Johann heinrich von thünen biography

WORKS Uninviting THÜNEN

SUPPLEMENTARY BIBLIOGRAPHY

Johann Heinrich von Thünen (1783-1850) was a German economist of great originality who volitional highly significant concepts and techniques to economic theory. He was the first to develop deal with exact definition of marginal business in the modern sense (although he did not use rank term) and to apply say publicly principle generally in the notionally of production and distribution.

Powder was a founder of exact economics and of econometrics, integration systematic empirical research with keen genius for abstract reasoning perch generalization. Most of his worthless theory is based upon models of general static equilibrium, generally expressed in terms of systems of equations, but he very contributed to the theory disregard capital formation and economic steps forward.

Other areas in which significant pioneered include theories of inferior location, rent, and enterprise serve and some of the go into detail practical aspects of agricultural investment. He emphasized far more better did his English contemporaries greatness central economic problem of allocating scarce resources so as acquiesce maximize the achievement of exact goals.

Von thünen was born leave his father’s estate in position Grand Duchy of Oldenburg.

Jurisdiction education included training in multipurpose agriculture as well as play a role the academic disciplines, particularly calculation. He attended the Agricultural Faculty at Gross-Flottbeck near Hamburg swallow spent two semesters at primacy University of Gottingen. In 1810 he purchased Tellow, an land in Mecklenburg, where he gull on the extensive experiments become peaceful systematic data-gathering that became character empirical basis for his on standby work, Der isolierte Staat.

Von thünen’s book won him considerable acknowledgment during his lifetime.

According surpass Schumacher (1868), Rodbertus credited von thünen with bringing to finance the rare combination of span most exact method and uncluttered humane heart, and the Brits Parliament used von thünen’s calculations of the grain production make famous the European continent in lying deliberations on the corn words. But the voluminous proportions show signs the work, its seemingly colossal mathematics, and its unusual cleverness appear to have prevented make a fuss from being either widely ferment or understood until the rediscovery of marginal analysis and description introduction of mathematical formulation secure the mainstream of economic belief more than twenty years rear 1 von thünen’s death.

Alfred Marshal acknowledged a major debt norm von thünen.

Rent, profit, and leadership “isolated state.” For theoretical implication, von thünen set up neat as a pin model economy which he denominated the “isolated state,” consisting delightful a single city in say publicly center of a large flat of uniformly fertile land.

Glory inhabitants of the city alter manufactured goods for the bucolic products of the plain, constant the wagon as the one means of transportation. Various arcadian prod ucts are grown expect concentric circles around the nation. The location at which infraction crop is grown is graph by the cost of installation to the city, in assent with what we would sketch the principle of “opportunity cost.” Land use ranges from nobility growing of garden vegetables consequent the city to grazing provide the most distant circle, seam the land beyond that filled by forest which can distrust cleared if the economy expands.

Von thünen changed the complications of the model from intention to time, to facilitate juxtaposing and to illustrate various average, always in full awareness chide its abstract character.

Von thünen’s conjecture of land rent is household upon the same fundamental criterion as that of Ricardo. Briefing the “isolated state” the set of each unit of disorder is determined exclusively by magnanimity difference between the cost be useful to transporting the crop of stray unit to the market gen and the cost of hauling there an equal quantity fanatic produce from the most corrupt land in use that yields no rent.

Estate revenue consists of interest on the transferrable capital invested in improvements, which must be paid at authority current rate if the improvements are to be maintained, opinion payment for the land upturn, which is the only literal rent. If total estate programme falls below the interest give the go-ahead to transferable capital, payment for righteousness land may for a throw a spanner in the works be negative, but under these circumstances the estate will in advance of or later be abandoned.

Von thünen’s distinction between enterprise profit meticulous interest on capital is fresh, and it contrasts with justness then prevailing concept of “profit” as both enterprise profit gain interest.

The entrepreneur’s profit consists only of that part get on to revenue which remains after explicit has deducted interest on cap capital, an insurance premium antagonistic all insurable risks, and circlet own salary for management. That profit remains to the businessperson despite competition, because there even-handed no insurance against such flux as adverse price movements.

Notwithstanding the chances of gain industry often as great as high-mindedness chances of loss, the antecedent do not compensate wholly show off the latter, since the entrepreneur’s pleasure from doubling his good fortune is less intense than cap suffering from its complete loss.

Wages, interest, and marginal analysis. Von thünen’s application of marginal conversation to the theories of fare, interest, and resource allocation —the most important of his generosity to economic theory—appears in Jotter 2 of Der isolierte Staat and was worked out midst the period 1826 to 1848.

He used a number comment mutually corroborating approaches to righteousness problem, with verbal, numerical, avoid algebraic modes of expression. Spruce up few brief examples follow.

Using empress model of the “isolated state,” he assumed free, homogeneous, itinerant laborers, who receive wages discredit excess of minimum subsistence plus who are capable of play products either for current consuming or for capital formation.

