Aligning regulations and jurisdiction is a headache but a solvable one
Maintaining peace is a bigger problem, it should be analyzed from the perspective of modern warfare. My guess is that there nation-scale still makes sense, but progressively less so
There have been times/places where everything was city-states (classical Greece, renaissance Italy, the Holy Roman Empire, Sengoku period Japan), and they were not good times/places to live.
I don't know how strongly that argues against what Jane Jacobs actually said, but to me it's a pretty strong argument against the "everything should be a city-state" point that the review suggests she almost said.
Renaissance historian Ada Palmer has a nice essay touching on the difference between a cultural golden age and a period you'd necessarily want to live.
I'm a bit wary of trusting a post that makes dramatic claims such as a gradual but severe drop in quality of life over the 1200s-1500s period without sources.
My fave is The Great Wave by Hackett Fisher who covers the period along with others. You could try The Third Horseman or anything else on the Black Death and its relationship to the Renaissance.
I've never read anything about the period to the contrary... as one instance Tuchman's "A Distant Mirror" drives the point home across every dimension that the 14th century in Europe was just a bad, bad time.
As the reviewer him/herself said, the city-states were constantly at war against each other, with obviously negative consequences for their citizens' quality of life. If you lived in a large state such as Persia, you might be oppressed by a despot, but you might also be less likely to be killed in battle or starve to death when a rival city-state lays siege to your city-state, so... the centralized states might come out ahead on the less-likely-to-die-a-brutal-death metric?
Most everywhere was constantly at war with each other back then. It isn't obvious to me that citizens of Greek city states were more likely to die or starve than Persian citizens. Life sucked back then.
I could tell an equally compelling story as you have just outlined bout why the Greek city states were better and it would be just as unsupported by evidence.
-edit- This sounded a little more aggressive/snarky than I intended. What I was trying to convey is that that's certainly possible, but so is the converse. Finding out what the actual answer is would be interesting.
You are correct; my post was pure speculation. On second thought, you're right that size does not guarantee stability/non-violence. China has been huge for multiple centuries, and it's had its share of violence due to both rebellions/civil wars and Mongol invasions.
What we need is a Steven Pinker-style analysis: was the rate of violent death per capita in ancient history higher in large nations/empires or in small city-states?
I think perhaps Greek cities and Sengoku era Japanese cities were sufficiently different (i.e. not quite technologically able to have the level of trading and manufacturing centers that Jacobs considers important for the city dynamics) than the more modern city states that Jacobs is thinking of. But yes, starting perhaps with imperial Athens, you start getting the city-hinterlands+trade dynamic (rather than just a Greek-era city with its surrounding farms).
To the question of "quality of life," I do think however that there is good evidence that Renaissance Italian city states (especially Venice), the free cities of the Holy Roman Empire (particularly in the north) and the essentially city-provinces of the Low Countries DID in fact have higher quality of life (and better along a lot of other features) than not only the primarily agrarian/herding populations of everywhere else, but the cities of the large empires.
To specifically the question of how much violence, my understanding of the Greek city-state era wars is that they were constant but not very destructive - they didn't have good siege equipment and most cities had walls, and so the "wars" were often decided usually in 1 day somewhat-ceremonial battles with relatively low casualties (and no longer campaigns where disease/starvation would set in, until things like the Peloponesian War), and didn't usually result in destruction for the losing city.
I am pretty sure that simply by definition, the existence of a city: lots of people living relatively densely together implies a lower level of violence that what researchers/archeologists theorize/see in pre-city life, which seems to have have rampant intra- and inter-group violence. The process that allows a group to have a non-currently-on-fire city probably necessitates a central (within the confines of the city anyway) authority that suppresses violence and certain cultural (self-domestication) changes to tolerate that. I don't know if Pinker or other similar researchers have compared urban to non-urban violence, the #'s I've seen are usually (no doubt to Jacobs' dismay) at the nation-level, but you might be able to proxy by comparing countries we knew to have relatively higher urban populations.
That is the complete opposite impression of city-state warring that I've gotten from the writing of Bret Devereaux. Even if your city walls repel all attacks, a war is destructive to everyone and everything around it, meaning the undefended villages of the peasantry and their farmland. Not just from enemy forces, but (and perhaps especially) from defending forces as well.
Is that what we need? As mentioned, city-states and empires in ancient history are not a good comparison for the modern world. We seem to have gotten pretty good at not going to war with each other as much. Would that change if we go back to smaller nations, now that the mutual benefits of peaceful trade are obvious to most? If not, that undercuts one of the largest downsides of city-states.
We've got good at not going to war with each other as much because we live under a (mostly benevolent) hegemony. This requires a hegemon, which must be a large state.
Just to flag: tracking relative death rates between urban and rural areas from violence is a problem that is hard even today. Entire teams of political scientists have devoted their careers to this.
Why does this happen? Urban areas are more likely to have monuments, histories, chronicles, newspapers, etc. to record news of deaths
There is also the theory that the reason European weapons and sailing technology eclipsed Chinese, was that European countries had been in a state of conflict with each other for centuries, spurring competitive development, while China had recently entered an era of peace and had no peer rivals until the Europeans showed up.
So while the peace of the Ming dynasty might have been nice for the people then, in the long term it disadvantaged their descendants.
True, but the states in this context were not necessarily city states. The biggest gap in European warmaking came with Napoleonic wars and absolutist nation states. At the same time, the theory claims that the Chinese were able to keep pace when they had two or three larger states infighting, e.g. Song vs Xia vs Liao
Weapons, maybe; sailing technology, not so much, because even in a divided China most warfare would be land-based and so wouldn't spur advances in navigation or boat-building. I suspect the real reason why Europe pulled ahead in sailing terms is simply that foreign trade was more important in Europe than in was in East Asia, where merchants were generally frowned on and international trade was conducted in a limited manner under the pretense of "gift exchanges".
I believe the story is the Chinese intentionally abandoned building big ocean-going vessels because rising merchant economic and political power posed a threat to the existing elite:
"From 1405 to 1433, large fleets commanded by Admiral Zheng He – under the auspices of the Yongle Emperor of the Ming dynasty – traveled to the Indian Ocean seven times. This attempt did not lead China to global expansion, as the Confucian bureaucracy under the next emperor reversed the policy of open exploration and by 1500, it became a capital offence to build a seagoing junk with more than two masts.[18] Chinese merchants became content trading with already existing tributary states nearby and abroad. To them, traveling far east into the Pacific Ocean represented entering a broad wasteland of water with uncertain benefits of trade."
Also Europe has wildly more coast and more usable coast for seafaring than China. China has mostly river based trade. Europe has an insane amount of coastline and invagination.
I don't know if it is still en vogue, but the explanation for why China's development didn't keep up with the industrializing West was a 'high level equilibrium trap'.
Basically, China's production systems were advanced enough without significant mechanization, that there was no benefit (and therefore incentive) to going through the early awkward stages of industrialization.
But I think that centralization still would have had to play a role. In a more decentralized environment, -someone- would have had the right conditions and made the jump, and then everyone else would have to do so too to stay competitive.
I think that is too simple. Take Germany before 1871, which the review brings up. It consisted of a huge number of tiny states. But those were not constantly at war with each other. At least not more than big states were at this time.
But it was a severely underdeveloped region of Europe. And then quite suddenly, after the unification of 1871, Germany got a huge and long-lasting economic boom which brought it among the top industrialized and powerful European nations within just 40 years.
The problem was not that the petty states were at war with each other. It's that economy of scale was impossible in petty states, that you had to cross dozens of borders with customs within 100km. And don't underestimate that you had no unified regulations. Apart from the currencies, there was no unified time. You had hundreds of different "time zones", and train rides were ridiculously complicated for that reasons.
Germany was technologically advanced but politically fragmented. It was noted for its innovations in mining, manufacturing and materials. The lack of political unity held it back. There were dozens of tolls along the Rhine raising the cost of shipping. Napoleon reduced the number of administrative districts from over 240 to a bit over 90 when he invaded.
This is what I was thinking while reading the review. It feels like Jacobs is comfortable leaning on contradictory ideas so long as she can think up an anecdote in her mind to tell a just-so story, but doesn't spend much time on counter-examples. Germany is a great example of when unification worked wonders. The US left the British Empire, sure, when there was a 6-month communications delay, but seems to have thrived in a nation covering a whole continent after that. It seems to me that her ideas about nations were already empirically wrong when she wrote them.
I'm relistening to Mike Duncan's revolutions podcast and especially the Haitian revolution makes me wonder how much would be different if there had been Twitter and Email during the French Revolution
How many of the petty states were large enough to generate a Jacobsian "city-region"? Bavaria, surely, for Munich. Maybe Hanover? Wurtemberg, centered on Stuttgart? I don't know enough about German geography or municipal history to say.
Don’t people generally view classical Greece and renaissance Italy as golden ages though? The problem they highlight (particularly Italy), is the threat of larger neighbours; you may not be interested in empire, but empire is interested in you.
Yeah, but at least in case of renaissance Italy, it's because they judged them based on historical artifacts, and historical artifacts were produced by the wealthy and their artist proteges. Once you start reconstructing human health, economy, etc., what emerges is a consistent picture of decline, and the artifacts stop being a symbol of flourishing, and start being one of wealthy elite siphoning all resources and squandering them on vanity projects (and war).
The Netherlands were no bigger than Italian states when they defeated a much larger Spain and became the next economic powerhouse of Europe. (Nor was, say, Switzerland.) Size wasn't decisive, asabiyyah was.
There is also the fact that Constantinople fell to the Turks only once, so the influx of scholars and manuscripts and technical know how that it brought about was not a renewable resource.
...if you don't mind a book (in particular, one with a final chapter titled "Conclusion: The Fundamental Incompatibility of Market Economies with Long-Run Prosperity"), "The Invisible Hand?" by Bas Van Bavel has an entire chapter on it.
Edit: Now that I think of it, the entire book is essentially one big counterpoint/complement for Jane Jacobs' ideas, as much of it is about the cities' growth impoverishing the countryside and eventually destroying the foundations of their own well-being.
For example - one of the trends, in Italian cities in particular, was their specialization in luxury goods - which amounted to import substitution a rebours - replacing a thriving industry capable of serving the local population with an export-oriented vestige. This makes sense, nominally, luxury goods are more profitable, they justify higher wages necessary for a place with a higher cost of living, etc. It still amounts to de-industrialization and leads to economic decline.
Golden age of what? Culturally, they were golden ages. Politically, they were disasters. Interstate anarchy makes for good fantasy fiction, but it is hell to live under. One of the reason for Rome's success was that it offered allies and even former enemies a square deal, an idea anathema to the ancient Greeks. An extended treaty negotiation lacks the drama of a good battle scene.
Depends on what you're looking for? Slaughter and patronage of high culture is probably not what the man on the street wants.
"In Italy for thirty years under the Borgias, they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace, and what did that produce? The cuckoo clock."
Not sure if I'd choose anywhere else BESIDES classical greece during the time period -- i mean, obviously it would be bad if you were a slave, but slavery was everywhere
"everything should be a city-state". Ideally, yes. Ideally they shouldn't have armies nor even weapons, or anything that saps resources from noble goals.
But it's like nobody asks "why do nation and multi-nation states arise"? and the answer to me is "to protect you against other states".
Yep. There was an essay I read a while back talking about how after the invention of the cannon, small European states essentially became militarily non-viable. In the Middle Ages, castles and walled cities could withstand a siege for months or even years when the only tactics they had to worry about were big rocks being hurled into the walls or tunnels being dug underneath them, and thus a small state could often withstand attacks from much larger ones, but cannons changed the equation for good. As war become more and more of an industrial endeavor over the next few centuries, this promoted further state consolidation, because being able to marshal more resources more quickly became a key to victory.
It seems like one way to ease the lack of feedback to cities that Jacobs points out is a YIMBY-like openness to internal migration. It’s certainly not as effective as currency feedback in terms of helping places, but it seems like it’s relatively effective at helping people: your city is failing, so move to a city that’s not failing!
True enough, but that ignores the stickiness of location. People are really resistant to moving for many reasons, not least of which is the non-liquidity of housing, but also including existing networks of family and friends.
It also doesn't fix the city (city region?). Ideally we would have a uniform spread of thriving, dynamic cities around the globe, not just a half-dozen megalopolis areas and everything else poor resource-extraction areas.
It varies quite a bit by year, but on average, over the last 10 years, 60-65% of moves have been within the same county. The is lower than I'd thought - I'd have guess 75% of moves were with in the same area.
There is also a data set on the distance people moved if they moved inter county. These are the buckets and the median % for each since 2005:
Less than 50 miles - 40.1
50 to 199 miles - 21.3
200 to 499 miles - 14.5
500 miles or more - 24.6
There is a note in the data that numbers before 2005 are less reliable (not sure why). There doesn't appear too much fluctuation in the numbers and surprisingly, you wouldn't really know covid happened just looking at this data set.
