Location and the Theory of Production Get access Leon N. Moses Leon N. Moses Harvard University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 72, Issue 2, May 1958, Pages 259–272, https://doi.org/10.2307/1880599 Published: 01 May 1958

T HIS paper contains a model that emphasizes the intimate connection between interregional trade and the location of economic activity. The author has blended input-output and linear programming techniques in order to achieve substitution and optimization within a general equilibrium framework. What emerges is a multi-region, multi-commodity, empirical study in comparative advantage. To the author's knowledge, it is the first such study. The Census regions of the United States are the areas analyzed. However, the model can be applied to most groupings of regions for which transfer costs rather than artificial restrictions are the major impediments to trade. It also seems likely that a related approach could contribute to understanding the problems of adaptation which confront members of the European Common Market and other contemplated economic unions. As mentioned above, the model synthesizes two approaches to interregional analysis: linear programming as applied to transportation problems, and regional input-output methods. These two techniques have been applied to quite different problems in the past. Three things are taken as given in the typical linear programming transportation study: (i) quantities of a specified good that are available at a number of originating points; ( 2) quantities of the good that are required at a number of destinations; (3) the cost of transporting a unit of the good from each origin to each destination. The problem is to find a network of trade which will satisfy the requirements with a minimum total expenditure on transportation. Thus, the transportation model concentrates on an individual good and sDecifies nothingz so far as interindustry relationships are concerned. It begins with known regional production and consumption and determines the network of trade for a specified good. Regional input-output techniques emphasize the interconnections between industries. Their aim is to determine outputs and requirements of all goods in all regions. To accomplish this, these studies have found it necessary to make assumptions regarding patterns of trade. In one way or another they have treated trade patterns as a datum. It is precisely this aspect of regional input-output analysis that is changed in the present study. Trading patterns as well as regional outputs and requirements of all goods are determined. The model involves the introduction of alternative production techniques and substitution into input-output analysis. This substitution takes place between regions. However, the model can be adapted to permit substitution between industries and between different technological layers of the same industry. The paper is divided into three sections. The first contains a description of the basic model. The second contains a brief explanation of the data and computational difficulties and how these difficulties were overcome by making adjustments in the model. The final section contains some of the empirical results and an analysis of these results. Thus, the first section will help the reader to comprehend more readily the empirical analysis and the reasons behind some of its restrictive assumptions. It also brings to light certain important issues which the empirical analysis must ignore. The second section, on the other hand, will help the reader to understand the process whereby the conceptual scheme was converted into an empirical study.

N previous issues of this Review,1 one of the present authors presented material to demonstrate the occurrence of a seventeen-toeighteen year cycle in the development of the United States for the period I825-I933. This cycle was designated the transport-building cycle and was found to exist in such comprehensive and strategic series as transport development, immigration, urban population growth, bituminous and anthracite coal production, pig iron production, wholesale prices, and building, and in the general growth of Chicago. At approximately the same time as that material was presented, the outstanding work of Professor Edwin Frickey, Economic Fluctuations in the United States,2 appeared in which the conclusion was reached that within the geographic and temporal setting, of the study, there is analytical evidence of the presence of one, and only one, definite pattern of fluctuation. 3 And a few years later the monumental volume, Measuring Business Cycles, by Professor Wesley Mitchell and Professor Arthur Burns 4 was published in which the authors maintained that there was no compelling reason at the present time, nor even any real justification, for organizing cyclical measures of our time series on the assumption that business cycles undergo cyclical swings within periods of long building ' which periods correspond closely to the periods of transportbuilding cycles. In the light of such statements by these authorities, the existence and significance of transport-building cycles might be doubted, a priori. But upon further scrutiny, the statistical material embodied in Frickey's study is found to lend considerable support to, rather than discredit, the hypothesis of transportbuilding cycles in United States experience. And further it is found that Burns and Mitchell arrive at the cited conclusion by employing a test which is neither good nor relevant. First consider Frickey's data. For his series to show evidence of a transport-building cycle, averaging roughly seventeen-to-eighteen years in duration, it might be expected, following Schumpeter's and Hansen's classifications of cycles, that each transport-building cycle should include two Juglar 6 or major 7 cycles. Further, since it has been maintained that the correspondence is of such a form that the depression phase of every other Juglar or major cycle coincides with the depression phase of a transportbuilding cycle,8 it should be expected that in series in which Juglar or major cycles are superimposed upon transport-building cycles, every other Juglar or major cycle depression would be unusually severe and long. More specifically, since Frickey's study covers the period i866I9I4, and since troughs of transport-building cycles have been observed to have occurred roughly during the years, I860-64, I875-79, I894-Io90, and I9I4-i8, depressions of unusual length and severity should be expected in various time series some time during the years I875-7Q and I8Q4-I90oo.9

A large literature has grown up in urban economics in the last decade. It can be broadly classified into: 1) studies of the growth, composition (industry and population), and spatial form of urbanized areas; and 2) analyses of problems such as congestion, discrimination in housing and employment, and the fiscal difficulties of cities. This paper concentrates on the former, where the contributions from other disciplines have been as important as those from economics. Part One of the paper deals with models of growth and intra-urban land use. Part Two is devoted to urban simulation and efforts to build large scale statistical models for analyzing, among other things, the impact of alternative government policies on patterns of urban development.

This paper takes a fresh look at discrete choice theory by observing that decision makers can deliberately blend discrete alternatives within an extended planning honrzon. Multinomial logit and generalized probit models are developed and their properties examined. These are then estimated and compared to the traditional myopic model using the travel diaries of a sample of commuters from Seoul, Korea. The new models yield travel cost elasticities which are substantially lower than those of the traditional approach.