The Global Financials Crisis Finance Essay - Free Essay Example

Sample details Pages: 10 Words: 2994 Downloads: 7 Date added: 2017/06/26 Category Economics Essay Type Research paper Did you like this example? The world economy has been challenged by different financial and economic crisis over the last two decades. All over, we witnessed a fall in the stock markets, huge financial institutions fell or were bought out and even the wealthiest of governments had to come up with rescue packages to get these financial systems out of trouble. The literature review unfolds the aspects of the role the global financial crisis plays in economies and stock markets as authorities try to achieve its maximum potential benefit in the economy of a nation taking the least of losses. Don’t waste time! Our writers will create an original "The Global Financials Crisis Finance Essay" essay for you Create order The contagion spread to financial system in all advanced economies and the resultant flight to safety soon dragged in the emerging and developing economies as well. The meaning and origin of the Global Financial Crisis The term Crises can be defined as situations characterized by a pronounced instability, therefore they are accompanied by volatility and a growing incertitude. In a crisis situation (no matter what form it may take) we find ourselves in a permanent state of restlessness and uncertainty about our future, fear and even panic. The problem with defining a crisis consists in specifying how severe the volatility and downfall of the market must be to frame such an evolution as a crisis. Conventionally it was established that there is a recession when after two successive quarters we are dealing with the dropping GDP of a country or region. National Bureau of Economic Research (NBER) defines crisis as a significant decline in economic activity for several months reflected in lower GDP, lower individual income, reduced employment levels, reduced industrial production and consumption. De Bonis (1999) defines financial crisis to be a wider range of disturbances, such as sharp declines in asse t prices, failures of large financial intermediaries, or disruption in foreign exchange markets. It is difficult to make assessments about when a financial crisis becomes an economic one or if an economic crisis generates a financial one or vice versa. Basically we always talk about an economic crisis generated by financial, political or social reasons. The financial crisis is a form of the economic crisis and reflects a miss-trust in the financial system, a significant decrease in the volume of the transactions on the stock market, a disorder of market mechanisms. The stock market is the barometer of the economy and it trades businesses of different sizes and from different sectors. Review of literature Many economists have offered theories about how financial crises develop and how they could be prevented. There is little consensus, however, and financial crises are still a regular occurrence around the world. Soludo (2009) identified five ways in which the global economic and financial crisis has impacted on the global economy: declining real output growth leading to slower economic growth; weakened financial systems leading to takeovers and bankruptcy; loss of jobs; loss of confidence in financial markets- leading to inability to carry out their intermediation role in the economy; and Stock Market Crashes. The evidence provided in the paper showing how the global economic and financial crisis has affected economies, did not adopt any econometric technique to measure the impact. However, a major strength of the study was that it identified the stock market as a transmission channel through which the global economic and financial crisis impact on economies across the globe. According to OECD (2009), the origins of the global financial crisis have been traced to the excess liquidity, asset bubbles and leverage in western economies which in turn resulted from macro accommodation arising from large trade deficits faced by these countries. The crisis first manifested itself in the sub-prime mortgage market of the United States in August 2007. However, with the subprime crisis the world economy bent but did not buckle. It was only later towards the middle of 2008 that advanced economies began to fall into mild recession with emerging and developing economies not affected. In September 2008 there was dramatic blowout of the crisis with the default by large investment banks and Government bailouts in both banking and insurance. An earlier paper that also identified the stock market as a transmission channel of the global economic and financial crisis into the economies of less developed countries was the study by Te Velde (2008). The study noted that the global economic and financial crisis have dragged Stock markets down by more than 40%. The paper provided trend analysis to justify the size of the impact. Coleman (2008) examined the impact of the global economic and financial crisis on African economies. The study provided trend evidence as well arguing that the crisis has affected selected African stock markets. The study examined the indicators of two developed stock markets (the DJIA and FTSE) and three African stock markets (the JSE, NSE and KNSE) over a period of 12 months (November 2007 to November 2008). The central conclusion drawn from the study relating to the selected African stock market was that African capital markets have fallen by 30-40% over the study period but private equity investors remained committed to Africa. The African Development Bank (2009) in studying the impact of the Global economic and financial crisis on Africa drew certain conclusions that are of importance for this present study. Among othe r arguments, they noted that Africa was not severely affected by the global economic and financial crisis because of its low level of financial integration with the developed economies. The study identified two transmission channels of the crisis into Africa: trade flows and capital flows (such as foreign direct investment-FDI, private capital flows and remittances). Similar study by the International Monetary Fund (2009) however noted that Low Income Countries (LICs) are exposed to the current global downturn more than in previous episodes because they are more integrated than before with the world economy through trade, FDI, and remittances. Though the study by the IMF and the ADB identified same channels of transmission, they differ in their