
landscapes stun and amaze the county‘s visitors. Every mountain in BH can be utilized for winter tourism and they
all are equally appealing and carry their peculiar charm. Mountains that are currently used for winter tourism are
Bjelasnica & Igman, Jahorina, Vlasic, Blidinje and Kupres (Enjoybosnia, 2010).
Bjelasnica and Jahorina Mountains once hosted the 1984 Winter Olympics. They are a popular tourist
attraction for skiing, boarding, paragliding, mountaineering and hiking. These mountains are only 20 minutes outside
of Sarajevo. During the 1984 Winter Olympics, Bjelasnica was used for a number of Olympic events, and has several
structures dating from that time, including hotels and skiing areas. Hotel Igman served as a seat to International
Olympic Committee presided by late Juan Antonio Samaranch. Bosnian mountains used to attract world famous
sports figures, athletes and sport managers but also many famous political figures. They were arenas for famous
battles during World War II but also during recent war in Bosnia.
Winter Tourism In Bosnia and Herzegovina
BH is endowed with beautiful mountains that are underutilized since there are only five winter resorts in the
whole country. Those are: Bjelasnica and Igman, Jahorina, Vlasic, Blidinje and Kupres. Although, Bjelasnica and
Igman, Jahorina and Vlasic stand out as better organized and better offer yet there is a huge prospect and immense
potential to offer great many new products in winter tourism (FIPA, 2010). Table 1 summarizes winter tourism
facilities for the five ski resorts in BH.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Existing/Plan
ned Facilities
Igman & Bjelasnica
Jahorina
Vlasic
Blidinje
Kupres
Accommodation
2250 beds (2 hotels with
342 beds, and the rest are
private)
4000 beds ( 6
hotels
with
1022 beds, the
rest private)
6000 beds (6
hotels
with
680 beds, and
the rest are
private)
2000 beds
(1 hotel and
private)
700 beds
Ski lifts capacity
5000 person/h
22.200 person/h planned
1000
person/h
12.200 m
5 machines with capacity
of 14.000m3
Exists
5400 person/h
15.000
person/h
planned
14.000 m
-
2500
person/h
Alpine ski slope
Snowmaking
machines
Night
lighting
system
Ski jump
7500 person/h
13.800
person/h
planned
25.000 m
-
4.500 m
-
14.000 m
-
Exists
Exists
-
-
2 with; 70m – 90m
-
-
-
Cross
country
tracks
Destination from
Sarajevo
Local population
Future plans
35 km
5 km
3 with; 90m35m-15m
15 km
-
-
25 km from airport
30 km
100 km
80 km
140 km
425.000
10.000 total bed capacity,
man-made lake, 80% of
skiing infrastructure for
children and beginners,
20% for advanced skiers,
multimedia
business
facilities, health centers,
more indoor and outdoor
entertainment facilities
30.000
8 more hotels,
9580 total bed
capacity, more
facilities for
families
70.000
10.000 total
bed capacity,
golf
course
(50 h)
17.000
2700 total
bed capacity
4.000
One more
private ski
center
is
planned.
Table 1: A comparison of winter tourism facilities of five ski-resorts in BH.
BH was the symbol of winter tourism in former Yugoslavia. 1984 Winter Olympics secured many
mountains international acclaim. XIV Winter Olympics (1984) were considered as one of the most successful of its
time. Today, Olympic resorts host a new generation of skiers and snow-lovers, hitting the slopes with Olympic
quality skiing without the outlandish prices and long waiting. However, these resorts are one of the last undiscovered
regions with vast tracks and untouched nature of the Southern Alps. As such they represent an ideal tourism
destination for hikers and walkers, as well as for adventurers and nature lovers (Bhtourism, 2010).
