Location Theory: ● He asserted that “all else being equal, manufacturers

will locate their plants either at the market or the

The Foundation of Planning and
source of the input depending on whether or not the
other Economic Theories and Models final product gains weight or loses weight in the
manufacturing process”.
Location Theory ● Weber formulated a theory of industrial location which
: the geographic location of economic activities industry located
: addresses the questions of WHAT economic activities are ● Formulated a theory of industrial location in which
located WHERE and WHY? an industry is located where the transportation costs
: rests primarily on the assumption that agents act in their of raw materials and final product is at a minimum
own self interest. Firms choose locations that maximize their (least-cost location). His model allowed for three
profits and individuals choose locations that maximize their types of locations: (1) raw materials locations, (2) a
utility. production site for final goods, and (3) a consumption
center
Early location theory was concerned with agricultural land
use, (Johann von Thünen) and with industrial location (Alfred Weber’s Weight-Losing Case
Weber). The weight of the final product is less than the weight of the
raw material going into making the product
Modern location theory has been concerned with the real
individual, rather than with rational economic man reflecting
the influence of behavioral geography.

David Ricardo

David Ricardo (19 April 1772 – 11 September 1823) was an

English political economist, and was one of the most influential Fig. 1 The processing plant is located somewhere between the
of the classical economists. His most famous work is his source and the market. The increase in transport cost to the
Principles of Political Economy and Taxation, wherein he left of the processing plant is the cost of transporting the raw
discussed his theories on labor value, rent and comparative material from its source. The rise in the transportation cost to
advantage. the right of the processing plant is the cost of transporting the
final product. Note the line on the left of the processing plant
: known for his differential rent theory based on fertility but has a steeper slope than the one on the right because the raw
he also gave "situation" as a possible cause of rent. material is heavier than the finished good.
Fig. 2 Situation if the processing plant is moved closer to the
“If all land had the same properties, if it were unlimited in source of raw material. Note that the transport cost of the final
quantity, and uniform in quality, no charges could be made for product delivered to the market is lower than in the previous
its use, unless where it possessed peculiar advantages of location. The optimal location of the processing plant is at
situation”. source of the raw material, as shown in Fig 3

• Economic rent: the difference between the produce Transportation cost for the product delivered to the market
obtained by the employment of two equal quantities of capital will be lowest of all if the processing plant is located at the
and labor source of the raw material.
: the payment over and above what is necessary to stay in
business Weber’s Weight-Gaining Case
The final product is heavier than the raw materials that
Alfred Weber requires transport

Alfred Weber (30 July 1868 – 2 May 1958), a German

economist, sociologist, and theoretician of culture. Works were
influential in the development of modern economic geography.
Author of Theory of the Location of Industries, studied
industrial location decisions, and built on von Thunen’s theory
by considering not only the costs of getting goods to market,
but also the costs of transporting material inputs to the The weight gaining case is illustrated in Figs. 4, 5 and 6. The
manufacturing plant. optimal location of the processing plant in this case is at the
market.
Considered Transportation cost as the direct function of the Transportation cost for the product delivered to the market
weight of the item and distance shipped. will be lowest of all if the processing plant is located at the
market.
Weber established that firms producing goods less bulky than Public action that seeks to assure livability and sound
the raw materials used in their production would settle near the development in the city as land is put to urban use. It involves
raw-material source. Firms producing heavier goods would the notion of control for public ends as they may be
settle near their market. The firm minimizes the weight it has to distinguished from private, economic and social ends. Public
transport and, thus, its transport costs interest values come into play in legalistic actions of formal
government organizations. This is referred to as "actions
William Alonso taken in the public interest." Among these concerns are:
● Extended the von Thünen model to urban land uses. 1. Livability
● His model gives land use, rent, intensity of land use, 2. Amenity
population and employment as a function of distance 3. Safety
to the CBD of the city as a solution of an economic 4. Convenience
equilibrium for the market for space. 5. Economy
● He postulated that there is an inverse relationship
between transportation cost and rent such that if There are other factors for consideration in deciding project
transportation cost is high, then the rent is low. developments but it must ensure that the highest and best
use* of land must be established and that the appropriate
development be pursued.