argument concerning the level of integration of the African economy with the rest of the world. These channels of transmission were also acknowledged in Fundangas (2009) speech. UNESCECA and AUC (2009) in their study pointed out that th e global economic and financial crisis was not expected to impact on African economies because of low integration of Africa into the global economy. Recent developments have, however, shown that the negative contagion effects of the crisis are already evident in the Africa region the study further noted. On the impact of the crisis on African stock markets, the study noted that the global economic and financial crisis has had a direct impact on Africa. The study argued that stock market volatility in Africa has increased, leading to wealth losses in major stock exchanges such as Egypt, Nigeria and Kenya. Te Velde et al (2009) in their synthesis of ten draft country report funded by the ODI and DFID documented that the main transition belts of the global economic and financial crisis are trade, private capital flows, remittances and aid. The study noted that Portfolio investment flows experienced a dramatic drop in 2008 in most countries, shifting sometimes to large net outflows a nd a significant drop in equity markets in 2008 and into 2009. Clearly, the study showed that stock markets (equity markets) are a veritable channel of transmission of the global economic and financial crisis into the economies of less developed countries. Stages of the crisis are discussed further below: First Wave: Sub Prime Crisis The sub-prime mortgage market in the United States was a securitization market whose underlying asset was mortgages primarily issued to individuals to purchase homes. In a traditional banking model, the banks comparative advantage stems from its local knowledge and individual attention given to customers. This enabled banks to give loan to those borrowers who were most likely to repay and to insist on collateral where there was more risk. For mortgage lending, however, this traditional model creates a mismatch between assets and liabilities as the mortgages are long term but most bank deposits are short term in nature. Governments have tried to address this mismatch through deposit protection, capital requirements, regulation and other interventions with limited success. Securitization was seen as a more sustainable and market driven solution to the asset liability mismatch in mortgage lending. By securitizing a set of mortgages and selling the new security to other investors ha ving long term funds, the mismatch is addressed and the risk is transferred to investors better suited to handle it. Securitization was also seen as a means of lowering the cost of capital for borrowers and integrating regional markets with national ones. The mortgages were securitized through Collateralized Debt Instruments (CDOs) which consisted of a pool of mortgages. The CDO could consist of high quality mortgages only, or a mix of high quality and lower quality mortgages and each CDO would be priced accordingly. These CDOs would in addition be rated by credit rating agencies hence allowing different investors to purchase different ones depending on their individual risk tolerance. Unfortunately, this process led to a serious misalignment of incentives between the banks issuing the initial mortgages and the investors in the CDOs. The banks no longer focused on the quality of the borrower and local knowledge as in traditional banking but instead focused on generating a higher volume of mortgages. With the stream of revenue from the mortgage (as well as the risk) having been transferred to other investors, the primary interest of the bank was to generate fees and commissions by issuing a higher number of mortgages. Hence, individuals who previously would never qualify for a loan were suddenly being issued mortgages on very generous terms. The lending was further fuelled by the housing price bubble in the United States which had seen house prices rise continuously for several years. Indeed, whereas many mortgage takers had traditionally been first time home owners who lived in the houses, a new breed of borrowers had emerged who were borrowing to purchase second, third or fourth houses purely for speculative purposes. With this misalignment of interest between the banks issuing the mortgages and the ultimate investors carrying the risks it was expected that the Credit Rating Agencies (CRAs) that rated the CDOs would save the day by acting as an indep endent intermediary between the competing interests. Unfortunately, the CRAs were not able to effectively rate the products due to the newness of the instruments, the lack of historical data, the entry of a new category of mortgage borrowers and conflicts of interest with the CRAs desire to maximize their own revenue. The next step in the chain was the Credit Default Swap (CDS). The CDS was a primary insurance taken by an investor against default in a CDO. Unfortunately, insurance companies that issued CDS insurance also had an incentive mismatch of their own. Instead of a fixed premium, the insurance fee was often in the form of a percentage of revenues hence creating an incentive to insure more risky products that would generate more revenue. In addition, just like CRAs, many insurance companies used unsuitable traditional models that they had used for bonds in assessing the risk of CDOs. Banks that had CDS insurance were able to invest more in CDOs because the capital requi rements for CDS (which are an insured product) were much less stringent than for other non-insured assets. The subprime crisis thus emerged when housing prices stopped rising, putting pressure on the lowest quality mortgages (many of which were NINJA mortgages), which in turn put pressure on the CDOs and CDS. This compromised the balance sheets on banks and insurance companies holding these assets leading to a number of closures and bankruptcies. Activity slowed in the face of tightening credit conditions in the advanced economies and some countries fell into mild recessions. However, the impact of the subprime crisis was considered largely limited and contained until all hell broke loose in September 2008. Second Wave: Credit Crunch In September 2008 a large US investment bank with heavy CDO holdings, Lehman Brothers, defaulted on its obligations. The US Government allowed it to go into bankruptcy. This caused a panic situation with almost all banks coming under a lot of pressure. The insurance company AIG which