Equilibrium versus Understanding: Towards the Restoration of Economics as Social Theory

By Mark Addleson | Go to book overview

8

MODELS OF INDUSTRIAL LOCATION

DECISIONS AND LOCATION THEORY

In this, the ‘applied’ half of the book, my object is to explore how the two languages of social theory ‘explain’ decision-making. The exercise will help not only to identify the limitations of the third-person perspective but also, and more importantly, to illustrate what it means to adopt a first-person perspective. While my interest lies in business decisions of all types, I will use the issue of industrial location and location decisions as the vehicle for pursuing both objectives. The theory of industrial location is unfashionable amongst economists today, although it is less so with industrial geographers who have continued to develop a ‘behavioural’ theory of location, and it is as well to explain my reasons for using it.

One important reason is that in the economic theory of location we find a well-developed theory, about decision-making, which is built upon neoclassical foundations. Orthodox theorists sometimes adopt the position that neoclassical equilibrium theory is not about practical problems (see, for example, Arrow and Hahn 1971:vi-viii). In the case of location theory, however, such arguments carry little weight, since the formulators are certainly of the opinion both that their frameworks are serviceable and that their analyses have a direct bearing on the problem of finding suitable locations for industrial undertakings. In order to show why determinate optimisation models are wholly unsuited to the task of explaining decision-making it is necessary to have an example of such a model to dissect. The economic theory of location meets this need.

The theory of location was developed in two phases. There is the orthodox, neoclassical, or traditional theory and a later behavioural approach, associated with industrial geography. By examining both types of location models, the object of this chapter is to reveal how the location theorist ‘sees’ the world and specifies the location problem. After reviewing and assessing these models and the conventional ideas about decision-making in the next three chapters, I then examine the ‘location problem’ from a manager’s point of view. Far from reviving or revising the theory of location, this analysis, which

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Equilibrium versus Understanding: Towards the Restoration of Economics as Social Theory
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • List of Figures ix
  • Acknowledgements x
  • Part 1 1
  • Introduction 3
  • 1 - Two Languages of Economic Theory 13
  • 2 - Neoclassical Methodology 34
  • 3 - The Practices of Neoclassicists 52
  • 4 - On Subjectivism 68
  • 5 - Interpretative Understanding 79
  • 6 - Austrian Economics and Subjectivism 97
  • 7 - Implications of Interpretative Understanding 116
  • Part 2 133
  • 8 - Models of Industrial Location 135
  • 9 - Location Theory as a Narrative 155
  • 10 - Decisions About Things in the World 170
  • 11 - Plans and Decisions as Understanding 182
  • 12 - Investment Decisions 195
  • 13 - Understanding and Locations 213
  • 14 - Retrospect and Prospect 231
  • Notes 241
  • References 266
  • Index 288
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