Agriculture & Location Theory – Chapter 13 Questions? Questions? Review Review 2 lectures left! 2 lectures left! Agriculture Agriculture Environmental ImpactEnvironmental Impact Von Thünen and Location theoryVon Thünen and Location theory
Environmental Impact of Contemporary Agriculture Monoculture: specialization on a massive scale Loss of fence-line diversity Riparian zone Intensive livestock Water quality Air quality Environmental goods and services
Von Thünen Location Theory Location Theory Model of land use Model of land use Prussian landowner (Pomerania) Prussian landowner (Pomerania) How net prices of farm products controls what crops are grown (i.e. agric. land use) How net prices of farm products controls what crops are grown (i.e. agric. land use) Important because Important because concept of economic rent concept of economic rent normative approach to location theory normative approach to location theory
Assumptions of Von Thünen’s Der Isolierte Staat Isolated agricultural region Isolated agricultural region Homogeneous in soil, climate, etc. Homogeneous in soil, climate, etc. Agricultural region served by a single market / central place Agricultural region served by a single market / central place Central place functions to sell and consume agricultural products Central place functions to sell and consume agricultural products Farmers will allocate land use to its highest and best use (most profitable function) Farmers will allocate land use to its highest and best use (most profitable function) Transportation costs are: Transportation costs are: Linear and proportional to distance in all directions (assume no terminal costs)Linear and proportional to distance in all directions (assume no terminal costs) May vary for different crops / commoditiesMay vary for different crops / commodities
Parameters of the Von Thünen Model Understand the role of: Understand the role of: DistanceDistance PricePrice YieldsYields Transport costs In defining the “Highest and best” use of land and hence allocation of land use on market principlesTransport costs In defining the “Highest and best” use of land and hence allocation of land use on market principles i.e. spatial variation in these factors
Definitions: Rent Surplus return to land after meeting all costs of production Producer surplus e.g. (market price – cost of production)Producer surplus e.g. (market price – cost of production) “ECONOMIC RENT” (ER) “ECONOMIC RENT” (ER) ER is a non-spatial conceptER is a non-spatial concept ER = p – c
Von Thünen Model Definitions: Definitions: “LOCATION RENT:” “LOCATION RENT:” “Economic Rent” that may be earned due to location of land.“Economic Rent” that may be earned due to location of land. Explicitly spatial concept Explicitly spatial concept Different land uses earn different rentsDifferent land uses earn different rents Rent depends on location relative to marketRent depends on location relative to market - transportation costs vary with distance - transportation costs vary with distance
Von Thünen Model LR = E (p – a) – E (f*k) Yield Price received (gross revenue) Location-specific production costs Transportation rate (e.g. $/ton-km) Distance of parcel from market Yield-specific gross revenue potential without spatial effects The role of geographic location in adding to total production costs and reducing revenues for given yield yield