was the worlds largest issue of CDS insurance was soon unable to meet its obligations and was rescued by the US Government which also had to make interventions in a large number of other systemic institutions. The same pattern soon followed in Europe with Government intervening in a large number of financial institutions. Financial institutions and even corporations in the advanced economies came to rely on central bank funding. Ironically, in an attempt to shore up cash positions financial institutions placed a lot of liquidity right back in the central banks resulting in excess liquidity in the central banks. Central Banks and Governments responded with a number of measures to inject liquidity int o the economies with huge rescue programs which in turn led to huge budget deficits. Despite policymakers efforts to sustain liquidity and market capitalization there was a huge increase in perceived counterparty risk, banks faced huge write downs, demand for liquidity continued to increase and market volatility surged. Third Wave: Recession The credit crunch inevitably resulted in a flight to quality that depressed yields for government securities (particularly US securities) and dried up wholesale funding and credit lines to other institutions. The strain in credit and absence of new borrowing impacted on companies ability to meet ongoing obligations. With a major decline in consumer demand coupled with constrained output the advanced economies soon fell into a major recession which eventually dragged down the emerging and developing economies as well. Causes of the Crisis The reasons for this crisis are varied and complex, but largely it can be attributed to a number of factors in both the housing and credit markets, which developed over an extended period of time. Some of these include: the inability of homeowner to make their mortgage payments, poor judgment by the borrower and/or lender, speculation and overbuilding during the boom period, risky mortgage products, high personal and corporate debt levels, financial innovation that distributed and concealed default risks, central bank policies, and regulation (Stiglitz, 2008). Avgouleas (2008) enumerated the causes of the crisis as: breakdown in underwriting standards for subprime mortgages; flaws in credit rating agencies assessments of subprime Residential Mortgage Backed Securities (RMBS) and other complex structured credit products especially Collateralized Debt Obligations (CDOs) and other Asset-Backed Securities (ABS); risk management weaknesses at some large at US and European financial i nstitutions; and regulatory policies, including capital and disclosure requirements that failed to mitigate risk management weaknesses. Taking the views of the various commentators into consideration, the current financial crisis is caused by the following; Firstly, Liberalization of Global Financial Regulations is one reason for the crisis. The regulatory model adopted by banks in the US emerged as a result of liberalization of banking business in the early 1990s and international consensus reached within the Basle Committee of Banking Supervision as regards the acceptable model of prudential supervision of banking institution (Scott, 2008 in Abubakar, 2008). This liberalization facilitates the global abolition of restrictions on capital flow in the 1990s and caused the operation of international investment funds to be largely unregulated. Another cause is the Boom and Bust in the housing market. A combination of low interest rates and large inflows of foreign funds help c reate easy credit conditions for many years leading up to the crisis. Due to low interest rates and large inflow of foreign fund, subprime lending/borrowing for investment became very attractive in both US and the UK. Since the demand for housing was rapidly rising in the US, most investors and homeowners took mortgaged loans and invested in housings. The overall US home ownership rate increased from 64% in 1994 (about where it was since 1980) to peak in 2004 with an all-time high of 69.2%. Furthermore, Speculations is also one of the causes of the crisis. Traditionally, homes were not treated as investment like stocks, but this behavior changed during the housing boom as it attracted speculative buyers. This makes speculation in real estate a contributing factor. During 2006, 22% of homes purchased (1.65 million units) were for investment purposes it means that nearly 40% of home purchases were not primary residences. This speculative buying makes housing prices to fall drastic ally. New Financial Architecture (NFA) according to Crotty (2008) NFA is a globally integrated system of giant bank conglomerates and the so-called shadow banking system of investment banks, hedge funds and bank-created Special Investment Vehicles. This makes excessive risk to build up in giant banks during the boom; and the NFA generated high leverage and high systemic risk, with channels of contagion that transmitted problems in the US subprime mortgage market around the world. Poor Credit Rating due to securitization practices, credit rating agencies have the tendency to assign investment-grade rating to Mortgage-Backed Securities (MBS), and this makes loans with high default rate to originate, packaged and transferred to others. Securitization is a structured finance process in which assets, receivables or financial instruments are acquired, classified into pools, and offered as collateral for third-party investment. High-risk loans There appears to be widespread agr eement that periods of rapid credit growth tend to be accompanied by loosening lending standards (DellArriccia, Igan and Laeven, 2008). For instance, in a speech delivered before the Independent Community Bankers of America on 7 March 2001, the then Federal Reserve chairman, Alan Greenspan, pointed to an unfortunate tendency among bankers to lend aggressively at the peak of a cycle and argued that most bad loans were made through this aggressive type of lending (IMF, 2008). Without considering high risk borrowers, lenders give Ninja loans high-risk loans to those with No income, No job, and no Assets. They also give home loans to immigrants that are undocumented. Government policies Some critics believed that the crisis was fuelled by US government mortgage policies which encouraged trends towards issuing risky loans. For instance, Fannie Mae Corporation eases credit requirements on loans and this encourages banks to extend home mortgages to people that do not have good enough credit rating.