Anyway. It's definitely true that people want to stay in the place they live, but that's not true of everyone who moves. And we have to wonder, if certain desirable cities were cheaper, would more people move there? Or the converse, if certain undesirable areas were less desirable because of lack of support of being in a "good" city-state, would more people move. I dont know. Its an interesting question.
I think the answer to the second question is that way more people would move. We can look at immigration to US for evidence of this. The US standing in for the desirable city state and latin america and other developing countries standing in for the less desirable city states. The answer to the first question is less clear - we'd more city level data before starting to generate good hypotheses.
I think that's an underrated plus for the United States historically. People were more likely to move than jobs rather than staying in their region, although I think geographical mobility has declined over the last few decades.
Internal migration poses a lot of the same problems that migration between countries does. (Ethnic/cultural change, exacerbation of existing inequality, overcrowding, "brain drain" from rural areas or from economically declining cities). This is especially the case in a country like India that includes many different ethno-national groups: mass migration, if it happened on a large scale, could change the ethnic and linguistic composition like Madras or Bangalore. (It *doesn't* happen as much as other countries, probably partly because of the language barriers, which I think is good).
Why do you consider brain drain a problem? To me it seems like an obviously good thing that brains move from where demand for them is low to where demand for them is high.
This was great, it introduced an idea that I hadn't heard of/considered before and that seems at least somewhat compelling. My guess about at least part of why her ideas may not have caught hold as strongly in mainstream economics is a lack of quantitative predictions. Modern Economics (for both better and worse) is built on a foundation of math and quantitative analysis. It's great to have a good idea, but then you need to figure out a way to make testable hypotheses using data you can actually collect. If you can't do that, then you aren't going to get more than a shrug.
But assuming for a moment that this is all 100% correct, it does imply a somewhat depressing conclusion: Human flourishing seems to be self limiting (at least in the rate of increase) due to the combination of the economic reality that smaller, more dynamic entities are what drive growth, but human psychology leads to ever greater agglomeration and centralization. When societies become successful, they are driven to kill the very thing that gave them their success.
I hope she is at least wrong in part, because I'm quite skeptical that we will overcome the psychological part anytime soon.
Tantalizingly, the biggest reasons for centralization were a) language, and b) contract enforcement. If AI solves the first and blockchain the second, small might actually become efficient again....
How will blockchain solve contract enforcement? If you pay me to deliver you apples, and I pocket your payment and don’t deliver apples, how are you helped by our contract being on the blockchain? How about if the blockchain says you own a house but I am squatting in it. Will the blockchain come kick me out?
Don't be obnoxious, that's a bullshit counterargument and you know it.
> If you pay me to deliver you apples, and I pocket your payment and don’t deliver apples, how are you helped by our contract being [recorded by law]? How about if the [law] says you own a house but I am squatting in it. Will the [law] come kick me out?
I have replaced 'blockchain' with 'law' and left these literally precisely the same in all relevant aspects. Enforcement still needs to be done, and is entirely independent of how the system for dispute resolution of contracts functions.
Large polities result (usually) in large homogeneous systems of law for resolving contracts, which means that contracts can be made across long distances and the proper resolution of disputes stays unambiguous. Smart contracts, decentralized or otherwise, can replace this function of large polities.
My point was that you need a meatspace authority that handles enforcement. That means you need a state. Blockchain can't replace it. And what counts as a contract is whatever the enforcement authority will enforce.
Sure, lots of different sovereign authorities could choose to enforce the same smart contracts. They could also choose to enforce the same dumb contracts, or follow the same legal code. I don't see how blockchain is any kind of difference in kind here.
The comment by Earnest Prabhakar to which I responded (with the argument that you characterized as obnoxious) literally claimed that blockchain was going to solve the problem of contract enforcement.
*You* don’t seem to be making this claim but ‘no one’ is flatly false. Also in *your* utopia of city states - what prevents them from being gobbled up by larger states?
Enforcer bots don't exist, not currently and not in the near term. And they won't have meatspace authority unless the men with guns stand aside and let them go about their business.
If you are saying `skynet plus terminators can replace the state,' well, duh.
Not sure why you're getting such vitriol. Solved is to strong (but then again I would hardly say the current legal framework has solved it either), but blockchain does open up a lot of options around escrow kinds of setups and reputational tracking that are difficult otherwise without a trusted, strong 3rd party.
For example in the apples case they payment can be provably placed on the blockchain in a smart contract that is only released when both parties sign off on the transaction (or in tranches, or whatever other schedule with mutual agreement) or by default if the fail to dispute the transaction. Depending on how we want the incentives to land there could be small cost to dispute or we can rely on reputational effects to be incentive enough to come to an agreement. In the failed case the payment is burned and both parties end up worse off. Or they could also agree on 3rd party to adjudicate disputes (or even several) that could release the funds to one party or the other, etc.
HA, if we have a smart contracts then it is impossible for either of us to lose money. We will just write it into the contract that we both come out ahead and the magic of blockchain will make it so!
is there any theory that says language and contract enforcement are what created / is maintaining centralization? On the creation side, seems to me that countries/empires mostly got built through military might, that language only became centralized as a consequence rather than cause of centralized military/government power, and that similarly uniform contract enforcement was rendered only necessary because the unified political power wanted to integrate the economy. As for maintenance, sure language and contract laws are part of what binds nations together, but I'd be hard pressed to cite them as the top 2 pieces of mortar, nor do I think that if you resolved these two everything would just naturally dissolve.
There’s plenty of historical evidence that linguistic grouping (literally “nations”) preceded political union (literally “nation-state”). On the other hand, it is certainly fair to claim that contract enforcement is just part of being a state, not really a cause for union. My point is merely that to “displace” a centralized union, an alliance of city states would need -some- mechanism to provide neutral contract enforcement between them, and blockchain -could- help with that.
Perhaps a better metaphor is that, if the US didn’t have to worry about foreign wars, it would have remained a loose (and squabbling!) collection of independent states. However, once it unified, a (mostly) common legal framework boosted large-scale economic development. The hope is that it might be possible to get most of the economic benefit without the downsides of centralization.
Not so. If the EU kept a lot of regulatory unity but abandoned the Euro and went back to small currencies, that would be fine and get most of the benefits. So you can get centralization with economic growth, if you understand what you need.
Saying that (urban, free-market) import replacement has "approximately nothing" to do with (national, government-encouraged) import substitution doesn't seem right. I mean yeah there's an important distinction between the two but they're clearly related...
And both of them are diametrically opposed to the ideas of specialization and comparative advantage.
I can see that there is _some_ sanity to the idea of import replacement. A decent sized city should have e.g. car repair businesses rather than shipping malfunctioning cars to the nearest other city that _does_ have a car repair shop. Shipping costs still matter for some things (and they used to matter far more in centuries past). Having a person "at the scene" makes sense for some things.
But
- Some import replacement is flat out impossible. *Elements* are not distributed uniformly and invariably in amounts and concentrations which are economical to mine. Should New York City try to mine its own copper within its borders?
- Some industrial infrastructure has _immense_ capital costs and makes no sense to duplicate in each city. Should each city have its own 7 nm integrated circuit fabrication facility? Or satellite launch capability?
- Some enterprises make no sense to replicate at all. Should variants of Windows be coded in each city?
The efficiency of specialization is a tradeoff against resiliency and robustness, case in point : a single ship stuck at the suez canal for less than a week had made the entire world shit its pants and prices worldwide starting to rise.
The cult of efficiency goes against decades of good engineering practice, which advocates always leaving slack and safety margins for when the inevitable unexpected happens.
Your points are all somewhat true (mostly just 1 and 2 though), but they are more like necessary evils, not things to be celebrated and accepted, and certainly not things to be replicated elsewhere. They are unfortunate facts of the world to be grudgingly tolerated and worked around.
(1) Yes, natural elements are not evenly distributed. But does it matter ? Do tuna cans have to be made of <element 1> when they can equally well be made of <element 2> ? Is it necessary to use the wood-dependent pencils when your city don't have forests, instead of just pens (which, I assume, can be made out of glass, plastic, metal, most anything that
can contain ink. And I assume ink is not a problem).
I don't know how much the authors (of both the book and the review) look at it like that, but I see Import-Replacement as a gradual and spectrum-ish process. That is, if you start buying <thing> from the country next door instead of from another continent, that's still Import Replacement to some degree. If the cities within a country (or within a language or within a shared culture, because countries are fake as the book says) start buying from each other, better still.
If instead of importing pencils for X million dollars, you instead import pens for X/2 million dollars (because they are cheaper to make, break less, etc...), that's still Import Replacement, you replaced X/2 million dollars worth of what you import. If you have glass/metal factories, you can start manufacturing the bodies of the pens and then fill them with imported ink that only cost you X/10, now you replaced (9/10)X million dollars. Then you can start manufacturing the ink itself out of imported chemical that only cost you X/100, and on and on and on. The natural end state of this is that you manufacture everything from the atoms upwards. You don't need to reach this state, you can stop short at compounds and above, or you can go beyond the atom (manufacture atoms themselves from sub-atomic materials you got from other atoms) when/if the tech gets crazy and transhumanistic enough.
But the point is, the scarce atoms that your land was born without is the only true hard limit imposed on you, most everything else is just how much you are willing to lazy it out.
(2) Those things are usually a sliding scale of complexity. To take your first example, your circuit fabs don't have to be all 7 nm, they can be 50 or 100 or 500. The chip in your fridge doesn't have to be a cutting edge super-duper fucktronic-8000 capable of running GTA V, it just has to be the bare minimum that can run the limited software required of it. So don't build a 7 nm fab, build a 500 nm fab, which is early 90s tech. When you want the latest laptops and smartphones, go for the imported 7 nm stuff, for everything else, stop fetshizing needless electronization and miniaturizing. As a matter of fact, this will actually save you from the cringe-worthy disaster that is the "IoT" trend, where even the godforsaken sex toys have wifi in them. Needless internet connectivity everywhere, needless displays everywhere, needless dog-slow UIs everywhere, "Touch Screen Menus" at restaurants because why the fuck not. All of this is because of how utterly easy it is to electronize something.
As for satellite launches, that's actually an example of (1) not (2) : Most favorable satellite launch sites are at special geographies, like the equator-near USA states (Florida, Texas) and also Kazakhstan (former USSR) for some reason, I forgot the physical reason why but it's something to do with Earth's rotation. Satellite rockets are actually not that hard, they are just ICBMs that never hit a target, their historical lineage makes that very clear. Any country that has developed or bought ICBMs by whatever means or expertise necessary could potentially, theoretically, launch a satellite, if geography wasn't a problem.
But again, how often do you really want to launch a satellite ? It's okay to never Import-Replace something that was never really a noticeable part of your budgetary.
(3) Yes, Windows should be open source, and I should be free to specialize it however the duck I want. Not only each city should have their own version of windows, each **Family** or **Person** should make their own version of Windows, or at any rate should have the freedom to do so. Windows isn't like that of course, which is one reason why it should be thrown in the garbage heap, replaced by Linux, the clearly superior alternative. With Linux, (3) is not an absurdity, it's a truism.
Yes, the Ever Given jam of the Suez Canal is a good example of the disadvantages of trade. Nonetheless, such incidents are uncommon. Both efficiency and robustness are valuable goals. I, personally, tend to be risk-averse, and would prefer to see more emphasis placed on robustness, but I don't control the tradeoffs.
Note also that locality is not always the more robust choice. Yes, it avoids the hazards of shipping. But other hazards may dominate. Hypothetically, suppose that 10 cities consume widgets, and one widget-stamping machine can supply one city's need for widgets. If production is centralized in one city, that city can keep one spare widget-stamping machine on hand for 10% of their total capital cost. If each city independently maintains its own widget-stamping machine, then keeping one spare machine doubles their capital cost - and they may well decide not to keep a spare. In this case, the centralized "imported" option with one spare on hand is more robust than the local case.
Re elements: "Do tuna cans have to be made of <element 1> when they can equally well be made of <element 2> ?" Does happen, but I think it is more the exception than the rule. E.g. if one needs an unreactive liquid metal at room temperative, one's choices are mercury. If one needs a replacement optical amplifier compatible with the existing fiber optic communications infrastructure, one's choices for the amplifying atoms are erbium. In biology, if one wants to grow a green plant, the central atom in chlorophyll has to be magnesium. If one wants B12 to avoid pernicious anemia, the central atom has to be cobalt. If one want to maintain a healthy thyroid, one needs iodine as an integral part of the hormones it secretes. In each of these cases, no other element can be substituted.
