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1998
La science régionale : Journées d'études en l'honneur de Jean Paelinck
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Some thoughts on regional science models and their potential uses in Europe today

Quelques réflexions sur les modèles en sciences régionales et leurs utilisations potentielles dans l'Europe aujourd'hui
Manas Chatterji

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Introduction

1It has now been about four decades since the birth of the interdisciplinary social science discipline of Regional Science. It was a productive time when new ideas were emerging in different social science disciplines like Management Science, Behavioral Science etc. From the beginning, the focal point was abstract spatial model building, without much explicit reference to application. Lately, there has been a movement towards application in developed, as well as developing countries.

2Regional Science methods have great potential for attacking the urban problems in the developed world. The urban centers in these countries are facing serious problems of transportation, housing, environment, social and municipal services. The problems will remain. In the developing world, there is great regional disparity between rural and urban areas. This has mainly arose due to years of colonial rules, poor natural environment, severe climatic conditions, niggardly endowment of resources, past social and cultural developments and restrictive religious practices. All of these factors confine the production within the maximum possible frontier leading to low output. Frequently, the vicious circle of low output, high propensity to consume, low savings and capital investment result for a country. Industrialization usually started in a few port cities and it became highly polarized. Due to lack of development, migration from the villages to the cities created huge slums. This problem of development is complicated by ethnic, language and religious strife. Regional Science, properly reformulated can be of immense value for policy decisions.

3Basic to regional science is the concept of region. At the present stage of scientific development the concept of a region is rather elusive. The region acquires a concrete form and character only with respect to a given problem. As regional science develops, the concept of optimum systems of regions may develop. Some of the techniques used in regional science are:

  1. Location Theory and comparative cost analysis

  2. Regional demography

  3. Regional and urban history approaches

  4. Economic base and related urban growth theories

  5. Regional and interregional social accounting

  6. Regional and interregional input-output models

  7. Interregional programming and other optimization techniques

  8. Industrial and urban complex analysis

  9. Interregional multiplier and business cycle analysis

  10. Central place theories and application of classification techniques like factor analysis, or discriminant analysis, cluster analysis etc.

  11. Spatial regularity models

  12. Regional systems and simulation

  13. Regional econometric model building

  14. Interregional general equilibrium theory with political, social, economic and ecological variables

  15. Spatial organization theory, graph theory application to regional problems

  16. Nearest neighbor approach; point distribution, pattern recognition and application of mathematics of topology to point distribution, remote sensing and other abstract models

  17. Regional allocation of resources within a fixed time horizon

  18. Survey methods in regional planning, problems of implementation

  19. Transportation studies and diffusion models

  20. Housing and rent studies

  21. General areas of management of public systems, such as hospitals, educational administration, etc.

  22. Empirical regional studies

  23. Application of expert system, decision support system, artificial intelligence and spatial decision making

  24. Fuzzy Set Theory

  25. Catastrophic Theory

  26. Rational Expectation

4etc., etc.

5One promising area pioneered by Jean Paelinck is spatial econometrics and spatial statistics. This area further developed by Luc Anselin (1988) includes such topics as (1) spatial dependence (2) spatial heterogeneity (3) nearest neighbor approach (4) spatial lag (5) spatial weight matrix (6) spatial/regional econometric models (7) spatial stochastic process (8) spatial estimation using ordinary least square, and maximum livelihood method (9) spatial autocorrelation (10) construction of comprehensive spatial/econometric models.

