Spatial economics

Regional economics is a sub-discipline of economics and is often regarded as one of the fields of the social sciences. It addresses the economic aspect of the regional problems that are spatially analyzable so that theoretical or policy implications can be derived with respect to regions whose geographical scope ranges from local to global areas.

Regional economics has shared many traditions with regional science, whose earlier development was propelled by Walter Isard and some economists' dissatisfaction with the existing regional economic analysis. Despite such a rather critical view of regional economics, however, it is hard to be denied that the "economic" approach to regional problems was and has been the most significant one throughout the development of regional science. As a sub-discipline of economics, it has also developed its independent traditions and approaches that conform with the subject matter or perspective of economics.

Location theory, that had been separately developed in Germany and North America in the early 20th century, and the theory of external economies from "localized industries" (as described in Alfred Marshall's Principles of Economics (1890)) formed the theoretical basis of regional economics, which has played a central role in regional science. As the preface and the contents of August Lösch's Die räumliche Ordnung der Wirtschaft (Jena: Gustav Fischer, 1940; 2nd ed., 1944), whose English translation was made in 1954 by W. H. Woglom under the title of The Economics of Location, consistently showed, economic approach to (industrial and consumer) locations has been central in both regional economics and regional science. Harold Hotelling's spatial approach to economic competition, which was introduced in The Economic Journal in 1929 under the title of "Stability in Competition," and Edgar M. Hoover's Location Theory and the Shoe and Leather Industries (1937) and The Location of Economic Activity (1948) were United States scholars' representative contribution to theorizing and empirically verifying the regional problems from the viewpoint of economics. In his seminal paper, "Increasing Returns and Economic Geography," Journal of Political Economy, Paul Krugman (1991: 498) emphasized the importance of economic geography and regional economics for enriching economics concluding it with his statement of scholarly hope as follows: "Thus I hope that this paper will be a stimulus to a revival of research into regional economics and economic geography."

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