The beauty of the Bjelasnica Mountain is augmented by the temper of its climate. Bjelasnica‘s highest part,
300 meters in length, towards the Adriatic Sea, represents a border of impact of two climates - Mediterranean and
Continental that results in rain and snow precipitation in autumn and great amounts of snow in the winter which
retains until late in the spring. The highest temperature is 24°C and the lowest is -41°C. Thick green grass covers the
mountain in the summer while winters attract 4 meters.
The greater area of Bjelasnica and Igman, including neighboring Visocica and Treskavica mountains
(around 100,000 ha), has a long list of attractions such as mountain scenery with expansive vistas, river-cut
limestone canyons, caves, rich forest, diverse flora, endemic and medicinal herbs and endangered fauna. However,
the greatest, and most sustainable growth opportunities lie in attracting new visitors, who will seek out Bosnia‘s
inherent appeals. These are primarily niche market segments, such as: ―soft outdoor adventurists‖, hikers, fishermen,
river rafters, birders (migratory season only) and history/culture enthusiasts. Most of this growth will come from the
more traditional tourism-producing markets in Europe, as well as neighboring regional markets.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Bjelasnica is an ideal place for winter holidays especially in the period from November to May, with snow
drifts of a couple of meters in height which are a particular challenge for winter sports lovers. Winter season is
particularly interesting because of the landscape of the mountain under snow, which is somewhat like a white desert
covered with rays of sunshine, above which there is nothing but the areal landscape.
During the Olympics at Bjelasnica and Igman, the competitions in Alpine Skiing (Downhill, Giant Slalom
and Slalom), Nordic skiing (Cross-country skiing, Nordic combined), Biathlon and Ski Jumps took place. Beside
traditional disciplines, Bjelasnica is also trying to put up with the latest trends with night skiing. Ski run on 8345
meters is perfect for skiers and snowboarders of various skill levels, those looking for adventure or those with young
children. Due to an increased market demand and interest in Bjelasnica and Igman resorts, the local authorities and a
number of private companies have made considerable investments in the infrastructure and particularly in
accommodation capacities in the last five years. This resulted in a huge increase in a number of beds (hotel with 240
beds) available at the mountain, and particularly in an increased number of condominiums (2,000 beds).
Bosnia and Herzegovina developed an authentic gastronomy familiar to many, with which it enriches its
tourism and represents its culture, tradition and mode of life Bosnian cuisine is influenced by Eastern and Western.
Bosnian dish is tightly connected to Greek, Turkish, and other Mediterranean cuisines. Gastronomy on Bjelasnica is
one of the main reasons that can assure an increase in the service quality. The richness of natural tastes, that became
a brand for B&H (such are burek and čevapčiĤi) can make a pleasant stay and serve as a nice added value to those
who came to visit mounting in BH. The other feature of the local cuisine is that local food producers can make
supply from neighboring villages. The latest trends of organic food can be linked to the local economy, which should
be able to ensure a 100% bio diet. This segment could be one of the future characteristics of future mountain tourism
in BH.
As initial trigger to be used for young and curious skiers and snowboarders, who are less attach to
traditional ski centers could be attracted to Bjelasnica with the lower prices. BH and Bjelašnica can provide the
expected level of service and tourism quality compared to the price. BH is relatively still not too expensive, and as
such can attract tourists on budget, young people and backpackers. Bjelasnica has enormous potential for further
developments, however, there is a need for overarching cooperation across different sectors that will trigger
investment in infrastructure and superstructure. Having in mind that Bjelasnica ski resort has not developed long
term strategy yet, nor has it fulfilled preconditions for mass tourism, they can focus on domestic clients, regional
clients and for the beginning youth clients from Europe. At later stages, increased capacities in hotel accommodation
and introduced preconditions for a more mass tourism, Bjelasnica has the potential to attract more tourists from
Europe and the rest of the world, as well.
