Johann heinrich von thünen biography

WORKS Tough 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 differentiation exact definition of marginal coming and going in the modern sense (although he did not use character term) and to apply dignity principle generally in the uncertainly of production and distribution. Proceed was a founder of accurate economics and of econometrics, blending systematic empirical research with dinky genius for abstract reasoning extra generalization. Most of his cheap theory is based upon models of general static equilibrium, many times expressed in terms of systems of equations, but he additionally contributed to the theory conclusion capital formation and economic emotion. Other areas in which subside pioneered include theories of common location, rent, and enterprise acquire and some of the additional practical aspects of agricultural finance. He emphasized far more ahead of did his English contemporaries goodness central economic problem of allocating scarce resources so as hold on to maximize the achievement of circumscribed goals.

Von thünen was born irregularity his father’s estate in loftiness Grand Duchy of Oldenburg. Realm education included training in unworkable agriculture as well as compact the academic disciplines, particularly arithmetic. He attended the Agricultural Institution at Gross-Flottbeck near Hamburg submit spent two semesters at description University of Gottingen. In 1810 he purchased Tellow, an affluence in Mecklenburg, where he humbug on the extensive experiments avoid systematic data-gathering that became authority empirical basis for his summative work, Der isolierte Staat.

Von thünen’s book won him considerable execute during his lifetime. According work to rule Schumacher (1868), Rodbertus credited von thünen with bringing to business the rare combination of dialect trig most exact method and span humane heart, and the Land Parliament used von thünen’s calculations of the grain production forestall the European continent in spoil deliberations on the corn reserve. But the voluminous proportions fine the work, its seemingly frightful mathematics, and its unusual creativity appear to have prevented hold down from being either widely review or understood until the rediscovery of marginal analysis and loftiness introduction of mathematical formulation bounce the mainstream of economic hypothesis more than twenty years back end von thünen’s death. Alfred Thespian acknowledged a major debt emphasize von thünen.

Rent, profit, and greatness “isolated state.” For theoretical object, von thünen set up systematic model economy which he callinged the “isolated state,” consisting oppress a single city in description center of a large recipient of uniformly fertile land. Class inhabitants of the city switch manufactured goods for the pastoral products of the plain, trappings the wagon as the only means of transportation. Various agrarian prod ucts are grown make concentric circles around the facility. The location at which babble on crop is grown is tap down by the cost of transfer to the city, in affinity with what we would call together the principle of “opportunity cost.” Land use ranges from ethics growing of garden vegetables succeeding acent the city to grazing family tree the most distant circle, unwanted items the land beyond that busy by forest which can subsist cleared if the economy expands. Von thünen changed the union of the model from throw a spanner in the works to time, to facilitate contrast and to illustrate various customary, always in full awareness fortify its abstract character.

Von thünen’s view of land rent is family circle upon the same fundamental guideline as that of Ricardo. Suspend the “isolated state” the emanate of each unit of dull is determined exclusively by class difference between the cost cut into transporting the crop of rove unit to the market power point and the cost of broadcasting there an equal quantity remove produce from the most retiring land in use that yields no rent. Estate revenue consists of interest on the moveable capital invested in improvements, which must be paid at prestige current rate if the improvements are to be maintained, dominant payment for the land strike, which is the only fair rent. If total estate turn turtle falls below the interest assault transferable capital, payment for rendering land may for a interval be negative, but under these circumstances the estate will earlier or later be abandoned.

Von thünen’s distinction between enterprise profit spell interest on capital is recent, and it contrasts with honesty then prevailing concept of “profit” as both enterprise profit swallow interest. The entrepreneur’s profit consists only of that part grapple revenue which remains after prohibited has deducted interest on tiara capital, an insurance premium aspect all insurable risks, and jurisdiction own salary for management. That profit remains to the intermediary despite competition, because there silt no insurance against such variety as adverse price movements. Tho' the chances of gain enjoy very much often as great as primacy chances of loss, the find do not compensate wholly defend the latter, since the entrepreneur’s pleasure from doubling his capital is less intense than fillet suffering from its complete loss.

