Christaller and Losch

This section looks at the central place theory developed by Christaller (1933) and Losch (1939) that build on Weber and Thunen’s theories. The central place theory is, however,

constructed under strict assumptions. Newer theories such as those developed by Isard (1956) and Alonso (1964) have been constructed under a more relaxed assumption in updating the central place theory. These newer theories will be discussed in the later sections of this chapter.

Christaller (1933) provided an empirical analysis to further explain and build on Weber and Thunen’s theories. Christaller studied a large number of market towns in South Germany where every group of market towns were focused on a larger administrative center. This center is also a market town, but is larger in scale and scope. This relationship continues as the smallest market towns are linked to the second smallest market town, and this second smallest market town is linked to the larger market town until the second largest market towns are linked to the largest market town. This hierarchy of relationship is the main point of Christaller. The inward centralistic manner of relationship shows that a hierarchy exists in the settlement pattern. Christaller also found that settlements of typical size tend to be spaced regularly. The empirical findings show that population of several sizes of typical settlements tend to bear a regular relation between each other, and the distances separating any pair of similar size settlements tend to increase by √3 as one proceeds from a given settlement size to a settlement of the subsequent higher size.

Losch (1938) added another important dimension to Christaller’s findings. Losch looked at the process of urban settlements by collecting additional empirical evidence.

His finding is also a rebuttal to Palander’s (1935) view that in the absence of pure competition in modeling spatial economics, general equilibrium can never be obtained.

Losch’s work features a highly simplified static model of a space economy that operates under monopolistic competition.

It is, however, important to note the strict assumption by Losch of a broad and homogenous plain economy with uniform transport features in all directions and with an even scatter of industrial raw materials in quantity sufficient to facilitate production activities. The economy also has a uniform distribution of agricultural workers as well as population that have the same set of tastes and preferences. Losch also assumed that each farmhouse is self-sufficient in the beginning and technical knowledge gets disseminated throughout the economy with production opportunities available to all the people.

Economies of scale is assumed to be the inducing factor for production of a commodity that is beyond the farmhouse’s basic needs. Thus, if the farmhouse finds production of a secondary or tertiary commodity to be profitable, it will produce the commodity to serve a certain market area that is depicted to take a circular form.

However, since production opportunities are available to all farmhouses, if a farmhouse finds it profitable to produce a commodity in surplus, so will the others, and thus the force of competition will eliminate excess profits and alter the market area. This alteration not only leads to smaller market size for each farmhouse, but also changes the shapes of the market.

Ultimately, the market area transforms from a circular form into a hexagon form.

The hexagon market area is seen as an ideal economic form of market area, and is sustainable because the net of the hexagonal market will completely cover any area under consideration. In contrast, a circular area will still leave empty untouched corners. Other possible shapes may be triangles, squares and octagons. But, only a hexagon deviates the

least from the circular form and at the same time allows minimization of transport costs in supplying a given demand. Thus, a hexagonal form has a circular form’s advantage of allowing maximization of demand from the population in the given area and at the same time, is better than the circular form because it does not leave any empty untouched corners.

As conceptualized, Losch’s argument is that for each commodity, the economy can be depicted in the form of a geometric plane that is dissected into a honeycomb or a net of hexagons of market areas. Losch further groups these honeycombs according to the size of the respective market units. The varying sizes and the relationship between the smaller and the larger markets create a system of nets that conforms to Christaller’s hierarchy of market centers.

The combination of the system of nets and the hierarchy of market area is well-known as Central Place theory. The strength of this theory is its ability to help simulate how shocks, shifts or changes in the economy can affect the economy from a spatial perspective. This effect takes place as producers, retailers and service providers from each hierarchy interact with one another in a vertical and horizontal manner. Horizontally, they interact with activities at the same hierarchy or size. Vertically, they interact with activities at the smaller and larger sizes or lower and higher hierarchies.

However, as discussed earlier, this theory is based on a very strict assumption of an even distribution of opportunities in a homogeneous place, which is contradictory to the fact that people tend to cluster in areas where more facilities and amenities are available. One way to overcome this possible drawback is to relax this assumption and to adjust the system of hierarchy with possible variations in opportunities along the

homogeneous plane. Despite this drawback, it is important to recognize the fact that Christaller and Losch provide an answer to how economies of scale and transport costs interact in determining the spatial structure of an economy.

Another possible drawback of Central Place theory, according to Krugman et al (2000), is its failure to explain how individual actions also play an important role in causing the hierarchy and how this hierarchy is sustained once created. The theory fails to acknowledge the fact that dynamisms in the economy may emerge from the actions of economic agents. Krugman et al (2000) suggest the use of Central Place theory as a classification scheme and a way to organize perceptions and data, but warn against using this theory as an explanation of the economy’s spatial structure.

2.3 Major Works on Spatial Economics in the 1950s and 1960s - The Classical