Research Purpose
The purpose of this research is to conduct a competitive analysis of ski resorts in Bosnia and Herzegovina
using differential advantage proforma. Identifying and analyzing competitors are two main steps to develop
successful marketing plans (Kotler and Keller, 2006). Competitive analysis guides managers to differentiate their
offering and devise focused product, price, promotion and distribution strategies. Although the ski resorts in BH have
unique characteristics that can be used in their marketing, competition-based plans to attract target groups of visitors
are still lacking. Detailed analyses of the competitive advantages of these resorts are necessary for future marketing
planning. Current research aims to conduct a competitive analysis of these resorts and identify their relative strengths
and weaknesses with differential advantage proforma technique.
Methodology
A series of qualitative techniques (focus groups, personal interviews, site visits - observation) are used are
used to identify the competitive positions and strengths of five ski resorts in BH. Initially, officials from ZOI‘84,
legal successor of the Organization Committee of the XIV Winter Olympic Games with all its sport and leisure
facilities, were conducted and personal interviews were conducted about ski-resorts in BH (ZOI84, 2010).
Researchers from a marketing management class asked questions about past and current situation of winter tourism
in BH in these personal interviews. Furthermore, researchers went on a site visit to Bjelasnica and Igman ski resort
where they conducted a focus group with the site managers and technical personnel of the ski center. In this focus
group, researchers asked structured questions about comparative positions of different ski-resorts in BH in terms of
differential advantages and disadvantages of these resorts. Finally, researchers conducted personal interviews with
the officials of one travel agency in Sarajevo.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Findings received from personal interviews and the focus group study were analyzed with competitive
positions proforma technique. This technique allows researchers to record competitive positions and strengths on a
competitive positions proforma where relative market shares, key customer values, weaknesses and differential
advantages of the competitors are recorded (Dibb and Simkin, 2008). Key customer values and differential
advantages are two main attributes that are used in the analysis of competing brands (Dibb and Simkin, 2008). Dibb
and Simkin state that ―A differential advantage is something a company or its marketing mix has which is desired by
the target market, and is not currently readily matched by rival companies or products‖ (p. 52).
Research Findings
Table 2 shows competitive positions and differential advantage proforma for ski-resorts in BH. As shown in
the Table, Jahorina is considered the market leader in skiing in BH, followed by Bjelasnica and Igman, Vlasic,
Blidinje and Kupres. Winter tourism at Jahorina resort occupies the position of market leader, due to its highest lift
skiing capacity and best quality in accommodation, health service center, and many other infrastructure and facilities
that are not affected by the past war. The only disadvantage perceived to be challenging this resort is the limitation in
the available space to meet the needs for any future potential expansion. Igman and Bjelasnica resort is occupying
the challenger position with huge space that might be needed for any possible expansion in the future. This resort has
the potential to occupy the position of market leader in the future as it has a great ski jumping venue ever since 1984
Olympics, a thick forest that allowing 200 skiing days, the steepest slopes in the region, the longest cross country
tracks, and one of the highest peaks in the region. The very poor infrastructure and administrative difficulties of the
resort being under the authority of the Sarajevo Canton and three municipalities (Hadzici, Trnovo and Ilidza) are the
main disadvantages and challenges that facing this resort to become a market leader. While Vlasic resort is recently
occupying the third position in the market, as a market follower, it has a huge capacity and lots of features that could
bring it to market challenger. This resort is the hottest venue for celebration of New year and is popular since 1991
international ski jumping competition. The resort preserves the very old tradition of sheep breeding (Vlasic or
Travnik cheese) and it houses hotels that maintain European standards. The resort is very close to the major markets
of Croatia and Slovenia. The main disadvantage of this resort is its distance to the regional international airports,
particularly from the Capital ―Sarajevo‖ (100 km.). Vlasic doesn‘t have the unique image that was created for both
Jahorina and Bjelasnica & Igman resorts due to hosting the Olympic Games, which prevent it to compete on the
position of market leader in the future unless similar opportunities offered to it too. Research results show that
Blidinje resort occupies the position of the market fast mover because it has certain features that could improve its
position in the future. The resort has a natural lake that helps a year-round tourism, rich variety of plant and animal
life from Mediterranean climate and has one of the highest peaks in BH (2.227 M). Finally, Kupres resort occupies
the position of market nicher with its shortest skiing days, as it has 300 days sun shine that makes it the all yearround tourism resort more than a winter tourism resort. It is attracting people from Croatia than anywhere else in the
region.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Competitive Positions
Differential Advantages
Market leader (Jahorina)
Market share
4.000 beds & the highest ski lift capacity up to 10.000 per/h.
