Economic Geography 3 A

1. Economic Geography 3 A Economic spatial theories

2. 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

3. Theories in economic geography • Spatial outlook: - Location theories (single plant) - Differentiation theories (spatial organization) • Temporal outlook - Growth theories - Development theories

4. 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

5. 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

6. 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

7. Ubiquities: the production takes place in the market centre (no transportation costs) 1 material without loss of mass. Production location Flexible as transportation costs always the same One material with loss of mass. Production on site to avoid transport of waste Types of locations according to A. Weber (1)

8. 1 material with loss, 1 with- out loss of mass. Production on second site to minimize transportation costs 2 materials with loss of mass. Production in a location where transport costs are minimal Types of locations according to A. Weber (2)

9. 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

10. 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

11. 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

12. 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

13. Basic costs Locational costs Optimum location Break-even point Profit zone Loss zone The Smith model

14. 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

15. 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)?

16. 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

17. 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

18. 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

19. $, £, Rand, CHF Marketprice (Ep)  Costs of production (Ea) b Transportation costs (Efk) Locational rent (R) km City A B C The locational rent R = E(p-a) - Efk

20. 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

21. 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

22. C The ring model • Free economy (milk, vegetables; perishable) • Timber and firewood (heavy) • Cereals (3 zones with decreasing intensity) • Cattle (no transportation costs)

23. Comment • Model based on homo oeconomicus thinking • Presupposes a deregulated economy • Far too abstract • Later modifications: river transport, secondary centre • To find it in reality is difficult, but certain elements are realistic

24. Outfield Infield Garden House 20 m The Ghana farm: Thünen in practice

25. 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

26. 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)

27. 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

28. 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

29. Empty corners Overlap Total coverage Basic forms

30. 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

31. 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

32. Geometric perspective C-P as unilateral dependency

33. Functional perspective C-P as a system

34. 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

35. 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

36. 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

37. 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

38. dominant centre, dominated periphery hypertrophic centre, abandoned periphery dominant centre, integrated and exploited periphery hypertrophic centre, integrated and annexed periphery flow of manpower and capital spirit of enterprise flow of raw materials The Reynaud model: interactions

39. 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

40. declining centre, periphery valuing the centre’s capital autonomous centre and periphery inversion flow of manpower and capital spirit of enterprise flow of raw materials The Reynaud model: dynamics

41. 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