Understanding Where Things are Built and Why

Although I am currently studying for a Master of #SpatialEngineering, I still help some people with location decisions, whether warehouse, store, or outlet.

Recently, I read an old but interesting book for location science, Location and Space-Economy, by Walter Isard[1]. I am going to make a short series of the content of this book, but re-write it in my own language. Honestly, my reason is rather selfish since it's a medium for me to read and learn this book using my own language for myself.

How Towns Grow

Imagine you and your friends are starting a new town, maybe in games like SimCity or Cities Skylines, from scratch on a big piece of empty land. The first thing you need to decide is where to build your houses. You'll pick spots based on things like how easy it is to clear the land, where you can get water, the type of soil, and how safe it is from animals or other dangers. Once you have your houses set up, more friends will join you, and they will likely build their houses close to yours, and thus creating a cluster of homes.

As your town grows, you'll start farming the land around it. Different types of crops will be grown in different rings around the town. For example, vegetables that need much care might be grown closer to the houses, while grains that don’t need as much attention might be grown farther away. Sometimes, the land isn't perfect everywhere, so some areas might be used for other things, like grazing animals, if the soil isn't good for crops.

If you discover something valuable like iron or coal nearby, you’ll start building mines and factories to use those resources. This will attract more people to your town for jobs, and you'll build new roads to connect these new factories with your town. These resources and factories help your town grow even more.

As your town continues to expand, you'll start trading with other towns. If another town is nearby, you might exchange goods like food for tools. The cost of transporting goods affects how much you trade. If it’s too expensive to move things, you’ll trade less. Over time, towns become good at making specific things. One town might be known for farming, another for making tools, and another for mining. This specialisation means towns trade a lot to get everything they need.

New technologies and resources can change how towns are set up. For example, if you discover a new way to make tools more efficiently, you might build a new factory in a different place. New roads or transport methods, like trains or planes, can make trading easier and faster. This leads to more changes in how your town and others around it grow and interact.

As towns grow and change, people ask important questions like: When should a town start trading with others? Where should new roads and ports be built? How should we plan the town so it can grow well and safely? What happens to old factories when new, better ones are built?

There are different ways to study and understand how towns grow and change. One way is to look at history to see how towns developed over time. Another way is to use models to imagine how different factors like resources and transportation affect town growth. Combining ideas from different studies can give us a clearer picture of how towns work.

Where Should Businesses be Located and Why?

Economists have argued about what’s more important: how things change over time or how things are spread out in space. Some focused too much on time and not enough on space, which means they missed important details about why businesses are located where they are. One big idea is called General Equilibrium Theory[1], which tries to explain how different parts of the economy fit together. Imagine trying to balance a bunch of things on a seesaw; if you move one, everything else changes too. Economists have used this idea to understand how markets and prices work but often ignore the space between different markets.

Some famous economists like Alfred Marshall[3] and J.R. Hicks[4] created theories that mostly ignored the space factor. They assumed that everything happens at one point, which isn’t very realistic because it ignores transport costs and other spatial factors. However, Alfred Weber[5] tried to develop a general theory about where businesses should be located. He looked at factors like transport costs, the location of resources, and labour costs to determine the best places for factories. Weber imagined an undeveloped country and how different layers of businesses and services would develop. He described these layers (strata) and how they depend on each other, like how a primary industry such as farming supports other industries like food processing.

Other economists like Englander[6] and Predohl[7] built on Weber’s ideas. They tried to make the theories more general and applicable to real-world situations. For example, Predohl introduced the idea of using the principle of substitution to decide where businesses should be located. There were many challenges in making these theories work in practice. Economists had to consider how different factors like labour, land, and transport costs vary in different places. They also had to account for the fact that not everything can be easily moved or changed.

Weigmann[8] introduced some complex ideas to understand the space-economy. He talked about how different markets are connected and how space limits competition. He also introduced the idea of a "basic form," which is a core market structure that remains relatively stable over time. August Losch[9] developed a system to understand the optimal locations for businesses. He imagined a plain where everything is uniform and used hexagons to represent market areas, which helps minimise transport costs and maximise efficiency.

These chapters give us a better understanding of how we see development and businesses from a spatial point of view. Although rather old, from 1956, this book is still relevant for us to understand how cities grow and how businesses interact. Thus, we can decide better on how we build our businesses, how they connect to each other, and what approach can be taken for us to understand why they did what they did. More chapters soon!

Notes

[1] Isard, W. (1956). Location and Space-economy: A General Theory Relating to Industrial Location, Market Areas, Land Use, Trade, and Urban Structure. Technology Press of MIT and Wiley.

[2] Mosak, J. L. (1944). General Equilibrium Theory in International Trade. Cowles Commission Monograph No. 7.

[3] Marshall, A. (1936). Principles of Economics (8th ed., Book V, Chap. XV, Sect. 1). London.

[4] Hicks, J. R. (1939). Value and Capital. Oxford.

[5] Weber, A. (1909). über den Standort der Industrien. Tubingen. English translation with introduction and notes by Carl J. Friedrich, Alfred Weber's Theory of the Location of Industries. Chicago, 1929.

[6] Englander, O. (1926). Kritisches und Positives zu einer allgemeinen reinen Lehre vom Standort. Zeitschrift für Volkswirtschaft und Sozialpolitik, Neue Folge, V(7-9).

[7] Weltwirtschaftliches Archiv. (1925). Vol. XXI, 294-331. A briefer article in English, "The Theory of Location in its Relation to General Economics," Journal of Political Economy, XXXVI(1928), 371-90.

[8] Ideen zu einer Theorie der Raumwirtschaft. WeUwirtschaftliches Archiv, XXXIV(1931), 1-40; and "Standortstheorie und Raumwirtschaft" in Joh. Heinr. von Thünen zum 150 Geburtstag, ed. by W. Seedorf and H. Jurgen, Rostock, Carl Hinstorffs, 1933, 137-57.

[9] L?sch, A. (1954). The Economics of Location. Yale University Press.