Entertainment, wellness, convenient location, leisure
Key Customer Values (KCV)
Weaknesses
Differential Advantage (DA)
Market challenger (Bjelasnica
and Igman)
Market share
Limitation in the available resort space to meet the needs for any future
potential expansion
Several hotels which are ideal for conferences and meetings, the highest lifts,
skiing capacity up to 10.000 per/h, infrastructure is in good condition since
not affected by the war, one of the most popular winter resorts in the region.
2.250 beds & 5.000 per/h ski lift capacity
Challenging skiing experience, convenient location, entertainment, wellness,
variety of skiing experience.
Key Customer Values (KCV)
Weaknesses
Administrative problems due to multiple authorities responsible for the
resort, poor infrastructure due to war, lack of multimedia business facilities
and health centers.
Differential Advantage (DA)
A great ski jumping venue ever since 1984 Olympic, thick forest that allows
the longest skiing season in the region (200 days), the steepest slopes in the
region, horse-drawn carriage rides through the snow.
Market Follower (Vlasic)
Market share
6.000 beds & 5.400 per/h ski lift capacity
Entertainment, wellness, leisure
Key Customer Values (KCV)
Distance to Sarajevo and international airport (100 km), limited indoor and
outdoor activities.
Weaknesses
Differential Advantage (DA)
Market fast mover (Blidinje)
Market share
European standard hotels, close distance to other markets - Croatia and
Slovenia, the hottest venue for celebration of new year, preservation of the
very old tradition of sheep breeding (Vlasic or Travnik cheese).
2.000 beds & 2.500 per/h ski lift capacity
Entertainment, wellness, leisure
Key Customer Values (KCV)
Distance to Sarajevo and international airport (80 km), limited indoor and
outdoor activities, the shortest alpine ski-slopes (4.500 m) compared to other
resorts in the region.
Weaknesses
Differential Advantage (DA)
Nature lake that helps a year-round tourism, one of the highest peaks in the
country (2.227 m), rich variety of Mediterranean plant and animal species.
Market Nicher (Kupres)
Market share
700 beds & 1.000 per/h ski lift capacity
Entertainment, wellness, leisure.
Key Customer Value (KCV)
Weaknesses
Distance to Sarajevo and international airport (140 km), limited indoor and
outdoor activities, limited accommodation and ski-lifts capacity.
Differential Advantage (DA)
300 days sun shine that makes it the all year-round tourism resort, close
distance to other markets – Croatia.
Table 2: Competitive positions and differential advantage proforma for ski-resorts in BH.
