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Economic Geography 3 A

Economic spatial theories

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Theory and reality

Every phenomenon and every process is unique

All phenomena and processes do have something in common

Theory looks at the abstract side of things, ignoring the particularities

Theory is like a ruler or a measuring rod

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Theories in economic geography Spatial outlook:

- Location theories (single plant)

- Differentiation theories (spatial organization)

Temporal outlook

- Growth theories

- Development theories

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Where to locate a plant?

Cost factors: Raw materials Manpower (salaries, social security) Construction of plant (incl. land) Transportation of products R+D Taxes, interests

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A. Weber‘s location theory

Reduces cost factors to raw materials and transportation

All other factors are either given or constant There is a linear relationship between trans-

portation cost and raw materials, depending on distance and weight

Three types of raw materials: ubiquities, ma-terials without loss of mass, and materials that lose mass

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Webers location triangle

Optimum (least cost) production location

Fixed market Different kinds of raw materials Weight of the final commodity is defined

by the weight of the raw material Different alternatives are possible

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Types of locations according to A. Weber (1)

Ubiquities: the production takes placein the market centre (no transportationcosts)

1 material without loss of mass. Production locationFlexible as transportation costs always the same

One material with loss of mass. Production on site to avoid transport of waste

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Types of locations according to A. Weber (2)

1 material with loss, 1 with-out loss of mass. Production on second site to minimizetransportation costs

2 materials with loss ofmass. Production in a location where transportcosts are minimal

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Comment

The ‘triangle’ as such is not the rule but a simplification (5th example)

Weber seeks to determine the optimum point of production, but simplifies far too much

Tranportation costs are not linear but regressive according to distance

Ubiquities do not exist Competition is not taken into account

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Major deficiency

According to Weber, the economic actors operate rationally (homo oeconomicus)

However, most if not all decisions are only in part rational; humans are to a large extent irrational

Nobody disposes of total knowledge and information to make perfecly rational decisions

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Incorporating irrational aspects Locational decisions are based on the

evaluation of the many factors an entrepreneur can think of

Apart from the quantifiable factors (cost of raw material, labour cost, etc.) he also has his personal evaluation of a given location

The decision-maker disposes of a certain manoeuvring space in his decisions

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The model by D.M. Smith

2 types of costs- Basic costs: minimum costs at the cheapest place of production- Locational costs: transportation costs

‘Personal whims and fancies’ The two cost types differ, but together they

define the potential locational area. The outer limit is the ‘break-even point’ where no profit results from the activity at a given point

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The Smith model

Optimum location

Profit zone

Loss zone

Break-even point

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Comment

Cost differentiation corresponds well to reality

Decisional freedom: the entire profit zone can be chosen for a location

The optimum location is no constraint

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General questions about locational decisions What is the goal of my economic activity? At what scale do I want to enter the market? How are my chances in the short, medoium

and long term at a given location What other factors, besides purely monetary

ones, are important for my decision? Does a single location make sense? What is the role of non-profitable domains

(R+D, administration)?

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How is economic space organized? A look at structural aspects 3 models:

- Von Thünen

- Christaller

- Core-periphery Each of them has to be seen in ist temporal

context: von Thünen late 18th century, Christaller 1930s, Core-periphery post-WWII

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J.H. von Thünen (1783-1850)

German agriculturalist, owner of a latifundium in East Prussia

1826 Treaty on ‘The isolated state’ (in relation to agriculture and economy)

Based on immaculate bookkeeping of his farm’s business

Deductive (like Weber) Interest: agricultural production areas in

relation to the market

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Basic ideas of von Thünen

Totally isolated state without external relations

Totally flat, no obstacles to transport, but surrounded by impenetrable wilderness

1 city (market) in the geometric centre Homogenous soil quality Transportation costs directly proportional to

distance, weight, volume and durability of the products

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The locational rent R = E(p-a) - Efk

Locational rent

(R)

Transportation costs (Efk)

Marketprice (Ep)

Costs of production (Ea)

ACity B C

km

b

$, £, Rand, CHF

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How to calculate the rent?

