From Economics of Place to Place-Based Economics

Places have very different faces. My place can be the home where I live, the country where I was born, the town where I work, the garden I cultivate, the continent of our shared past or even the cosmos as a whole. If we look at the history of modern economic thought, land as a scarce resource has played an important role. For the school of Physiocrats in the eighteenth century, land was the main if not the only source of value creation. With modern industrialization and the rise of classical economics labor became the creator and measure of monetary worth. Later on, neoclassical economists considered utility (pleasure, happiness) as the measure of value creation and price formation. In today’s economics ‘place’ only becomes relevant when it is perceived as a scarce good. An economist is not interested in the uniqueness of a specific locale, nor in its memories and stories. The laws of economics apply to every place and hence to no specific place. Space and place are considered factors in a production function or elements of consumption and entertainment. From the moment scarcity arises, opportunity cost, competition and price formation and regulation become part of the game. When, e.g., the oceans become the subject of intensive human exploitation and competition, they need political and economic regulation. All these features can be subsumed under the umbrella of ‘economics of place’. However, by place-based economics we mean something altogether different. While the economics of place primarily envisage place as an instrumental good used for the maximization of human utility, the proposed alternative views place as an existential good that creates meaning and identity for people. In a first section I will now explore the existential meaning of ‘place’ starting from Martin Heidegger’s definition of the human being as Da-sein which means literally being-there, being rooted in a specific place. In the second section I will reconstruct a well-known theorem in economics called the tragedy of the commons. It explains how places can be degraded from communal property where relations matter to instrumental goods for individual profit maximization. The third section revisits the first theoretical model of place-based economics in Western philosophy developed by Aristotle in the fourth century BC. It is fascinating to see how this Aristotelian model of oiko-nomia gradually lost its grip in subsequent centuries. In the last section I reflect on some proposals of E.F. Schumacher to recontextualize the Aristotelian model of place-based economics.