The Immigration Issue And Refugee Crisis - 2066 Words

The first immigrants to the United States were European Quakers that came over on The Mayflower with a quest for freedom from the restraints of Great Britain and the Catholic Church. They were seeking freedom from oppression and the opportunity to build a better life. These people - by definition - are immigrants or refugees. We are all essentially foreigners in the United States, but some of us claim this land as our own - more so than others - and feel that people are intruding upon our â€Å"Americanized† country. This phenomenon has turned into a full-fledged political debate that has been coined as a â€Å"Refugee Crisis† or â€Å"Immigration Issue†. This is not just in the United States. Many European countries are dealing with the same issues and their refugees are seeking asylum from the torturous acts of ISIS. The history of immigration, the difference between immigrants and refugees, how immigration and refugees can be viewed as a social issue, and spec ific refugee and immigration conflicts and resolutions are all important factors of deciding how The Immigration Issue and Refugee Crisis are categorized as a social issue. Immigration in the United States dates back to Georgetown, Virginia and the Mayflower in the 1600s. The French and Spanish attempted to colonize before this, but unsuccessfully. The English founded the first successful and permanent settlement in Georgetown, VA in 1607. More colonies started showing up in the years following. Most immigrants had a common goalShow MoreRelatedWho Should Determine Refugee Policy870 Words   |  4 Pagesshould determine refugee policy The fundamental definition of refugees include natural disaster, war, class oppression, national oppression, religious, racial discrimination, change of borders and so on. They were forced to leave their homeland because of some or all of the possible reasons. And the United Stated have been working towards the largest refugee camp in the world due to U.S. policy and diplomacy. After the mid 1970s, a prominent American immigration policy issue facing the problemRead MoreThe Is A Realist Strategy Will Not Be Beneficial When Dealing With A Refugee Crisis892 Words   |  4 Pageswill not be beneficial when dealing with a refugee crisis. Realists tend to not look at a situation in terms of emotion and instead always think of themselves and their own governments’ endgame. This dismisses human suffering altogether unless it is affecting the realist himself. For liberal strategies, there are options such as: cooperation, furthering democracy, and collective action. Cooperation would entail all of the countries involved in a refugee crisis acting together. This would include theRead MoreThe Treaty Of Immigration And Refugee Reform1706 Words   |  7 PagesAcross the globe, the widespread refugee crisis has been severely mishandled by both European and non-European countries. The failure to organize and create new tactics has resulted in a mass influx of r efugees on the borders of European countries (United Nations, 2016). Likewise, even though the crisis continues to generate national turmoil for nations that have been subjected to manage more than their country can reasonably handle, hardly any new legislation or programs have been implemented toRead MoreThe United States Should Accept More Syrian Refugees1300 Words   |  6 Pagesreach the conclusion that Kukathas makes a more convincing argument because the freedom of movement argument and the humanity obligations of the United States outweigh the risks of a threatened cultural identity and economic state. The Syrian refugee crisis started in March of 2011 when anti-government groups began to protest against the government. These protests quickly became violent as the government turned to armed opposition groups to quiet the rebellion. This violence has created chaos inRead MoreA Guide For How Refugee Protection System1730 Words   |  7 Pagestherefore many refugees look to Au stralia for help in times of need. In order to have a structure for the large number of asylum seekers, the Australian government implemented a Refugee Policy in the 1970s. Over time this policy has undergone many changes and caused some controversy, but it continues to act as a guide for how refugee protection system works in Australia and proves its relevance in today’s current events. Australia began seeing a large number of refugees coming over for help around theRead MoreRough Seas And Overcrowded Boats Await Travelers Who Have1663 Words   |  7 Pagesovercrowded boats await travelers who have already made long journeys on foot. Some of these travelers choose to bypass a sea crossing and continue on land - trekking through rough terrain and hostile environments. These are the options of an escaping refugee. However, their journey does not end once they reach European soil. They might have physically made it, but there is a long road ahead to gain citizenship and acceptance in their new homes. The huge influx of refugees from Northern Africa and theRead MoreNegative Effects Of The Holocaust1466 Words   |  6 Pagesconservative immigration policies, contribute to the liberalization of American immigration and increased worldwide instances of United States humanitarian intervention. From the time of the Articles of Confederation to the time of World War One, the United States remained predominantly isolated from nations outside of North America, notably in Asia and Europe. The practices of isolation, exclusion, and sole focus on domestic issues later correlated with discriminatory immigration policies. ForRead MoreThe Most Important National Security Threat1656 Words   |  7 Pagescountry is the migration crisis. Middle East’s conflicts, especially Syria’s civil war have created an influx of refuges outflow. Greece is the main point of entry in the Western â€Å"Balkan Route†; migrants’ access trek to desirable northern European â€Å"destination countries†. This humanitarian crisis raises serious security concerns regarding terrorism and nationalism but also economic concerns as Greece is facing an intense financial recession. Moreover, this migration crisis tests the European Union’sRead MoreCanada s Immigration Sys tem Lacks Heart879 Words   |  4 PagesCanada’s immigration system lacks heart, critics say, is an article filled with professional opinions and debates. These debates and opinions are regarding the humanitarian and compassionate side of immigration and refugee law in Canada. The article’s main purpose is to expose how Canada has changed its compassion for acceptance of refugees in recent years. Canada has always been recognized as an accepting and â€Å"go-to† country in crisis. However, in recent years, there have been changes. Refugee legislationRead MoreThe European Crisis Of The United States894 Words   |  4 Pagesaddress effectively the current immigration crisis. First, terrorist attacks have fueled xenobia towards some groups especially arabs and muslims (Lonhi 2012). Second, the European Union’s dublin regulation which states that the first country in which asylum seekers first set foot is responsible for their asylum claim make it more a national issue rather than an European one. In other words, if refugees arrive in Italy, it automatically becomes an Italian government issue. Third, european countries that

