Transport Costs in Space—Geographical Models and Contradictions

Abstract

Economists work with theories and models to depict the correlation between supply and demand. This all happens in a world where the provision of goods and services necessitates efforts and costs. In cooperation with economists—or on their own—economic geographers and spatial scientists add the element of space in their visions and models. They know that distances have to be covered in order to bring any good and most services to the consumer. Classical researches, namely H. von Thuenen, A. Weber, A. Loesch, and more recent scientists like E. Ullman, R. Abler, J. Adams and P. Gould and P. Dicken thus developed a vision of interactions in space, where transportation costs played a notable role. They helped to define optimal locations for producers (and consumers) in a homogenous or variably equipped economic landscape. A current look at such models proposed in the last 150 years gives the impression that classical and neoclassical spatial models have lost their relevance. Shrinking transportation costs and even a “collapse of time and space” have ironed out spatial differences and the protective effects of previous high transportation costs. Is this the end of all distributive and delimitating models which were based on distance and transport efforts, as voiced by some of today’s analysts? A solution comes from the findings of modern marketing approaches. Our Fig. 1.1 combines the marginal costs concept, based on the economies of scale, with the reality of segmented markets. Protected or trusted items fetch a better price, and this generally happens in the relative proximity to the producer. In contrast, when considering the economies of scale the supplier will be able to cope with lower revenues per unit in more distant markets. Transportation costs still do exist, but they are hidden behind current market strategies. With a coming perspective of increasing transportation costs again, resulting from rising energy prices, the relevance of transport- and trade-off models may appear again in the real world of producers and consumers. Open image in new window Fig. 1.1 The global decrease in transportation costs 1920 (=100) to 1990 (index of real prices)