Unit-I
Economic Geography
Economics:
Economics is the social science which studies optimum utilization of scarce resources. It basically studies economic activities, markets, allocation, money, capital, competition, resources, development, growth, welfare, well-being, poverty, deliberate, purposeful, rational, optimal, efficient, and many more.
We can also define the economics as
"Economics is the study of purposeful human activities in pursuit of satisfying individual or collective wants"
"Economics is the study of principles governing the allocation of scarce means among competing ends"
Geography:
When we think of Geography, we often use the following words or concepts: location, site, place, access, spatial, regional, distance, separation, proximity, speed, mobility, transportation, resources, communication, agglomeration etc.

Economic Geography:
What are the major factors that explain the recent growth of the Chinese economy and the relative decline of the United States economy? What explains persistent poverty in pockets of global cities such as New York, London and Tokyo, and what prompted the emergence of vast urban slums in Calcutta? What are the impacts of globalization on people’s jobs and livelihoods in different parts of the world? Explaining the causes and consequences of uneven development within and between regions is a central concern for economic geographers. The discipline’s goal has long been to offer multi-faceted explanations for economic processes – growth and prosperity as well as crises and decline – manifested across territories at various scales: local, regional, national and global. Contemporary economic geographers study geographically specific factors that shape economic processes and identify key agents (such as firms, labour and the state) and drivers (such as innovation, institutions, entrepreneurship and accessibility) that prompt uneven territorial development and change (such as industrial clusters, regional disparities and core – periphery).

A quick and simple definition of Geography thus may be: "the study of the way in which society organizes itself in space".Economic geography is the study of the location, distribution and spatial organization of economic activities across the world. It represents a traditional subfield of the discipline of geography. However, in recent decades, many economists have also approached the field in ways more typical of the discipline of economics.
Economic geography has taken a variety of approaches to many different subject matters, including but not limited to the location of industries, economies of agglomeration (also known as "linkages"), transportation, international trade, economic development, real estate, gentrification, ethnic economies, gendered economies, core-periphery theory, the economics of urban form, the relationship between the environment and the economy (tying into a long history of geographers studying culture-environment interaction), and globalization.
Economic geography is sometimes approached as a branch of anthropogeography that focuses on regional systems of human economic activity. An alternative description of different approaches to the study of human economic activity can be organized around spatiotemporal analysis, analysis of production/consumption of economic items, and analysis of economic flow. Spatiotemporal systems of analysis include economic activities of region, mixed social spaces, and development.
Alternatively, analysis may focus on production, exchange, distribution and consumption of items of economic activity. Allowing parameters of space-time and item to vary, a geographer may also examine material flow, commodity flow, population flow and information flow from different parts of the economic activity system. Through analysis of flow and production, industrial areas, rural and urban residential areas, transportation site, commercial service facilities and finance and other economic centers are linked together in an economic activity system.
"In Economic Geography, we study the (vocational, organizational and behavioral) principles and processes associated with the spatial allocation of scarce (human, man-made and natural) resources (which are also distributed spatially) and the spatial patterns and (direct and indirect, social, environmental and economic) consequences resulting from such allocations."
Thus, “Economic geographers study the principles governing the spatial allocation of resources and the resulting consequences".
History and Evolution of Economic Geography:
Over its history, economic geographers have considered various key geographically specific endowments as drivers of territorial development. In the early days of the sub-discipline, the economy was dominated by agriculture, and therefore climate and natural-resource endowments mattered significantly, as did labour supply. As industrialization advanced during the twentieth century, the focus shifted to the geography of firms and industries, factory wages, production processes, technology and innovation, the quality and skills of labour, and the role of the state in inducing and promoting industrialization. Most recently, emphasis has shifted away from geographically specific resource endowments in forms of tan-gible and quantifiable indicators towards research that focuses on often unquantifiable and intangible contributions to territorial development, and, in particular, social endowments such as institutions, networks, knowledge and culture. Analyses that recognize differences among agents have emerged, taking into account, among other things, race, class and gender. New research themes are also emerging, ones that focus for example on financialization, consumption, the knowledge economy and sustainable development.

