Jane Jacobs On Economics

Thanks to – if I remember correctly – argumate, I and a few other people in the rationalist community recently became interested in the ideas of Jane Jacobs, and particularly her city-based economic theory. So I have acquired The Economy of Cities and Cities and the Wealth of Nations and will be blogging them as I pass through chapters, starting with Economy.

Before setting out to read her books on the subject, I’d read this summary and poked around the internet for mainstream criticism of the idea. Here’s my general understanding:

Jacobs considers that cities, via the concentration of workers and particularly creative artisans and entrepreneurialism, are the basic unit that powers economies, and that rural areas with a local economy based on farming are no better off than resource-rich places like the petrostates. She also considers that the main mechanism by which a city’s economy develops is import replacement; a city imports something, then gradually, first through repairs and then through local factories, builds up the ability to create it locally rather than import it, beginning to export it and bring in new things.

This brings with it some recommendations: large-scale currencies are bad and probably doomed, free trade is probably not good for the developing world because local tariffs assist in promoting import replacement, and regulating economies at the city level (with hyper-local currencies if possible) would probably be good. This also provides some amount of explanation for the success of Singapore and Hong Kong; these are/were places where the unit of economic governance and the city were the same, so the incentives would be better than in most places.

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