Location Theory, Regional Economics and Backward Areas

Location theory, in its earlier forms, had very little to contribute to the understanding of regional differences of economic activity. In the hands of Weber, and of those whose thinking primarily derived from Weber, the theory was essentially micro-economic. The problem that Weber and his followers set themselves was that of explaining the geographical location of the individual firm, assuming given physical locations of the necessary materials for production, assuming, if relevant, the existence of possible external economies in some locations, and assuming also — and most important — the location of the market to be served. The theory was micro-economic in the sense that the decision-making unit was by implication small enough for supply and demand to be treated as wholly independent of each other.