Theory of knowledge Free Essays

What are the methods of the historians and how do they compare with other methodologies: First of all, we have to know what is the definition of history: It is a branch of knowledge dealing with past events, political, social, economic, of a country, continent, or the world. It is an orderly description of past events. It is also a train of events connected with a person or thing. We will write a custom essay sample on Theory of knowledge or any similar topic only for you Order Now Secondly I will define what is a method. It is 1) a system, orderliness, 2) it is a way of doing something 3) doing things with 4) it is a science or study of something. The differences between the facts of the past and historical facts: We all know, or think we know, what a fact is: a reliable piece of information, something we know to be, in the common sense meaning of the word â€Å"true†. We also know, or think we know, what an historical fact is. Give examples. These are facts, definite pieces of historical knowledge, close perhaps to the natural scientific knowledge the nineteenth century historians wanted to use as their model of knowledge. But these facts are only the start of history, only the foundation on which history is built. History is not the facts of the past alone but the processing of these facts into a coherent, meaningful interpretation of the past with which these facts are concerned. â€Å"History is the interpretation of these facts, the processing of them into a narrative with causes and effects.† These facts, these pieces of information about the past are important to historians. Historians must be certain of their accuracy, must have confidence in their integrity before they can confidently interpret them for their contemporaries. Historians collect their facts from whenever they can. Certain historical facts, mostly those obtained from archives, may be collected directly by historians themselves. Historians can visit public records offices or churches and examine historical documents directly. Epigraphy is an interesting example of such a discipline. It is the study of ancient inscriptions: letters and words and symbols, chiselled, moulded or embossed on stones. E.g.: the Rosetta stone: it is an inscribed stone found near Rosetta in northern Egypt in 1799. History is a selection: Historians make history by selecting facts and processing them and it is the processing that creates history. History has been described as an enormous jig saw with lots of bits missing. Historians try to create the missing pieces. They can only do this by selecting from all the information available to them. What evidence we have for this comes, of course, from the people in the middle Ages who wrote about their own lives and times. And the people who wrote about their own lives and times in the middle Ages in Europe were monks and priests. Imaginative understanding is an important part of an historian’s skill, but imaginative understanding varies from historian to historian. They have to imaginatively understand the minds of the older people. The only way they can do this is by using their own thought processes. Historians recognize that to portray history is impossible. They cannot really be sure of the motives of the writers of the archive documents. â€Å"The past can only be seen through the eyes of the present†. Historian should present their records of the past. Ranke and his fellow nineteenth century historians believed that not only was it possible to present the past â€Å"How it really was† but they also believed they were doing exactly that when they wrote their history books. The historian’s job was to collect together a proven body of facts and present them to the readers. Is history a unique area of knowledge? We have seen that natural sciences, mathematics and logic, and the social sciences have distinctive areas of knowledge. Can a similar claim be made for history? YES of course it can be made!!!!. One way of answering this question is to look at the work of historians. As we do this, we should ask ourselves the question † What do historians do that scientists, mathematicians and social scientists do not do?†!!!!!. Four different stages exists: 1) Recording: Some scholars collect records and preserve evidence from the past. If we stick to our definition of historians as interpreters of facts these scholars are not historians in our sense of the word. They are archivists and curators, collectors and preservers. E.G: Nothing is moved until photographs are taken, measurements made and meticulous records compiled of everything that is there and exactly where it is. That is the work of the historical researchers who record and preserve evidence from the past. Every objects is recorded and, as far as possible identified. The historical knowledge these Historians have is no different from the knowledge of natural science: it is empirical and of course objective. Give example of the titanic. 2) Assessment: These historians asses the evidence they have, compare it to other similar evidences that might be available and come to the conclusion that Holden’s room are indeed a unique historical event. 3) Reconstructing the past: Having assessed the evidence and accepted its importance, historians now have to use it, to infer from it and to reconstruct the past. They use evidences. Historians also are interested in reconstructing beyond the obvious. They attempt to reconstruct the values of a wealthy youth 100 years ago. 4) Interpreting: Historians ask themselves questions. They might compare the artefacts with other atifacts for instance†¦ Historians’ ways of knowing are distinct. They record, assess, reconstruct and interpret in a way that others scholars do not. Historians continually reinterpret the events of the past and reappraise them for each new generation. Historical sources: Primary and secondary sources: The problem with the past is that it has passed. It has gone. The idea of all time past, and present, running parallel is intriguing but until we have the technology to explore other times in reality, we have to explore the past through what the past has left us, through the multitude of artefacts surviving from times past. Historians use what they term PRIMARY SOURCES as their main access to the past. Secondary sources are also available: these are sources of information provided by other historians. Primary sources are the bedrock of history. They include every conceivable type of documents: maps, treaties, churches and temple records, imperial archive documents, letters, legal records, diaries, newspapers, catalogues and even bus tickets. They can be formal or informal, private or public, serious or frivolous. Primary sources also include artefacts. Unlike