*HABU - use in a manner that provides an optimum return to

their operators and/or society. ·
- use for the purpose of which it has the highest
comparative advantage or least comparative
disadvantage relative to other uses.

• Need for planning and other types of land development (real

estate) due to population growth, migration patterns, etc.
He developed the "Bid-Price Curve": A set of combinations of
land prices and distances among which the individual is • Societal trends due to changing living patterns, changes in
indifferent (i.e. satisfied with the combination of land price as class structure, and changes in work conditions and lifestyles.
well as the distance at some point). - changes are brought about by new technology, e.g.
—-------------------------------------------------------------------- use of mass transit systems, new road systems, new
forms of communication, etc.
Land Use Determinants • Changing values and attitudes
- Growing awareness and appreciation of healthier
surroundings
Physical Determinants
- Requirements of people belonging to different social classes
The physical and natural features of the land may serve as one
(suburban neighborhoods vs.
of the considerations in assessing the land's capability and
downtown neighborhoods)
suitability to support certain uses, and can be considered as
determinants of land use decisions.
• Income
1. Topography
2. Geology
3. Climate
4. Soil
5. Bodies of Water AR 452_Planning 31nlro to Urban and Regional Planning
6. Environmentally Critical Areas Lecture Notes (Urban Economic Structure & Spatial
Growth Models)
Economic Determinants
The economic condition of the land and the surrounding area ECONOMIC STRUCTURE - the geographic location and
is an essential criterion in arriving at a development decision. distribution of activities within an urban or
Examples to this are the following: metropolitan area
1. Land Value Location ✓ All urban economic activities (Basic and Non-Basic)
2. Cost of Land Development compete for urban space - and some are more successful than
3. Increase/Decrease in Population others
4. Trends, Changes in Fashion and Tastes ✓ Because some urban economic activities are more
5. Changes in Technology competitive than others, these activities are typically found in
6. Changes in Money Supply similar kinds of urban location
7. Changes in Planning Controls ✓ Almost all cities exhibit the same pattern of urban economic
structure, with only minor variations from city to city
Public Interest
GENERAL PATTERNS IN URBAN ECONOMIC STRUCTURE
BY LAND USE