I agree that import replacement is a spectrum-ish process. In the extreme case, one could argue for each individual to be self-sufficient. This maximizes the range of skills that each individual has, and, by the same token, it maximizes the range of skill that each individual _must_ have. "Jack of all trades, master of none." If one pursues autarky on a larger scale - municipal, national, or continental, one allows more specialization and better mastery of the particular skills one specializes in, but increases dependence on people specializing on different skills, with vulnerability to transport interruptions or breakdowns in agreements. You mention, as part of the spectrum, moving imports from intercontinental to intracontinental international, to intranational interurban, to intraurban. Yes, the physical length of the supply chain shrinks with each of these moves, but, again, this requires shoehorning all of the skills required into a smaller and smaller group of people. I'm a bit skeptical of your pen example. Bringing a larger fraction of the cost of a pen into a city doesn't necessarily mitigate the risk of a cutoff of a critical component, even if that component is only a small part of the cost of goods.
Re 500 nm IC fabs: I took a look at https://en.wikipedia.org/wiki/List_of_semiconductor_fabrication_plants and I'm honestly not sure what to make of what I see. TSMC has, as I expected, astoundingly expensive, productive, and high-tech fabs, e.g. Fab 18 (P1-P3), costing 17.08 billion dollars, processing 120,000 wafers/month, and achieving 5nm channel lengths. I honestly wasn't expecting anyone to be running anything with feature sizes an order of magnitude larger, but there are some e.g. Intel's Fab 68, costing 2.5 billion, processing 30,000–52,000 wafers/month with a feature size of 65nm. As I said, I'm not sure what to make of this. An order of magnitude in linear size implies a two order of magnitude loss in devices per unit area. Yeah, the cost to build it was a factor of 7 lower, but it still seems strange that it can compete with a fab with a hundred times its device density. Given that it exists and is still running, I'm not sure what that implies for wanting each city to have a non-bleeding-edge IC fab.
Re electronizing: Why the hostility? I'm not a fan of IoT for household stuff. I tend to refer to internet-connected fridges and thermostats as "hacker-ready". But electronics has its uses. For instance, I bought a really cheap digital kitchen scale that turns out to have part-per-thousand accuracy. Part of this is probably because a cheap microprocessor can internally calibrate a cheap, probably rather nonlinear force sensor and correct for it, and correct for where on the measuring plate a weight is positioned. Why denigrate this?
Re operating systems
I should have been clearer. What I had in mind was each city having programmers who coded an OS from scratch themselves. Why solve a problem that has already been solved by someone else, when the solution can be either cheaply or freely copied? I've used both Windows and Linux, and I've compiled lots of code over the years, but I've never had a need to recompile Linux, let alone modify its source code. Even forgetting a _fully_ local, coded-from-scratch OS for a city and considering just modifications to Linux source code - how often do people really want to do this? If e.g. one changes how 'ls' works - um, do you really want any otherwise-sharable shell script to break?
You're welcome, Jeff. Please don't take my hostility the wrong way, it's not directed at you, it's directed at the lazy corporations who keep shoving badly secured computers into our devices (which work perfectly good without computers), I hate the kool-aid behaviour and the copy-cat imitation, and I hate that people uncritically see it as "progress!!!" and "more computers!!!" and not as the big big problem it is.
>Note also that locality is not always the more robust choice.
Ok, fair, noted. I do think that locality is always the freedom-maximizing Moloch-minimizing option though. Like, to put it very bluntly, you just open yourself to so much shit when you depend on people. And I hate that the direction of history always goes against that, always towards the ugly, oppressive, giant, ant-like colonies of insignificant humans, and never towards beautiful, consensual, small, and human-like groups of humans who matter. Even the Internet, the thing we once "Declared its Independence", devolved to the same thing.
>Bringing a larger fraction of the cost of a pen into a city doesn't necessarily mitigate the risk of a cutoff of a critical component
Hmmm, how so ? If you import 5 different things from 5 places, then any problem at any of the 5 places can disrupt you. If you import just 1 thing, only a disruption at that particular thing's source can disrupt you.
Ok, I'm making a lot of implicit assumptions here (that 1 thing == 1 source, and that all sources are roughly equally likely or at least comparely likely to be disrupted), but they are not completely unreasonable assumptions, and they are satisfied in practice reasonably often.
>Why the hostility?
Because corporations keep taking choice from me. If they just offered **The option** of buying computer-enabled things, I would have made fun of that, yes, but I would respect their dedication to serve many different tastes. Right now they are just "Fuck you, we're going to put 75 computers in your product, and you're going to like it and give us money". Look at the sad state of Smart TVs, we're stuck with inferior, bloated, proprietary, insecure pieces of shit that probably spy on us with abandon, and you can't go back to "Good old TVs", there is no good old now. Do you want this to be the state of all other things ?
Computers are awesome, okay ? That much I very much agree on. I have read SciFi and I do want to live in a world where widespread computation and networked devices make everything easier. The thing is, I don't trust corporations to run the computers. I don't trust their quality, their security, their motives, their everything. "IoT" should have stayed a scifi concept till people with better intention and competence implement it, the moment consumer corporations learned about it, it turned to shit.
>Why solve a problem that has already been solved by someone else, when the solution can be either cheaply or freely copied?
Robustness. Remember LeftPad ? It's an extreme example, I admit. But multiple people all depending on 1 thing is legitimately a scary thing, even if that thing is as rock solid as Linux.
Re-Inventing the wheel is a time honored tradition of programming. Remember when some XML advocate was like "Why reinvent the wheel" at json and the people who did json replied at his blog "The nice thing about reinventing the wheel is you can actually get a round one this time". Reinventing the wheel is educational and mind-changing.
I agree that the vast majority of time you are better off choosing some thing that already works, and this is all pretty tangential to the main ideas and I don't think that JJ would have seriously argued against Open Source if she was aware of the culture. I'm not sure it's a fair rephrasing of her idea that "Everything should be made from scratch", Software is special. But even in software, you're better off reinventing a wheel from time to time.
"it's directed at the lazy corporations who keep shoving badly secured computers into our devices (which work perfectly good without computers)" That's a good point. My late wife and I purchased a toaster oven about 2 years ago. It has a dozen buttons, a dial that serves three different functions (and is also a button for one function). I'd wanted one with a temperature control connected to a dumb thermostat and an on/off switch. I _think_ we searched for the simplest one, but couldn't find a simpler one. At least it isn't connected to the internet. Still, featuritis bit it pretty hard.
"Ok, fair, noted. I do think that locality is always the freedom-maximizing Moloch-minimizing option though. Like, to put it very bluntly, you just open yourself to so much shit when you depend on people." I agree that depending on other people is risky, and I even agree that the risk goes up somewhat with distance, but I don't think it goes up very fast with distance. I just bought a cheap magnetic stirrer from China, which arrived and worked with no problems. I also transferred some money between two sibling credit unions within the United States (which is also where I am) and it took 33 emails and 6 phone calls to get that straightened out. "beautiful, consensual, small, and human-like groups of humans who matter" - on an urban scale plenty of human interactions are non-consensual, hence "You can't fight city hall." Maybe Dunbar-number-sized bands of 150 people avoid this, but cities are typically 10,000 times this size.
"If you import 5 different things from 5 places, then any problem at any of the 5 places can disrupt you. If you import just 1 thing, only a disruption at that particular thing's source can disrupt you" Ok, you are considering a case where the disruption is roughly equally probable and equally disruptive for the 5 parts, and I agree with your analysis for that case. I had in mind a case where one part is particularly critical (e.g. a bleeding edge microprocessor or an ultra low noise first stage amplifier) and everything else can be supplied from an alternate source.
"The thing is, I don't trust corporations to run the computers. I don't trust their quality, their security, their motives, their everything." That's fair. About the only case where I trust any organization is where I have a live option to switch easily to their competition, and where working out which one actually offers the better deal isn't a monumental task. This is rare.
"Remember LeftPad ?" Ok, though if LeftPad had actually been copied into the code using it, it wouldn't have been an external dependency, and the mess wouldn't have happened. It is also a kind-of weird case in terms of the type of problem and the types of organizations involved. A namespace collision. An open source developer colliding with a company (I never did figure out who claimed the "Kik" trigram first...). The open source developer unpublishing his code. If the whole thing had happened in a single city and both developers had been open source it isn't clear that it would have been any cleaner, though I _do_ agree that if LeftPad itself had been independently implemented then the mess wouldn't have happened (or if it was physically copied rather than referenced - but then maintenance needs to track down copies...).
I think you are just wildly underselling how much on a day-to-day basis people choose efficiency over robustness when given the choice.
It is all well and good to say "wouldn't you rather live in a more sefl-reliant1990s Denver where the chance of total economic collapse was .01% instead of a 2020s Denver where the chance of total economic collapse is .1%"?
"No."
"Come on 1990s computer sand cars aren't that much worse? if you zoom out enough it is basically the same exact thing"
"Yes they are and Yes I will notice"
And I agree with you in some ways to be clear. I do think we push too hard towards efficiency at the cost of all else. But it is a hard thing to actually fight.
I was wondering about why the import replacement should work at all. Is it all about transportation costs? If so, it could explain why it makes sense to produce iron tools in Boston rather that in London, but maybe not so if the tools are produced in a nearby city.
Transportation costs (and hazards) indeed. Probably also hazards of agreements failing (your supplier's rulers just declared war on your rulers, and honoring the contract is now "trading with the enemy"). To a small extent broadening the set of natural hazards one is subject to: You need parts from 21 suppliers spread across half the world and are now much more interested in earthquakes or violent weather in _all_ of their locations.
intuitively, it seems like import replacement works better with higher shipping costs and higher communications/agreement costs. If shipping costs are very low, and it is easy to specify exactly what you want and get it from a distant provider, then it's going to be pretty hard for a local company to take over that production. On the other hand, if shipping costs are high, and it's difficult to get the distant provider to listen to your specific needs, there's an opening for a local business that will be more responsive, and that will be able to save you on shipping costs.
Basically agreed. With low enough shipping costs "https://www.amazon.com/World-Flat-History-Twenty-first-Century/dp/0374292884". And this is _mostly_ the direction of recent history. Unfortunately, my rulers and China's rulers have been growling at each other a lot, which can screw up agreements with distant producers.
It clicked for me immediately, although I can see why it might not be universal.
E.g if you are Boston, buying tools from Europe - you need those tools. Going without is not optional - without the tools (presumably used for farming and construction) you'd starve. No matter how much you get screwed on the price, you will buy those tools. If they send you crap tools, well, you're stuffed. If you want a specific kind of tool to work for your own environment, they're not gonna develop it for you specifically unless you pay a lot, and if they do you'll be charged a premium.
Applied to a vital import, it's a bit akin to rent - as long as you need it, you are at mercy of the producer of this good.
In the Boston example, starting their own foundry and making their tools is a bit like buying a house - suddenly, they are no longer at the mercy of their tool suppliers. If you want a particular kind of tool that the Europeans don't need, you can just develop it yourself. Obviously the business can still screw the customer, but poaching a blacksmith to start a competing business from Boston to Boston is much easier than Europe to Boston.
Yes, although those disadvantages of imports decrease a lot in cases where there are multiple potential suppliers. You still don't get tools for your local environment, but if you can buy generic iron tools from London or Stockholm or Berlin the case for making them in Boston gets weaker.
I think it's also an alignment of interests, for the case of keeping production of tools in Boston specifically. It's totally possible for all the tool-makers in Europe to realise that hey, actually, we can form a cartel and keep the price for tools artificially high. (Modern equivalents - pharmaceutical companies banding together to protect their right to price life saving medicines, OPEC for oil production).
If your producers of vital goods are local, it's much easier to force them to capitulate to your demands against their own interests. E.g oil and gas companies operating in Australia often have a quota they need to sell on the domestic market as a condition of production, which keeps the natural gas you need for domestic and industrial use cheap. For geographically bound natural resources, you can bully an overseas company into this kind of thing. For manufactured import goods, you usually can't, e.g how in most socialised healthcare systems the government is paying the likes of Pfizer, Novartis etc the difference between what the consumer pays and what the companies demand - that being said Eli Lilly is based in the US and the US is just letting them charge whatever to patients, so it's both a can and a want issue).
Ok, yes that could happen. One of the best-documented cartels, https://en.wikipedia.org/wiki/Phoebus_cartel included both US and European companies and made the lifetime of light bulbs artificially short for consumers in all their areas. So, like your example of Eli Lilly, the local potential remedy actually failed.
If I'm understanding Jane correctly, it's not about costs at all, at least not directly. It's about the natural tendency for economic corrections when a balance of trade is too one-sided. Using Boston as a cheap source of raw resources and a market for finished goods is great for London, but bad for Boston. London gets richer, Boston remains poor. Inasmuch as Boston continues to exist, there is considerable pressure to develop replacement options for London-produced goods. From a worldwide perspective, the most productive use is for Boston to remain poor and London to get even richer. This is not good for Boston, though, or the people that live there.