6These items are straightforward generalizations of five principles postulated by Klaassen and Paelinck (1979) namely:

  1. the role of spatial interdependence in spatial models

  2. asymmetry of spatial relations

  3. importance of explanatory factors located in other spaces

  4. differentiation between ex post and ex ante interaction

  5. explicit modeling in space

7Although Isard (1956) emphasized the role of continuous space as early as 1956, most of the work in regional science was conducted in terms of dividing up the space into sub areas developing independent models of the sub areas and connecting them with linear Eucledian distance measures. Paelinck's concept of spatial econometrics embraced the all pervasive characteristics of space and formalized the development of regional econometric models. This differs from the standard econometric models in the sense it does not assume the independence of cross section observations. Isard generalized it in terms of policy space and time-space dimension. This concept of spatial autocorrelation has been largely elaborated by Cliff and Ord (1981). Just as we have temporal heterogeneity, we can define the concept of spatial heterogeneity to mean that the economic and behavioral relationships over space vary with location. Based on Paelinck and Klaassen's five principles, Anselin (1988) defines the area of spatial econometrics as "consisting those methods and techniques that, based on a formal representation of the structure of spatial dependence and spatial heterogeneity provide the means to carry out the proper specification, estimation, hypothesis testing and prediction for models in regional science". The basic formulation of a spatial econometric model is:

8Dit = git (Xit, αit, Eit) where 'i' refers to a spatial unit of observation and 't' to the time period. git are time space functions in terms of a vector of dependent variable 'D' and independent variables 'x' and a set of parameters 'α'. For the identifiability of the model, it is necessary to impose some restrictions. Bailly, Coffey, Paelinck, and Polese (1992) estimated the parameters of a spatial econometrics of service model in terms of national and regional concentration of economic activity primarily based on the concept of location elasticity. Five assumptions postulated by them are:

  1. the higher the level of national activity, the greater the chances of regional shares of location, i.e., partial correlation will be negative

  2. specialization should lead to more concentration, i.e., partial correlation should be positive

  3. the length of the national development period i.e., cumulative sum of the yearly development is negatively partially correlated with concentration

  4. geographical factors forming/not forming certain areas for rapid development. Here the expected partial correlation is positive.

  5. policy measures acting against unwanted concentration have negative correlation with concentration. The model based on the above principles is:

9log Pi = αo + α, log x1i + α2 log x2i + α3 log x3i

10+ α4 log x4i + α5 log x5i + E

11where 'i' is the national index, the variable xki (k = 1, 2 ...5) corresponds to the five assumptions presented above and Ei are the disturbance terms. This equation should be looked at as a structural equation of a system of at least two equations. In the first log Pi is dependent on log x1i through log X5i and the second structural equation describes the assumed relation between log x5i and log Pi. The authors then estimate the reduced form model for EEC countries. This service orientation of spatial econometrics is particularly significant since the production activity in developed countries is becoming more service oriented and human knowledge based inputs are having more importance.

12Paelinck is the originator of the abstract spatial system in the framework of general system analysis claiming that regional economics is more general than classical economics. He was quite modest to admit that regional science "ought not to claim having answers to all regional problems." He recommended long ago that other disciplines like environment, transportation and social issues should be incorporated. He also noted the limitation of the influence of government on regional and urban development, and he cautioned "against the lighthearted use of highly theoretical optimization models."

13Although spectacular development took place in regional science during the period 1955-1985, for the last ten years it has stagnated. Significant changes are taking place in international political economies, production processes, institutional set ups and environmental factors. New thinking is called for.

14Regional Science methodologies were developed with the economic factors of developed countries in mind. The assumptions applied only to those countries. However, in the area of economic activity, in a country like India, many non-economic factors are involved. This is particularly so in many such countries with a federal structure of government. Thus, there is a need to develop new tools by scholars in these countries. They should be heavily oriented toward practical application and factors other than economic should be considered. Although Isard (1956) has repeatedly mentioned the need for such integrating non-economic factors, we have been unsuccessful in incorporating them. In this paper, we highlight this need in regional science to suit the changing conditions.

Public and Private Cooperation

15With the dissolution of the Soviet Union and changes in Eastern Europe, it is becoming clear that excessive governmental control of economic activity is detrimental to economic development and efficiency. The trend is toward more privatization and public-private cooperation. However, complete transition of socialist systems to capitalist systems is neither possible in the short term nor even may not be desirable, to attain egalitarian distribution of the economy's surplus. Introduction of competition, markets and political democracy rather than large scale privatization may be the road to market socialism. Whatever the policy implication may be, movement of the economy, particularly in a developing country, to a more private sector will have implications for regional planning, since public investment was primarily intended for balanced regional development.

16In developed countries, we have had experiences with a mixed economy for a long time. Countries such as Sweden have had a long history of providing social services like health and education; although they have not had public enterprises competing with private companies. On the other hand, in Great Britain, France and Italy, in some sectors, public enterprises competed side by side with private companies. Although the experience of the developed countries is important, in the case of poor countries, the context is quite different.

17From the point of efficiency, it is not abundantly clear that private enterprise in the developing countries will be more efficient than the public enterprise. At the present time, for some countries like India, in the context of the managerial talent, private sector seems to be more efficient. However, the situation may change due to the development of management education and administration cadre without corruption and bureaucracy. It is also not true that the public authorities have a longer term perspective, since the leaders are interested in getting elected next time. However, public enterprises are managed by bureaucrats whose jobs do not depend on politicians; they might have a longer term view, although it is not clear whether their ability is superior to that of the private managers. The State has the capacity to interfere in risky ventures and areas where private money may not be committed. Since it is not always possible to create perfect, incorruptible human beings, the solution is the development of a suitable institutional mechanism. New tools to estimate regional impact of privatization and economic reform and allocation of investment process of private and public capital in a mixed economy are to be developed.

Regional Allocation of Investment

18The problem of optimal regional allocation of investment is too well known to be emphasized here. Rahman (1963) first studied this problem in a programming framework. Then Intriligator (1969), and Sakashita (1967) reformulated it in terms of Pontryagin's maximum principle.

19Sakashita's analysis was more comprehensive. He divided public investment funds into productive government investment (e.g., building a steel mill) and social overhead investment. The investment fund is assumed to come from total (consumers and producers) savings in two regions constituting the nation. A tax is charged on this savings, and the resulting revenue is used for public investment. The funds left over after the taxation are used for private investment. The problem is deciding the optimal values of the tax rate () and the proportions of private and public investment devoted to each region such that the national income generated at a future time is maximized, given that the growth path of the regional income at each time period is determined by the investment plan outlined before. In regional science, this line of thought has not been pursued further. With the new political scenarios and existing situations in many developing countries this dualism needs serious attention of regional scientists.

Role of Technology

20Most of the developing countries have excessive population growth. Obviously it is impossible to develop organized manufacturing sectors or service sectors to support such a large number of people looking for jobs. The strategy will be to revolutionize agricultural sectors and support small scale industries. For this purpose, development of technology and its diffusion are necessary. Technology management thus plays an important part in regional development. The private sector is the key for the training and education of the work force. Although, initially, the public sector provides the funds for research and development, it is the private sector which should be responsible for its management and diffusion of technology. Of course, the communication system has to be developed by the public sector.

21The trend of economic development in the developed areas is mostly away from the extraction and fabrication activities and toward processing and service activities. Production is often seen as the vehicle for moving the society from one stage to another, but it is really information and communication driven by the computer which make the transformation quicker and more lasting. When we look at the development process of the so-called poor countries, we find that, in many cases, although considerable amounts of resources have been spent on economic development, this industrialization process has led to uneven socio-economic transformation.

22One significant aspect of this process is the spread of technological innovation in geographical space. Although considerable effort has been made on analyzing macroeconomic aspects of regional economic growth, the role of information technology in regional development is not understood. Telephones had a powerful impact in leading to the growth of large companies which were located in the major cities of the countries. It was possible, through telephones, to control economic activities at a number of points in space from a central location. The information technology has further developed, and it raises the interesting question of whether their developments will lead to decentralization in space. Regional science theories are based mostly on transportation cost. The advent of the computer and the information system can greatly change the formulation of interaction models. The globalization of the market requires the development of new theories of location. Weber's transport oriented theory needs reformulation. Today's industries are operating in a boundryless world.

23There also has been a drastic change in the manufacturing process. More and more computers are being used for automated and just in time production processes. The storage of products will be less and less important. This has crucial implications for location theory and service activities. It may mean more and more locations should be near the market rather than at a resource site. We should have a new look at the location-allocation literature.