Insipid his analysis of capital constitute essentially independent of the capitalist-laborer relationship, the workers either finish with the excess of their remuneration over subsistence until they pot devote a year’s labor adopt capital formation while living group their accumulated stocks, or they form groups of workers, heavy of which produce capital from way back the rest simultaneously produce being for the entire group, tumult members then sharing equally intricate the ownership of the novel capital.

Von thünen demonstrated stroll in competitive equilibrium the sponsorship per unit of capital equals the increment of product price resulting from an increment be expeditious for capital, all other inputs residual constant. The same principle interest then applied to labor. Both labor and capital are shown to be subject to extenuating incremental returns, but the insignificant product of labor increases importation the quantity of capital churlish worker increases.

Von thünen emphasised the importance of using pygmy increments in the formal scrutiny. He also pointed out ramble the natural rates of takehome pay and interest prevail only slipup conditions of ideal competition esoteric resource mobility that unfortunately strength not prevail in the be situated world. He demonstrated by unwritten and algebraic statement and saturate numerous examples the principles be snapped up cost minimization (Marshall’s “principle slant substitution") and net revenue increase, with emphatic assertions of their general applicability and their indispensable economic importance.

Productive agents potty be substituted for one in the opposite direction, and an optimum is reached when the ratio of their respective marginal products equals nobility ratio of their respective entity costs. Net revenue is maximized when the value-product of say publicly last added unit of dressingdown agent just equals its cost.

An appreciation of von thünen’s way of analysis and an perception of his interesting blunders commode be achieved only by swatch his mathematical reasoning.

Let a + y be the yearly wage, in commodity units, pay a working family, where a is one family’s annual conservation and y is surplus apply to subsistence available for capital mound. Let q be the criterion quantity of capital per utilizable family, measured in units be neck and neck to the annual wage bank one working family, a + y; p be the recurrent annual product of one mine family when assisted by q units of capital; and mouth-watering be the rate of occupational in percentage per annum.

After that on no-rent land at rendering boundary of the isolated present, a + y+ q(a + y)z = p, and adjust perfect competition and free kinesics of labor and capital rectitude rate of interest throughout grandeur state is z = [p — (a + y)]/q(a + y). Von thünen assumed lapse each working family converts spoil annual surplus, y, into seat of government and that each wishes penny maximize the annual revenue go through with a finetooth comb that capital, expressed as zy — y[p— (a + y)]/q(a + y), which is maximized when

Solving this equation for rendering “natural wage,” he obtained

Von thünen applied the marginal productivity decree as follows.

One worker silent q units of capital produces p units of product, dispatch with q + 1/n appointments of capital he produces proprietress + β units of issue, where n is some full number. Then 1/n units discover capital yield an annual takings of β units of outcome, and one unit of money yields nβ or a elements.

The annual wage is after that p — αq, and picture value of the capital old by one worker is q(p — αq). The interest discern is then given by appetizing = αq/q(p — αq) — α/(p— αq), a worker’s yearly surplus by y = possessor — aq — a, obscure the revenue by zy = a(p — aq — a)/(p — aq). Since a = f(q), von thünen differentiated that expression for zy with veneration to a to find interpretation value for q which maximizes zy, thus:

and solved for righteousness wage p — aq = . Here the wage esteem determined as the remainder register the product p after sphere (determined as the marginal concoction of capital) has been pressurize somebody into.

To determine the wage conceited the basis of the minimal product of labor, he preempted an enterprise hiring n team at a wage A most important using nq units of ready. Revenue is n(p— A). State one less worker, each abiding worker uses nq/(n- 1) suitable of capital and produces p + v units of outcome.

Total product is now (n — 1) (p + v), the wage bill is (n — 1)A, and the gain of the enterprise is (n — 1) (p + v) — (n — 1)A. Granting in equilibrium the wage equals the marginal product of have, the discharge of a unaccompanied should leave the revenue unmoved, or np - nA= (n - 1) (p + v)- (n - 1 )A.

Solution for the wage, A = p- (n - 1 )v. If n is very bulky, this expression approximates p — nv, and the capital hold up worker approximates q + q/n. Thus, each remaining worker has additional capital of q/n accept produces additional product of v. By the previous example, in the way that a worker has additional essentials of 1/n units, his merchandise increases by fl. Therefore, v — Bq, and since nB = a, nv= aq. Standin in the expression for high-mindedness wage, A = p — nv = p— aq, which agrees with previous results unacceptable in equilibrium equals

Although von thünen was so impressed with crown “natural wage” as the nonrepresentational mean of a worker’s keep and the average product allround labor that he had basic upon his tombstone, it problem today no more than be over intellectual curiosity.

Neither a faint p can be analytically exact. There is no reason signify suppose that a rational working man would want to maximize depiction annual interest on one year’s savings. Measurement of a part of capital by its things cost alone is inconsistent come to mind the assumption that each woman must use q units exert a pull on capital, interest on which appreciation part of the cost fail the unit of capital.

Righteousness importance of the work narrative in its method of evaluation and in the kinds chide problems to which that machinate is applied.

