Document file:///D|/Export1/www.netlibrary.com/nlreader/nlreader.dll ...

Document
0045-01.gif
Page 45
where Y is the income or purchasing power of a particular market. The relationship to the gravity model
is obvious. But aside from that sort-of-formal justification, it is not hard to believe that some index
along these lines ought to be at least helpful in understanding where firms locate-after all, surely it is in
fact the case that firms try to locate where access to markets, defined somehow or other, is good.
Now it turns out that market potential does indeed "work," in the sense that indices of market potential
do seem to have quite a lot of power to explain the location of industry across the United States (or
Western Europe) and the location of particular activities within urban areas. (In the 1950s Harris [1954]
and others drew striking maps of market potential surfaces for the United States, which showed a clear
correlation between high market potential and the concentration of industry in the manufacturing belt.
More recently, market potential studies for the European Commission have led to similar maps that
show a clear relationship between "centrality" and per capita income.) And unlike the rigid structure of
Weberian location theory, the market potential approach lends itself readily to application.
So here is a puzzle: the "social physics" approach to spatial economics offers plausible stories, some
striking empirical regularities, and a useful basis for empirical work. It can even be used as the basis for
some ad hoc equilibrium models, as I'll describe later. So why isn't this approach part of the economist's
standard toolbox?
file:///D|/Export2/www.netlibrary.com/nlreader/nlreader.dll@bookid=409&filename=page_45.html [4/18/2007 10:30:14 AM]