science, say, history is often criticized for serving no purpose. We are unable to learn from history, it is argued, either because precisely the same circumstances as in the past cannot arise again in future, or because if sufficiently similar circumstances did arise, we would not be able to act differently. In the natural sciences we have both statements of immediate observations, reporting for instance the outcome of an experiment, and general laws from which we can derive predictions. These two kinds of statements are justified in quite different ways: observational statements by perception. The evidence, not necessarily written, which historical research is based on are the ‘sources’. Sources need not be items that go back to the time in history which is being studied, but can be texts written since then about that time: the former are called primary, and the latter secondary sources. There are two main questions that must be asked regarding primary sources. The first of these concerns their authenticity, or genuineness. Suppose that we have, for instance, a painting of a particular historical event; then the painter may have added or omitted certain details to please his customer, or to make it a better painting, he may not have been there himself and have used incomplete accounts, the painting could even be a later forgery, and so on. The other question concerns their completeness. We must bear in mind that the material available to us has already been systematically selected, in a variety of ways: we tend to know more about the upper classes of the societies we study, because it is largely their doings that were recorded, while we find many ruins in some parts of the world, little remains of the wooden structures that were more common elsewhere, and so on. On one side there are those who hold that historical explanation must be like the scientific explanation of an event: to understand an historical event, we must have a general, or ‘covering’ law, so that from this law and a description of the historical situation we can deduce that the event would happen. For even where history is capable of being objective, there are problems with the ‘evidence’ it is based on, as we have seen: the sources available may not be authentic, and they will certainly be incomplete. And to the extent that history is (necessarily) subjective, i.e. a matter of the position from which it is written, historical accounts or explanations are liable to the problem of bias, i.e. partiality, tendentiousness or even prejudice. The historian cannot be objective about the period, which is his subject. In this he differs (to his intellectual advantage) from its most typical ideologists, who believed that the progress of technology, ‘positive science’ and society made it possible to view their present with the unanswerable impartiality of the natural scientist, whose methods they believed themselves (mistakenly) to understand. For much of the time that history has been written, the work of the historian was not thought to be particularly problematic — as long as he had the right intentions, he would just try to discover the truth, and †tell how it really was.† The first law for the historian is that he shall never dare utter an untruth. The second is that he shall suppress nothing that is true. Moreover, there shall be no suspicion of partiality in his writing, or of malice. History, then, is not, as it has so often been misdescribed, a story of successive events or an account of change. Unlike the natural scientist, the historian is not concerned with events as such at all. He is only concerned with those events, which are the outward expression of thoughts. †¦ How to cite Theory of knowledge, Papers Theory of Knowledge Free Essays Bertrand Russell was a British philosopher and a mathematician who is generally recognized as one of the founders of analytic philosophy. He, like many other people was searching for proof and evidence of us- people being rational animals, whose thoughts and actions are reasonable and sensible. Reason is a way of knowing in which we build up explanations by refining independent ideas and theories in order to reach a logical conclusion or in other words we use reason to decide whether something is correct or wrong. We will write a custom essay sample on Theory of Knowledge or any similar topic only for you Order Now Through observations and experiments we can prove by reason if our hypothesis was right, and by this broaden our knowledge horizons. Reason is present as much as in everyday choice making, as it is present in science, mathematics and other areas of knowledge. However reason is not always the most useful way of knowledge, for example in music and arts, as we are not robots and we also rely on our emotions and perception. So how can we gain truth by reason, when there are so many different opinions and emotions involved? Reason can help us gain knowledge, but only to a certain extent and therefore it has its strengths and weaknesses, which I am going to discuss in my essay. In science logic and reason are said to be the core element to get a valid conclusion, but there are some contradictions and exceptions to this general judgment. For example in biology, we use reason and logic to make a hypothesis, and then through several experiments or observations, we can obtain a valid and logical conclusion, which will support our hypothesis. As an example, a biology class, had to run an experiment to find out the presence of glucose and starch in two different food solutions. In two test tubes A and B, two different food solutions, which are unknown to the students, are found. The class divided into four different groups and each group had to add chemicals such as iodine for starch and benedicts solution for glucose to find out, in which test tube was each solution. If starch was present the solution had to turn from blue to black, and for glucose it had to change from blue to orange. Group 1, was successful and their one solution turned to black, proving that it has starch in it and the other turned orange demonstrating that it has glucose. Group 2 however, had a negative outcome, as both of their solutions did not change color, therefore showing that it has none of the solutions present. One of the solutions of group 3 turned green, instead of orange, therefore contradicting the hypothesis and the whole theory. By this example we see that logic and reason, has its own uncertainties and doubts. Reason can sometimes obscure our knowledge if we see something, which contradicts our initial theory. This logic is quite similar to perception, as we need to use our five senses- see, hear, touch, taste and smell to acquire a rational verdict. In music and art, I think that reason as a way of knowing has both advantages and disadvantages. We cannot express our opinion on a piece of music or a piece of art without bringing up emotion and perception. A composer cannot write music without any feelings, same as an artist cannot paint without inspiration through his senses. A