This goes back to the ducats - where if they are too expensive people will look for alternatives that are cheaper. When they are cheap, other localities would like to buy more goods from them which increases their sales and boosts their economies.
Incidentally, if you recall the crisis in Greece a few years ago, it was fundamentally a problem of the Euro (shared currency). Because Germany and France were on the same currency as Greece, the Greeks could not revalue (that's a bit of an oversimplification, but it happens naturally) their currency to make their goods cheaper. German goods should have been more expensive, but with the shared currency the value of that currency is automatically the same anywhere that uses it. The same is true in the US (Jane used the Detroit example) between high value areas that are rich (New York, etc.) and poor areas like rural Alabama.
I read it as decreasing external dependency by climbing the tech tree. If you learn how to fix a leaky pipe, you don't need to blow all your disposable income on a plumber. Similarly, if you learn how to blacksmith, you don't need to blow all your tax revenue on imported iron.
I don't think it needs to apply to all industries and products to be meaningful.
London may have had an advantage in providing complex goods because of capital investment and network effects. The question for Boston is did it have an advantage providing goods to Boston. While Boston didn't have the capital goods or the human capital they also didn't have to deal with shoppingy. Boston may be worse then other cities at producing a good bit still be the best at producing that good for Boston consumers.
Jane is directly contradicting the idea of comparative advantage. When Boston starts making tools, they will be inferior in every relevant respect. They will be cheaper because London's prices are inflated by the trade imbalance. London being rich, they will charge more for the same goods. Bostonians being poor, they are willing to make and sell the goods for less, opening a new market. This is how China/Taiwan/Korea and other rapidly developing nations did it. They started industries to sell goods much cheaper because their costs (including but not limited to wages) were so much lower. GM in 1980 was paying $18.44/hour for autoworkers, which is about $150,000 inflation adjusted today. There was apparently a lot of contention about how much Japanese workers were actually making (union negotiations resulted in people on both sides offering counterclaims and such), but I think the rate for the Japanese was about $8-12/hour. By that point the Japanese cars were also very high quality, which is why there was so much consternation about the imports in the early 80s. Detroit didn't adjust, and the city collapsed. The city once had a population of over 1.8 million, which has dropped to 632,000 and still shrinking today.
The idea that is being sought is that of dynamic comparative advantage. Specialisation and trade based on it make us all richer right now. But a city/region/country wants to move up the value chain and have comparative advantage in 'better' things.
The argument here seems to be that this process relies on dynamic cities. I don't think it is just that but it could be part of the picture.
I think it's an interesting point that your example of sensible import replacement is actually about services, not goods. The cost of transporting goods these days is mostly pretty low. But you can't transport dental services, you either need to go to a dentist in your town or you need to make the long trek to a town with a dentist.
It's hard to imagine a small remote town these days being transformed by the arrival of a tool factory, but easy to imagine one being transformed by the arrival of a supermarket.
The point of import replacement seems to me that successful dynamic cities don't replace _all_ imports but they do replace _some_ (progressively more and more), which is entirely in line with specialization and comparative advantage. Big cities both import and export a great deal of varied goods, but they don't entirely depend on the basic tech/services from the outside. I agree that the review didn't emphasize this point, plausibly leading to confusion.
_Do_ successful dynamic cities replace more and more imports? Or do they grow in other ways - particularly if shipping costs are low, and they don't have a comparative advantage in producing an import. E.g. Silicon Valley uses plenty of paper, but I'm not aware of them having or planning to add a paper mill.
Yeah, I agree this is something useful to emphasize. I don't think Jacobs says anywhere that cities should become self-sufficient and that specialization is bad. But to get to a point where a city can develop new specializations and meaningfully contribute to trade with other advanced cities, it needs to be economically dynamic, which is difficult to achieve and according to Jacobs is only attainable if you do a large degree of import replacement first.
My interpretation of Jacobs’ view of import substitution is that it’s kind of just a fancy name for the emergent phenomenon of the situation where transaction costs result in comparative advantage for localized production. Might still be worth naming the phenomenon for purposes of development economics but it seems like it’s kind of just tacking a name on to a higher-level phenomenon / high level of abstraction of basic microeconomic predictions.
I think it's much more about a balanced trading balance and harvesting the value added by production and generating high value jobs at the same time.
I think the review is quite clear that replacing imports is important especially when you have a export deficit or are exporting mostly raw materials. This is not about being self sufficient, but about realizing when it is time to diversify (find and fill a new market). Doing so is easiest in a market that already exists locally without local competitors. So in the hard time of starting you have the benefits of local trust and less shipping costs, plus the potential to export later when you made it to become competitive.
I think you're right that this is awkwardly worded, but I meant to put the distinction in strong terms because it seems to be a very common misinterpretation of Jacobs's ideas. In fact you can see this misinterpretation occur many times right here in the comments, which suggests I haven't made the distinction clear enough. "Import replacement" according to Jacobs is something that *happens*, not something that you *do*, but people interpret her as suggesting that governments should take actions to do it, which as far as I understand is the opposite of what she says (in fact she brings up how trying to do import substitution in Uruguay was a disaster).
IANAE (I Am Not An Economist), so this is pulled directly out of my backside, but I see a *lot* of problems with this.
Our federal government doesn't just issue currency; it does complex maneuvers to maintain the value of that currency, based on analysis I don't even pretend to understand. Can such sophisticated apparatus be successfully created at the level of each city? And if it can't, then what? If Chicago's currency crashes, do we just say, "Well, looks like Chicago is f**ked, that's the price they pay for having an independent currency"?
When you say *each city* has its own currency, do you mean every single city, or is there a size cutoff? If there is a size cutoff, what happens to smaller towns - do they share the currency of the large city nearest to them? And if so, doesn't that recreate the problem Jane Jacobs was complaining about? If Bumblecluck, Illinois, population 5,000, shares its currency with Chicago, then Bumblecluck is artificially sheltered by Chicago's economic success (or unfairly crushed by Chicago's failure).
Also, wouldn't this make traveling around the US a pain? Imagine having to do currency exchange every time you want to fly to an academic conference in Boston or visit extended family in Ohio. It would suck!
Also also, since you're proposing that all these cities with their different currencies are still part of one country, presumably all residents would still have to pay federal taxes. How would that work? Let's say you live in San Antonio - do you pay your taxes in San Antonio dillos*, or in DC dollars? If you earn San Antonio dillos but owe your federal taxes in DC dollars, what conversion rate do you use? What happens to the value of the DC dollar in April, when millions of Americans suddenly have to convert their San Antonio dillos and Cleveland buckeyes and Seattle salmons and Boston beaners and so on into DC dollars in order to pay their federal taxes?
This idea, while appealing at first, seems to me to be a fustercluck of epic proportions. Again, IANAE, if there are any economists among our commenters, please tell me where I'm wrong!
*an affectionate nickname for the San Antonio currency based on the armadillo on the one-dillo coin.
I do recall a lot of problems back when the EU adopted the Euro. Different countries, when shorn of the ability to manipulate their own currency, had serious problems involving trade and deficits.
Possibly we just notice the problems involved in a transition, no matter which way it goes. But it should be possible to go back to that example, look at the problems, and come up with theories on what would happen if it all suddenly reversed.
You make a good point about the Euro, but this is the opposite of what Scott proposes. If we unwound the Euro, we would go back to the standard model of one nation-state = one currency. Scott is proposing one nation-state = many currencies, one for each (major) city. It's as if Berlin and Hamburg and Cologne were each to get a different currency.
Doesn't it sort of depend on how much we consider the EU to be a single entitiy? As in, the problems Berlin and Hamburg and Cologne faced under the Deutsche Mark, should be a smaller version of the problems Paris and Rome and Madrid face under the Euro?
The thing is, if you've "pegged your currency" to some other currency, you can change your mind when it stops working well. It often doesn't happen, but it can be done. (OTOH, trade agreements can make this difficult.)
True, but some institutions are longer-lasting than others, and break less catastrophically. I think his point was "a currency peg is an attempt to say that one thing is the same as a thing that is fundamentally not the same thing; if you put a lot of effort into maintaining that fiction you can keep it going for a while, but eventually reality will catch up with you." But I liked his phrasing better.
"Moving from the krone to the franc: In 1924, the Principality of Liechtenstein turned its back on the Austrian krone and adopted Switzerland’s national currency, somewhat clandestinely at first and then officially."
"Montenegro is a country in South-Eastern Europe, which is neither a member of the European Union (EU) nor the Eurozone; it does not have a formal monetary agreement with the EU either. However, it is one of the two territories (along with Kosovo) that has unilaterally adopted the euro[a] in 2002 as its de facto domestic currency."
And they aren't a member of the EU, though they are a member of the EEA trading treaty. And presumably they could change their currency if they thought it was worth the bother. Which make it not an argument against the proposed idea. or at least not really.
This makes me wonder whether there would be a way of addressing this problem by having a nation issue several different currencies...but how should the differences between them be structured. Should it be based on something like a stock exchange? Who do you want to invest your savings in?
I think (with computers) it *MIGHT* be possible to create a system like that that's better than the current system. But this doesn't mean the system created *would* be better.
"And presumably they could change their currency if they thought it was worth the bother."
Yup. My point in citing this data point is that Liechtenstein _didn't_ find it worth the bother to create their own currency. I agree that computers make it easier to maintain a new currency now than in past centuries. I suspect that there are still tradeoffs. If nothing else, a currency for a tiny nation is going to have fewer people holding it and a thinner market than a major currency. At some point, mere statistical fluctuations will become a problem. ( "The currency was fine till the one investor with 10% of the foreign holdings of it had a manic episode..." )
>Also, wouldn't this make traveling around the US a pain?
If we're imagining something as radical as all major US cities having their own currencies, I don't think it's a stretch to assume currency exchange would look much more seamless than what we currently have.
>taxes
Just simplify the tax code to the extent that rEfUnDs no longer exist, and the IRS can do a conversion every time it receives a withholding or estimated payment. (Again, we are in fantasy land anyways)
But yeah I have no idea how we'd get there from here.
When different banks in the US issued their own bank notes prior to the establishment of greenbacks, it was typically fairly seamless to exchange notes between different banks in New England via the Suffolk System. And that was without the information technology we have today. So I suspect it wouldn't be that much of a problem.
People here have not responded well to this in the past but all of this can pretty simply be accomplished using crypto currency which has pretty effective solved the "how do I nearly seamlessly convert between different currencies which fluctuate in relative value problem". From your perspective as a consumer the price of the goods themselves would change while staying in your local denomination. There are all sorts of tax schemes that could work but I thought some of the benefit would be further federalization.
The legacy financial system handles this pretty well too - I've been able to use my British debit and credit cards abroad without problems for as long as I can remember.
This does rely on a lot more moving parts though while a colored coins/fungible token based solution can do it all atomically with better transparency and lower fees. The legacy financial system relies on a lot of complicated deals between banks in different regions for settlement that would only get more complicated if you multiplied the number of currencies.
ethereum L2s have fees so low they aren't worth considering, thousandths of a penny. Legacy banking institutions have a lot of surprising moving parts. Most traditional cards in my experience chart around a 3% transaction fee. I understand the well has been poisoned by a hundred thousand shills but not everyone interested in crypto is trying to scam you.
Yeah, lots of good points here. My biggest gripes are the following (actual economist here, though monetary economics has never been my forte):
0. I am probably strawmanning the argument of the book here, so please tell me where I get it wrong, but if we take this idea to the level of states, it would suggest that developing countries should let their exchange rates slide (even help them, if there are forces going against it) and the real economy will sort itself out. I think we all agree that growth is more complicated than that. Yes, it is possible that there are some countries that are held back _only_ by a stupid exchange rate regime, but still, come on.
1. Wages and rents (the prices of labor and land, two main factors of production) are already lower in Detroit than in SF. So if you want to start a business that uses lots of labor and land, you are already kind of getting the right price signals from Detroit. Yes, I am ignoring the role that capital plays here in the production, but more on that later.
2. The idea that exchange rate movements help trade balances to correct themselves is of course not new and admittedly a clever one, but it is kind of a special case. Nowadays, the flows that govern exchange rates are not those of goods, but those of financial investments. Granted, I cannot quote figures here, but it I guess it is quite easy to do some rudimentary research here. So if you want the FX->trade balance idea to work, you need to make sure that the "price signal" sent by low Detroit export of goods is not muddied up by foreigners using their NY or DC dollars to buy up cheap Detroit land or high-yield Detroit bonds. (Federal taxation is just one example of this, although the most important from a historical point of view and the hardest to get rid of). Which bring us to...
