Location theory
Encyclopedia
Location theory is concerned with the geographic location of economic activity; it has become an integral part of economic geography
, regional science
, and spatial economics. Location theory addresses the questions of what economic activities are located where and why. Location theory rests — like microeconomic theory
generally — on the assumption that agents act in their own self interest. Thus firms choose locations that maximize their profits and individuals choose locations that maximize their utility.
, Etienne Bonnot de Condillac
, David Hume
, Sir James D. Steuart
, and David Ricardo
), it was not until Johann Heinrich von Thünen
's first volume of Der Isolierte Staat in 1826 that location theory can be said to have really gotten underway. Indeed, the prominent regional scientist
Walter Isard
has called von Thünen "the father of location theorists." In Der Isolierte Staat, von Thünen notes that the costs of transporting goods consumes some of Ricardo's economic rent. He notes that because these transportation costs and, of course, economic rents, vary across goods, different land uses and use intensities will result with distance from the marketplace. However, the discussion was largely criticized since Johann Heinrich von Thünen
over simplified the problem with his assumptions of e.g. isolated states or single cities.
A German hegemony of sorts seems to have taken hold in location theory from the time of von Thünen through to Walter Christaller
's 1933 book Die Zentralen Orte in Sűddeutschland, which formulated much of what is now understood as central place theory
. An especially notable contribution was one by Alfred Weber
, who published Über den Standort der Industrien in 1909. Working from a model akin to a physical frame adapted from some ideas by Pierre Varignon
(a Varignon frame
), Weber applies freight rates of resources and the finished goods along with the finished good's production function to develop an algorithm that identifies the optimal location for manufacturing plant. He also introduces distortions induced by labor and both agglomerative and deglomerative forces. Weber then moves on to discuss groupings of production units, anticipating Lösch's market areas.
Carl Wilhelm Friedrich Launhardt
conceived much of that for which Alfred Weber received credit, prior to Weber's work. Moreover, his contributions are surprisingly more modern in their analytical content than Weber's. This suggests that Launhardt was ahead of his time and simply was not readily understood by many of his contemporaries. Whether Weber was familiar with Launhardt's publications remains unclear. Weber was most certainly influenced by others, most notably Wilhelm Roscher and Albert Schäffle
, who seem likely to have read Launhardt's work. Regardless, location theoretic thought blossomed only after Weber's book was published.
, where it can help to find areas that would be good to study, taking into account previous studies.
Economic geography
Economic geography is the study of the location, distribution and spatial organization of economic activities across the world. The subject matter investigated is strongly influenced by the researcher's methodological approach. Neoclassical location theorists, following in the tradition of Alfred...
, regional science
Regional science
Regional science is a field of the social sciences concerned with analytical approaches to problems that are specifically urban, rural, or regional...
, and spatial economics. Location theory addresses the questions of what economic activities are located where and why. Location theory rests — like microeconomic theory
Microeconomics
Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...
generally — on the assumption that agents act in their own self interest. Thus firms choose locations that maximize their profits and individuals choose locations that maximize their utility.
Origins
While others should get some credit for even earlier work (e.g., Richard CantillonRichard Cantillon
Richard Cantillon was an Irish-French economist and author of Essai sur la Nature du Commerce en Général , a book considered by William Stanley Jevons to be the "cradle of political economy". Although little information exists on Cantillon's life, it is known that he became a successful banker and...
, Etienne Bonnot de Condillac
Étienne Bonnot de Condillac
Étienne Bonnot de Condillac was a French philosopher and epistemologist who studied in such areas as psychology and the philosophy of the mind.-Biography:...
, David Hume
David Hume
David Hume was a Scottish philosopher, historian, economist, and essayist, known especially for his philosophical empiricism and skepticism. He was one of the most important figures in the history of Western philosophy and the Scottish Enlightenment...
, Sir James D. Steuart
James Denham-Steuart
Sir James Steuart, 3rd Baronet of Goodtrees and eventually 7th Baronet of Coltness; late in life Sir James Steuart Denham, also called Sir James Denham Steuart was a prominent Jacobite, who wrote one of the first noteworthy books in English about economics...
, and David Ricardo
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...