piece of music however requires some basic reason. For example if a composer needs to write a concerto for a violin, he will not write a concerto for a piano, and no other instrument than a violin can replace it. This is very basic reason, but we can see that it is present in creative arts. I am an IB Art student and I know that reason has little to do with it. Making art is based mostly on emotion and on the way we feel or what we think at a certain moment. Art comes from the heart, and reason is only present when we need to know which two colors for example make purple or what do we need to do to make a canvas. Add reason Another demonstration of advantages and disadvantages of reason is present the case of superstitions. In many cultures superstitions make up a lot of beliefs that are carried throughout generations. For example it is said that it is bad luck to go forward of a black cat has passed your way. Even though I have never heard anyone claim that he or she has bad luck because of a cat passing his or her way, I would still rather prefer to avoid it, as I was brought up with this and I actually started to believe in it. Even though there is no scientific prove of this superstition and common logic experience says that this is not true, most people would still avoid it. Therefore reason can be very objective, in a way that it can differ from different cultures and dissimilar beliefs. Mathematics is the one area where reason plays a fundamental part. Reason is the basis on which mathematics is founded. Before any mathematical theorem can be taken as true, it must be backed by a reasonable mathematical proof that shows, that the answer got is correct. This type of empirical, reasonable verification shows that of all the areas of knowledge, mathematics uses reason the most. In mathematics, an answer is either wrong or right. There is no midpoint in mathematics. Without reason, all mathematical arguments would naturally fail, and so if a mathematical statement cannot be fortified with reason, the statement should be rejected. Mathematics is the only area of knowledge where every statement must be backed up by reason. Reason itself is not enough to explain such things as the origins of the universe, or right and wrong, and so reason can and should be complemented by other sources of knowledge. Reason can be used when the sense misinformed us. For example when you put a straw in water senses tell us that the straw is bent, because it looks like it, but through reason we deduce that the straw is straight. Therefore reason is more reliable than our senses and is used more effectively. For the conclusion, I should discuss whether in the end our knowledge can be obtained purely by logic and reason, or it needs the support of human emotion and perception to give us reasonable comprehension of our existence. â€Å"Man is a rational animal who always loses his temper when called upon to act in accordance with the dictates of reason,†- this is a quote by Oscar Wilde. I agree with him as I think that emotions and feelings often overtake reason, as we are more driven by our desires, fears and passion than logic and rationality. I think that pure reason cannot exist without other ways of knowledge, and has its strengths and weaknesses. Reason is valid when it is not contradicted by anyone, but can we call something rational knowledge when someone disputes it? Reason within its domain is very reliable, as for example in mathematics, you can be almost one hundred percent certain that something is true, and this is the main strength of reason. I think that in all the other areas of knowledge, reason has many weaknesses. Reason always needs input from another source and therefore can only be reliable as its source of data. In the arts, in the absence of inspiration, no great work can be done, however reason is present in the mixing of colors and proportion and so on. Science without any data has no use of reason, and is therefore unreliable. My conclusion to this essay is that reason always needs input from another source and therefore can only be reliable as its source of data. How to cite Theory of Knowledge, Papers Theory of Knowledge Free Essays â€Å"History is always on the move, slowly eroding today’s orthodoxy and making space for yesterday’s heresy. † Discuss the extent to which this claim applies to history and at least one other area of knowledge. In order to find out if the claim applies to the areas of knowledge history and chemistry I will break the question down in three parts. We will write a custom essay sample on Theory of Knowledge or any similar topic only for you Order Now Firstly I ask if history and chemistry move. Secondly I question if it erodes today’s orthodoxy and finally I consider if yesterday’s heresy takes over. In my opinion the claim applies to some extent to history and to a great extent to chemistry. Are history and chemistry always on the move? Moves in history can have various causes: the discovery of new facts, a different focus of interest or a political shift. In the year 2005 a Bosnian archaeologist called Semir Osmanagic suspects there are pyramids in his homeland Bosnia and Herzegovina. Anthropologists say the Visoko valley already offers ample evidence of organized human settlements dating back 7000 years. [1] This discovery would change the entire European history. Something that was commonly accepted, that the first pyramids came from Egypt, has altered completely. Thus history is moving. A counter argument to this could be that history just repeats itself and does not move at all. The Renaissance is a repetition of the Classical times, in which the work of ancient scholars was studied again. Painting, sculpture and architecture were influenced by the Latin and Greek culture, so that â€Å"paintings became more realistic and focused less often on religious topics. †[2] Furthermore, the name ‘rebirth’ was not given for nothing, it was a repetition. One might say that history is not always on the move, it just reiterates. Scientist observe nature and try to explain what they see with the help of theories. The nature itself does not change, but the way they look at it is different. A paradigm is the idea of a prevailing theory or model, which is commonly accepted by a whole community. When a scientific revolution takes place, the paradigm changes, and with the paradigm all basic concepts of the science. If we look at paradigm changes of atomic models through time, we see that Dalton (1807) displayed atoms as a solid, indivisible ultimate particles of matter. In 1898 Thompson imagined an atom to be like ‘Plum Pudding’. Rutherford (1911) presented the ‘Planetary’ model, which shows electrons in finite orbits. In the present model, we imagine the electrons in orbitals having precise energies and diffuse spacial properties, often referred to as electron clouds. [3] The model of displaying atoms keeps changing and so does chemistry. One might argue that chemistry is not always on the move, because it takes place when a researcher finds an anomaly and