3. ... capital controls and other regulatory issues? Detroit will probably have to set up their own Fed, even just to manage their own financial system, and it will have to commit strict floating of the Detroit dollar and very probably stopping the engineers working in all those new Detroit factories to save in Florida dollars (where they want to retire or in, gasp, Canadian dollars (which in general will offer some protection against exchange rate fluctuations). I think it is a very hard sell politically, especially that monetary policy has just gotten drastically closer the average voter.
There is probably a lot of things that I have gotten wrong/omitted, but I guess the point I am trying to make is that the existence of the exchange rate channel is not the panacea that some people might make it out to be.
Isn't intentionally deflating the value of their money something China has been repeatedly accused of? That is, creating an artificial advantage in exports by making their people poorer? Or, more to their situation, keeping them from gaining the benefits of the increased trade in order to build their industrial capacity instead.
Yes several Asian countries very specifically did this. Use exchange rates to keep your boot on the throat of domestic consumption so that the surplus from your export economy can be poured back into economic development instead of "wasted" on consumption of consumer goods/services.
And it is generally great economic policy if you just care about growing the economy and not "fairness" or whatever.
During the first half of the 19th century individual U.S. banks issued their own currencies. Hundreds of them, and it definitely did create some of the problems that you're anticipating with city currencies.
RE: taxes, each locality would definitely have to pay taxes in their local currency or nobody would actually use the local currencies. In the modern post-gold-standard world of fiat currency, the only thing besides inertia that keeps the currency valuable is that the government requires you to pay your taxes with it. If federal taxes were in DC dollars, everyone would keep using them for day-to-day transactions as well.
I live in a country with less people than Chicago and that has a completely independent currency. A few years ago it was the 10th most traded currency in the world, it has dropped a few places since then though. The place hasn't exploded and in fact is considered to be notably stable.
I note also that small EU countries like Czechia pay their confederal taxes despite not using the Euro. They seem fine.
I think she might agree it would help, if each city region (when it got to a sufficient GDP) started its own (crypto?) currency.
But you'd still have the problem that they're bound by the national policy. If they want to change their laws or tax policy to redirect $ to building that local industry, or spend less on "transactions of decline", they would be non-sovereign and therefore unable to do so. (Obviously some level of federalism that let them control that AND their own coins, could work!)
Why not a separate cryptocurrency for each *individual*? Let's assume that it would be technically easy, like not even much programming required, because all those currencies would reuse the same few algorithms only with different constants. Let's assume everyone would have a simple application that would support all these currencies, and could simply convert from and to any. If you are in a shop, your augmented reality glasses automatically translate all the prices into your currency based on current exchange rates. In other words, let's assume away all the friction that is typically involved in currency exchange.
How would this look like? I have no idea, seriously, it just seems interesting to follow the idea to its extreme and see exactly where it breaks.
Individuals are too small to pick up more than one or two industries to a useful level. The theory seems to go, if a city imports too little so it’s currency goes down, locals stop being able to afford things from other cities, but that removes external competition as a barrier to business. There’s no reason to encourage internal business within an individual.
Ah. I guess individuals do not need price signals in the form of private currency, because they already have sufficient price signals in the form of "how much money do I have".
So the hypothetical smallest unit that could benefit from (a hypothetical frictionless) currency could be a family. Like, my kids could get their pocket money in our private currency, and when the family budget is tight, I could simply update the exchange ratio of the private currency to euro. Which from my kids' perspective would mean that the chocolate is more expensive, however the opportunities to make money by mowing the neighbor's lawn are more attractive. (I would need to think longer about exactly this would work.)
The other benefit of balanced trade is that the currency itself is regulated by supply and demand, not just widgets. If the US has a trade deficit, that means dollars are leaving the US, which floods the foreign market with dollars, which causes demand for the dollar to weaken, which increases the friction on the outflow of dollars. the system is self-stabilizing.
If your kids are only receiving an allowance from you, the currency flows in only one direction. And then you have none of the benefits and all of the complexity of managing a currency.
I think every person having their own currency would be exactly the same as everyone having 1 currency, just instead of everyone varying by how much currency they had (you have 100 dollars, I have 1) everyone would vary based on the worth of their currency (your Villiam-bucks would be worth 100 of my Brian-pesos), and would largely be the same result (minus the transaction costs of converting.)
If every person had their own currency, it would be a de facto return some form of barter system. It's nonsense for a Walmart employee to have a personal currency. How would they get paid and/or pay others?
The importance of transaction costs feels like it's being overlooked here, and something that's so thoroughly overlooked by Jacobs that it's part of what takes her into such bizarre territory. The whole reason for currency is to reduce transaction costs.
Reductions in various transaction costs is the argument for having cities, and it's the argument for having countries. I'm not sure if it's just the reviewer's oversight, or that of Jacobs herself, but the omission of an open discussion of how transaction costs would be impacted in many of the proposed 'solutions' makes it impossible to see the obvious tradeoffs those policies are asking people to undergo. Nearly every proposal seeks to increase transaction costs on everyone.
Indeed, Ronald Coase famously debated people who misinterpreted his Nobel-winning work, noting that they were omitting the all-important factor of transaction costs in their discussions. Transaction costs are what gave Uber the edge over taxis, why people choose chain hotels over local motels, and they're why Europe went to a common currency.
I think in this case it was just a thought experiment where the (very high - as you point out) transaction costs would be ignored.
In terms of real proposals, I think both Jacobs and the Optimal Currency Area theory people would pick a size much larger than 1 (or even 100,000 people) person for each currency. The size of the units either proposes are pretty big, such that after enacting such a regime (magically?) there would probably be fewer total currencies in the world, potentially reducing transaction costs, but possibly increasing them as most of the small currencies currently in existence don't handle a lot of transactions.
At that point we're not arguing about whether there are transaction costs, just how much. There has to be some point in the conversation where a real economist would start talking about tradeoffs.
What do you give up when you start implementing Jacobs' ideas? What's the magnitude of the cost vs. the benefit, and who pays that? Is the trade worth it? I don't think it is for most of the proposals presented in the review.
> Why not a separate cryptocurrency for each *individual*?
That may or may not be a good idea in reality, but it sounds like a great premise for an SF story!
(My favourite SF story on these lines, Ken MacLeod's *Newton's Wake*, sadly didn't go into details about the reputation-based post-capitalist economy. "How am I paying for all this?" "Don't worry about it, your credit and interest are high.")
I'm not a finance guy, but I wonder to what degree some financial asset that cashes out to a "share" of the city itself would serve this purpose, without supplanting the Dollar (or whatever) itself. Like some kind of bond or something.
It does occur to me that the closest thing to a "share" in the city itself (if the city does well, I do well) would just be real estate... but that makes for a poor currency.
I'm also not a finance guy, but if I understand the argument correctly, currency changes only affect people whose incomes are denominated in that currency. So just creating the financial asset alone wouldn't change anything.
Incomes or expenses. If the city government charged a Georgist LVT denominated in their local currency, that'd compel businesses interested in the best locations to obtain said currency, a hassle which they'd likely find ways to pass on to their customers.
John Law tried something like this with the French Louisiana territory (structuring a currency as an equity rather than a debt instrument). It ended terribly although the only author I’ve read who discusses it chalks it up to external conspiracy by French banking interests as much or more to any internal flaws.
dollars are just bonds with a maturity of 0, and bonds are just dollars with a maturity above 0. Central banks are called banks because buying a bond is equivalent to depositing money in a local bank, if you squint.
REIT shares are fairly tradeable, and there are a bunch of projects trying to tokenise real estate. If you did manage to create a frictionless currency backed by real estate assets in a single city, what do you think would happen?
I wonder if it would be kept in line just below the national currency, just because it's less liquid and otherwise there's arbitrage opportunities
Also not an economist, but I'm interested in international trade.
All the different cities would need an overarching currency to trade between each other, a national reserve currency I guess.
You could have that currency be the US dollar and have each city-currency pegged to it, but I think that's effectively the same as everyone just using the dollar anyway.
If you wanted to keep the city-currencies sovereign they'd need to have floating exchange rates. In which case it's likely that the national reserve currency would become the city-currency of the most powerful, economically important city. Which would give that city enormous leverage in trade relations between cities, analogous to the position the dollar holds in international trade (the dollar is the main international reserve currency). It'd probably create much larger power imbalances between regions (i.e. different currency zones) than the ones mention in the review.
Cities who's currency held the status of national reserve currency would be in a position to create a commodity by fiat (their own currency) that stays in high demand even if that currency isn't backed by the production of real goods or service, because it's now needed for intra-national trade. Allowing them to run perpetual trade deficits within some limit, i.e. reserving goods and services without providing them in return, effectively extracting tribute from cities lower down the currency hierarchy.
Some of one, some of the other - I would assume that by law, the national reserve currency would be the USD, which would remain the currency in which national taxes were paid, federal payments disbursed, and Federal Reserve bonds bought and sold. The NYSE might continue to price in USD or might switch to Yorkers or whatever the NYC currency is called. (Initially, Yorkers and USD would probably be de facto pegged, but assuming JJ was right, they would gradually uncorrelate as Angelas and San Francs and Dallars got more meaningful.)
And even if that wasn't true - the USD is the global reserve currency. Why would we expect a national reserve currency to behave differently? And is the global reserve currency being USD actually bad, or extracting tribute from smaller countries? I believe it is not.
Is the US able to practice seignorage in international trade due to the dollar's status as the international reserve currency?
AI
Certainly! The United States has historically benefited from the seigniorage income generated by the global use of the U.S. dollar. Seigniorage is the profit gained by a government from issuing currency. As the world's reserve currency, the U.S. dollar is in high demand and is widely used in global transactions. This has allowed the United States to issue more currency than it would otherwise be able to, providing an additional source of income. Let me know if you have any other questions!"
I think if you wanted to make this work, national taxes would have to be collected in local currencies. Otherwise there's too little incentive to actually use them instead of just continuing to do everything in USD.
First potential failure mode which springs to mind is "company town" scrip, trapping people because it makes low-level trade with the outside world nearly impossible. To avoid that, I'd say the city-level currencies should be purely electronic, with an official exchange rate to some broader nation's paper-and-coin currency, and such exchanges kept as frictionless as possible. Land value taxes, utility bills, and bureaucrat salaries would presumably be denominated in the local currency, but federal obligations wouldn't, so major businesses and the local government itself would both need to keep the rate in mind as part of routine operations.
Maybe mandate that the exchange rate can't stay fixed - say, every week, at exactly four in the morning on Monday, it has to either decrease 20% or increase 25%. When the situation is stable, that means it'll just keep oscillating between the same two values on odd and even numbered weeks, but the possibility of disproportionate windfall from a disruption to that pattern would keep arbitrageurs interested in hunting for clues of potentially unsustainable market imbalances.
Her argument was pretty strictly based on economics. To the extent that it stripped out both spending on military and on welfare programs. I don't know whether she considered public health. Etc.
As a strictly economic argument I find it quite plausible. This doesn't mean that it's valid in a larger context, which includes non-economic variables.
Mandating exchange rates by fiat loses you almost all the benefits. The **whole point** of having your own currency is that the exchange rates naturally float and this has salutary effects on the local economy by encouraging import replacement when the economy is weak and the purchasing of imports from other, weaker economies when the local economy is strong.
Defining an official exchange rate but having it shift at predictable intervals is a deliberate compromise between that long-term benefit, and the short-term convenience of keeping prices predictable - which is important for letting poor people participate at all. If whoever's setting the official rate tries to push it in the direction opposite where it would naturally float, their peg probably gets broken before the end of the week.
The US economic system is based on ever-increasing debt. This is extremely bad, unless you are the global reserve currency. The US maintains global reserve currency status by being the largest economy, having military dominance, enforcing consistent enough trade and contract law, and indeed, running a massive deficit (issuing a massive amount of bills and bonds which can be held by surplus countries and traded in the world's largest and most liquid market).
The US would be in deep trouble if it transitions away from this arrangement (or maybe more accurately, when we lose global reserve currency status, say in 100 or 200 years, the nation's economy will be devastated).
Repharse: The US will be in deep troubleas it transitions away from this arrangement.
This transition should be expected to occur within 20 years. Possibly 10. Both China and the EU are acting to weak the US dominance. India too, but that currently looks a distant third. Within 20 years I expect there to be a dominant triad, with the US fading in relative status. (Yeah, this is a pretty uncertain projection. Emerging trends, say AI, or biotech, could totally swamp this. But it's what looks most probable to me. If it's robotics, then Japan could end up the dominant country...it they're lucky and play their cards right.)
