Economic Geography Glossary



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Economic base concept

Economic change

Conceptualization of "Change" (based on the degree to which we wish [or are able] to recognize complexity [acknowledging that all change is ultimately complex])
  1. "Simple Change"(e.g. growth of our [aggregate] bank account based on [aggregate] yearly interest rates). Any internal differentiations are averaged out.

  2. "Compositional Change" (we recognize changes in the composition [or proportions of components] of a whole without accounting explicitly for additions and subtractions.)

    Here then we adopt a relatively unsophisticated notion of "structure" and define "structure" simply as "composition", and "structural change" as change in such a composition. A good example would be our frequent reference to the "shifts" from "primary" to "secondary" and "tertiary" (and quaternary and quinary) sector employment patterns in post-industrial economies, where we refer simply to changes in employment composition and NOT to actual movements of employees between sectors)

    The forces bringing about such shifts can be found both on the

    1. "supply side", i.e. in the realm of production and the application of technological and organizational innovations resulting in productivity increases (which are highly variable between different economic activities), and on the
    2. "demand side", i.e. in the realm of changing and variable consumption patterns (notably the response of the demand for different products and services to changes in personal incomes;
      * Be sure you know what is meant by the Engel's Law and "Engel's Curve".

  3. "Population Change" (we recognize additions [births] and exits [deaths] and the compositional bases and consequences of such entries and exits over time, as the population ages and replenishes)

  4. Structural Changes as "Interdependence/Interaction Changes" (e.g., Changes in Trade, Transportation, Communication or Inter-Industry Flow Patterns in the Process of Economic Development)

  5. "Development" as yet more Complex Change (involving non-economic variables)

Economic concentration

Economic distance

A reference to distance in economic terms (i.e. in terms of the cost of overcoming the frictions of space) instead of physical terms

Economic Geography || Handout!

Economic Man

Highly abstract model of human economic behavior based on simplifying but extreme assumptions of perfect information and perfect ability to use such information in a rational way (i.e. to achieve optimal ends) [the attributes of this non-human "person" describe the ideal actor in classical micro-economic and location theories "who" processes information into globally optimal (locational) outcomes or (spatial) equilibrium patterns].

Economic Overhead Capital (EOC)

Economic infrastructure, such as roads, railways, port facilities, power facilities

Economic reflexivity [Storper, p.29] see Reflexivity

Economic rent

A residual earning (payment to) a factor of production (e.g. land, labor capital) over and above its opportunity cost, i.e. the return from its best alternative use.


Economy, economies

Two meanings of "economies" need to be distinguished (as found e.g., in the difference between "local economies" and "localization economies")
(1) the economies of regions (as aggregates of interrelated economic activities) "The economy of Seattle"
(2) in the sense of economizing, savings, cost reductions etc, as used in: agglomeration economies, scale economies, localization economies. See also "Diseconomies".

Economies of agglomeration, see: agglomeration economies

Economies of scale

reference to the reduction in unit (or average) costs with increasing output levels resulting from both
  1. the effects of fixed costs (once a pipe is installed, increased throughput reduces the average costs related to the use of the pipe)
  2. increasing returns to scale (e.g. learning [curve] effects)
Goodall, p.146 [see Hayter, p.91-2: External economies of scale, positive & negative externalities, localization economies of scale] -
some Websites

Economies of scope, as different from "economies of scale":

1. Savings resulting from the fact that different products are produced or different activities are pursued under one roof, in close proximity or within one organization.
2. There are different views as to to what "different" might mean. Healey & Ilbery seem to equate scope economies with economies of vertical integration (p.130). Thus also accept able: All savings or cost reductions associated with a diverse range of related activities happening within the facility or organization except scale.

Definition would depend on definition of "scope"; often used in the context of product mix or the extent of vertical integration.

Unit costs decrease as variety and flexibility in production increase. (Quinn, Intelligent Enterprise, p.25)
See for another definition and resources: Flexibility Website.


