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Ever since the emergence of civilization, human activities and standards of living have been unevenly distributed among both the continents and their territories. Economic life is concentrated in a fairly limited number of human settlements (cities and clusters), which are gathered under the heading of “economic agglomerations”. Furthermore, there are large and small agglomerations with very different combinations of firms and households. Economic geography - or geographical economics - aims to explain why economic activities choose to establish themselves in some particular places, with the result that some places fare better than others.

The purpose of this chapter is to provide a bird’s-eye overview of the main contri­butions made by economists and regional scientists in understanding how the space­economy is organized. There is a wide agreement that the space-economy may be viewed as the outcome of a trade-off between different types of scale economies in production and the mobility costs of goods, people and information. Although it has been rediscov­ered many times (including in recent periods), this trade-off is at the heart of economic geography ever since the work of Losch (1940). It implies that the location of economic activities is the result of a complicated balance of forces that push and pull consumers and firms in opposing directions.

I want to stress from the outset the influence of three major scientists who epito­mize the main questions raised in economic geography: Johann Heinrich von Thunen (1783-1850), Harold Hotelling (1885-1973) and Paul Krugman (1953-). Their contribu­tions have paved the way to large flows of high-quality research. Thunen (1826) is the founding father of land use theory and his work has served as the corner-stone for the development of modern urban economics. Hotelling (1929) deals with a very different but equally fundamental issue, namely the nature of competition across space and the way firms choose their location in a strategic environment. Last, Krugman (1991) has highlighted the microeconomic underpinnings of both spatial economic agglomera­tions and regional imbalances at national and international levels. He has achieved that by building a full-fledged general equilibrium model, which is able to explain why the economic activity is agglomerated in a few places.

Ironically enough, none of those three authors is a “spatial economist” per se. They turned their attention to spatial issues for reasons that are not directly related to the location of economic activities. Thunen was interested in the allocation of resources and the determination of prices. He emphasized space because land was an essential produc­tion factor in the main sector of his time. Hotelling aimed to build a theory of product selection by oligopolistic firms. To achieve his goal, he used space as a metaphor. As for Krugman, he was mainly interested in the interplay between increasing returns and imperfect competition in globalizing markets, commodity trade and production factor mobility being the two fundamental ingredients.

A last warning is in order. Even though Krugman gave new life to the field of eco­nomic geography, many ideas and concepts have been around for a long time. However, they were fairly disparate and in search of a synthesis ranging from the small to the large, which Fujita and Thisse (2013) have endeavored to develop. To a large extent, the history of economic geography may be viewed as a process that has gradually unified various bodies of knowledge, as shown by the different names given to the field (regional and urban economics, location theory, and spatial economics), within a theoretical framework in which the focus has shifted from perfect competition to imperfect com­petition and various types of market failures. In what follows, I will only discuss the fundamental contributions made in economic geography through the lenses of modern economic theory. This choice will lead me to put aside a wide range of contributions that have not passed the test of time.