Various interpretations exist on the origin and historical lineage of economic geography. Some argue that the earliest roots of economic geography were deeply linked to British colonialism, which necessi-tated the study of commercial geography to better understand and improve trade routes and modes of transportation (see Barnes, 2000). Others point to the Germanic location theories of Heinrich Von Thünen and Alfred Weber (who were then followed by Walter Christaller and August Lösch) as the roots of economic geography. Their goal was to develop optimal location patterns for the most efficient functioning of farms, factories and cities, given geographical endowments and acces-sibility (e.g. transport costs). Location modelling subsequently crossed the Atlantic, where it was incorporated into North American economic geog-raphy and became an important foundation of regional science, thanks to Walter Isard.
The history of economic geography was influenced by many theories, arising mainly from economics and geography.
Some of the first traces of the study of spatial aspects of economic activities can be found in seven Chinese maps of the State of Qin dating to the 4th century BC. Ancient writings can be attributed to the Greek geographer Strabo's Geographika compiled almost 2000 years ago. As the science of cartography developed, geographers illuminated many aspects used today in the field; maps created by different
European powers described the resources likely to be found in American, African, and Asian territories. The earliest travel journals included descriptions of the native peoples, the climate, the landscape, and the productivity of various locations. These early accounts encouraged the development of transcontinental trade patterns and ushered in the era of mercantilism.
Subsequently, the Great Depression and the catastrophe of World War II dramatically changed economic geography as imperial expansion ended and the extreme consequences of implementing deterministic concepts into policy and then practice became evident. World War II contributed to the popularization of geographical knowledge generally, and post-war economic recovery and development contributed to the growth of economic geography as a discipline. During environmental determinism's time of popularity, Ellsworth Huntington and his theory of climatic determinism, while later greatly criticized, notably influenced the field. Valuable contributions also came from location theorists such as Johann Heinrich von Thünen or Alfred Weber. Other influential theories include Walter Christaller's Central place theory, the theory of core and periphery.
Fred K. Schaefer's article Exceptionalism in geography: A Methodological Examination, published in the American journal Annals of the Association of American Geographers, as well as his critique of regionalism, made a large impact on the field: the article became a rallying point for the younger generation of economic geographers who were intent on reinventing the discipline as a science, and quantitative methods began to prevail in research. Well-known economic geographers of this period include William Garrison, Brian Berry, Waldo Tobler, Peter Haggett and William Bunge.
Contemporary economic geographers tend to specialize in areas such as location theory and spatial analysis (with the help of geographic information systems), market research, geography of transportation, real estate price evaluation, regional and global development, planning, Internet geography, innovation, social networks.

Approaches of the Economic Geography:
I.Institutional Approach of Economic Geography:
Institutional economic geography is dominated by scholars with a geography background and is akin to institutional economics (Hodgson, 1998). At the risk of oversimplification, institutional economic geography argues that the uneven distribution of wealth across territories is primarily related to differences in institutions (Whitley, 1992; Gertler, 1995; Martin, 2000). The new economic geography has been developed by neoclassical economists (Krugman, 1991; Fujita et al., 1999; Brakman et al., 2001), who view uneven distributions of economic activity as the outcome of universal processes of agglomeration driven by mobile production factors.
It highlights the importance of formal and informal institutions, technology, institutional embeddedness, and historical lock-in for understanding how development takes place in regions. Although these institutional theoretical concepts have been used primarily for explaining interregional differences in economic development, they soon became interesting as a theoretical basis for the development of innovative concepts in regional planning and policy.

First, institutional economic geography and new economic geography differ in methodology. Institutional economic geographers tend to dismiss a priori the use of formal model

ling. Instead, they apply inductive, often, case-study research, emphasising the local specificity of ‘real places’. Institutions are embedded in geographically localised practices, which implies that localities (‘real places’) are the relevant unit of analysis.

The following paragraphs provide a brief analysis of theoretical concepts from the institutional approach in economic geography that have been applied in regional planning and policy.

1. Institutions: Institutions are a focal point of the institutional approach in economic geography. The economy is strongly dependent on formal and informal institutions. Since institutions are place-specific and difficult to diffuse, they can be understood as an endogenous development factor responsible for the economic development or stagnation of regions. Therefore, appropriate institutional structure is of high importance for the successful promotion of regional development. Regions with a high level of trust are capable of developing innovations. They have better prospects for adapting to new development challenges (Saxenien, 1994).

2. Embeddedness: This theoretical concept was taken originally from economic sociology, but geographers introduced its spatial dimension. If the economy is embedded in social relations, then trust, collaboration and conventions have a key role in promoting regional development, while they enable exchange of knowledge and solving various challenges (Martin, 2005; Saxenien, 1994). Regional policy needs to introduce platforms that stimulate co-operation between different stakeholders in a formal and informal way. The latter might be difficult when regional planning is institutionally formalised, but there are informal networks of entrepreneurs in every region that can be used for increasing cohesion in the region. The geographical notion of spatial embeddedness also highlights the importance of geographical proximity. Therefore, regional agglomerations seem to be the right answer while planning spatial dimensions of regional development.

3. Geographical proximity: Geographical proximity stimulates formal and informal interaction between enterprises and other development stakeholders in a region (government and its offices, local and regional administration, development agencies, universities, technological centres, financial organisations, economic chambers, trade unions, nongovernmental organisations) resulting in trust, co-operation and knowledge exchange. Geographical proximity increases the efficiency of learning and developing innovations
(Cumbers at al., 2003) that are recognised as a key element for economic breakthrough.