From the market price one substracts the costs of production

What remains is the rent, but ... ... only in the case of zero transportation cost If the product has to be transported, the rent

decreases by the transportation costs Every product has ist own cost structure and

hence its own locational rent This calls for a specific spatial organization

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Von Thünen‘s concentric rings

The market lies in the centre, the con-ditions are uniform all over the isolated state

As a logical consequence, land use will organized itself in concentric circles around the city, according to the loca-tional rent to be obtained for a specific product

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The ring model

• Free economy (milk, vegetables; perishable)

• Timber and firewood (heavy)

• Cereals (3 zones with decreasing intensity)

• Cattle (no transportation costs)

C

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Comment

Model based on homo oeconomicus thinking

Presupposes a deregulated economy Far too abstractLater modifications: river transport,

secondary centre To find it in reality is difficult, but certain

elements are realistic

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The Ghana farm: Thünen in practice

20 m

Outfield

Infield

Garden

House

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Walter Christaller‘s hexagons

German geographer, published ‚The central places in southern Germany‘ in 1933

Misunderstood in a period when scientific research had to glorify the Germanic culture and history

Aim: to find regularities in the provision of services from a centre to its hinterland

Centre = a place of higher importance than neighbouring places

Centres occur in a hierarchical order

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Christaller‘s preconditions

Again a deductive model Uniform surface Uniform population (needs, purchasing

power, and income) Uniform transportation network in all

directions with linear cost structure Homo oeconomicus behaviour of

customers (minimizing costs)

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Specific conditions of central places and goods Each commodity and service has ist own

specific range. The larger this range, the more central the commodity or service

The threshold, i.e. the minimum market area necessary for a specific commodity or ser-vice, is the key element for the rank of a central place

Threshold goods determine the outer limit of the range

Central places of a higher order offer goods and services of all lower rank central places

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An essential condition

The space (a country) must be entirely serviced with central goods of all ranks

In the interest of economic thinking, there must be neither overlap nor unserviced regions.

Central places are evenly distributed in space The only geometrical shape that guarantees

equal service is the hexagon

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Basic forms

Empty corners Overlap Total coverage

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Comment

Too abstract a model, far from reality Basic ideas are correct and hold good

today Certain regularities can, however, be

detected Modern mobility has changed the basis

of Christaller’s ideas

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Core and periphery (-ies)

Related to the central place theory through the idea of polarization

Core areas = places or regions where innovations take place

Peripheries = all other areas Different approaches to this model are

possible

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C-P as unilateral dependency

Geometricperspective

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C-P as a system

Functional perspective

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Dominance of the core

Draws substance from periphery Increase of information and knowledge due to

growth of population, capital etc. Psychological advantage Constant modernization Linkage-effect: growth of innovations thanks

to links with other cores External advantages stimulate income and

production and reduce costs

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Consequences

Structural: Goods and services are un-evenly distributed and will increasingly be so

Interactions: Relations between core and periphery are asymmetrical and will remain like this

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Evolution of the model

Prebisch (1950s): Centre = the devel-oped industrialized countries, periphery = the developing countries

Friedmann (1960s): dependency rela-tionships that pass into polarized rela-tions later (stages of development)

Reynaud (1981): differentiated view of both centres and peripheries

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Reynaud‘s different types of C-Ps Centres are of differing importance (cf.

Christaller’s central place theory) There is not just one periphery but there

are different types, according to the relationships

The relations C-P are not uniform or unidirectional but depend on the interaction potential between the two

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The Reynaud model: interactions

dominant centre, dominated periphery

hypertrophic centre, abandoned periphery

dominant centre, integrated and exploited periphery

hypertrophic centre, integrated and annexed periphery

flow of raw materialsflow of manpower and capital spirit of enterprise

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The dynamics of the model

Cores and peripheries are not stable over time but subject to change

Changes include variation in the degree and direction of the interactions to the inversion of their role

In extreme cases, the core can lose its position without being replaced

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The Reynaud model: dynamics

declining centre, periphery valuing the centre’s capital

autonomous centre and periphery

inversion

flow of raw materialsflow of manpower and capital spirit of enterprise

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Comment

The core-periphery model corresponds to the reality of the polarized economic space

In Reynaud‘s interpretation, it is a dynamic model that makes us aware of the dynamics of space

A humanistic perspective: the interrelation-ships C-P are based on human decisions and actions, themselves conducted by subjective perceptions and attitudes