China lacks the confidence of the global market due to poor rule of law (rule of Xi will trump rule of law). That and poor naval/global military projection capability mean that the yuan cannot become the world's reserve currency yet. IMO, the EU will not last.
Everyone else's economic system is *also* based on increasing debt. They aren't reserve currencies and they are doing just fine. Therefore, I call bullshit.
all governments going bankrupt just means nobody wants hard currency and everybody hoards toiletpaper and we get hyperinflation. So.......... stagflation.
I'm not an economist, but I suspect the answer is that cities should have their own currencies, *in addition* to a national and supranational currency. The idea would be that trade within the city mostly takes place in citycoin, regional import/export is handled by moneychanging/devaluation, and national/international trade is denominated in nationalcoin and maybe pays taxes to the nation directly. So not only could you gauge the relative trade power of cities among each other, but also the gain from nationalism/internationalism directly, via the rate of local vs national coin.
That's clearly what she's recommending. It definitely has it's points, but I'm not sure it would work. A common currency is a lot of what holds a nation together. Note that Britain, the only EU member with its own currency, and which had a lot of other special privileges, is the only member to have withdrawn.
It probably makes great economic sense, but economics isn't the whole of life. There are non-economic reasons, e.g., to support the military. What's bad is that this tends to get out of control. Similarly for welfare. In the case of welfare, however, I really think that it should be a local matter, and the Supreme Court was wrong when it threw out a residency requirement for assistance. That would allow welfare to be scaled to local needs and capabilities, which is what should happen.
OTOH, it's worth remembering that the State Banks didn't have a great track record. Well, states aren't cities, but they're *closer* to being cities than the US govt. is.
I don't even see why the currency is needed. Glasgow or Manchester have the same currency as London but that doesn't mean there is no price feedback. Doing almost anything in Manchester or Glasgow is cheaper than doing it in London.
Why isn't this enough to move business back to regional cities to capitalise on the cheaper prices.
Because it doesn't encourage Glaswegians and Mancunians to set up their own local businesses, and therefore uses Glasgow or Manchester as a supply region for labor, or an abandoned region like Napizaro.
If there is a Glaswedget currency, everyone in Glasgow has an incentive to purchase goods from within Glasgow, where their money goes further, thus keeping the money in Glasgow, encouraging the formation of local businesses in Glasgow, and in Keynesian terms increasing the funds multiplier rate of stimulus. This creates new economic capacity and new local wealth.
There's nothing about calling a currency "Glaswedget" that automatically makes it "go further" within Glasgow. The US dollar goes further in places that are not the US, e.g. due to lower labor costs. Sometimes it goes so much further that it makes economic sense to buy stuff cheap in one place, pay to transport it somewhere else and sell it for more there, and we call that trade. This applies whether the buying and selling happens in the same currency or not.
When a Glaswegian decides whether to buy from Glasgow or Manchester, they decide based on the different prices and transportation costs for the two places. The greater distance from Manchester *already* incentivizes Glaswegians to buy local. If they decide to order from Manchester instead, that indicates that there's a price difference large enough to make transportation worth it.
If you now denominate prices in Glaswedgets and Manchesthares, controlled by the cities' respective governments, you're adding risk from exchange rate fluctuations into the mix, because maybe the Glaswegian government decides to massively devalue the Glaswedget and you can no longer get enough Manchesthares to pay your Mancunian supplier, so that further encourages buying local. That might be good for Glasgow – except that this effect relies on the (at least perceived) risk of the Glaswegian government deciding to massively devalue the Glaswedget, which might be very bad for Glasgow!
So I'm not sold on the idea that giving every city control over their own currency is going to be an obvious boon to the local economy.
(Note that at least in the review's portrayal of Jacob's argument, government interventions directly manipulating the value of currency don't feature at all, which means that all effects described are independent of whether it's the cities' own currency or that of some larger state – the feedback mechanism described consists of fluctuations in the relative price of goods that would happen no matter what currency you measure them in, or even if you barter without using currency at all.)
In principle it may be true that a local currency does not actually strengthen the effect. Empirically, that seems to be false. Divided currencies result in divided centers of economic activity.
Currency itself is also a commodity, subject to supply and demand. The desire to buy things from Glasgow (with Glaswedgets) is what would drive up demand for the Glaswedget. Unlike Venice however, I don't think Glasgow offers anything uniquely special, so the premium wouldn't be that high.
The petrodollar, on the other hand, has a much stronger reason for its premium.
When I read this in 2016, my proposal was that each of the US states issue its own currency, and the feds continue to issue USD, where taxes must be paid in USD and federal reserve bonds are bought and sold in USD. This wouldn't fix California (which is Too Damn Big) and would be pretty confusing around NYC (Connecticut, New Jersey, even Philadelphia) and New England (much of NH, CT, and RI are effectively part of the Boston conurbation), but would do a lot of this.
Corollary thought: JJ probably *wouldn't* have been for Brexit. The UK already had a separate currency, and a city which was the economically-defining touchstone for that currency. Sharing regulatory systems with the currency union is not, in principle, a big deal.
States are even worse than nations as a unit. Cities very often span state borders, in ways that they don’t span national borders quite as often. (St Louis, New York, Philadelphia, Washington, Chicago, Cincinnati, and Portland all span state borders, while only Detroit and San Diego span national borders.)
I would go one step further: Could you solve this without different currencies?
My major takeaway is that each city/region needs a balanced economy with balanced imports and exports and a fair share of high value production.
The extra currency is just a tool to generate a feedback loop if (high value) production is too low. Can we generate and communicate this feedback in another way without the drawbacks of different currencies mentioned below?
Theoretically maybe, but then you get into the problem of centralized decisions in very complicated economies. It's very easy to make mistakes, whereas a separate currency by its very nature will tend to correct the imbalance. People can try to cheat the system (as China was accused of during their growth) but always at a cost. Chinese people stayed poor, which helped keep prices lower for longer and encourage additional industries to be built.
I'm surprised no one has yet suggested Keynes's idea of Bancor. I still don't know quite how to explain it in full... but the short version is that it's the halfway point between:
"Every nation gets its own currency, things get chaotic."
&
"Every nation has to use the same currency, and sucks to be you if that currency winds up not being right for you."
Bancor is instead the idea that,
"Every nation gets to have its own currency... BUT we'll also have an overarching global currency, for providing a nice simple universal unit of account everyone can use to handle international trade, and to help coordinate the response to international economic issues."
You could run Bancor within a single nation by replacing every instance of "nation" within that description with "city" and "international" with "national":
"Every city gets to have its own currency... BUT we'll also have an overarching national currency, for providing a nice simple universal unit of account everyone can use to handle national trade, and to help coordinate the response to national economic issues."
That would be especially nice for dealing with the issue Jane Jacobs identifies with some cities running perpetual trade surpluses and others running perpetual trade deficits, because the international economic issue Bancor was built around solving was that exact issue: some nations running perpetual trade surpluses and others running perpetual trade deficits. If you want to read more about this, see https://en.wikipedia.org/wiki/Bancor & https://theweek.com/articles/626620/how-john-maynard-keynes-most-radical-idea-could-save-world
(I must admit in all honesty, I am especially biased towards Bancor because it incorporates some Control Theory with its penalties for excessive trade surpluses and deficits - I'd personally prefer more and deeper applications of Control Theory to economics, but it's a nice start. Us engineers will convert everyone to using PID controllers for everything someday, I tell you, anything and everything that requires more balance than just 'playing things by ear' can provide. The math is simple and elegant at heart, not intimidating at all. But until then, I'll settle for advocating for Bancor, and the first steps towards applying Control Theory to economics.)
Early in the history of the US, different states issued their own currencies (some cities and banks even I believe). It introduces a lot of other challenges, I dont know which way the scale tips once you add it all up.
My thoughts on reading this were more along the lines of, "is it possible to find some other mechanism to replicate this feedback effect that ISN'T separate currencies?". Currency exchanges are a pain and we all know it. A multiplicity of separate currencies has this effect of increasing value to local purchases vs far purchases, but is there a reason to think that other rules or mechanics couldn't?
I am by no means an expert on economics, but I was under the impression that "optimum currency areas" were a well-known topic of study with quantitative (testable?) predictions, and that the generally accepted theory in this regard suggests optimal areas larger than single urban areas.
I was a little surprised not to see any reference to this in the article, and whether there is some synthesis possible between Jabobs' ideas and optimum currency area theory.
this is a good point, I think that theory was solidified after Jacobs' time (I may be wrong). But certainly I think she would agree with it - pointing out that in the EU, having them all use the Euro, when many places in the EU are those city hubs, and others are those hinterlands and "other types of places" she describes, using the same currency makes little sense. (There's the added non-Jacobs wrinkle that beyond that, each of those EU sub-nations can do their own spending policy, which adds another thing that can be out of whack to the monetary policy).
Not an economist, but at least the articles on Google seem to say that most OCA economists thought the Euro was a good idea, because Europe was an OCA. They are revising their opinions after the Greece incident, but they still seem to support much larger areas than city states.
I think you are right that they thought that, I am just implying that it was a mistake (and one that Jacobs might have identified) and if they would've thought about it more, there were some big red flags for "all of Europe being an OCA" even beyond Greece. (north vs south Italy, Iberia vs England/France/Germany, West Germany vs ex-East Germany or any other ex-Warsaw Pact country)
I think Jacobs might agree that the OCA size for parts of Europe IS larger than just the city state, and would encompass those "city regions", some of which are larger than some countries that had their own currencies pre-euro.
I think the concept that SamLL is proposing is that OCA and Jacobs' ideas are similar, and I think he is right, with OCA being more of a general theory, and Jacobs' ideas as an explanation of the mechanics of *why* a given region should have one currency - because that region's economy is driven by whichever city is its primary economic engine.
I did some research on whether Canada was an optimal currency area, around the turn of the century. It actually has very little to do with the author’s concerns. Optimal currency area theory is mostly about monetary policy and whether central bank reactions will be hampered by different regions facing different monetary/economic shocks at the same time. There’s also an exchange rate tie-in, as monetary policy always ties to exchange rates, but It only has a tenuous relationship to long term development economics.
Her argument is basically that the optimal currency area theorists are wrong and long term import substitution is more important in local economic development than effective medium-term monetary policy. Unfortunately she seems to downplay a lot of basic ideas in international economics. It’s always a mistake to take one economic idea (import substitution, productive advantage, labour v capital, competition, effective laws and contract enforcement, costs, government planning, work ethic, scale, technology, education, health, etc.) and make it the most important one for development. It’s easy to see the flaw here: why a city and not a district? Where does the city’s border get drawn? Why not each factory be a city with its own currency? (Which actually existed for many businesses in Canada at one point.) There is a reductio waiting where every “city” produces one thing for export, and the world returns to barter since there are no common currencies. Even if there is a benefit to having a currency for each city, there are also advantages to uniting economies into larger areas. (To be fair, it sounds like in the end she suggests experimenting to see what actually works, which is often good economics.)
Ironically, the evidence I found was that Quebec fit pretty neatly within the Canadian currency union - it was Saskatchewan that really didn’t fit.
"It’s easy to see the flaw here: why a city and not a district?...Why not each factory be a city with its own currency?"
What if an industry is doomed for some reason besides having too strong a currency? Like I don't know, a town that makes type writers or fax machines. In that case, a declining currency for the whole town would support the growth of new industries, right? One town has enough labor mobility that industry in one part can replace industry in another, which is not nearly as true for an entire country.
Yes, I think we agree. Labor mobility is one offsetting factor that makes currency unions larger than a single product/business valuable.
Diversification of production also provides a form of insurance against product failure for a region.
I think most economists would argue that there are many other pros to currency unions - enough that going larger than a single city is economically optimal even if labour mobility or import substitution. start to decrease.
>The prices in a poor country like Portugal or India (her two examples) feel low for an American or Canadian, but they’re high for most Portuguese or Indian people. At the same time, Portugal and India provide too few jobs to their residents. Inflation and unemployment are both perennially high, and none of that feels surprising whatsoever.
This is an egregious mistake. Expensive != inflation.
You’re completely right of course. I will note that stagflation is indeed common in poor countries - Haiti for example has an unemployment rate of of 14.6% and an inflation rate of 34% - but it’s not a rule and it’s not accurate to describe stagflation as being synonymous to poverty.
Inflation was not common prior to the rise of central bank fiat currencies. When everyone is using Spanish pieces of eight (still referenced in pirate movies), the only shock to the money supply is if gold is discovered.
Prior to the establishment of the Federal Reserve the US economy was able to grow despite not being able to just print more money. Nowadays inflation is expected and the absence of it can cause problems, in a different context monetary stability is the norm.
This is a fascinating review, well deserving of a spot among the finalists! I had never heard of either of these books. Thank you to whoever wrote this review!
Jane was clearly a brilliant and original thinker, but I can't help thinking that she has overlooked many things. (Epistemic status: wild-ass speculation from a non-economist; please tell me where I'm wrong.)
The way Jane tells it, it's so simple: divide the world into smaller units, each unit will be incentivized to produce stuff and export stuff; prosperity for all! In reality, well...
/laughs-sobs in Sub-Saharan Africa
There are plenty of small countries that would benefit tremendously from import replacement and yet continue to be stuck in subsistence-level agriculture and poverty. If Jane is right, then why hasn't the end of colonization unleashed a ton of productivity and prosperity everywhere? She makes very insightful points about the disadvantages of empire and size, but she overlooks some basics like "infrastructure" and "good institutions" and "cultural norms against corruption and nepotism" and "strong rule of law" and such. Being small and locally controlled and having your own currency is clearly NOT sufficient for a strong economy!
Second, the reviewer says that Jane would have applauded Brexit. From my very cursory skimming of The Economist magazine, I get the impression that Brexit has been an economic disaster for the UK, so much so that Scotland wants to leave the UK *and rejoin the EU*! If autonomy is all that and a basket of roses, why would Scotland want to join the EU? What does the EU offer that Jane could not see? Why hasn't the UK blossomed post-Brexit, contrary to what we might have guessed based on Jane's writings?
Third, our old friend Moloch comes a-knocking. "Si vis pacem, para bellum." It's all well and good to have a bunch of right-sized somewhat-larger-than-city-states, as long as all these entities agree to cooperate and not attack/conquer each other. All it takes is one Putin to ruin it for everyone.
Regarding preparing for war, we could always follow the example of the Delian League. One country takes the lead with the armed forces, and all the other countries contribute either people or equipment or cash. That ended well for Melos!
The easy answer regarding Brexit, per Cummings anyway, is that it gave the UK the opportunity for innovation after ridding itself of Brussels red tape etc. The abject failure of Johnson's premiership, followed by Truss, Sunak, have failed to take advantage, instead largely recapitulating the same problems, partially motivated by negotiations. C.f. UK and EU on destructive AI regulation.
As for Scotland, that's even easier. The place was an enormous net receiver of EU money, and if the UK isnt resurgent its obvious why they'd prefer to go back.
Much of UK science was EU funded, so Brexit was initially a step backwards in innovation. It's also hard to plug the research funding gap yourself when you have fundamental economic woes, which you do, because of Brexit.
The idea that red tape, AK A regulation is a 100% negative is naive. It's hard to get rid of red tape, because much of it is useful. Nowhere has ever turned itself into a utopia just by making a bonfire of regulation.
Some of it is useful and some of it is a net loss. I don't think it need to be as drematic as a bonfire to be worthwhile. Getting rid of the worst regulations and tweaking other tradeoffs to better suit your individual situation should increase growth.
Even if the UK used that control wisely it might not be worth loosing frictionless access to an enormous market.
Which brings me to a disagreement I have with Jane (if she was anti EU in all its forms). City states are great for somethings but I'd expect a collective of city states that all agree to certain standards to make trade easier would out preform city states who are all completely individual
> Getting rid of the worst regulations and tweaking other tradeoffs to better suit your individual situation should increase growth.
Good governance is good. Good governance is also difficult. The problem of getting rid of bad regulation isn't fundamentally different to the problem of implementing good regulation, and that's the problem everyone is failing at to some extent. It's pointless to blame the UK government for not getting rid of all the bad regulation, when neither you nor they know exactly what is. Populist politics keeps underestimating just how complex everything is. "Burn it all" is popular because it is simple.
(Since the Scottish government is well known for dodgy financial figures, I'm not citing this to prove you wrong, but I haven't found anything to support that myself.)
In any case, if Scotland was a net beneficiary of EU funding then the same would be true of all regions of the UK outside of London. The biggest beneficiaries of the EU within the UK were rural Wales and Cornwall (through the regional development fund) but I don't recall them being hotbeds of EU support, unlike London, the biggest contributor.
Seems I'm out of date on Scotish transfers, thanks. That said, distributed net costs from cities clearly don't bother people much (as you point our regarding London), whereas the loss of ag, fishing, and other targeted subsidies is felt much more keenly by those communities.
It shouldn't necessarily be a surprise that Cornwall and Wales have reacted differently to Scotland so far since those areas are much more tightly integrated with the English core.
Again, I'm not trying to be rude but, if you're out of date, do you have a source that Scotland was ever a net beneficiary? I question that because (according to the Scottish government) Scotland was a net contributor to the UK treasury between 1980 and 2012.
If you look at the voting figures for the referendum you'll see that the areas of Scotland with more agriculture, fishing and rural development subsidies were much more in favour of Brexit than the central belt, so I'm curious to know why you argue that economic self-interest would be driving the Scottish view on Brexit in a way that's different from similar areas in the rest of the UK.
If you ask me, the main difference is that Scottish people who resented their situation could blame the UK government, and had no need to turn against the EU.
I've never suggested EU transfers were a driving force for Scottish views on Brexit. I'm saying the removal of those transfers without commensurate post-Brexit benefits from London is likely a driving force behind Scottish desires to leave the UK and rejoin the EU. Essentially: things were better before, and I want to go back. That people don't realise what they have until its gone is nothing new.
As for Scottish/EU transfers, the key here is not how much money goes to/from the UK, or even the public sector net contribution you were talking about earlier, but rather the total EU money in/out of Scotland. I confess I was rushed during my first reply to you, so was mostly taking your word for it. You're right to point out the public sector was a net contributor, to the tune of £0.46b/year, but this surplus is entirely wiped out once non-public sector subsidies are taken into account:
Agricultural subsidies were ~£0.6b/year
Other reported subsidies (social funding, rural development, fisheries) were ~£0.15b/year, likely much higher in the final analysis once other EU programmes, such as those listed at the end of the report, are included.
So Scotland was a net beneficiary to the tune of ~£200m/year. However a proper accounting would also include the impact of favourable loans from the EIB, which amounted to ~£2b/year (prior to the Brexit vote anyway, after which point it dropped considerably).
Clearly this wasn't widely known or appreciated. So when the demographics that previously received wildly disproportionate net transfers started to hurt as the 'transactions of decline' dried up, it should be no surprise that they began to favour a return to the old system.
What I'm claiming is that isn't at all true that Scottish opinions on Brexit today are a case of 'you don't know what you've got till it's gone'. The day after the referendum, Nicola Sturgeon argued Scotland was being dragged out of the EU against its will. This is the 'material change' argument which justified the push for a second referendum. But if you look at poll trackers, this has no more support now than it did on results day. A priori, your narrative would be plausible, but as far as I can see the evidence doesn't agree.
Instead, the idea of rejoining the EU is simply a perfectly logical step for independence supporters. The SNP sell the idea that Scotland is a nation with a different set of values to England, and that independence would allow the country to become more socially democratic, and fairer. Since Denmark, for example, shows this is perfectly possible within the EU, there is no contradiction at all there. Libertarians and Brexiteers might be surprised to hear that Scots would throw off the yoke of Westminster just to replace it with Brussels, but that's just a fundamental misunderstanding of the main motivations behind independence.
Finally, to the figures. You've essentially just doubled the 'money in', because the subsidies you're talking about are paid by the EU to national governments, and comprise the 'public sector receipts' the report is dealing with. Private sector receipts are a minority of total funding. See Box 1 on page 10 here:
> From my very cursory skimming of The Economist magazine, I get the impression that Brexit has been an economic disaster for the UK
The Economist is well-known to be a fanatical europhiliac rag. They will downplay or omit any mention of positive benefits of Brexit but trumpet and exaggerate temporary setbacks or difficulties resulting from it.
The UK has not yet had a chance to benefit fully from Brexit because most British politicians and civil servants are abject cowards who can't bear to part with their EU comfort blanket and have done their utmost to sabotage and prevent any positive developments stemming from Brexit.
Nothing to add, and I don't really need to get in a discussion about it anyway. But if I had the option to press "like" or "+1" or whatever I'd have pressed it. I don't know the etiquette on this site for "hear hear" posting.
"My genius plan would have worked just fine if not for literally everyone hating my plan and making it fail on purpose out of sheer spite" doesn't rank high in my hierarchy of excuses, especially since when it comes to politics, "will everyone hate it" is also part of what one has to consider when assessing a plan .
Obviously not everybody hated it -- it passed, after all. The ruling class hated it and tried to have it overturned, but if we're going to accept that as a reason not to leave the EU we might as well just give up on the whole notion of democracy.
I'd say that the Brexit people were sold on / voted for didn't actually have much overlap with the 'actual plan' (going by Cummings) for how to benefit from Brexit. The impression I get is that very few people outside of the ruling class knew what the actual idea was, instead being persuaded by the same playbook developed during the Alternative Vote referendum. I know I spent a lot of time thinking "clearly there are people much smarter than me who think Brexit is a good idea" and trying in vain to find their arguments, and it wasn't until reading Cummings years later that I managed to find it. In the posts explaining it he was clear that they didn't think people would vote for what they wanted to do, so they found a different framing for the idea which was more appealing to their target audience. Even then, he stresses that they couldn't have won if it weren't for exceptional luck and an unusually incompetent opposition.
The results of the Brexit and (much moreso) the Alternative Vote referendums did really shake my faith in democracy in the modern era though, with the sentiment towards an idea being increasingly decoupled from reality.
It's almost impossible to separate this from the object-level question, but in general it seems like a bad idea for the demos to insist on a policy the ruling class hates. By definition, it is the ruling class which is tasked with implementing the policy. The ruling class may be motivated by a strong public service ethos (as is the self-perception of the British ruling class), but even so it's difficult to implement a policy effectively if you think it's stupid and/or evil. Of course it's much worse if the ruling class is self-serving (as cynics tend to assume).
Maybe, but then that removes one of the main advantages of democracy, i.e., that it governs in the interests of the people as a whole rather than of a narrow political elite.
<i>Second, the reviewer says that Jane would have applauded Brexit. From my very cursory skimming of The Economist magazine, I get the impression that Brexit has been an economic disaster for the UK, so much so that Scotland wants to leave the UK *and rejoin the EU*!</i>
In addition to what Alethios and John R Ramsden have already said, Britain went into lockdown not long afterwards, and then after *that* the war in Ukraine pushed up the price of fuel and hence of everything else that involves fuel in its production/distribution, which, it turns out, is everything. These factors would clobber the British economy even in a world where Britain was still part of the EU.
<i>If autonomy is all that and a basket of roses, why would Scotland want to join the EU?</i>
Scotland is (or was) a big net receiver of EU funds. Also, globalism is such a powerful belief system among western elites, that even nationalist leaders want to be part of big supra-national organisations.
The thing about Brexit is that the main disadvantage , the return of complex frictional trade, is a stone cold certainty, but the advantages are distant and vague.
Dunno. The whole article we are discussing is about the advantages of not living under a one size fit all regime, yet you choose to focus on the frictional costs.
you can change what is administered at each organizational level. (similar to federalism in the US)
You could, for example, have an European Union that:
For military defense against Putin: had a unified, NATO-style organization with either an alliance based force or just a unified single military controlled by some supra-national office like NATO.
For currency: had "optimal currency area" style currencies, maybe 6-7 in Europe, similar to what Jacobs proposes.
For trade/tariffs: free trade between members, and agreement to negotiate collective trade/tariffs agreements with outside countries.
For domestic/spending policy: total federalism on some issues, agreement to abide by generally set limits on human rights, spending limits, etc...
Scotland voted heavily against Brexit and had only barely stayed in the UK with an earlier referendum. It was expected at the time that Brexit would make the Scots want independence more, but David Cameron had gambled & won with the Scottish referendum and figured (incorrectly this time) he could do it again.
I agree that Jane overlooked many things, but she didn't say everything would go well automatically if only the entities are the right size.
I see her main point in explaining mechanisms at work. Having a separate currency for a city gives one regulating mechanism to help keeping the balance, I didn't understand that this is a cure for everything.
About Sub-Saharan Africa: many of the conditions she describes for rural regions and the western powers have little incentive to change this as they like to get cheap commodities and export their valuable goods. This is like the example of London and Boston in colonial times. Many African countries don't even have full sovereignty yet e.g. by CFA-Franc, foreign sponsored corrupt governments and even uninvited foreign military bases. The example of a country pushing for African sovereignty is Libya, you know how this ended?
Power politics in general is one of the topics Jane seems to ignore completely. Of course it is not so important for the economic mechanisms she was exploring, but it is necessary to explain the world or even change it for the better.