Economies of Flexibility

The advantages accruing to a producer with many plants of different sizes in allocating increases or decreases in operations to that plant whose size is such as to handle the total output change of the producer most efficiently. (Nemmers)

Those scale economies "which flow from the fact that (the firm) is large, employing numbers of workers, with a large management, buying materials ... on a large scale, raising capital on a large scale, and often able to use and keep busy large units of moderately versatile equipment on a variety of comparatively similar jobs." (as different from "standardization economies")

Edge Cities

Cities at the outskirts of large urban centers [Joel Garreau, Edge Cities]
"Edge cities really are cities. Despite their large areas, segregated functions, and suburban settings, edge cities fit all the definitions of a city. They encompass residential, commercial, and industrial districts. They provide jobs and entertainment both for those who live there and those who come in from outside. Most importantly, they are recognized by the local population as unique places." []

Electronic commerce

"refers generally to all forms of transactions relating to commercial activities, involving both organizations and individuals. that are based upon the processing and transmission of digitised data, including text, sound and visual images." [Electronic Commerce, OECD 1997, p.11]


Reference to the idea that economic behavior is influenced by (embedded in) the dominant norms, institutions and social practices which, in turn are culturally embedded. [See: Granovetter, M., Economic Action and Social Structures: The Problem of Embeddedness," American Journal of Sociology 91 (1985), pp.481-510.]

Empowerment Zone and Enterprise Community Act of 1993

The first formal successful federal attempt in the U.S. to apply the enterprise zone concept to regional policies. Before that, only states and local jurisdiction had identified enterprise zones. "Between 1981 and 1991, 38 states and the District of Columbia passed enterprise zone legislation." (Fisher & Peters, New England Economic Review, 1997)


An endogenous variable is the result of the inner-working or the relationships of the model; it is an output of the model. Its variability depends on other parts of the model or the operation of the system and on exogenous variable(s).

"Engel's Curve"

a general reference to the line which shows the relationship between various quantities of a good a consumer is willing to purchase at varying income levels (ceteris paribus).

"Engel's Law" (associated with Ernst Engel, a [19th century] German statistician)

With rising incomes, the share of expenditures for food (and, by extension, other) products declines (= Engel found, based on surveys of families' budgets and expenditure patterns, that the income elasticity of demand for food was relatively low). The resulting shift in expenditures affects demand patterns and employment structures. [Engel's Law does NOT suggest that the consumption of food products remains unchanged as income increases! It suggests that consumers increase their expenditures for food products at a percentage rate which is lower than that of their increases in income]. Poorer family will spend a larger share of their total expenditures on food than wealthier families.
"... je ärmer eine Familie ist, einen desto grösseren Antheil von der Gesamtausgabe muss zur Beschaffung der Nahrung aufgewendet werden ..." (Ernst Engel 1857, 2. edition, 1896b, s.28-29). [see also: Income elasticity of demand] [Not to be confused with Friederich Engels, the collaborator of Karl Marx]

Enterprise- or Empowerment zones

are specifically targeted, relatively small areas which benefit from tax abatement, other monetary aid or exemptions from selected regulations designed to attract new investments, and jobs and thereby stimulate economic development.


(Schumpeter, The Theory of Economic Development, pp.74ff. 1934/ Galaxy 1961,):



Supply-Demand Equilibrium. A theoretical concept used to describe a state of stable balance between opposing forces or variables.


reference to the fairness in some distribution of effort aiming ultimately at the equality of opportunities and outcomes. Thus, an equal distribution of funds may not be equitable. Mobilization for Equity in Schools

Ethnomethodology []


