German Roots of Regional Science - Regional Science Matters - page 90

or agricultural economist. His main concern was income distribution. In particular he
was plagued by the Malthusian proposition that the wage of workers would always
have a tendency to fall back to the minimum of existence, the level that does not
allow the workers' families to live, but only to prevent them from dying. He gave the
first satisfying answer to the positive issue of income distribution by developing the
marginal productivity theory of income distribution, and he also suggested a norma-
tive answer engraved in his tombstone. It says that the natural wage is the geometric
mean between the subsistence wage and the average product. This formula has been
subject to much debate and misunderstanding, but space prevents me from touching
this interesting debate [see Dorfman ( 1986 ), and Samuelson ( 1986 )].
Nor am I able to pay homage to the many other achievements not mentioned so
far. Th¨nen invented the modern style of abstract economic reasoning. He was the
first to apply differential calculus in economics. He also was the first scholar whom,
to use a modern term, we can call an econometrician. He never introduces a
functional relation like pulling a rabbit out of the hat. He always calibrates it with
real data, experimenting with different functional forms, among them a
generalisation of the function reinvented 80 years later by Paul Howard Douglas
and Charles Wiggins Cobb, the famous Cobb-Douglas function. Th¨nen had a clear
perception of the theory of externalities and public goods, he developed first ideas
on dynamic optimisation (when to cut a tree) (Th¨nen 1863b ; English edition
2009), he wrote on the economics of politics (conscription and the cost of war),
on population policies and more.

7.3 Roscher

Born 1817, Wilhelm Roscher grew up in Hannover and studied humanities in
G¨ ttingen. He is one of the most prominent representatives of the Older Historical
School , a group of economists who were sceptical about the possibilities to derive
laws of general validity from deductive reasoning. They set up a research program
aiming at deriving regularities in the economic process from a careful study of
historical developments and actual data. In this context they gathered, classified and
systemised a huge body of empirical material. Despite their scepticism with regard
to deductive methods, their interpretation of the data is by no means merely
descriptive or “theory-free”. As a matter of fact, in his interpretations Roscher
developed a marginal productivity theory of factor pricing essentially not different
from Th¨nen's or from the modern macro version of neoclassical factor price
theory. Albert Sch¨ffle, another representative of the Older Historical School ,
also contributed to spatial economics (Sch¨ffle 1873 ).
Roscher published a short but extremely dense piece on regional economic
development. It dates from 1865, but is accessible only as a chapter in his Ansichten
der Volkswirtschaft aus dem geschichtlichen Standpunkte 2 (Roscher 1878 ). This

2 Economic views from a historical perspective.