he is aware of it. Only then he will search for a possible explanation. If this anomaly can not be explained by the current paradigm, he has to come up with a new theory. Until the whole community is dissatisfied with the current paradigm, a crisis emerges, and new paradigm will be accepted. [4] This shows that history just moves in times of crisis. Is today’s orthodoxy eroded? An aspect of Bosnian history that has struck me since coming here is that each ethnic group has it’s own version of the past. In Bosnia there are three main ethnic groups: Bosniaks, Croats and Serbs. Each of them blames the other for starting the Bosnian war from 1991 to 1995 and has their own story about who was the first victim of the war. My Croatian friend tells me that at first a man was killed in the Croatian town Caplina. On the other hand my Bosniak friend says that the first fallen was a guest on a wedding in Sarajevo. However, my Serbian classmate claims that the war started because a Serb in Pale was murdered. The common prevailing history is eroded and has made place for three different versions. On the contrary, it has also happened that after an important discovery othing happened. Besides an excellent painter, Leonardo Da Vinci was also inventor and scientist. Had his theories been published in his time, then â€Å"they would have revolutionized the science of the 16th century. Leonardo actually anticipated many discoveries of modern times. †[5] He studied the circulation of the blood in anatomy and did a great discovery on the circulatory system. Unfortunately his insight did not erode today’s orthodoxy. This could be explained by the influence of the church, which determined what was commonly accepted in those days. Only a century later, William Harvey published a book in which he wrote about the discovery of the human circulatory system as his own. [6] In this example the prevailing orthodoxy does not change, even after an important discovery. In chemistry a new paradigm will only be accepted when it can answer the question, which the previous paradigm couldn’t. This means that today’s orthodoxy must be eroded. â€Å"At the end of the eighteenth century it was widely known that some compounds ordinarily contained fixed proportions by weight of their constituents. [7] Yet, â€Å"the generalization of this theory was impossible without an abandonment of affinity theory and a reconceptualization of the boundaries of the chemist’s domain. †[8] The meteorologist Dalton approached these problems with a different paradigm than his contemporary chemists and this lead to the Chemical Atomic Theory. The old theory was rejected in order to accept the new one. However, one might argue that scientific revolutions are invisible. Therefore we cannot know if today’s orthodoxy has been eroded. Since scientific revolutions are difficult to date, we do not know when they started or ended exactly. Thus, one can assume that it is not possible to determine if the commonly accepted changed. Does yesterday’s heresy take over? History can change when new facts are discovered. More information about a historical event is available and therefore new knowledge. This allows us to describe an event in the past more accurately. An example of the discovery of new facts is the DNA analyzer. This new research method can reveal details about the Neanderthal DNA. [9] The analyzer allows researchers to find out the entire DNA sequence of the closest cousin humans ever had. The ability to reconstruct prehistoric DNA enables scientists to find out what relationship existed between Neanderthals and the first modern humans. â€Å"Such a feat, deemed impossible even a few years ago†[10] This implies that yesterday’s heresy has been replaced by today’s orthodoxy. Nevertheless, there are examples of events where yesterday’s heresy did not take over. The Armenian Genocide is one of them. This change in history is caused by a different focus of interest from the involved parties. The Armenian genocide can be defined as â€Å"the atrocities committed against the Armenian people of the Ottoman Empire during W.  W. I . †[11] It is in the interest of the Armenians to display the events that happened between 1915 and 1918 as genocide, because they want formal acknowledgment of the crimes committed during W. W. I. [12] However, the Republic of Turkey denies that a genocide was committed against the Armenians. It is in the interest of Turkey not to affirm the truth about the occurrence. Since there are two possible histories, yesterday’s heresy did not take over. In chemistry if often occurs that what was commonly accepted is replaced by something which was not thinkable at that time. An example is the discovery of oxygen. The British scientist Priestley isolated a gas and saw it as dephlogisticated air. [13] He lacked the framework to understand what he had isolated. Only after a paradigm change had taken place, another chemist, called Lavoisier, was able to see the gas as oxygen. Both were looking at the same phenomenon, but only one was able to see the gas from which air existed. â€Å"Lavoisier saw nature differently†¦ after discovering oxygen Lavoisier worked in a different world. †[14] For Priestley it was unthinkable that the gas was oxygen, and thus it was yesterday’s heresy which took over. A different focus of interest, political shifts or the discovery of new facts, like the Bosnian pyramids, cause history to move. Even repetition, as the Renaissance, is a change and so history is always on the move. Due to these changes the prevailing orthodoxy mostly alters, as I perceive from my surroundings in Bosnia. Despite of Da Vinci’s progressive discovery, it is rare that important findings are not recognized. Furthermore, there are many cases, like the Armenian genocide where there is not one prevailing history, but more. Thus, I can conclude that yesterday’s heresy does not necessarily take over. The claim applies to some extent to history. Just as history, chemistry is always on the move. Science is subject to alteration, as we perceive trough different atomic models in time. Chemistry works in such a way that when a new theory is accepted the old one has to be rejected. In case of the Atomic Theory we see that it is impossible to keep the prevailing orthodoxy, it has to be eroded. Furthermore, after a paradigm change something that what was unthinkable before becomes commonly accepted. Scientists have to come up with a new theory, like the discovery of oxygen, although this is often unthinkable for the scientist of that time. Yesterday’s does take over and thus the claim applies to a great extent to chemistry. Changes in history and chemistry will be taking place in the future, as they have done in the past. What we are learning in school today, may be nonsense tomorrow and therefore knowledge could be relative to time and place. If these areas of knowledge continue working in this way, there might be a day in the future when people read this essay and say: ‘her knowledge was so limited. How to cite Theory of Knowledge, Essay examples