1. Central Business Center

o The city's center. The focus of transportation routes
and the foremost location of commercial, social and
business activities
o Retailing ranges from huge department stores to
small specialized shops
o The city's financial and organizational hub, with
large banks.office buildings, government centers, • With a background in human ecology theories, the model was
hotels and corporate headquarters the first to give the explanation of distribution of social groups
o The social and cultural life of the city also focuses within urban areas in concentric rings.
on the CBD (theaters, museums, restaurants, night • An urban version of Von Thunen's regional land use model
spots, etc.) developed a century later, it was based on a case study in
2. Wholesale and Light Manufacturing - surrounds the CBD Chicago in 1920s.
3. Low Residential Areas - a zone in transition. Often this is • Observations noted by Burgess:
where the slum areas are located, with population density very - A correlation between the distance from the CBD
high, poverty quite common, and crime being a serious and the wealth of the inhabited area (e.g.
problem. Wealthier families tended to live much further away
4. Medium Class Residential Areas - the independent from the CBDs)
working men's home - As the city grew, the CBD would then expand
5. High Class Residential Areas - the zone of better causing same effect lo the other rings
residences of high income families, where exclusive residential
districts are located, and population density is lower. Criticisms:
6. Heavy Manufacturing District • It assumes an isotropic plain - an even, unchanging
7. Commuters Zone - residential suburbs and exurbs outside landscape
city limits • Physical features - land may restrict growth of certain sectors
8. Outlying Business Districts; Residential and Industrial • Decentralization of shops, manufacturing industry, and
Suburbs entertainment
_ • Urban regeneration and gentrification - more expensive
property can be found in 'low class' housing areas '
• Many new housing estates were built on the edges of cities in
THREE (3) MODELS OF URBAN ECONOMIC STRUCTURE Britain
• II does not address local urban politics and forces of
1. THE CONCENTRIC RING MODEL globalization
Ernest Watson Burges (1886-1966) • The model does not fit polycentric cities, for example Stoke -
- An urban sociologist at the University of Chicago on Trent
2411 President of the American Sociological
Association (ASA) in 1934 2. THE SECTOR GROWTH MODEL
- Some of the books he wrote Homer Hoyt (1895 -1984)
> Introduction to the Science of Sociology - A land economist, real estate appraiser and a real
(1921, with Robert E. Park) estate consultant
> The City ( 1925, with Robert E Park and - Established the Homer Hoyt Institute’
Roderick D McKenzie) . - Some of the books he wrote:
> edited and published the Proceedings in Principles of Real Estate co-authored with Arthur
1935 under the title, 'The Human Side of Weimer, went through seven editions and he
Plannin” published in a variety of professional and academic
> conceptualized one of the earliest Journals.
theoretical models to explain urban social - proposed in 1939 a modification of the original work of
structures "The Concentric Ring Model" Burgess and developed the "Sectoral Model".
 Chauncey Harris (1914- 2003) & Edward Ullman
(1912-1976)
Chauncey Harris:
● was a pioneer of modem geography. Some of his
works are 'The Nature of Cities” and “Functional
Classification of Cities in the United States”
● published the “Annals of the American Academy of
Political and Social Science”, described a model that
had prophetic relevance for American cities in the
later 20th century.
● Accepted the existence of CBD, however suggested
that zones expand outward from the city center along Edward Ullman:
transport arteries. - an American geographer; proposed that trade was an
● Theorized that cities tend to grow in wedge - shaped interaction based on 3 phenomena: complementarity,
patterns emanating from the CBD and centered on intervening opportunities, and transferability of
major transport routes commodities
● It attempts to state a broad principle of urban - Ullman noted that while a city may have formed a
organization. The model explains an outward CBD, similar industries may have formed near it,
progression of growth. specifically those with common land use and financial
● Observations noted by Hoyt: requirements.
- Common for low-income households to be ● A good example would be hotels in airport locations.
near railroads while commercial ● The number and kinds of nuclei mark a city's growth.
establishments follow business ● Critical to this model is the observed increase in car
thoroughfares ownership resulting to greater movement.
- Recognition of various transport routes into ● Some concerns not addressed by the former models
an urban area (e.g. Railroads, seaports and can be seen here:
tramlines) meant greater access - Suburbanization and decentralization;
- Higher level of access meant higher land accommodation of irregularities; time
values dimension; flexibility
● A general rule: Hoyt for old cities; Burgess for recent ● Distinction of the CBD may not be too clear.
ones
—--------------------------------------------------------------------------------
Criticisms:
● The theory is based on early 20th century transport; CENTRAL
does not make allowance for privatization of PLACE THEORY WALTER CHRISTALLER
automobiles.
● Narrow focus: height of building; mixed land use WALTER CHRISTALLER
zones - A German Economist / Geographer that formulated
● Physical features - land may restrict growth of certain the central place theory in 1933 in his pioneering work
sectors “Central Places in Southern Germany”
● The growth of a sector may be limited by a leapfrog - He claims that there is an overall ordering theory that
approach explained the distribution of urban centers, or Central
● Notes that while a city may have formed a CBD, Places, as well as their size and number in a given
similar Industries may have formed near 11, region.
specifically those with common land - use and
financial requirements. CENTRAL PLACE THEORY
● A good example would be hotels In airport location. ● Explains the spatial arrangements, patterns and
● The number and kinds of nuclei mark a city's growth. distribution of urban areas and human settlements.
● Critical to this model is the observed increase in car ● Extends the idea to the case where there is a
ownership resulting to greater movement hierarchy of cities as well as a distinction between
● Some concerns not addressed by the former models urban and rural areas.
can be seen here: ● Settlements simply function as ‘central places’
- Suburbanization and decentralization; providing services to surrounding areas
accommodation of irregularities; time
dimension; flexibility URBAN HIERARCHY
● Distinction of the CBD may not be too clear. "Urban Hierarchy is based on the functions available in a city"
City
Town
3. THE MULTIPLE NUCLEI MODEL Market Town
 Village/Hamlet center served by the next higher order center including itself.
Boundary
● Higher-order places are more widely distributed and
fewer in number than lower-order 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

