TOPIC 2 - LOCATION OF THEORY: THE
FOUNDATION OF PLANNING
Location Theory
In economics and geography, theory 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.
The location of economic activities can be determined on
a broad level such as a region or metropolitan area, or
on a narrow one such as a zone, neighborhood, city
block, or an individual site.
Location theory is closely tied to urban and regional
planning. When planning for the development of cities or
regions, decision-makers often use location theory
principles to strategically place infrastructure,
businesses, and services.
Location Theory Models
3 Model of Locational Theories:
• Von Thunen's model of Agricultural location
• Alfred Weber's Theory of Industrial Location
• Central place theory
These 3 models are called "Location Triad"
Theory of Agricultural Location
JOHANN HEINRICH VON THUNEN
a Prussian landowner who introduced an early THEORY
OF AGRICULTURAL LOCATION in Der isolierte Staat
(1826) (The Isolated State). The Thünen model suggests
that accessibility to the market (town) can create a
complete system of agricultural land use. His model
envisaged a single market surrounded by farmland, both
situated on a plain of complete physical homogeneity.
Transportation costs over the plain are related only to
the distance traveled and the volume shipped.
Von Thunen's model was created before industrialization
and is based on the following limiting assumptions:
1. Central City in an Isolated State
2. Surrounded by Wilderness
3. Flat Terrain, No Natural Barriers
4. Consistent Soil and Climate
5. Oxcart Transportation
6. Absence of Roads
7. Farmers Maximize Profits
In an Isolated State with the foregoing statements being
true, Von Thunen hypothesized that a pattern of rings
around the city would develop.
Ring 1 (Intensive Agriculture): Closest to the city,
high-value crops like vegetables and dairy due to easy
access and transportation.
Ring 2 (Forest): Timber production as it's less
perishable, and transportation costs are slightly higher.
Ring 3 (Extensive Agriculture): Crops requiring more
space and less frequent transportation, like grains.
Ring 4 (Animal Grazing): Livestock farming due to
lower land value and transportation costs.
Ring 5 (Wilderness): Beyond the agricultural rings, the
unoccupied wilderness with no human activities.
The model assumes that farmers surrounding the market
will produce crops which have the highest market value
(highest rent) that will give them the maximum net profit
(the location, or land, rent). The determining factor in the
location rent will be the transportation costs. When
transportation costs are low, the location rent will be
high, and vice versa. This situation produces a rent
gradient along which the location rent decreases with
distance from the market, eventually reaching zero.
The Thünen model also addressed the location of
intensive versus extensive agriculture in relation to the
same market. Intensive agriculture will possess a steep
gradient and will locate closer to the market than
extensive agriculture. Different crops will possess
different rent gradients. Perishable crops (vegetables
and dairy products) will possess steep gradients while
less perishable crops (grains) will possess
less steep gradients.
Theory of Industrial Location
ALFRED WEBER
Carl David Alfred Weber was a German economist,
geographer, sociologist and theoretician of culture
whose work was influential in the development of
modern economic geography.
Alfred Weber formulated a theory of industrial location in
his book entitled Über den Standort der Industrien
(Theory of the Location of Industries, 1929). Weber’s
theory, called the location triangle.
Location Triangle
Sought the optimum location for the production of a good
based on the fixed locations of the market and two raw
material sources, which geographically form a triangle.
To determine the least-cost production location within
the triangle by figuring the total costs of transporting raw
material from both sites to the production site and
product from the production site to the market.
Least Cost Theory
Also known as Weber's Least Cost Theory or Weberian
Theory, was developed by German economist Alfred
Weber in 1909. This theory aims to explain the optimal
location for industrial facilities based on minimizing
production costs, particularly transportation costs.
LEAST COST THEORY AND ITS CONNECTION TO
URBAN PLANNING
1. Industrial Zoning - Urban planners may use Weber's
principles to determine the optimal locations for industrial
zones within a city.
2. Transportation Planning - Weber's emphasis on
transportation costs underscores the importance of well-
planned transportation infrastructure in urban areas.
3. Mixed-Use Development - Guide planners in
creating balanced urban environments where different
land uses are strategically located to reduce overall
transportation costs and enhance efficiency.
LEAST COST THEORY ASSUMPTIONS
1. Resources, markets and processing plants are all
located in one country.
2. The area under consideration is the same in climate,
topography, technology and economic system.
3. Considers only one finished product at a time.
4. Transportation costs vary based on the weight of the
