1. VON THUNEN THEORY (Subject: Location and Spatial Analysis)
Belinda Ulfa Aulia, ST, MSc
DEPARTMENT OF URBAN AND REGIONAL PLANNING
2018

2. INTRODUCTION
If modern economics began with Adam Smith, modern location economics began with Von Thunen (1826).
He was the first to develop a basic analytical model of the relationships between markets, production, and distance. For this purpose he looked upon the agricultural landscape.
The relative costs of transporting different agricultural commodities to the central market determined the agricultural land use around a city.
The most productive activities will thus compete for the closest land to the market and activities not productive enough will locate further away.

3. BASIC ASSUMPTION
Isolation. There is one isolated market in an isolated state having no interactions (trade) with the outside.
Ubiquitous land characteristics. The land surrounding the market is entirely flat and its fertility uniform.
Transportation. It is assumed there are no transport infrastructures such as roads or rivers and that farmers are transporting their production to the market using horses and carts. Transportation costs are dependent of the type of commodity being transported to the market as well as the distance involved.

4. The pure isolated state over an isotropic plain (left)
The pure isolated state over an isotropic plain (left). In this case, the model takes a shape of perfect concentric circles.
The potential impacts of modified transport costs (a navigable river) and the presence of a competing center (right).

5. LAND RENT PRINCIPALS
The main concept is land rent or land value, which will decrease as one gets farther away from central markets.
Rent is highest in the closest proximity to urban markets. (Bid-Rent Theory)
Thus, agricultural products that have intensive land use, have high transportation costs and were in great demand would be located close to urban markets.
Bid rent – how much someone is willing to pay for a particular piece of land.

6. SO..
Dairying and gardening of fruits and vegetables would be closer to the urban market while…
Timber and firewood for fuel and building materials would be in the second zone.
Mixed farming, commercial grain and orchards and extensive cattle ranching would be located farther away. Transportation is cheap: the animals can walk to the city for butchering.

7. WHY..
Some products spoiled more quickly, needed more sensitive transportation, or generate higher prices at market→ These products mean the farmer can afford higher land rent.

8. The model compares relationships between production cost, the market price and transport cost of an agricultural commodity and is expressed as follows:
R = Y(p − c) − Yfm
R = rent p = production costs
Y = yield c = market price
F = transportation costs
m = distance to market

9. THE DEVELOPMENT OF VON THUNEN’S THEORY
Von Thünen’s (1826) analogy of agricultural development of a city was one of the first ideas that addressed the concept of centrality.
Von Thünen’s model represented the growth of the city as a self-organizing network possessed by a single centre or attractor.
The subsequent growth of the city would be formed in a hierarchical order of agglomerations represented in concentric rings from the centre outwards (Figure 1).
Based on Von Thunen’s agricultural land use model, Burgess developed the ‘concentric zone model’ in expanding the theory of having concentric ring patterns of urban zones of development.

10. William Alonso
William Alonso used von Thunen’s model to evaluate the cost of land in an agricultural region (or industrial center)
The farther away from the CBD, the less money people were willing to pay due to the limited access to the CBD
How can this be applied today?

11. Relationship between distance and rent values from the CBD taken originally from Von Thunen’s
agricultural analogy and Burgess’ Concentric Zone model of distribution of land uses.

12. The graph clearly shows that commerce is willing to pay the largest amount in rent to be located in the CBD.
Department stores and national chains are willing to pay the high rent, to get the footfall (and as such, turnover) that only the highly accessible CBD can offer.
Industry needs land available to build factories and as such, they are not willing to pay the high prices for the land within the CBD.
Area 3 is unattractive to commerce and industry and as such residential building does not get priced out of the running for land. Without the competition from industry and commerce, the land is cheaper and so it is possible to build larger houses with gardens.
The graph clearly shows that commerce is willing to pay the largest amount in rent to be located in the CBD.
Department stores and national chains are willing to pay the high rent, to get the footfall (and as such, turnover) that only the highly accessible CBD can offer.
Many stores in the CBD maximise their square footage by building plenty of levels (stories) to their store.
The rent that commerce is willing to pay is the steepest line on the graph - which means the amount of rent commerce is willing to pay declines quicker per kilometre out of town, than any of the other land uses.
Industry needs land available to build factories and as such, they are not willing to pay the high prices for the land within the CBD. As long as Industry sites are within easy distance of the CBD, to make use of the communication and market place, they are willing to pay to be on outskirts of the CBD.
Area 3 is unattractive to commerce and industry and as such residential building does not get priced out of the running for land. Without the competition from industry and commerce, the land is cheaper and so it is possible to build larger houses with gardens.

13. THANK YOU

14. References
Adisasmita, Rahardjo Pengembangan Wilayah: Konsep dan Teori. Edisi 1. Graha Ilmu. Yogyakarta
Bendavid-Val, Avrom Regional and Local Economic Analysis for Practitioners. Praeger Publishers. New York.
Eiselt, G.A. Vladimir Marianov, Eds Foundations of Location Analysis. Springer. New York.