The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Location of Economic Activity

  • M. J. Beckmann
Reference work entry


Location theory develops principles for determining where the various economic activites take place. It was focused on the location of types of land use in agriculture (von Thünen 1826) before addressing the emerging problems of the locational concentration of ‘heavy’ and related industries (Launhardt 1882; Weber 1909) and the shifts of industrial production locations induced by the railroad system and the growth of international trade. The first systematic treatment of industrial location theory was due to Alfred Weber (1909). Location theory was treated as a branch of price theory by Engländer (1924) and Predöhl (1925). This development culminated in Palander’s theory of imperfect competition in spatial markets (1935). A. Lösch (1940) expanded the scope of location theory to include the location of services in ‘central places’, a concept due to W. Christaller (1933), of trade flows and of transportation networks. The systematic study of the location of consumers (households or residential land use) had to await the development of the ‘new’ urban economics (Alonso, Mills, Beckmann). A macroeconomic perspective of locational problems was provided by regional economics – the study of regional differences in population, output, income, capital and growth (Isard 1960). The development of methods for the actual calculation of the optimal location for single facilities or systems of facilities (warehouses, assembly plants, Disneyland, etc.) was undertaken independently of economics by operations researchers, utilizing such new tools as linear and integer programming which are appropriate when the search for optimum locations is restricted to a finite set of points on a grid or in a network (nodes).

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • M. J. Beckmann
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  1. 1.