items shipped and distance shipped.
5. Raw materials are at a fixed and known location.
6. Market location is also at a fixed and known location.
7. Labor has a fixed cost, but there is an unlimited
availability and labor is available at any production site
selected.
8. There is an equal demand throughout the region and
equal opportunities to purchase the product throughout
the region.
Four factors that affect costs that changed based on
locations
1. Transportation
Least Cost Theory states that the location of a
processing plant will in an area that ensures the lowest
cost of moving raw materials to the processing plant and
moving the finished products to the market. The cost of
transportation is determined by the distance traveled and
the weight of the product being transported.
2. Labor
Usually this is the most expensive factor. As
labor costs increase, profits of companies decrease.
This is why companies will sometimes outsource parts of
their manufacturing to locations where labor is less
expensive. Generally, employers are looking for
locations where wages are low, there is little unionization
and workers are younger.
3. Agglomeration
Concentration of businesses in one particular
area Agglomeration happens when there is a demand
for services that a population needs. Generally, this
benefits businesses because it pools talents and
services. Typically, this results in lower prices.
Deglomeration
When industries move away from each other
When an agglomerated region becomes overcrowded,
there are negative effects such as: pollution, traffic,
strained resources and labor pools. Businesses will
choose to move away from or avoid moving to these
areas because these negative effects raise costs.
CENTRAL PLACE THEORY
Walter Chirstaller (1893-1969)
- A German Geographer, major contribution to location
theory was Walter Christaller’s Formulation of the
Central Place Theory, which offered geometric
explanations as to how settlements and places are
located in relation to one another and why settlements
function as hamlets, villages, towns, or cities.
- The Primary purpose of a settlement for market
town, according to central place theory, is the provision
of goods and services for the surrounding market area.
Such towns are centrally located and maybe called
Central Places.
- Settlements that provide more goods and services than
do other places are called Higher-Order Central Places.
- Lower-Order Central Places have small market areas
and provide goods and services that are purchased
more frequently than higher-order goods and services.
- Higher-Order Places are more widely distributed and
fewer in number than lower-order places.
- Before testing his theory, however, Christaller had to
first define the Central Place. In keeping with his
economic focus, he came to the conclusion that the
central place exists primarily to provide goods and
services to its surrounding population.
Hierarchy of Settlement
Hamlet - fewest goods and services available.
Village - includes the region of the hamlet and some
additional goods and services.
Town - includes the region of the village and hamlet and
provides some additional goods and services.
City - includes the region of the village hamlet and town
and provides additional goods and services.
- Because transport in equally reachable from all
distance market areas are circular.
- However circular shape results in unserved
area. So Christaller suggested a hexagon
shape.
- This suggests that within a given area there will
be fewer high order settlements in relation to
lower order settlements.
- It also suggests that theoretically settlements
are equidistance from each other, higher order
settlements are further away from each other.
Central Place Theory Assumptions
An Even Terrain - Flat area promotes the growth of
town.
Evenly Distributed Population - Residents are not
concentrated in one place.
Evenly Distributed Resources - No place has an
advantage of resources.
Similar Purchasing Power - Wealth is fairly distributed.
Nearest Market Preference - People buy products from
nearest market
Equal Transportation Cost - Cost for transporting
goods is equal to all.
Perfect Competition - People will buy all the lowest
price which market has to offer.
Concepts
1. Urban Center & Hinterlands
- Urban center - center for providing services
- Hinterlands - area surrounding the center
2. Threshold - Minimum no. of people needed to make
service viable at a particular place.
3. Range (of good or service) - Maximum distance that
a consumer is willing to travel to purchase a good or
avail a service.
Distinct Rules
- The larger the settlement, the less number of
settlements and farther apart they are.
- The less there are of a settlement, the larger the
hinterland, or sphere of influence, of its goods and
services
- Places of the same size will be spaced the same
distance apart
GROWTH POLE THEORY
The Growth Pole Theory conceived by French regional
economist Francois Perroux (1995) and later expanded
by Boudeville (1966) is a regional and industrial planning
model for a "set of expanding industries located in an
urban area and inducing further development of
economic activity throughout its zone of influence".
