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This is a remarkable list. Interestingly, in the entire extensive literature on
agglomeration and dispersion one does not find any reference to this chapter of
von Th¨nen until Massa Fujita's citation in a working paper (Fujita 2011 ).
Comparing the list with the modern literature, its coverage is striking, and many
modern authors neglect some important items in the list. In particular items 5 and
6 receive less attention in modern treatments than they should (Duranton and Puga
2004 , being a notable exception). Th ¨ nen also drew the conclusion that horizontal
interaction between firms reinforces the agglomeration tendency and leads to
industrial clusters. And last but not least, he also predicted that the building of
railway lines will favour the agglomeration in large cities. His arguments could
serve as a concise summary of the predictions made by a continuous space version
of a modern NEG model.
Though Th¨nen well understood the mechanisms behind concentration and
dispersion, he did not try to extend his model to an endogenous agglomeration
model. Today we know that within his framework he would not have succeeded.
Starret's ( 1978 ) impossibility theorem tells us that an endogenous division of labour
across space and positive transport costs are incompatible with homogenous space
and price-taking. Agglomeration in homogeneous space implies scale economies
which in turn imply imperfect competition. In Germany the theory of imperfect
markets had to wait until Launhardt gave the first satisfying account of it
(Launhardt 1885 ), being, like Th¨nen, far ahead of his time.
Admittedly, the list of agglomeration economies has one obvious and important
omission: learning externalities. Though the second part of volume 2 of the Isolated
State offers deep insights into human capital theory (Th¨nen 1863a ,
4, Sects.
9 and 10), from Th¨nen's rural perspective the role of cities in innovation does not
seem to have been obvious enough. The twin pair agglomeration and innovation is
however at the core of the writings of Wilhelm Roscher to whom I turn later.
Th ¨ nen's digressive style and the fact that his writings were for a long time not
available in English have restrained economists in general and spatial economists in
particular from fully exploiting his ideas. The next fundamental step in theory based
on von Th¨nen was William Alonso's invention of the monocentric city model
(Alonso 1964 ) that was seminal to an entire field of research, modern urban
economics. It remains a mystery why this took a whole century though the idea is
clearly and precisely stated in von Th¨nen: “Exploring more deeply the reasons
why housing rents increase towards the city centre, we find them in labour savings
as well as higher convenience and lower time cost of business; we thus find that
housing rent and agricultural rent are governed by the same principles.” 1
Though Th¨nen's fame largely stems from his contribution to spatial and
agricultural economics it is completely misleading to classify him merely as a spatial
}
1 “Forschen wir den Ursachen, warum die Grundrente der H¨user nach der Mitte der Stadt hin
immer mehr steigt, genauer nach; so finden wir diese in der Arbeitsersparung, der gr¨ßeren
Bequemlichkeit und der Verminderung des Zeitverlustes bei der Betreibung der Gesch¨fte; wir
finden also, dass die Grundrente und die Landrente durch ein und dasselbe Prinzip reguliert
werden” (Th¨nen 1826 , p. 210).
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