Location theory
Location theory is a social science framework that explores the spatial distribution of economic activities and seeks to explain why certain activities occur in specific locations. Developed primarily in the fields of economics and geography, it gained prominence in the mid-20th century and has evolved significantly with advances in technology. The roots of location theory can be traced back to the 1700s, with contributions from key figures such as Johann Heinrich von Thünen, who focused on agricultural land use and transportation costs. Thünen proposed that farmers would compete for land near markets to minimize transportation expenses, leading to a concentric circle model of agricultural production.
Following Thünen, Alfred Weber introduced concepts related to industrial location, emphasizing transportation costs, labor expenses, and the benefits of agglomeration economies—where similar businesses cluster together to enhance efficiency. In the late 20th century, as transportation became more affordable and rapid, the relevance of traditional location theory began to shift, prompting new interpretations. Today, while the significance of physical proximity has diminished due to technological advancements like the internet, location theory remains relevant. Businesses still consider factors like land, labor costs, and workforce availability when deciding where to establish operations, making it an essential area of study for economists, urban planners, and policymakers.
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Location theory
Location theory is a social science theory that describes patterns of economic activity and tries to explain why economic activity takes place in specific places. This theory is used most often in economics and geography, and it is an important part of regional science. Economists developed the foundations of location theory between the 1700s and early 1900s. Location theory became a popular field of study in the 1950s and 1960s, but it has changed significantly because of advances in technology.
Background
Adam Smith helped found the field of economics in the 1700s. Many thinkers helped contribute to the economic theories of the era. Johann Heinrich von Thünen was a Prussian landowner, and he was interested in economic theories. His work is seen as the foundation for location theory. Thünen was interested in agriculture and the location of farms. Thünen realized that farmers who had low transportation costs would most likely be more successful. He developed a theory that farmers would compete for the land closest to the market where their goods would be sold. Thünen realized that if all farmers had the same amount of land and soil with the same fertility, they would all produce the same amount of goods. The transportation cost would then be an important factor in how much money a farmer made. Therefore, farmers would compete for the land closest to the market.
Thünen also realized that the type of crop or good being produced would be different in different locations around the central market. He theorized that most farms would be somewhat like concentric circles around the market in the center. Producers selling milk and fresh vegetables would most likely be located in the circle nearest the center. These producers would be willing to pay more for rent because their products could spoil easily and had to be transported to the market quickly. At the time, refrigeration did not exist. Thünen believed producers of wood and wood products would be in the next circle, as their products were bulky. He believed the third circle producers would most likely grow grains and other cash crops. He proposed that the fourth circle producers would most likely sell livestock, as those animals could be walked to market, making transportation much less of a problem. Thünen's work was important because it helped lay the groundwork for other location theorists, and it developed a framework for thinking about how transportation and other factors affect producers' locations.
Overview
Location theory attempts to describe what economic activities are located in certain areas. It also examines why these activities are located in particular areas. The theory is wide ranging and looks at different careers and fields. Location theory can address large areas, such as countries or global regions, and small areas, such as neighborhoods or individual sites. Thünen laid the foundation for location theory, but it was not until the 1900s that people further developed the idea.
Alfred Weber, a German economist, added to Thünen's ideas to create his own version of location theory. Weber was mostly interested in manufactured goods and industry. He speculated that industries would be located in particular areas because of the cost. He believed that industries were located in places where raw materials could be collected at the lowest price. Weber wanted to create what he believed was a "pure" economic theory, so he eliminated variables, such as demand, from his theory. He also made sure that all the comparisons he did were between the exact same materials.
Weber believed that industrial location is most affected by transportation costs, labor costs, and agglomeration economies. Agglomeration economies occur when a number of similar businesses are clustered in the same area, benefitting one another. These three factors became part of Weber's location triangle. Each side of the triangle represents one of the three factors. The size of the triangle indicates the cost of locating a business in a certain area. For example, a business located where its transportation cost would be high would have a long line indicating the side that represented transportation costs. If the same business were also located in a place where labor costs are high, the length of the labor side would also be long. These long sides create a large triangle. A large triangle indicates high costs for an industry. Conversely, a small triangle would indicate low costs.
Weber's theory indicated that industries would be located in areas where they could spend the least money to produce their goods. Many of the industries of the twentieth century did locate in the areas where their costs were lowest. For example, the steel industry was important in Pittsburgh, Pennsylvania, in the first half of the twentieth century, and much of Pennsylvania mined coal, which was an important material used to produce steel. Nevertheless, Weber's theory became more dated in the late twentieth century. As transportation costs decreased and transportation became much faster, industries could be located in areas farther from the natural resources needed to create them. As a result, location theory has changed and developed since Weber's contribution in the early 1900s.
As technology continued to change, so did location theories. In 1939, economist August Losch published The Economics of Location, which examined how cities developed and why some parts of cities were more important to certain industries than others were. Economists in the United States popularized location theory in the 1950s and 1960s. The theory became an important part of social science. At the same time, the field continued to change. In the twenty-first century, location theory was not as popular as it was in the mid-twentieth century because changes in technology made location less important. Modern transportation allowed goods to be shipped relatively inexpensively to various locations, and the internet allowed people to work in certain jobs from many places around the world.
Nevertheless, location theory is still relevant because producers tend to choose locations based on the cost of land, labor, and capital. Therefore, a business may choose a location in an area where wages are lower to save money. A business might also choose to locate in a particular area because workers with the right qualifications already live there. The study of this type of location-based decision is sometimes called economic geography in modern research. Understanding the foundations of location theory and the integration of economics and geography are important for policymakers, business owners, environmental impact studies, and many other aspects of modern development.
Bibliography
Jung, Eun Jin. "Location Theory." Encyclopedia of Urban Studies, edited by Ray Hutchison, SAGE, 2010.
"Location Theory." Oxford Bibliographies, www.oxfordbibliographies.com/view/document/obo-9780199874002/obo-9780199874002-0037.xml. Accessed 25 Nov. 2024.
Rodrigue, Jean-Paul. "Von Thunen's Regional Land Use Model." Department of Global Studies & Geography, Hofstra University, transportgeography.org/contents/chapter8/urban-land-use-transportation/von-thunen-regional-land-use. Accessed 25 Nov. 2024.
Rodrigue, Jean-Paul. "Weber's Location Triangle." Department of Global Studies & Geography, Hofstra University, transportgeography.org/contents/chapter2/transport-and-location/weber-location-triangle. Accessed 25 Nov. 2024.
Warg, Barney, editor. "Location Theory." Encyclopedia of Geography. SAGE Publications, 2010.
Watkins, Thayer. "Alfred Weber's Theory of Industrial Location." San José State University, Department of Economics, www.sjsu.edu/faculty/watkins/weber.htm. Accessed 25 Nov. 2024.