CONCEPTUAL ELEMENTS
Ranking/Order of Central Places
● HIGHER ORDER - Larger number of central
functions; bigger market area CRITICISMS
● LOWER ORDER -Lesser number of central ● An Isotropic Surface is rarely found in real world
functions; smaller market area. ● Behavior of consumer & seller are not always rational
● Humans are not always an optimizer rather a satisfier
Ranking/Order of Goods and Services ● The hexagonal pattern of the central place is rarely
● LOW ORDER - Those everyday use (Convenience found
Stores, Sari-Sari Stores) ● The theory is suitable primarily for agricultural regions
● MEDIUM ORDER - Those needed frequently but not because modern factors such as communication,
every day (Drugstores, Banks, Barber Shops) transport, etc. have reduced the distance between
● HIGH ORDER - Those needed occasionally buyer & seller
(Furniture Shops, Legal or Medical Services) ● The fixed value of K gives a poor approximation of
reality and all take
TWO BASIC CONCEPTS ● place together in real-world in urban areas
1. THRESHOLD - Minimum number of people required to
support any good or service outlet established at central place STRENGTH
2. RANGE - Maximum distance that a consumer is willing to ● clear and systematic explanation of the distribution
travel to obtain certain goods or services of cities and towns in a region.
If the good is to be produced and is to continue in production ● explain the economic relationships between different
RANGE > THRESHOLD sized settlements.
● Helps urban planners and policymakers to understand
ASSUMPTIONS the spatial organization of urban areas
● An even (flat) terrain ● framework for analyzing and predicting the behavior
● Evenly distributed population of consumers and producers in different settlements
● Evenly distributed resources ● has been found to be applicable in many different
● Similar purchasing power regions and countries around the world
● Preference for the nearest market
● Equal transportation cost (proportional to distance) WEAKNESSES
● Perfect competition ● Assumes a uniform and isotropic plain, which does
not exist in reality
SHAPE ● Ignores the impact of political and historical factors
on the spatial organization of urban areas
● Does not consider the impact of cultural or social
factors on the location and distribution of urban
settlements.
● Assumes that consumers will always choose the
closest and most convenient place to obtain goods
and services
● Does not account for the impact of technology on the
spatial distribution of settlements
THREE PRINCIPLES IN THE ARRANGEMENT
Hexagons of lower orders are nested within hexagons of
higher orders which is known as the Nested Pattern of —--------------------------------------------------------------------------------
Hierarchy
LOCATION THEORY
Christaller identified fixed relation between 2 connecting Johann Heinrich von Thünen
levels of hierarchy (Towns and Cities) that is the K value
Johann Heinrich von Thünen was born on June 24, 1783, in
K indicates the number of complementary area of lower order the Kingdom of Prussia was a practical, serious-minded,
Prussian landowner who was actively engaged in managing
his estates and economics. He is best known for his theory on
location in his book Der isolierte Staat or The Isolated State
(1826). He died on September 22, 1850, in Tellow,
Mecklenburg

LOCATION THEORY
Von Thünen’s theory of location is based on profitable or
commercial agriculture, which means that farmers are solely
focused on making a profit. Another important aspect of Von
Thünen’s theory is that it is one of the first to treat spatial
economics seriously. An important note to be made in von
Thünen’s location theory model is that he envisaged it before
the industrial revolution, which occurred in 1760. He was
mostly investigative on why farmers produce certain crops in
certain areas. His model explains that it is because of the cost
of land and transportation of the market that products are
produced in particular locations relative to that product’s
perishability, labor, and cost to transport.
- Transportation is “on the hoof”
Assumptions : Von Thünen developed a mathematical way to see the basics
1. The city is located centrally within an "isolated state" of the Theory of marginal productivity. He summarized it in a
2. The Isolated State is surrounded by wilderness. formula which
3. The land is completely flat and has no rivers or mountains.
R = Y(p-c)-YFm
4. Soil quality and climate are consistent
Where,
5. Farmers in the Isolated State transport their own goods to
R = land rent
market via oxcart, across land, directly to the central city .
Y = yield per unit of land
There are no roads
p = market price per unit of commodity
6. Farmers behave rationally to maximize profits. (Economic
c = production expenses per unit of commodity
man)
F = freight rate (per agricultural unity; per mile)
m = distance to market
Simplified Version
● First Ring (dairy farming)
Economic Rent - A formula that shows the advantage of a
- Fruit, vegetables, milk, and other dairy
piece of land over another.
products
- Perishable products
- Quickly transported before products LR = Y(m-c)-Ytd
- spoil
● Second Ring (forests) Where,
- Timber and Firewood LR = location rent per unity of land
- Very heavy and difficult to transport Y = yield per unit of land
● Third Ring (grains and field crops) m = market price per unit of land
- Crops (grains) c = production cost per unit of product
- Takes a long time to spoil and can take t = transport rate per unit of distance
longer to reach the city d = distance to market
● Fourth Ring (ranching and livestock)
- Livestock, meat 3 Distinct Aspects of Von Thunen's Model
● Land Values
- This aspect of von Thunen’s model shows that prices
go up when a particular piece of land is nearer or has
better access to the market. Values of land could get
so high that only farmers who can produce the
greatest yield could afford the land.
● Land Use Intensity
- Farmers on farmland nearer or adjacent to the central
market should use the land much more intensely to
be able to produce high revenues to afford being
situated there. This results in higher person-hour for
 central farms, thereby requiring larger hired-labor
forces.
● Transportation Costs
- The further away a product is from the market, the
higher the transportation cost. However, the cost of
land is then decreased since it is more peripheral
compared to if the land is closer to the urban center

