Cities and the Wealth of Nations: Principles of Economic Life

by Jane Jacobs

Book Overview

In this eye-opening work of economic theory, Jane Jacobs argues that it is cities--not nations--that are the drivers of wealth. Challenging centuries of economic orthodoxy, in Cities and the Wealth of Nations the beloved author contends that healthy cities are constantly evolving to replace imported goods with locally-produced alternatives, spurring a cycle of vibrant economic growth. Intelligently argued and drawing on examples from around the world...

• Format: Paperback
• Language: English
• ISBN: 0394729110
• ISBN13: 9780394729114
• Release Date: March 1985
• Publisher: Vintage
• Length: 257 Pages
• Weight: 0.40 lbs.
• Dimensions: 0.5" x 4.7" x 7.3"

Customer Reviews

Cities are the fundamental macroeconomic units -- not nations

In The Death and Life of American Cities, Jane Jacobs demonstrated with clarity, intelligence and righteous indignation that city planners had for decades -- going on a century, in fact -- misunderstood the virtues that cities possessed, and hadn't understood why people wanted to live in them. According to Jacobs, all of orthodox city planning was built around the belief that what city dwellers most wanted was to leave the city and live in a suburb or on a farm. So they bulldozed blighted neighborhood after blighted neighborhood and replaced them with parks. When many of those parks themselves became blighted, filled with the familiar sight of the homeless and drug users, orthodox city planners could only scratch their heads; that simply wasn't supposed to happen. If anything, this only confirmed cities' incorrigibility. So they wiped out sizable sections of major American cities and built freeways out; clearly people would prefer to be elsewhere. The millions who continued to live in American cities were an inconvenient datum. In Cities and the Wealth of Nations, Jacobs claims that national governments repeat the same misunderstandings of their cities on a larger -- and possibly more tragic -- scale. At this larger level, they believe that they can produce economic activity just anywhere. Struggling farmland? Dam up their rivers, build schools, give them tax breaks, and invite foreign companies to build factories there. Wait a few years and watch a million economic flowers bloom. City planners believed -- and maybe still do believe -- that a city was just a defective pasture. According to Jacobs, national planners likewise believe that a city could thrive anywhere. So they build cargo-cult cities and pray that the same thing which animates their real cities will turn their farmland into the next New York. But of course that normally fails. A real city has a good reason for being there; a cargo-cult city does not. People aren't fooled. They want real cities. Jacobs wants to recast all of macroeconomics using these insights and others, and has the rhetorical skills to convince at least one non-economist that she's on to something. All the dynamism in a national economy, says Jacobs, comes from its cities. Even the vaunted "heartland" of the United States only survives because cities have brought industrial technologies to their farms. If you want to understand why a nation succeeds or fails, says Jacobs, look to its cities. The title of her book is no accident: she wants to yank economics off the track that it's been on ever since Adam Smith.

Wealth Creation

"Any settlement that becomes import-replacing becomes a city." Cities and the Wealth of Nations, Jane JacobsWritten by an economist, this is a very unusual book. Ms. Jacobs is not hampered by orthodox preconceived notions, misleading postulated theoretical myths like utility optimization, rationality, or efficient markets. These standard phrases of neo-classical economic theory cannot be found in her book. Instead, and although her discussion is entirely nonmathematical, she uses a crude qualtitative idea of excess demand dynamics, of growth vs. decline. Her expectation is never of equilibrium. The notion of equilibrium never appears in this book. Jacobs instead describes qualitatively the reality of nonequilibrium in the economic life of cities, regions, and nations. She concentrates on the surprises of economic reality.Jacobs argues fairly convincingly that significant, distributed wealth is created by cities that are inventive enough to replace imports by their own local production, that this is the only reliable source of wealth for cities in the long run, and that these cities need other like-minded cities to trade with in order to survive and prosper. Her expectation is of growth or decline, not of equilibrium. If she is right then the Euro and the European Union are a bad mistake, going entirely in the wrong direction. As examples in support of her argument she points to independent cites like Singapore and Hong Kong with their own local currencies. Other interesting case histories are TVA, small villages in France and Japan, other cases in Italy, Columbia, Ethiopia, US, Iran, ... .The book begins in the chapter "Fool's Paradise' with discussions of Keynsian economics and Phillips curves (the Philips curve idea is demolished convincingly by Ormerod in "The Death of Economics"), I. Fisher and monetarism, and Marxism. These were all ideas requiring equilibria of one sort or another. Also interesting: her description why, in the long run, imperialism is bound to fail, written in 1984, well before the fall of the USSR. Her prediction for the fate of the West is not better. Jacobs is aware of the idea of feedback and relies on it well and heavily. She is a sharp observor of economic behavior and is well versed in economic history. This book will likely be found interesting by a scientifically-minded reader who is curious about how economies work, and why all older theoretical ideas (Keynes, monetarism, ... ) have failed to describe economies as they evolve.I'm grateful to Yi-Ching Zhang of the Econophysics Forum for recommending this book.

An exciting, observant, and enduring work

Wow. Jacobs is so adept at explaining the complex currents of global, national and local economies that even the casual reader will be spellbound. The book is simultaneously radical (she essentially repudiates all modern macro-economic theory) and reasonable. This book is a great asset to anyone who wishes to comprehend the world around them.

One of the Best

I read this in 1984. It is one of the five best non-fiction books I have read. Really. It forced me to reconsider some long-held notions about the economic role of individuals, and their environments, in society.

Specialization and Adaptation

Jacobs writes convincingly that individual firms are not the basis of the economy. She identifies the city as a place in which economic activity is generated by a network of interlocking dependencies amkng firms as the basis of an economic analysis. She identifies these interdependencies as either being capable of adapting to change or incapable. A closed fixed system of interdependencies is the hallmark of a city (or a firm) which is ready for decline. Cities or enterprises in which the economic components are free to exploit new opportunties can adapt to challenges from outside. Jacobs charaterizes this adaptation as taking the form of a specialization of an existing economic component to supply a new need. Contary to popular belief this notion of local as central to economic life is not opposed to glabalization. On the contrary it is opposed to the view that the nation state is central. Jacob's analysis explains economics as global network of independent local units. In this network each local unit will continuously adapt to the challenges and opportunities supplied by the needs and supplies of the other units.Jacobs shows that only by being open to change, by being willing to adapt, by being willing to let old ways die oif they no longer serve their purpose can a city or an enterprise ensure its long term survival.