Economic Geography

Five economic geographies
Since human geographers began to take questions of theory, philosophy and
method seriously in the 1960s, Anglophone economic geography (globally by far
the most influential cluster of ideas) has experimented with at least five influen-
tial approaches, each with distinct perspectives on the question of geographically
unequal livelihood possibilities; location theory, political economy, the ‘cultural
turn’, feminist approaches, and geographical economics.
Location theory
August Lösch developed the radical position, for a German economist writing
during the Third Reich, that market mechanisms under the rules of perfect
competition could create a minimally unequal economic geographical landscape of
loosely hierarchically organized central places, taking advantage of scale economies
to deliver commodities at low prices (and minimal profits) to spatially dispersed
rational consumers (Lösch 1954 [1940]). More than any of the initial genera-
tion of German location theorists, he offered a vision of the invisible hand operat-
ing in space that was taken up by American and British economists, geographers
and regional scientists, to develop location theory in which competition organ-
ized the geography of production in a way that delivered the goods (so to speak)
to consumers. In this vision, the ‘economic’ in economic geography meant the
micro-economic (and later macro-economic) laws of economics, such as supply
12
Eric Sheppard

---

and demand curves and fully informed rational choice, and capitalism meant
simply market exchange. Notwithstanding this grounding in economic theory,
Lösch showed that geography did matter, in two ways. First, is morphogenesis;
economic mechanisms can produce a spatially differentiated economic landscape,
even when the geographical backcloth is undifferentiated (i.e. an unbounded
uniform plain). Second, space trumps economic theory. Perfect competition is
impossible on a uniform plain; rather imperfect competition prevails, with the
implication that capitalists make non-zero profits (unlike the zero profits of stan-
dard microeconomic theory), reducing consumer welfare. Nevertheless, competi-
tion minimized these reductions, as well as differences between the real incomes
of the most and least well off consumers (those closest and farthest, respectively,
from producers).
At the macroeconomic scale, and under the assumptions of mainstream
economic theory, regional scientists showed that unrestricted mobility of labor,
capital, know-how and commodities also generate spatial equilibrium outcomes that
tendentially minimize profits and equalize economic welfare across regions for
the average consumer. Together, these results had strong normative implications.
As Lösch (1954: 4) put it: ‘The question of the best location is far more digni-
fied than that of the actual location’. Inequalities in livelihood chances, defined
here in terms of consumer welfare, could be reduced through the proliferation
of market rationality, with the state intervening to address market failures due to
the spatial nature of public goods. Philosophically, this approach aligned itself
with the precepts of positivism, insisting on logical rigor and mathematical 
precision, and on observation as the independent arbiter of theory.