Von Thunen Model of Land Use and Rent

Von Thunen Model of land use and rent was given by J.H. Von Thunen, a German. He observed and analyzed the receipts of rent and distribution of agricultural activities in and around his estate in Rostok, Maclenburg, Germany and came to propose his model to determine the land-use around a city.

Basic Idea of Von Thunen

Broadly speaking, Von Thunen said that the land-use around a city is determined by the value of products grown on the land. If the value of product is high, it will be grown near the city. Similarly, low valued products will be grown farther from the city.

Basic idea of Von Thunen’s model is driven by three factors.

1. Perishability of Goods: The production of perishable agricultural goods such as milk and flowers will be located near the city as they may become unusable after long hours of transport. Similarly, the non-perishable products may be located farther from city.
2. Total Revenue and Price of Goods: Revenue is defined as total quantity of goods produced multiplied by the price of goods. The goods with higher market price will be located relatively closer to city than cheaper goods and vice-versa. In Fig. 1, the price of milk is higher (Rs. 100) than wheat (Rs. 50), therefore, milk products are produced near the city (10 Kms.) while wheat is produced farther (15 Kms.). Note that price of product is only a proxy for economic rent and not a synonym.

   

3. Transport Cost: Transport cost increases uniformly with distance from city. The goods with very high transport cost and lower price but is necessary for survival will also be located relatively closer to city. This is so because transporting such a product from far away will make it costlier to survive. Similarly, if the share of transport cost in total cost is too high but the price of product is low, the total profits will be low.

   

The above three factors should not be read in isolation. It is the interplay between these three factors which determines the location of agricultural activities around a city.

The relationship between these three factors in the real world will be complicated by many factors such as undulation in topography, location of lakes, behaviour of producer etc.

Assumptions of Von Thunen’s Model

Von Thunen made following assumptions to control such factors.

1. One Market: There is only one market or city and all its hinterland (surrounding area) sells all the goods and services to this market only.
2. Isotropic Topography: The land around city is plain and has same productivity.
3. Economic Men: The farmers are economic men and want to maximize their profit. Hence, they will not behave emotionally but rationally and economically.
4. Only One Mode of Transport: There is only one mode of transport i.e. Horse Wagon.
5. Uniform Transport Cost: This means per kilometer cost of transport is constant. If cost is 10/Km, you will pay 100 for 10 Kms., 200 for 20 Kms and so on.

Explanation of Von Thunen Model

• Given the abovementioned factors and assumptions, Von Thunen tries to explain that any producer/farmer is an economic man who wants to maximize his profit.
• The profit is maximum when the difference between revenue and cost is high. Therefore, each farmer will try to reduce his/her cost and increase the revenue from the product.
• The revenue from product is determined by the total quantity of product multiplied by its price.
• Intensive Cultivation
• Total quantity produced per unit of land is high when the land is cultivated intensively over time and space. This means that multiple crops are grown in a given period of time without leaving fallow land. Contrarily, the extensive cultivation means fewer crops are grown while leaving fallow land.
• Since the land near the city has higher rent, the farmer will try to cultivate it very intensively. As we move farther from the city, we will see more fallow land and extensive agriculture.
• Agricultural Location and Land-use Pattern in Von Thunen Model: The location of crops will be determined by price, yield and transport cost as explained below.
  1. Case 1: Among those crops which has same price and yield, the crops which are heavier will be located closer to city. It is so because the heavy products have high transport cost than the lighter products.
  2. Case 2: Among those crops which has same yield and transport cost, the products with higher price will be located closer to city and vice-versa.
• Hence, Intensity of Agriculture, price of good, transport cost and nature of goods determine the land-use pattern around a city.

Formulae for Economic Rent or Total Profit Per Unit of Land

LR=Y (P-C)-YTD

LR is Locational Rent; Y is Yield/unit of land; P is Price of Good; C is cost of production of good; T is transport cost; D is distance from market.

Concentric Zones of Land-Use

Based on the explanation in the previous section, Von Thunen divided the hinterland of a city into six concentric zones of land use (Fig.3).

1. Market Gardening and Milk Production

These are those products which are perishable and during the time of Von Thunen, the refrigerated containers did not exist. Hence, the production of flowers, fruits, vegetables, milk etc. needed to be closer to city to transport quickly.

2. Firewood, Lumbering and Forests

The wood and lumbering are heavy and their transport cost is high. The wood was essential to survive the cold winters of Germany during early 19th Century.

3. Grain Crops with no fallows

The grain crops which are not perishable easily and easy to transport, are located relatively closer to city than other crops. The land is never left vacant in this zone. The land is cheaper to lease. Hence, the cost of grains will not be very high. Rye was most important grain during that era.

4. Grain Crops with 14% fallow land

The major crops of this zone is Rye, Barley and Oats. This zone has lower cropping intensity. Farmers in this zone follow Seven Year Crop Rotation. First three years are for rye, barley and oats. Next three years are for pastures. The last year is kept as fallow. Since, the price of barley and oats is low, they have to be located farther from city. So, 14% of land is left fallow in a cycle of seven years ie. if total land is 100% in 7 years, 100/7=14.2%.

5. Three Field System

The farmers in this zone devote 33.33% of their land to crops and .33.33% to pastures. Rest 33.33% of land is kept as fallow.

6. Livestock Ranching and Grazing

The last and sixth zone is kept for livestock ranching and grazing. The animals in this zone are primarily used for meat and leather. The animals graze on large pieces of land freely and get fat. The low land rent is helpful in leasing such large pieces of land.

Let’s Think

One may think, why don’t the farmers farther from city practice intensive agriculture. They can increase their revenue by increasing production too. To answer this, the students should know that the crops can be grown on a piece of land repeatedly by investing in the fertility of soil. The farmers near city can afford this investment because the value of their product is high. These farmers will incur losses if they leave fallow land.

Contrarily to this, the farmers farther from city can not afford this investment because the value of their product is low. By cultivating on large pieces of land and diversifying their crops, these farmers can earn profits due to low rent of land even when they leave fallow lands.

Click here for Walter Christaller’s Central Place Theory.

Modification in Von Thunen Model

Von Thunen realized the limitation of his model and modified it.

• So, if a river transverses through the region, all the land-use zones will be elongated along the river as shown in Fig. 4. He realized that he presence of river navigation makes the transportation faster, easier and cheaper.
• He also realized that there are some sub-centers or small secondary markets around a large city center which have their own hinterland Fig. 4.

Conclusion

Von Thunen Model is a unidimensional model which is based in a medieval Eurpean setting. Therefore, it has been widely criticized. However, it has certain parts which are applicable to date. Click here for detailed Criticism and Applicability of Von Thunen Model in India