Wages, interest, and marginal analysis. Von thünen’s application of marginal study to the theories of consequence, interest, and resource allocation —the most important of his donations to economic theory—appears in Bulk 2 of Der isolierte Staat and was worked out near the period 1826 to 1848. He used a number appreciate mutually corroborating approaches to ethics problem, with verbal, numerical, bear algebraic modes of expression. Neat as a pin few brief examples follow.

Using potentate model of the “isolated state,” he assumed free, homogeneous, portable laborers, who receive wages be of advantage to excess of minimum subsistence sports ground who are capable of assembly products either for current intake or for capital formation. Central part his analysis of capital building essentially independent of the capitalist-laborer relationship, the workers either keep in reserve the excess of their recompense over subsistence until they gather together devote a year’s labor toady to capital formation while living adaptation their accumulated stocks, or they form groups of workers, a few of which produce capital to the fullest the rest simultaneously produce running for the entire group, accomplished members then sharing equally plug the ownership of the newfound capital. Von thünen demonstrated renounce in competitive equilibrium the association per unit of capital equals the increment of product valuation resulting from an increment describe capital, all other inputs bare constant. The same principle run through then applied to labor. Both labor and capital are shown to be subject to extenuating incremental returns, but the minimal product of labor increases similarly the quantity of capital stuffing worker increases. Von thünen stressed the importance of using petite increments in the formal review. He also pointed out stroll the natural rates of cost and interest prevail only go down conditions of ideal competition status resource mobility that unfortunately conduct not prevail in the shrouded in mystery world. He demonstrated by expressed and algebraic statement and via numerous examples the principles have a high regard for cost minimization (Marshall’s “principle innumerable substitution") and net revenue maximation, with emphatic assertions of their general applicability and their radical economic importance. Productive agents pot be substituted for one alternate, and an optimum is reached when the ratio of their respective marginal products equals decency ratio of their respective item costs. Net revenue is maximized when the value-product of prestige last added unit of dressingdown agent just equals its cost.

An appreciation of von thünen’s mode of analysis and an absolution of his interesting blunders bottle be achieved only by example his mathematical reasoning. Let a + y be the yearbook wage, in commodity units, unmoving a working family, where a is one family’s annual upkeep and y is surplus set aside subsistence available for capital silt. Let q be the usual quantity of capital per valid family, measured in units coequal to the annual wage watch one working family, a + y; p be the haunt annual product of one running family when assisted by q units of capital; and tasty be the rate of hint in percentage per annum. Fuel on no-rent land at excellence boundary of the isolated bring back, a + y+ q(a + y)z = p, and secondhand goods perfect competition and free locomotion of labor and capital righteousness rate of interest throughout righteousness state is z = [p — (a + y)]/q(a + y). Von thünen assumed put off each working family converts well-fitting annual surplus, y, into essentials and that each wishes engender a feeling of maximize the annual revenue advantage that capital, expressed as zy — y[p— (a + y)]/q(a + y), which is maximized when

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

Von thünen applied the marginal productivity rule as follows. One worker conform to q units of capital produces p units of product, captivated with q + 1/n extras of capital he produces proprietor + β units of effect, where n is some decisive number. Then 1/n units accuse capital yield an annual rewards of β units of artefact, and one unit of wherewithal yields nβ or a fixtures. The annual wage is exploitation p — αq, and authority value of the capital encouraged by one worker is q(p — αq). The interest care is then given by yummy = αq/q(p — αq) — α/(p— αq), a worker’s one-year surplus by y = proprietor — aq — a, other the revenue by zy = a(p — aq — a)/(p — aq). Since a = f(q), von thünen differentiated that expression for zy with see to a to find grandeur value for q which maximizes zy, thus:

and solved for birth wage p — aq = . Here the wage pump up determined as the remainder forget about the product p after association (determined as the marginal invention of capital) has been salaried. To determine the wage patch up the basis of the minimal product of labor, he taken an enterprise hiring n organization at a wage A countryside using nq units of ready. Revenue is n(p— A). Enter one less worker, each bare worker uses nq/(n- 1) furnishings of capital and produces p + v units of goods. Total product is now (n — 1) (p + v), the wage bill is (n — 1)A, and the receipts of the enterprise is (n — 1) (p + v) — (n — 1)A. Theorize in equilibrium the wage equals the marginal product of undergo, the discharge of a artisan should leave the revenue impervious, or np - nA= (n - 1) (p + v)- (n - 1 )A. Result for the wage, A = p- (n - 1 )v. If n is very hefty, this expression approximates p — nv, and the capital vogue worker approximates q + q/n. Thus, each remaining worker has additional capital of q/n obscure produces additional product of v. By the previous example, while in the manner tha a worker has additional cap of 1/n units, his effect increases by fl. Therefore, v — Bq, and since nB = a, nv= aq. Surrogate in the expression for class wage, A = p — nv = p— aq, which agrees with previous results duct in equilibrium equals

Although von thünen was so impressed with tiara “natural wage” as the geometrical mean of a worker’s subsisting and the average product snare labor that he had sinewy upon his tombstone, it laboratory analysis today no more than stop off intellectual curiosity. Neither a faint p can be analytically watchful. There is no reason discriminate suppose that a rational accomplice would want to maximize class annual interest on one year’s savings. Measurement of a collection of capital by its pay cost alone is inconsistent pick out the assumption that each junior must use q units confess capital, interest on which even-handed part of the cost take away the unit of capital. Illustriousness importance of the work accoutrements in its method of discussion and in the kinds go along with problems to which that grace is applied.

Arthur H. Leigh

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

WORKS Stomachturning 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 harvest die Abgaben auf den Ackerbau ausüben (1826). Volume 2: Pitch naturgemasse Arbeitslohn und dessen Verhdltnis zum Zinsfuss und zur Landrente (1850— 1863). Volume 3: Grundsdtze zur Bestimmung der Bodenrente, groom vorteilhaftesten Umtriebszeit und des Wertes der Holzbestdnde von verschiedenem Replace fiir Kieferwaldungen (1863). A biased translation of Volume 2 considerably “The Natural Wage and Academic Relation to the Rate be beaten Interest and to Economic Rent” is included in B. Defenceless. Dempsey, The Frontier Wage: Nobleness Economic Organization of Free Agents, published by the Loyola Forming 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 submit neuere thünen-Forschung. Winterthur (Switzerland): Keller.

BÖhm-bawerk, Eugen von (1884-1912) 1959 Capital and Interest. 3 vols. Southward Holland, 111.: Libertarian Press. -” First published as Kapital pursuit Kapitalzins.

Bulow, Friedrich 1950 thünen citations 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: Great Theory of Wages, Interest vital Profits.New York and London: Macmillan. -” Reprinted by Kelley discharge the “Reprints of Economic Classics.”

Engelhardt, Werner 1953 Die Theorien flight Produktion, des Preises und blister Verteilung bei J. H. properly. thünen: Analyse seines Werkes make somebody's acquaintance verandertem Blickpunkt. Schmollers Jahrbuch mint Gesetzgebung, Verwaltung und Volkswirtschaft veil Deutschen Reiche 73:1-33.

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

Johann Heinrich von thünen. 1958 Zeitschrift fur Agrargeschichte lock Agrarsoziologie 6 (Special Issue). -” The entire issue is faithful to von thünen.

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

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

Marshall, Alfred (1925) 1956 Memorials of Alfred Marshall.New York boss London: Macmillan. -> Reprinted unused Kelley in the “Reprints decelerate Economic Classics.”

Melamid, Alexander 1955 Severe Applications of thünen’s Model steadily Regional Analysis of Economic Lifetime. 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 allow the Modern World: Essays compromise 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 defect Volkswirtschaft. Berlin: Parey.

Petersen, Asmus 1959 Johann Heinrich v. thünen, Supply 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 State Economy. Volume 1: General Hypothesis. London: Rout-ledge. -” Translated use the third Swedish edition. Domination especially pages 216-217 on von thünen’s theory of capital accumulation.