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�2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo
Conclusion
BH Mountains, particularly the ski resorts of Bjelasnica & Igman and Jahorina which hosted Winter
Olympic Games in 1984, have long known for their winter tourism opportunities. BH has a great potential for winter
tourism due to a number of reasons including the natural beauty of its mountain range, proximity of major mountains
to city centers and major airports, proximity to western European markets. Each ski resort in BH possesses unique
characteristics that can be used to differentiate its offerings in marketing. Research results indicate that Jahorina can
be promoted as a family vacation winter destination with its high accommodation potential and suitable skiing
infrastructure for youngsters non-professionals. The main positioning theme for this resort can be entertainment and
fun for families. On the other hand, Bjelasnica and Igman can be positioned as the resort for skiing professionals and
learners considering its technical infrastructure that was used in winter Olympics. Also, close proximity of this resort
makes the reach easy for ski-enthusiasts living in Sarajevo and nearby destinations. Vlasic resort has similar benefits
with Jahorina as it has great accommodation potential and entertainment opportunities. Vlasic can also be presented
as a family vacation and entertainment destination but it can target different markets compared to Jahorina such as
Croatia, Slovenia and other European markets. Finally, Blidinje and Kupres can act as nich products in skiing and
go after focused target markets. These resorts may consider developing a vacation theme that combines skiing and
mountain sports which may attract specific target markets from various age groups. The common disadvantage
between the five winter resorts is that only a fraction of their huge potential and opportunities for winter sports is
being used due to insufficient infrastructure and facilities at the mountains including lack of vertical transportation,
un-groomed ski slopes and too few overnight accommodations. These mountains and resorts have great opportunities
for further development that require strong and experienced strategic partners that are able to provide the investment
capital and introduce new managerial skills and marketing plans. If managed properly, winter tourism can impact
BH‘s gross national income to a great extend by enjoying the benefits of invisible exports such as tourism receipts
and revenues. In the due course, winter tourism can provide employment, generate income, liven up and preserve
hundreds of beautiful villages with old traditional life-styles in the heart of Europe that are at the risk of extinction.
To develop winter tourism in BH further in the future, a comprehensive strategy should be developed covering all
necessary aspects with participation from all the stake holders. The implementation should be thorough and without
exceptions. For more effective marketing and management strategies, collaboration and cooperation of all parties at
stake is necessary. This is especially true for Bjelasnica and Igman resort which has suffered most from recent
Bosnian war. Future strategies should give priority to the restoration of basic infrastructure and superstructure
needed for tourism. Providing high quality services for European tourists should also be a priority to attract tourists
from nearby European markets. Tourism is a beautiful mosaic and requires full cooperation and contribution from all
to be successful.
References
Bhtourism (2010). Retrieved on 15 May 2010 from <www.bhtourism.ba/eng/yournextadventure.wbsp>.
Dibb, S, and Simkin, L (2009). Marketing Essentials. London, UK: Cengage.
Enjoybosnia (2010). Retrieved on 15 May 2010 from <www.enjoybosnia.com/page-al-Planine.html>.
FIPA (2010). Winter Tourism Investment Opportunities in Bosnia and Herzegovina. Retrieved on 10 March 2010 from
<http://www.br-agency.org/UserFiles/File/SKI_CENTERS.pdf>.
Kotler, P. and Keller, K. L. (2008). Marketing Management. Int. Ed. Upper Saddle River, New Jersey, USA: Pearson.
ZOI84 (2010). Retrieved on 15 May 2010 from <http://www.zoi84.ba/index.php?lang=en&sel=1>.
428
�
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Extent
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226
Title
A name given to the resource
A Competitive Analysis Of Ski Resorts In Bosnia And Herzegovina Using Differential Advantage Proforma
Author
Author
HAMAD, Mohammad
SMAJIC, Edin
MUJKIC, Adisa
BECIC, Armin
SABOTIC, Armin
YURT, Çetin
DUMAN, Teoman
Abstract
A summary of the resource.
The purpose of this paper is to conduct a competitive analysis of ski resorts in Bosnia and Herzegovina using differential advantage proforma. Bosnia and Herzegovina has a strong brand image due to Winter Olympics conducted in Sarajevo in 1984. This image has been weakening due to lack of marketing efforts, especially following the war between former Yugoslav republics. Competitive analysis is an important part of marketing strategy for companies to identify strengths and weaknesses among various competitors. In this study, differential advantage proforma is used as a technique of competitive analysis to identify comparable positions and key customer values of ski-resorts in Bosnia and Herzegovina. To identify competitive positions, a series of qualitative techniques (focus groups, personal interviews, site visits – observation) are used. Research results indicate that five competing ski-resorts have unique differential advantages that can be used in marketing of these resorts.
Date
A point or period of time associated with an event in the lifecycle of the resource
2010-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory