Alfred Weber’s Least
Cost Theory of
Industrial Location
Hyeran Park
Alfred Weber
•
Early 20th century German economist.
•
Born on1868 and died on 1958.
•
Set out to predict and explain where factories would choose to located
and grow.
•
Studied the locations of agricultural activities.
•
Published Theory of the Location of Industries in 1909.
Least Cost Theory
•
Predicts where industries would locate based on the places that would
be the lowest cost to them.
•
Industries wanting to locate where transportation costs are minimized
must consider two issues: the distance of transportation to the market
and the weight of the goods being transported.
•
Main Idea:

Cost of Transportation

Proximity to Market

Proximity to Raw Materials
Principles of Location
•
Raw materials
•
Labor supply and cost
•
Processing costs
•
Markets
•
Transportation costs
•
Government policies
•
Human behavior
Assumptions in Weber’s Model
•
Transportation cost is determined by the weight of the goods being
shipped and the distance they are being shipped and the distance they
are being shipped.

The heavier the good and/or the farther the distance, the more expensive it is
to ship.
•
Industries are competitive and aim to minimize their costs and maximize
their profits.
•
Markets are in fixed locations.
•
Labor exists only in certain places and is not mobile.
Break of Bulk/Transshipment Point
•
•
A point where there is a need to change mode of transport due to

Physical Reason - Port

Artificial Reason - National Boundaries
Costs rise each time cargo has to be loaded and unloaded

Ship: the cheapest

Rail: next cheapest

Truck, or

Air: most expensive
Transportations
Different Modes of Transportation
Transport Cost/Freight Rate
•
Structure of transport cost
Weber’s Industrial Model
•
Considering a product of w(M) tons
to be sold at market M, w(S1) and
w(S2) tons of materials coming
respectively from S1 and S2 are
necessary. The problem resides in
finding an optimal factory location
P located at the respective distances
of d(M), d(S1) and d(S2).
Criticism of Weber’s Model
•
Weber’s theory does not identify the fact that:

Markets and labor are often mobile.

Labor force varies in…
age, skill sets, gender, language, and other traits.
•
Some transportation costs, unlike in Weber’s model, are not directly
proportional to distance.
•
Important factors neglected

Profit

Diseconomies

Technology

Institutional and Behavioral Factors
Impact of Technology
•
•
•
Production

Use less amount of raw materials and/or power

Use of substitutes (raw materials or power)
Transport

Lower freight rate

Refrigeration

Standardization (use of containers)
Automation

Less labor and skilled labor
Cited Sources
•
http://www.sjsu.edu/faculty/watkins/weber.htm
•
https://people.hofstra.edu/geotrans/eng/ch2en/conc2en/weberlocationtria
ngle.html