Alfred Weber

Alfred Weber (born July 30 1868 in Erfurt - died May 2 1958 in Heidelberg) German economist, sociologist and theoretician of culture and his work was influential in the development of modern economic geography.

Least Cost Theory

Alfred Weber formulated a least cost theory of industrial location which tries to explain and predict the locational pattern of the industry at a macro-scale. It emphasizes that firms seek a site of minimum transport and labour cost.

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The point for locating an industry that minimizes costs of transportation and labor requires analysis of three factors:

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1. Material Index

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The point of optimal transportation based on the costs of distance to the "material index" - the ratio of weight to intermediate products (raw materials) to finished product.

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In one the weight of the final product is less than the weight of the raw material going into making the product, is the weight losing industry. Such as the copper industry and it would be very expensive to haul raw materials to the market for processing, so that manufacturing occurs near the raw materials. (Besides mining, other primary activities (or extractive industries) are considered material oriented; timber mills, furniture manufacture, most agricultural activities. Often located in rural areas, these businesses may employ most of the population. As they leave entire cities lose their economic base.)

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In the other the final product is heavier than the raw materials that require transport. Usually this is a case of some ubiquitous (available everywhere) raw material such as water being incorporated into the product. This is called the weight-gaining industry.

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2. Labor

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The labor distortion, sources of lower cost labor may justify greater than transport distances and becomes the primary determinant in production.

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A. UNSKILLED LABOR ?industries such as the garment industry require cheap unskilled labor to complete activities are not mechanized. They are often termed "ubiquitous" meaning they can be found everywhere. Its pull is due to the availability of low wages, little unionization and young employees (few healthcare costs).

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B. SKILLED LABOR - High tech firms, such as those located in Silicon Valley, require exceptionally skilled professionals. skilled labor is very scarce and often difficult to find, high education standard are often required.

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3. Agglomeration and deglomeration

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Agglomeration is a phenomenon of spatial clustering or concentration of firms in a relative small area. The clustering and linkages allow individual firms to enjoy both internal and external economies. Auxiliary industries, specialized machines or services used only occasionally by larger firms tend to locate in agglomeration areas, not just to lower costs but as necessity for finding sufficient customers.

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Deglomeration occurs when companies and services leave because of the diseconomies of industries? excessive concentration. Firms can achieve economies because of the increase in scale of industrial activities benefited from agglomeration. However, after reaching the optimal size, local facilities may become over-taxed, lead to an offset of initial advantages and increase in PC. Then the force of agglomeration may eventually be replaced by other forces which promote deglomeration. (Diversification of an industry in the horizontal relations between processes within the plant.)

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