4. Development of the economy :– evolutionism. Institutionalists are convinced that the economy is a social construct that is developing. For successful promotion of regional development it is necessary to understand that the production system is a result of historical processes. Therefore, it is difficult to change regional institutions (Saxenien,
1994).
5. Geographical diversity: There are important spatial differences in the characteristics of institutions; therefore, the institutional context differs between different regions causing differences in development dynamics (Pike at al., 2006). Regional policy instruments exercised in a successful region cannot be universally applicable in other regions. Every region needs to develop its own regional development approach.

6. Technology: According to institutional theory, technology stimulates institutional changes. Viewed from the regional planning and policy standpoint, innovations are necessary when trying to achieve sustainable economic and regional development (Martin, 2005).

7. Networking: Co-operation between companies reduces risks. Therefore, production networks are an organisational form that enables development (Storper, 1997). Regional development strategies should pay special attention to complementing already existing production networks or building new ones, for example, with foreign direct investment that fits well into the existing production structure.

8. Institutional thickness: This is a theoretical concept developed by economic geographers. It is defined through a number of organisations in a region with a high degree of mutual connectedness. Institutional thickness stimulates mutual co-operation on different projects. A mutually connected regionally specific organisational structure is a prerequisite for successful economic growth and regional development (Barnes, 1999).

II.New Economic Geographic Approach:
The new economic geography has been developed by neoclassical economists (Krugman, 1991; Fujita et al., 1999; Brakman et al., 2001), who view uneven distributions of economic activity as the outcome of universal processes of agglomeration driven by mobile production factors. The new economic geography aims to explain geographical patterns in economic activity from utility-maximising actions of individual agents. The New Economic Geography approaches the matter deductively using formal models based on ‘neutral space’, representative agents and equilibrium analysis.

First, they emphasize advantages of concentration which are unrelated to natural endowments. Hence, arguments of circular causation play a role, that is, dominance of regions is regarded as a self-reinforcing process that can be sparked off by a small event. Second, the whole approach has a distinct general equilibrium flavor. The interactions between different markets, between firms and their suppliers and customers, and the dual role of workers as production factors and consumers are emphasized. Third, the centripetal forces favoring agglomerations are weakened by counterveiling centrifugal forces. Fourth, microfoundations are important.

In particular, positive externalities are not assumed, they are derived from the interplay of transportation costs, increasing returns to scale and factor mobility. No single one of these aspects is new to spatial economics. This is particularly true for the point that there are potential advantages from geographical concentration of economic activity. For firms within industries, this point has been made by Marshall (1920, ch. 10) who distinguishes between advantages from having a larger local labour pool, from employing common non-traded inputs and from knowledge spillovers.

The Marshallian arguments do not rely on general equilibrium interactions; in fact, they are particularly suitable for explaining small-scale concentration of firms within specific industries. They may explain why cities or small areas without specific natural advantages in the production of certain goods become highly specialized in these goods: the more or less arbitrary decision of a small number of firms to locate in one region may induce others to follow. However, they can probably not explain the existence of vast agglomerations with firms from different industries.

With the rise of the New Economy, economic inequalities are increasing spatially. The New Economy, generally characterized by globalization, increasing use of information and communications technology, growth of knowledge goods, and feminization, has enabled economic geographers to study social and spatial divisions caused by the arising New Economy, including the emerging digital divide.

III.Evolutionary Economic Geography:
Evolutionary economic geography can be considered a third approach in economic geography. Evolutionary economists argue that “the explanation to why something exists intimately rests on how it became what it is” (Dosi, 1997: 1531). Rather than focusing on universal mobility processes underlying agglomeration (neoclassical) or the uniqueness of institutions in specific territories (institutional), an evolutionary economic geography views the economy as an evolutionary process that unfolds in space and time. In doing so, it focuses on the path-dependent dynamics underlying uneven economic development in space (Martin and Sunley, 2006). In particular, it analyses the geography of firm dynamics (such as the geography of entrepreneurship, innovation and extinction) and the rise and fall of technologies, industries, networks and institutions in different localities. In this view, uneven economic development requires an understanding of the Schumpeterian process of creative destruction at different levels of spatial aggregation (cities, regions, nations, continents).

An evolutionary approach to economic geography is different from new economic geography in that it attempts to go beyond the heroic assumptions about economic agents and the reduction of geography to transportation costs. At the same time, evolutionary economic geography also differs from institutional economic geography in that an evolutionary approach explains territorial differences not primarily by referring to different institutions, but from differences in the history of firms and industries residing in a territory. An evolutionary analysis may well take into account the role of institutions though, but in a co-evolutionary perspective (Nelson, 1995). Methodologically, evolutionary economic geography differs from both institutional and new economic geography in that it combines all research methodologies: case-study research, surveys, econometrics, theoretical modelling exercises and policy evaluation can, in principle, all be based on evolutionary theorising.