24Environment is another factor. Everybody wants to be at a maximum distance from pollution sources and hazardous material sites and at the same time they want to get the financial benefit of the facilities. The traditional location theory did not consider this type of situation. Weber's theory of minimizing transportation cost and critical isodapane analysis may not be applicable.

Regional Science and Conflict Management

25Significant changes are taking place in world economic and political structures. Russia, East European countries, China, India etc are taking urgent steps to redesign themselves politically and form economic strategies. This has great implications on regional development policy. Regional science methodologies have become doubly important in handling these changes. The whole notion of nation-state is at stake, and the integration of regional science techniques with those of conflict management and Peace Science will be very useful for analyzing regional and interregional conflict and economic conversion from military to civilian activities.

26Development of Peace Science has taken place in a number of directions. In the academic area, in recent years, the greatest contribution has come from peace studies, where learned societies are formed, books are written, and international issues of peace and conflict are discussed at conferences. An overt expression of this interest culminated in peace movement that was quite prominent in the second half of the twentieth century. In modern times, the issues of peace and war have come to entail more than an ethical or religious question; they are interwoven in the social, economic, and political fabric of the global community. Therefore, it is vital that we develop a theoretical basis for conflict management and peace analysis in regional/spatial perspectives and indicate how the techniques used in the social sciences can be applied to solve practical, real-life problems in such areas as personal-family conflicts; societal problems such as race relations; ethical problems; planning problems such as housing, transportation, and of course, international relations. The following is a list of some techniques that can be used effectively in regional and interregional conflict analysis. Readers are referred to Chatterji (1992) for details.

27Statistical Methods in Conflict Management

  • Descriptive Statistics

  • Probability Theory and Probability Distribution

  • Statistical Inference

  • Analysis of Variance, Co-Variance and Design of Experiments

  • Nonparametric Testing of Hypothesis and Chi-square Test

  • Multivariate Distributions

28Differential Equations, Arms Race, And Related Models

  • Differential and Integral Calculus

  • Topology

  • Catastrophe Theory

  • Chaos Theory

29Gaming, Coalition Theory, and Simulation

  • • Decision Science and Game Theory

  • • Coalition Theory

  • • Simulation

30Factor Analysis and Related Methods

  • • Factor Analysis

  • • Discriminant Analysis

  • • Cluster Analysis

  • • Content Analysis

31Econometric Models and Rational Expectations

  • • Econometric Models

  • • Rational Expectations

32Input-Output and Programming

  • • Input-Output Models

  • • Programming

33Graph Theory and Markov Chain

  • • Graph Theory

  • • Markov Chain

34Participants and Information Models

  • • Decentralization Process

  • • Learning Theory

  • • Artificial Intelligence and Expert Systems

  • • Asymmetric Information Theory

  • • Fuzzy Set Theory

  • etc., etc.

35Let me now present some suggestions for new regional science research following Isard and Chatterji (1993).

36The frontier or boundary concept in regional science must be revitalized to be consistent with these extended concepts of centrality and polarization. Perhaps this need can best be seen if we examine the problem of the preservation and enhancement of environmental quality. What is needed is a conception of an hierarchically ordered set of boundaries and associated administrative areas --- a conception somewhat similar to that of a central place network defined as a hierarchally ordered set of central places. We should also cover qualitative factors. The critical notion of mental representations --- scripts, schema, causal scenarios, lessons of history and other concepts must be brought into the fold of regional science.

37Key political, business and other leaders are never fully informed and at best can perceive, if not misperceive, only a fraction of the relevant structure and relationships with respect to any given problem. Hence, when we aim to affect policy, to educate leaders as to what is not bad policy, and hopefully, what is good policy, we need to know their current perceptions (misperceptions) of the relevant elements in a situation, how such perceptions enter into their decision making and, ideally, how to help change them to be more in accord with reality.