European Union


Transaction(s) between economic units
  • Market Exchange: Exchange of scarce goods or services at a price determined by a market mechanism
    Examples: Wall Street, Pike Place Market, 7/11 store exchanges of milk for $$$
  • Reciprocity: exchange involving goods, favors or services among individuals in a given societal group based on implicit or explicit, but generally well-defined social conventions
    Examples: Babysitting clubs with a formal credit system; "chipping in" to do household chores (with vague promises to get some supper in return); doing your share in your project group (some edit the English, others are better with computers)
  • Redistribution: An exchange relationship governed by strong social conventions or governmental fiat involving the transfer of economic gains between the rich and the poor, the powerful and the economically weak, the young and the old etc.
    • Grandparents paying for the education of grandchildren (formal intergenerational transfers)
    • Governments paying for welfare and collecting taxes (based on income-levels based on principles of equity and social responsibility)
    • Social Security System (largely a formal intergenerational transfer system)
    Another reference: de Souza, A Geog. of World Economy, pp.213-15.

Exchange Rate

The price of one country currency in terms of another country's currency.


External to the inner workings of a system or model; variables are exogenous to the extent that they are "given" and not the result of the operation of the system (or anything going on in the model itself). Opposite: Endogenous -- More!

Expected value maximization principle (also: "Bayes principle")

the most widely advocated rule in decision theory. It suggests that the option with the largest expected value should be chosen. Calculation of the expected value of a decision option requires the availability of the probabilities attached to each possible environmental state (e.g. probability of any specific action taken by the competitor out of all possible actions). Thus, the EV is the sum of the products of all environmental states multiplied by their respective probabilities.
The EV principle actually consists of a family of principles. These principles differ by the way probabilities and the "values" (or "payoffs") are generated or interpreted (namely either objectively or subjectively). Thus, we have the following possibilities:

Objective PayoffsSubjective Payoffs
Objectively Expected Value (OEV)Expected Utility (EU)
Subjectively Expected Value (SEV)Subjectively Expected Utility (SEU)
Source: Lee, Decision Theory, p.32

The use of the expected value principle is, in spite of its popularity, controversial due to

  1. the possibly subjective nature of the underlying probabilities or values;
  2. the underlying assumption of "risk neutrality". Decision-makers may view 2 decision options with equal EVs differently based on different probability distributions; and
  3. the inability of many decision-makers to use the EV principle due to the inherent danger of not surviving ("in the short-run") an unfavorable outcome.

In other words, when is the "expected value" a reasonable choice criterion? The conditions are met when:
  1. decisions of the same kind are made so frequently that the average return of the individual decisions approximate the expected value; at least, downward deviations are certain never to accumulate to an extent which would endanger the existence of the firm. OR:
  2. If the decision is not frequently repeated (and the decision-maker is still confident in her probabilities), then she has to be "risk-neutral", i.e. she has to be indifferent, e.g., to
    1. gaining $ 1.5 million (.5 probability) or loosing $ .5 mill (.5) ; and
    2. gaining $ .5 mill. with complete certainty (probability of 1)
However, "safety nets" (e.g. selecting the highest expected value strategy which, even in the worst case scenario, would guarantee survival; or selecting a high expected value strategy which includes sufficient flexibility, i.e. provisions for subsequent adjustments) have been suggested in response to this criticism. (see, e.g. Koch)

[see also: uncertainty; decision theory]

Expert System

Explanatory variable (or "dependent variable") []


used to describe the role of a host country as a production location designed to serve international markets, possibly including the home market of the parent firm. (see Dicken, Global Shift, pp.154 & 204)

Export substitution

A shift to the export of increasingly processed products. The export of more or less processed raw materials is substituted for the export of raw or relatively unprocessed materials contributing to local (or national) employment and the creation of value added.

Externality/ externalities;

Positive or negative impacts, side-effects or spillovers which are usually not reflected in the costs or prices of a particular good or service, i.e. not covered by a market mechanism; see H&I, p.337; Goodall, p.164.


(Marshall/Stigler, 1951): "Economies outside the reach of the firm and dependent upon the size of the industry, the region, the economy, or even the whole economic world."

Mobile and Immobile External Economies [Roger Hayter]
More! (Bergman & Feser)

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