Land Use Model of Von Thunen
- Johann von Thunen created perhaps the first known spatial economic model on land rent using observations he had experienced. It was presented in the book – ‘The Isolated State’ (1826)
- Von Thunen established the first major discussion of spatial economics and economic geography, linking it to the rent theory.
- The von Thünen agricultural model was an attempt to answer the problem of balancing the cost of land rents with the most effective crops to grow.
Assumptions of Land Use Model of Von Thunen
Land Use Model of Von Thunen was created before industrialization, the key assumptions in the classical model are:
- A city is centrally located in an “isolated state,”
- One of the surrounding areas around a town is wilderness,
- Land is generally flat,
- Soil quality and climate are consistent,
- Farmers transport goods to a market using mainly carts, and
- Farmers behave rationally in choosing where to conduct their activities.
There are generally four main circles around the city that consist, from nearest to a town and moving outwards: 1. intense farming, 2. forest lands, 3. extensive farming, and 4. grazing.
The model generally explains the variation of land rent and market activity of a region around towns as rent prices for land are high near a city.
- According to the model, a commercial farmer initially considers which crops to cultivate and which animals to raise based on market location.
- Farmer takes into account two costs: cost of land v. cost of transportation
- The goods that are expensive to ship or are perishable will be closer to the central city while the goods that need lots of land or are inexpensive to ship will be farther from the central city.
While in many respects the model seems out of date, and not to mention focused heavily on a limited type of town or city with a surrounding landscape of central Europe, there are key concepts relevant for modern spatial economics.
Distance to market for given goods does have a relationship with profitability, which von Thunen’s model demonstrates clearly. Similarly, land use intensification does appear to have a relationship in countries where agriculture and grazing play a prominent role in the economy.