38Mental representations are just part of the full set of relevant qualitative factors which I do not have space to discuss in this paper. However, we should note the emergence of a number of significant techniques aimed at quantifying qualitative factors in spatial analysis: fuzzy set theory, qualitative variable econometrics, discrete choice models and multidimensional analysis, and optimization methods. IIt is important to improve our existing quantitative analysis. One needed direction is to improve, and significantly increase our stock of information that relates to local, urban and regional entities. Beyond information creation, we need basic improvement of our quantitative analysis. The fiction of a purely competitive spatial general equilibrium framework must be replaced by a more realistic one that recognizes, as Thisse (1992) puts it, space as a disturbing factor. Spatial competition cannot be ignored and Thisse's call for incorporating spatial competition in general equilibrium theory must be heartily endorsed. Leaving the abstract areas, we come to those more directly concerned with application and policy. A basic need exists for expanding our work on local public economics.

39The concept of a set of integrated multi-level authorities and decision making structures is also essential to regional modelling. If we may, we would like to extend the framework and discussion to embrace the globe as a whole. This is essential for sound world environmental policy, a much more adequate set of world trade policies, and other actions affecting the economic and political security of local, regional, national and multiregional communities.

40Finally, in this broad conception of the relationships within a global society we must not forget the basic role of the firm, its production and location. Here, we need to examine in an analytical way the forces that have affected firm location in the past and lay the basis for a sound evaluation of the forces that will come to play in the future location of firms and their "territories". Additionally, we need to assess the impact on the enterprise by regional policy. In the emerging world of exponentially increasing complexity and interdependence, the absolutely essential production activity of enterprises must be kept in mind.

41The economic integration of Europe, North American Trade Treaty (U.S., Canada and Mexico), Pacific Rim, Commonwealth Countries, etc. will have profound regional impact. Regional Scientists should develop a theoretical structure and conduct empirical analysis of this phenomenon. After the collapse of the Soviet Union and changes in Eastern Europe, many nations are breaking up and the concept of the federated system is emerging. We need to develop regional planning theories to deal with these problems of regional conflict and disintegration.

42Increasingly, the central philosophy of regional science based on theorizing is under attack. Under budgetary scrutiny, programs in regional science not related to practical problems are being eliminated. To avoid this problem "it is necessary to integrate, in a more comprehensive way, regional science's avowed primary object of analysis of human spatial behavior in a regional context into the manner (both basic and applied) in which we produce the field" (Bailly and Coffey 1994). Some scholars want to make regional science more practical. The proper objective should be to develop theory on the basis of a few select variables, preferably economic and in sequential steps extend it to multiple dimensions and time.

43Talking about real life situations, there is great scope in applying regional science to such areas as health care and location of hazardous waste facilities. Health systems with clinics, hospitals and physicians, definitely have a spatial dimension. The development can also be theoretical. The location of unwanted facilities is not based on the criteria of minimizing the transportation cost. Here, instead, we are interested in maximizing the distance, and at the same time would like to have its advantages available.

44There is great need to devise new regional science tools for developed countries such as United Europe.

45After the World War, Europe was organized on two strong pillars.

  1. A power balance between two blocks, i.e., ideological and military

  2. The introduction of supranationality.

46The idea was to bring Germany into Europe by combining industries under one umbrella in an integrated institutional framework with coal and steel as the chosen industry. The choice of the industry was not only meant to serve as a pillar but also to build a roadblock against rearmament. In the U.S. and Russia the trend is toward moving away from federalism. In Europe, it is different, as they start from different points of scale. Cultural imperialism or cultural independence determine the unmaking or making of the federation (Moller 1995).

47In the middle of the twentieth century, Europe was confined to a nation state and one language and culture, i.e., age of seclusion. The events that are taking place in Europe are acting against this seclusion to new cultures broadening or making national borders.

48Economic integration has led to international manufacturers, agriculture and service products. The market is now global. Consumer preferences never take place in the same geographical location. Due to the spread of communication networks, the market of a product/service is very wide.

