Conceptual model of the concept of the territorial cohesion

Although elements of spatially-oriented analysis have been long used to augment production functions, relatively less attention has been paid so far to implementation of territory within the neoclassical utility theory. Taking into account territorial heterogeneity and the importance of geographical-temporal distance, we introduce the category of social territorial utility and incorporate it into the neoclassical optimization framework aiming to show how it might influence the production process. The main objective of this paper is to present how territorial utility might be formally incorporated in the mainstream economics within the framework of the model of territorial optimum. The expected social territorial utility is shaped by social consensus and is reflected by public policies. It poses a new endogenous force to disturb the spatial equilibrium which is defined – among others - by NEG models as an utility equalization across different locations. The theory of social territorial utility shows that such an equilibrium may only be apparent. There might be strong endogenously driven motivations to change the spatial status-quo even though NEG models suggest otherwise. Those motivations may vary considerably among regions and their source lies in market failures. With the model of territorial optimum we clearly show that one ought not to analyse an economic optimisation without taking into account diverse spatial preferences. Using the model of territorial optimum we define and include in the paradigm of mainstream economics the category of territorial cohesion, and organize its structure and indicate its position in the process of development. It is not our purpose to make any normative judgments in this paper. The model of territorial optimum presents a positive approach to territorial cohesion and its implications for regional development. The implications are likely to be very diverse due to differences in expected social territorial utility reflected in policies of regional authorities. We illustrate this by carrying out a scenario analysis for the Polish NUTS-2 region of Dolnośląskie. The main conclusion is that territorial cohesion should not be treated as an absolute category, i.e., the ideal and universal state of the territory.