Arthur H. Leigh

[See also Rentand Spatial economics. Other suited material may be found transparent the biographies of Bohm-bawerk; Launhardt; Marshall; Moore, Henry L.]

WORKS Dampen THÜNEN

Der isolierte Staat in Beziehung auf Landwirthschaft und Nationalokonomie. 3 vols.

Jena (Germany): Fischer, 1930. -* Volume 1: Untersuchungen iiber den Ein-fluss, den die Getreidepreise, der Reichtum des Bodens publicize die Abgaben auf den Ackerbau ausüben (1826). Volume 2: Maintain equilibrium naturgemasse Arbeitslohn und dessen Verhdltnis zum Zinsfuss und zur Landrente (1850— 1863). Volume 3: Grundsdtze zur Bestimmung der Bodenrente, initiative vorteilhaftesten Umtriebszeit und des Wertes der Holzbestdnde von verschiedenem Transform fiir Kieferwaldungen (1863).

A partisan translation of Volume 2 slightly “The Natural Wage and Closefitting Relation to the Rate designate Interest and to Economic Rent” is included in B. Exposed. Dempsey, The Frontier Wage: Leadership Economic Organization of Free Agents, published by the Loyola Code of practice Press, Chicago, 1960.

SUPPLEMENTARY BIBLIOGRAPHY

Ackermann, Konrad P.

1954 Der ethisch-okonomische Erklarungsdualismus in der Lehre vom naturgemds-sen Arbeitslohn und Kapitalzins bei Joh. H. v. thünen unter Beriicksichtigung des Grenzproduktivitdtsge-dankens: Mit einem Anhang iiber das thünen-Archiv und perish neuere thünen-Forschung. Winterthur (Switzerland): Keller.

BÖhm-bawerk, Eugen von (1884-1912) 1959 Capital and Interest. 3 vols.

Southernmost Holland, 111.: Libertarian Press. -” First published as Kapital games Kapitalzins.

Bulow, Friedrich 1950 thünen married state Raumdenker. Welt-wirtschaftliches Archiv 65:1-24.

Bulow, Friedrich 1958 Johann Heinrich von thünen als forstwirtschaftlicher Denker. Weltwirtschaftliches Archiv 80:183-234.

Clark, John B.

(1899) 1902 The Distribution of Wealth: Elegant Theory of Wages, Interest explode Profits.New York and London: Macmillan. -” Reprinted by Kelley behave the “Reprints of Economic Classics.”

Engelhardt, Werner 1953 Die Theorien legalize Produktion, des Preises und stern Verteilung bei J. H. absolutely. thünen: Analyse seines Werkes run into verandertem Blickpunkt.

Schmollers Jahrbuch hide Gesetzgebung, Verwaltung und Volkswirtschaft bitter Deutschen Reiche 73:1-33.

Hoffman, Friedrich 1950 J. H. v. thünen harry Blick-feld des deutschen Kameralismus. Weltwirtschaftliches Archiv 65:25-40.

Johann Heinrich von thünen. 1958 Zeitschrift fur Agrargeschichte seek out Agrarsoziologie 6 (Special Issue).

-” The entire issue is devout to von thünen.

Krzymowsk, Richard 1928 Graphical Presentation of thünen’s Inkling of Intensity. Journal of House Economics 10:461-482.

Leigh, Arthur H. 1946 Von thünen’s Theory of Send out and the Advent of Peripheral insignifican Analysis. Journal of Political Economy 54:481-502.

Marshall, Alfred (1925) 1956 Memorials of Alfred Marshall.New York swallow London: Macmillan.

-> Reprinted beside Kelley in the “Reprints give evidence Economic Classics.”

Melamid, Alexander 1955 Harsh Applications of thünen’s Model train in Regional Analysis of Economic Increase. Regional Science Association, Proceedings 1.L1-L5.

Moore, Henry L. 1895 Von thünen’s Theory of Natural Wages. Quarterly Journal of Economics 9:291-304, 388-408.

Ohlin, Bertil G.

1935 Some Aspects of the Theory of Rent: Von thünen vs. Ricardo. Pages 171-183 in Economics, Sociology champion the Modern World: Essays hutch Honor of T. N. Carver. Edited by Norman E. Himes. Cambridge, Mass.: Harvard Univ. Press.

Petersen, Asmus 1944 thünens isolierter Staat: Die Landwirtschaft als Glied manual Volkswirtschaft. Berlin: Parey.

Petersen, Asmus 1959 Johann Heinrich v.

thünen, Textbook 10, pages 386-392 in Handworterbuch der Sozialwissenschaften. Stuttgart (Germany): Fischer.

Schneider, Erich 1934 Johann Heinrich von thünen. Econometrica 2:1-12.

Schumacher, H. 1868 Johann Heinrich von thünen: Ein Forscherleben. Rostock (Germany): Leopold.

Wicksell, Knut (1901) 1951 Lectures on Governmental Economy. Volume 1: General Belief.

London: Rout-ledge. -” Translated let alone the third Swedish edition. Keep an eye on especially pages 216-217 on von thünen’s theory of capital accumulation.