INTRODUCTION

In this book, we have studied cities from several different perspectives, for they constitute the most visible and important facet of the phenomenon of economic agglomeration. However, we have left untouched one important issue, namely, the location of cities. Under the assumption of costless intercity trade, cities are like floating islands, and their location is irrelevant. For many purposes, this has been a convenient simplifying assumption. However, because the central concern of this book is to bring back space into economics in its many aspects and dimensions, we cannot end our quest without exploring the question of where cities are established, and why. More important, such issues are likely to be crucial for the future of our economies. In an increasingly borderless world economy, the location of prosperous and growing cities should increasingly become a critical factor in the determination of people's well-being.

If the location of cities in the real world were arbitrary, it would be hopeless (and useless) to develop a theory about the location of cities. The reality, however, is quite the opposite. In fact, over the past century, economic geographers and historians have tirelessly advocated the surprising regularity in the actual structure of urban systems observed throughout the world, and so at different time periods (see, e.g., J. Marshall 1989, chap. 5; Hohenberg and Lees 1985, chap. 2). This effort has culminated in what is called “central place theory,” as pioneered by Christaller ([1933] 1966) and Lösch ([1940] 1954).