According to perroux - Growth does not appear
everywhere at the same time, it appears at points or
poles of growth with varying intensity, it spreads along
various channels and with differing overall effects on the
whole economy.
CORE IDEA OF THE GROWTH POLE THEORY
• Economic development and growth is not uniform over
an entire region but instead takes place around a
specific pole.
• The pole is characterised by key industry around which
linked industries develop mainly through direct and
indirect effects.
• Expansion of this industry implies expansion of output,
employment, related investments as well as new
technologies and new industrial sectors.
• Because of scale and agglomeration of economies
near the growth pole regional development is
unbalanced. Transport terminals play a significant role
here.
Perroux Considered 2 Basic Aspects as Base of His
Theory
1. Theory of Development - states that Growth is not
seen everywhere but it is in a form of aggregate or
poles. Growth is not seen everywhere. it will be seen in a
form of cluster and agglomerate. This is the theory of
development.
2. Inter Industrial Linkages - the area which is
developing all the industries that are setup they will be
having some linkeges with another. Like One industry
depends on another. An output of one industry will be
input for another one. Like we have a firm that is growing
cotton now the cotton is a output of firm A, now that
cotton will be a input for firm b which is a cotton mill
industry than it will make cloths from it, now this cloths
will turn into finished product like t-shirts. So we can see
all the industries are linked with another.
3 Main Factors of Growth Pole Theory
External economics
i. Positive: If an iron industry has 3 subsequent
industries like steel industry, glass industry and circuit
industry and these 3 industries depend on iron industry.
Then if the iron industry produce more, the subsequent
industries will get more amount of raw material.
ii. Negative: On the other hand if the iron industry
produce less the subsequent industries will get less
amount of raw material as a result they start producing
less.
Agglomeration
Agglomeration is nothing but the expansion of small unit
to the large unit. Example: Before 1968 Ankleshwar is a
small town. But after ONGC and some other industry
came and the scenario suddenly change. People
migrate in Ankleshwar from nearby villages and towns
for job, labour work and other work, so agglomeration
create over there.
Linkages
i. Forward linkages: An industry encourages investment
in the subsequent stages of production either by
transmitting innovation or effects of innovation forward.
ii. Backward linkages: An industry encourages
investment in the earlier
stages of production by expanding its demand
for inputs.
According to Boudeville, "A set of expanding industries
located in an urban area and inducing further
development of Economic activity throughout its zone of
influence.
'Boudeville's Regional development Theory It is a
modification of Perroux theory. He was the one who
brought the growth pole theory as geographical context.
Then he classified economics under three heads -
Economics internal to the firm, Economics external to
firms and internal to the industries, Economics external
to industries but internal to the urbanization.
WILLIAM ALONSO: ECONOMICS OF LAND USE
- William Alonso (1933-1999) was an urban
planner and economist.
- Born on January 29, 1933 at Buenos Aires,
Argentina and died on February 11, 1999 (aged
66) at Boston, Massachusetts, United States.
- Alonso wrote Location and Land Use: Toward a
General Theory of Land Rent, which was first
published in 1964.
- William Alonso postulated the bid-rent theory.
ECONOMICS OF LAND USE
“The Economics of Land Use brings together the
most significant key areas of contemporary agricultural,
food and resource economics and land use policy.”
The study of land use is distinguished from the study of
other economic goods by three characteristics.
• Land is immobile
• Land is also heterogeneous
• Land can be in the public domain, have restricted or
open access, be held in common, or held privately in
part or in whole.

The economics of land use is not distinguished by

unusual behavioral hypotheses or by unique
methodology. The common behavioral hypotheses, such
as profit maximization, utility maximization, and risk
aversion, apply as much to land as to any other
economic good.

BID-RENT THEORY

- The Bid rent theory is a Geographical economic theory

that refers to how the price and demand for real estate
change as the distance from the central business district
(CBD) increases.

- The bid-rent distance relationship, which was

established by Alonso (1960), may be viewed as an
important theory relevant to residential location. Bid rent
theory (which you may alternatively see written out as
"bid-rent theory") builds upon very general urban
patterns identified by urban geographers:

- A city will include a central business district (CBD),

where most commerce takes place

- A city will include an industrial district, where most

manufacturing takes place.

- A city will include one or more outlying residential

districts.