The location of crops, according to him, is determined by:

(i) The market prices,
(ii) Transport costs, and
(iii) The yield per hectare

The transport cost varies with the bulk and the perishability of Strength
the product. The crop with the highest locational rent for the ● Influence on agricultural, economic, and urban
unit of land will always be grown, since, it gives the greatest geography
returns and all farmers attempt to maximize their profit. Two ● Economic hardships imprint patterns on thelandscape
crops may have the same production costs and yields but Weakness
differences in transport costs (per ton/kilometre) and market ● The model was abstract
prices influence the decision making of the farmers. If ● Absence of rivers, hillsides, mountains, climate, and
commodity A is more costly to transport per ton/kilometre and soil classifications
it has a higher market price, A will be grown closer to the Outdated
market than B. ● The model was obsolete
● Labor or transportation were old-fashioned
The Bid Rent Model ● No mention of cars, roads, railroads, and such
Diagram shows the comparison between Von Thünen's Land Lack of Social Components
Use Model and the Bid Rent Curve Theory of William Alonso. ● Recreation rather than production
The diagram shows the relationship between the land rent and ● Exclusion of certain farm products for cultural reasons
distance from the market, and the values according to different ● Government or private ownership of productive land
land use. for non-agricultural purposes
● Security issues such as areas controlled by rebel
groups
● Government price controls

Inference of Von Thunen’s Model to Continental United

States

FINAL MODEL
Zone I: Perishability products such as fresh milk and
vegetables
- Figure A represents what the agricultural land use
Zone II: Bulky product such as wood
would be if the most basic assumptions were applied,
Zone III: Crop farming mainly rye
namely the market located in New York (or
Zone IV: Used of seven-year crop rotation where rye occupied
BostWash), crops being ranked by comparative
only oneseventh of the land. Crops such as rye, barley, oats,
rent-paying abilities, and considering ubiquitous
pastures, and fallow. Products like rye, butter, cheese, and
geographical characteristics. Although this
occasionally, live animals
representation has some level of concordance with
Zone V: Three-field system, one-third of the land was used for
reality, it inaccurately portrays agricultural land use in
field crops (rye), another one-third for the pasture, and the rest
the United States.
left fallow.
- Figure B includes one supplementary assumption that
Zone VI: Livestock farming
considers climate variations, where the north is colder
than the south. This constraint has a significant
impact on agricultural land use as even if for a
location a crop would have a higher rent-paying
ability, another crop would be grown because climatic
conditions forbid it. The resulting agricultural land use
 has a much higher level of correspondence with
reality.

New York & Philadelphia

The remnants of the intensive farming and dairy industry
related to von Thünen rings near New York and Philadelphia
are still visible through traversing across New Jersey. Some of
the basic patterns and processes exist up until today and can
be outlined in the landscape. Von Thünen gave rye farming as
an example, by calculating the maximum possible distance
that rye could be cultivated from the city center and still be
cost-effective for the farmer.

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