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So why did spatial issues remain a blind spot for the economic profession? It was not a historical accident: there was something about spatial economics that made it inherently unfriendly terrain for the kind of modeling mainstream economists know how to do. That something was, as you might well guess, the problem of market structure in the face of increasing returns, a problem that is even more acute in economic geography than in development economics. In development the crucial role that high development theory assigned to increasing returns was a hypothesis crucial to that doctrine, but not necessarily crucial to understanding development in general. One could do meaningful theorizing about developing countries, albeit not in the grand tradition, without sacrificing the convenient assumptions of constant returns and perfect competition. In spatial economics, however, you really cannot get started at all without finding a way to deal with scale economies and oligopolistic firms. (en) |