), it was not until Johann Heinrich von Thünen
Johann Heinrich von Thünen
Johann Heinrich von Thünen was a prominent nineteenth century economist. Von Thünen was a Mecklenburg landowner, who in the first volume of his treatise, The Isolated State , developed the first serious treatment of spatial economics, connecting it with the theory of rent...
's first volume of Der Isolierte Staat in 1826 that location theory can be said to have really gotten underway. Indeed, the prominent regional scientist
Regional science
Regional science is a field of the social sciences concerned with analytical approaches to problems that are specifically urban, rural, or regional...
Walter Isard
Walter Isard
Walter Isard was a prominent American economist, the principal founder of the discipline of Regional Science, as well as one of the main founders of the discipline of Peace Science....
has called von Thünen "the father of location theorists." In Der Isolierte Staat, von Thünen notes that the costs of transporting goods consumes some of Ricardo's economic rent. He notes that because these transportation costs and, of course, economic rents, vary across goods, different land uses and use intensities will result with distance from the marketplace. However, the discussion was largely criticized since Johann Heinrich von Thünen
Johann Heinrich von Thünen
Johann Heinrich von Thünen was a prominent nineteenth century economist. Von Thünen was a Mecklenburg landowner, who in the first volume of his treatise, The Isolated State , developed the first serious treatment of spatial economics, connecting it with the theory of rent...
over simplified the problem with his assumptions of e.g. isolated states or single cities.
A German hegemony of sorts seems to have taken hold in location theory from the time of von Thünen through to Walter Christaller
Walter Christaller
Walter Christaller , was a German geographer whose principal contribution to the discipline is Central Place Theory, first published in 1933...
's 1933 book Die Zentralen Orte in Sűddeutschland, which formulated much of what is now understood as central place theory
Central Place Theory
Central place theory is a geographical theory that seeks to explain the number, size and location of human settlements in an urban system. The theory was created by the German geographer Walter Christaller, who asserted that settlements simply functioned as 'central places' providing services to...
. An especially notable contribution was one by Alfred Weber
Alfred Weber
Alfred Weber was a German economist, sociologist and theoretician of culture whose work was influential in the development of modern economic geography.-Life:...
, who published Über den Standort der Industrien in 1909. Working from a model akin to a physical frame adapted from some ideas by Pierre Varignon
Pierre Varignon
Pierre Varignon was a French mathematician. He was educated at the Jesuit College and the University in Caen, where he received his M.A. in 1682. He took Holy Orders the following year....
(a Varignon frame
Varignon frame
A Varignon frame is a system of weights and pulleys used by geographers to help determine optimum location. For example, the weights might represent the relative cost of transporting particular goods to or from particular locations, to help a firm decide the most cost effective site to locate a...
), Weber applies freight rates of resources and the finished goods along with the finished good's production function to develop an algorithm that identifies the optimal location for manufacturing plant. He also introduces distortions induced by labor and both agglomerative and deglomerative forces. Weber then moves on to discuss groupings of production units, anticipating Lösch's market areas.
Carl Wilhelm Friedrich Launhardt
Wilhelm Launhardt
Carl Wilhelm Friedrich Launhardt was a German mathematician and economist.Launhardt was born in Hanover, the capital of the Kingdom of Hanover. He studied and taught at Hanover's technical school...
conceived much of that for which Alfred Weber received credit, prior to Weber's work. Moreover, his contributions are surprisingly more modern in their analytical content than Weber's. This suggests that Launhardt was ahead of his time and simply was not readily understood by many of his contemporaries. Whether Weber was familiar with Launhardt's publications remains unclear. Weber was most certainly influenced by others, most notably Wilhelm Roscher and Albert Schäffle
Albert Schäffle
Albert Eberhard Friedrich Schäffle , German statesman and political economist, was born at Nürtingen in Württemberg, and in 1848 became a student at the University of Tübingen....
, who seem likely to have read Launhardt's work. Regardless, location theoretic thought blossomed only after Weber's book was published.
Other uses
Location theory has also been used outside of economics, for example in conservation biologyConservation biology
Conservation biology is the scientific study of the nature and status of Earth's biodiversity with the aim of protecting species, their habitats, and ecosystems from excessive rates of extinction...
, where it can help to find areas that would be good to study, taking into account previous studies.