49In the case of R & D, it is just too costly to develop a product if it's not marketed immediately. There is a need to convert development to demand. At this time demand controls production. Information technology is widening the horizon of the consumer and it is replacing the supremacy of production technology.

50In the past, enterprises were limited to specific locations due to availability of resources. Due to changes in communication and transport, the location theory has to be completely revised. Capital has become more important since competition has become tougher. For customers, the cultural profile has become more important than price and quality. Consumers choose product concepts on the basis of a set of values chosen by the firm. For example, environmental protection by a firm has become an important factor. Cultural relationships between the consumer and the firm are stronger than the economic relationship. Again, the strategy must be brought out in the open for the competition. The shift in competition from economic parameters to a cultural profile means a shift from plant and machinery towards workers.

51The basic culture is communicated by means of language and religion. Most states in the European Union are geared to cultural decentralization (except probably U.K.). Before the nation state acted as a threat to the local/regional areas, their access to international community was not guaranteed. But that has changed. The European Union would provide new access to the international areas.

52In Europe we expect (1) high technological challenge for U.S./Japan and low cost for developing countries, (2) large number of countries want to join, and (3) environmental conflict. Although attention has been drawn by Molle and Cappellin (1988) and others to properly evaluate the regional impact of European Union policy, regional science lags behind in formulating the evaluation process for an integrating economic system. It is essential that we develop new regional theory with respect to agriculture, industy, energy, transportation, communication, trade,macro and monetary policy.

53In Europe, particularly in Western Europe, the growth of population has declined and the system is at zero population growth. Increases in the population can only come from migration. Most migration models in regional science have been developed on the basis of distance and intervening opportunity and attraction of income. But other factors are becoming important. One such factor is the regulation of migration and a certain type of politics of exclusion (Miles and Thranhardt 1995).

54Bailly and Coffey (1994) rightly advance the thesis that the mainstream regional science is in a state of crisis due to the lack of touch with real world situations and narrow perspectives in sharp contrast of its original objectives. Nijkamp (1994) thinks that the vitality of the field can be maintained by mixing the (1) orientation towards applicable and sophisticated research tools and techniques (2) with behavioral and policy orientation.

55Although Cassetti (1995) admires the contribution of regional science to spatial modeling, he is unsure whether "this will lead to a new discipline or to enrich the subfields in the social science with which regional scientists are affiliated". The other contributors to the special issue of "International Regional Science Review" (1995) also feel the same way.

56Regional science, was born in developed countries and it has had phenomenal growth all over the world for the last four decades. However, it has not been found to be quite useful in poor countries such as India and China. Great opportunities exist for the regional scientists in those countries to reformulate the theory and methods to suit their own countries. Some of the areas where further work can be done are:

  1. Conflict management and peace

  2. Free enterprise & regional development

  3. Decentralization

  4. Regional political economic systems

  5. Religious, linguistic base, regional dimension, and cooperation

  6. Multinational cooperation

  7. Location of public facilities

  8. Health care

  9. Population dynamics

  10. National resource - forest and mining, etc.

  11. Energy

  12. Agriculture

  13. High technology

  14. International cooperation, etc.

  15. Statistical geography

  16. Geographical information systems

57I have summarized some of my thinking about the state of Regional Science and what we can do about it. In this process, I have heavily drawn on the views and contributions of others. If the tone of the paper appears to be negative and pessimistic, this was not the intention. The challenge for us is to reinvent Regional Science for future generations in the twenty-first century and beyond.

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Manas Chatterji, « Some thoughts on regional science models and their potential uses in Europe today », Cybergeo: European Journal of Geography [En ligne], Dossiers, document 43, mis en ligne le 06 février 1998, consulté le 18 avril 2024. URL : http://journals.openedition.org/cybergeo/341 ; DOI : https://doi.org/10.4000/cybergeo.341

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Manas Chatterji

Professor of Management at Binghamton University, State University of New York at Binghamton, New York Honorary Distinguished Professor of Management, Indian Institute of Management-Calcutta and Guest Professor, Peking University.
mchatter@binghamton.edu

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