CHAPTER 4 Industrial dynamics and the geography of proximity Andre Torre There is a broad division into two camps in both traditional literature and the recent models ( ... ). On the other side is the belief that the choice among multiple equilibria is essentially resolved by history: that past events set the preconditions that drive the economy to one steady state or another ( ... ) On the other side, however, is the view that the key determinant of choice of equilibrium is expectations: that there is a decisive element of self-ful®lling pro- phecy. Paul Krugman, History versus expectations, Quarterly Journal of Economics, 1991. 4.1. INTRODUCTION The regional economists' tendency to be ®rst and foremost interested, during the eighties, in subjects such as milieux or districts, by using an excessive interest in purely local or even microsocietal expressions as an excuse, has sometimes been gibed at. However, this infatuation only represents, a renewed interest in matters of proximity and localization. Milieux, districts, localized systems of pro- duction and innovation or territorialized systems of production form the ex- pression of the research undertaken on ®rms' or individuals' conditions of localization, with the small size of these economic areas representing (in spite of their diversity) an advantage in the meticulous and often monographic study of the links of proximity. This approach should be considered as a return to funda- mental matters, the method thus followed providing the opportunity to test, on relatively simple systems, a theorical framework which might at some time be extended to more complex series. The importance of the notion of proximity and of its function in the structuring of production relations or in the technological interaction process is now widely acknowledged. You come across this view again among the evolutionary economists (Foray, 1992) or among geographers who subscribe to a neo-Fordist conception of production (Scott and Storper, l990). In a more surprising way, the idea has gained ground in the contemporary theories of development (see Lucas, 1988), and serves as a support for complex and documented econometric studies (Acs et al., 1992), even if sometimes lacking in explanatory principle (Jae, 1989). Questionings though, con- Progress in Planning Vol. 49, No. 3/4, pp. 145±158, 1998 # 1998 Published by Elsevier Science Ltd. All rights reserved Printed in Great Britain 0305-9006/98 $19.00 + 0.00 PII: S0305-9006(98)00007-5 145