Life and Works
Thunen was born in Canarienhausen in Northern Germany in 1783. He inherited a strong interest in, and talent for, mathematics and at an early age received private lessons in calculus.
An agricultural professional training followed from 1799 to 1802 before Thunen went to the Agricultural Academy of Lucas Staudinger near Hamburg for one year. Noting the different farming systems in the area, he got an idea of the structure of agriculture around a central market and, at the age of 19, put forward his first primitive Isolated State Model in the short treatise Description of the Agriculture in the Village of Gross-Flottbeck. He then spent a year in Albrecht Thaer’s famous Agricultural Institute in Celle. Both institutes propagated the modern English crop rotation system applied by progressive farmers. Thunen completed his theoretical education at the University of Gottingen in 1803-04, where he also attended lectures in economics.In 1806 he married and in 1810 he bought the estate of Tellow, which he developed into a profitable agricultural model farm, which soon attracted visitors from far and wide. There he elaborated the first model of a closed economy, which combined a realistic account of the production technology used at his time with an analysis of rational decision-making in competitive markets.
He put much energy into the estate's bookkeeping to obtain records of labour, capital and other inputs and outputs of agricultural production processes between 1810 and 1819. His main economic ideas were developed between 1815 und 1830 (Thunen 1817, 1823-50). He published numerous papers on a large number of issues, including the “Social Question”, in local periodicals. In 1818/19 he wrote the first draft of Part I of The Isolated State, which was published only in 1826.
In the early 1820s, Thunen in all probability studied intensively the works of major economists, including David Ricardo, Jean-Baptiste Say and Thomas Robert Malthus.
He then worked out the main propositions of his theory of distribution, centred around the concept of marginal productivity and on the capital formation model dealing with the “natural wage” (naturgemaβer Lohn), which was published in Part II of The Isolated State only in 1850. He derived a wage rate that is higher than the subsistence wage. His manuscripts of these years, comprising some 250 pages, contain inter alia the concept of optimization of individual objective functions, the solution of systems of equations and the formulation of a two-factor Cobb-Douglas production function (capital and labour). While Thunen was mainly interested in income distribution, he also contributed to monetary, trade and resource economics.Between 1830 and 1850 Thunen refined his economic system. He contrasted his “natural wage” model with the prevailing subsistence wage theory and was particularly keen to find a “law” in production, relating inputs, outputs and the return on capital. He also applied his findings to real-world problems, for example, taxation, trade, agricultural education, improvements of infrastructure and technical progress.
In 1842 he drafted a complete outline for an extended Isolated State opus, which he was not able to realize. In the posthumous Schumacher edition (1863) we find only fragments of his manuscripts and an incomplete manuscript on forestry economics.
With the advent of democratization and unification of the German regional kingdoms and dominions and in fear of a social revolution, political questions got the upper hand between 1840 and 1850. Thunen was elected to the National Assembly in Frankfurt, but due to bad health he never attended any meeting.
Besides his research and farm management Thunen was an adviser to his farmer colleagues, the regional government and foreign visitors. His main economic contributions with respect to these activities were published in the agricultural journal Neue Annalen der Mecklenburgischen Landwirtschaftsgesellschaft, and include essays on the improvement of urban farming (Thunen 1831b), taxation, the introduction of a credit system (Thunen 1817) and a deposit bank (Thunen 1831 a), and on improved agricultural technology. Thunen’s social commitment, his political conviction and his philosophical outlook are well documented in his published letters (Rieter 2011).
Owing to his scientific achievements and his activities on behalf of common welfare he was awarded a PhD honoris causa by the University of Rostock in 1830 and was made an honorary citizen of the town of Teterow in 1848.
Thunen died in September 1850, half a year after the first section of Part II of The Isolated State was published. According to his instructions his natural wage formula was engraved on his tombstone: A = "ap (A = wage; a = subsistence wage; p = average product of labour).