Jacobs actually does touch upon decolonization briefly in the book. She notes that it usually makes things worse at first, because colonies tend to not have well-developed cities, and the loss of the link to the colonial empire means the loss of the link to dynamic cities. The economy of Belgian Congo was mostly dependent on Brussels, not Leopoldville/Kinshasa. Independent DR Congo doesn't have Brussels anymore, but Kinshasa can't replace it because it isn't a good import-replacing city. Whether Kinshasa becomes one depends on many factors, including all the ones you mention, like good institutions and regional conflict.
Jacobs would, of course, totally agree with you that "being small and locally controlled and having your own currency is clearly NOT sufficient for a strong economy."
It’s not just separating smaller regions - it’s separating regions that are economically cohesive, likely because of urban geography. I think of the city as the region where people regularly travel on a daily/weekly basis. But African national borders famously don’t often respect the meaningful geographic and cultural divisions on the ground.
This was a great review and a great post. I could not stop reading it.
I wonder what Jacobs and those who support her theories think about autonomous regions like Tyrol (shared by Italy and Austria) and The Basque Country (shared by Spain and France).
Both regions are incredibly wealthy and are in constant negotiations with the centralized states with regards to the sharing of power and economy. I was very impressed when I visited these regions and felt that more places could use this system.
I wonder if Jacobs thought that the centralized governments would eventually make these regions poor?
I wonder whether this is a more general phenomenon: Regions that have alternatives have more leverage in negotiations with nation states. Also, it would be interesting to know whether this only leads to reallocation of resources from other regions that have no such leverage or whether it leads to an actual economic growth.
Spain is an interesting case study, because various ethnonational subregions do enjoy relative autonomy within the larger nation-state. Catalonia isn't the only one. Asturias has its own language and a measure of self-rule. It's economy was dependent on raw material exports, and now relies on tourism. I don't know much about the details.
>2. Currency rate fluctuations are a feedback loop that encourages the right kind of activity.
... but only in units that are the right size for feedback to take effect. You can't strap a motor to Earth and try to pilot it purely by feedback, by the time you will "feel" anything, it would already be too late. Feedback is just the "Fail Early, Fail Often" ideology, or Agile as the software folks love to call it. You have to be sufficiently small to do it, babies can fall, but grown men can't.
The example demonstrate it, Detroit's Industry failed, but instead of that failure feeding back into the decision-making of Detroit, it fed back into the decision-making of the entire USA, which is too large, too busy, too blind, and too powerless to correctly interpret the feedback and take corrective action. It's like a student who keep studying the wrong way, failing exams, but their failing grades are intercepted by their protective parents. The student knows they are failing and that what they are doing is wrong, but they never know the exact questions they got wrong or even how many of them, the feedback keeps getting intercepted by the large entity above them.
Ideally feedback is a lot more than "Fail Early, Fail Often". Feedback ought to be "notice a correction is needed and make it". The "Fail Early" only applies in a situation where the design was wrong, there wasn't feedback, or the feedback wasn't properly interpreted and acted upon. Ideally you avoid failure by incremental changes. This doesn't always work, but it often does.
I was thinking in this direction too. But You don't have to go that far, even gathering the right regional statistics and communicating awareness for these mechanisms and the current situation could help. Or to consider this in public spending by preferring local offers even if they are x% more expensive than the lowest bid.
Your question goes completely against Jacob's view of the situation. So there must be more to it than just the two points you list for her to come to such a radically different view.
Sorry, I’m confused. It may well be that my summary of the contestant’s summary of the book is entirely incorrect. But do you have a specific argument?
I dont believe Jacobs would have written an entire book, that she was apparently very proud of based on the quotes in this article, that boiled down to just two points.
Additionally, Jacobs would not believe there is a "smart set of regulations, some kind of adaptive taxes/subsidies perhaps, that would have the same effect". She would have likely seen this as quixotic and was very against top down decision making.
So I, quite glibly and dismissively, was trying to imply that maybe you have missed something if you boiled down the review to those two points and your take away was to ask something the reviews subject would have been very against. I should not have been such a jerk about it!
The central premise seems to be pretty in line with Austrian theory - "mal-investments wreck the economy". Her value adding insights seem to be "hey there's a ton of bad investment / underinvestment happening because of signal distortion that we haven't really been seeing. Large regional currencies disguise important signals and the things large regions do to try to pacify peripheries don't give back as much as they cost and slowly drain everything" and secondly "you might think the former statement suggests that maybe we need to go down even further and assess within cities or even at the individual level, but no, actually cities are the right unit to consider economics".
The former is pretty in line with previous economic theory and makes apparent sense.
I'm not nearly so convinced of the latter. This focus on import replacement feels like a special case and not a precondition. Trade is good where there's comparative advantage and literally creates wealth. You could not make a struggling city prosperous by nudging it to replace imports. Rather, it seems like in some notable cases where places happened to, by chance, find themselves in a situation where it suddenly made tremendous economic sense to replace imports, doing so made them a lot of wealth very quick, which makes sense. All at once they started pocketing the costs previously paid in shipping and tariffs. I'd really like to know a lot more about the specific mechanisms by which those 5 forces create the declining towns mentioned, because overall the USA seems to be a tremendous counter point to her thesis. There are a large number of massive economic centers that are very successful and growing rapidly, even if you can pick out a biggest, and many didn't do it by a process of replacing imports generally.
An alternative model of events that maybe fit the same data:
People will agglomerate where a combination of factors make productivity high. Some of these factors are things like natural resources, availability of labor, access to capital. Two other notable factors are economic and governmental policy, and the network (agglomeration) effect.
Starting from a state of some distribution of economic centers of various size, in large economic centers there is high productivity due at least in large part to it's large network. It's trend however is for natural resources to drain and more importantly for local policy to be captured, lowering productivity.
In some small regions, there will be plenty of access to resources, sufficient access to labor. Capital in the modern world is relatively fluid. As long as a locality keeps their policy good, at some point somewhere the scale is going to tip - someone considering their next venture will weigh the large network of the large center against it's low natural resources, poor access to cheap labor, and / or constrictive local policy, and choose the smaller center.
This creates a cascade because now the smaller center has more capital and a larger network, making the next venture more likely to pick it. In very short order, there is a sudden shift of economic activity from various places to this new center, which _looks_ like import replacement, because it's suddenly producing a lot of activity.
The city might still be right unit if economic analysis but I'm not convinced. But the proposed solution for economic crises is "keep policy that makes it easy to be productive and stop making mal investments"
I feel like the definition of a city here as it relates to import substitutions is that a "city" can be thought of not just as the actual literal city center but as a sort of center of gravity/watershed. Economic activity concentrates in a "point" where transaction costs are comparatively negligible, though Manhattan is obviously a lot bigger than a 1 dimensional point in physical reality. That point, which is "the city" exerts a zone of influence around it until you either reach bypassed land or cross a watershed. For any pair of cities one will have the comparative advantage in any given good only in an environment of no transaction costs. Import Substitution is the process of burning through all the goods where you normally would have not had comparative advantage but need to produce it yourself because of transaction costs. Cities like Gary, Indiana withered not necessarily due to losing their comparative advantage in their specific thing, that was just a symptom of the fact transaction costs had plummeted to the point where it no longer needed to be a separate watershed. Gary was downgraded from an independent economic center to de facto part of Chicago's gravity well. It was only a matter of time until it ended up collapsing like the moon entering the roche limit. That's why the UK is pretty much a one city country now and why Gary painfully transformed from a full city to a glorified highway pitstop town.
I think this explains some of the mystery of the middle income trap and Japan's apparent success with protectionist tariffs to get their industry kickstarted despite the usual objection of comparative advantage.
"Import substitution" seems to vaguely gesture at the concept of "catch-up growth", when a developing nation begs borrows or steals technology from developed nations. That's all well and good. A nation, state, city or village can benefit from copying successful enterprises and institutions built elsewhere. But comparative advantage and win/win benefits from trade are such fundamental economic ideas that to ignore them seems crankish.
I understand "import substitution" here as a quite specific advice: start diversifying your production with some good you now import.
This will combine several benefits:
- balance your imports/exports or allow more imports of other goods.
- create jobs that create value
- keep the return of capital within the local economy
- generate the means and expertise for future exports
This is not meant to replace all trade and get self sufficient, but to catch up to level were win/win trade is possible or to maintain this equal level
I had been viewing Import Substitution as more fundamental, making the city or even neighborhood the right level of economic analysis: it's essentially specialization. If you're subsitence farming or cash crop farming or drilling oil, that's the only thing to do, but if you suddenly have enough concentration of people to allow specialization OR it makes economic sense to have some of your banana pickers become candle makers because candles got more relatively expensive, then you can start to have a self-sufficient economy. I'm not sure exactly how the leap goes to working up the value chain, which always seemed like the end goal in my studies of development, but some level of specialization seems like the right step to get there
Or better yet - if a city is failing it's like a company is failing. Either it's mismanaged and you can save it by fixing it's policy to allow productive use of its capacity, or it just isn't a good idea and we'd be better off letting it fail and having those people move to a different economic center where they will produce more.
A policy stance that might come out of that seems to be "let's make it easy and profitable for people to move around quickly so they can get to economically productive cities and out of bad ones"
Furthering that point: having a common currency, culture, army, laws, etc. across multiple cities near each other geographically helps make it easy for people to move from one to another. Call it a "Nation" perhaps?
It's not that simple. Sometimes the environment you're operating in changes, and you can't change to accommodate it. Say 1/4 of your cities wealth comes from selling buggy whips, and cars are taking over the transportation business. You've now got a city that 1/4 too large for it's base. That you can import a replacement industry is usually a pipe-dream. The pure economics answer is to get rid of the now-excess 1/4 of your population. Perhaps, however, that would have undesirable consequences. Welfare will probably hold them locked in place. And they don't WANT to learn a new trade "I make buggy whips, and so did my father before me!" (If you don't like buggy whips, you can find your own analogies, they're all around us.) So what do you do?
It's a real problem. You can find examples all around the country. Back before transportation was so good and government so central you could find abandoned towns all around where a resource had failed. Coal mines, silver mines, etc. The town was just abandoned. That's an approach that works, but it makes you really unpopular with those forced to abandon their home. But a city is a much bigger problem. A mining town had perhaps 500 people. (That's a guess, there was one with a population of 15000, but its an extreme outlier). A small city has about 100,000 people. That's a lot of people to get unhappy with you. And when it keeps happening...well, even over generations it contributed to political instability. So you'd *better* be funding your military.
You're right. I'm not super convinced by the concept of "import replacement" generally, although there are clearly cases where it does work.
Every major city has a large professional-managerial class, which relies on laptops and cell phones, which are invariably imported. Would, say, NYC or London be better off if their people said, "Let's do import replacement! Let's stop importing all our laptops and cell phones and build them here instead, starting with the microprocessors!"
Would it make sense for every major city to have its own microprocessor fab? Based on recent experiences with trying to relocate more microprocessor manufacturing to the US, I would say the answer is no. The "let's have every region make as much stuff as possible to replace imports" philosophy runs counter to the specialization and economies of scale that are among the strengths of modern economy.
I have a lot of issues with the Jacobs view of the world. She’s right of course that the nation state is an abstraction that contains a lot of internal variation, but so too is a city! Western Sydney is substantially poorer than the Northern Beaches. The Bronx is poorer than Manhattan.
It’s often useful to sum up these areas with differing economic circumstances as “Sydney” or “New York”, just as it’s often useful to sum up Auckland and Christchurch as “New Zealand”. But I don’t see a principled reason to embrace the city as the fundamental economic unit.
I’m also deeply unconvinced by the idea of import replacement being an especially important process. It seems to imply that the more things a city produces for itself the more it will grow, while in reality it seems to me that the largest cities have the most trade.
Suppose we have a factory town that imports food and exports widgets. If the demand for widgets collapses and they turn to subsistence farming, that’s “import replacement” but it doesn’t seem like a step in the right direction economically. Conversely if the price of widgets goes up and they can start importing more stuff, that seems like a good thing, even though it’s kind of the opposite of import replacement.
The example with the factory, that's not import replacement - sounds more like import cessation.
My understanding is import replacement is about independence without loss of standard of living. E.g if Japan figures out how to build some kind of miracle renewable energy which is reliable and scalable enough to supply their entire country, this will replace their natural gas imports entirely without dragging down standard of living.
(Because in the case if subsistence farming, as soon as you get money again you'll go straight back to importing food - import replacement is about imports stopping voluntarily and not because you can't afford it).
I sort of understand why cities should be seen as a single economic unit - you can commute to work/goods and services from Western Sydney to the CBD (in fact, many people do) and you very much can't from Higgins to NYC. If one day there is a bullet train that makes it so that it'll take $10 and an hour each way to go from Sydney to Melbourne or vice versa, it'll probably make sense to consider them the same urban area too, but still consider Adelaide, Brisbane and Perth separate (unless you loop them into the same bullet train but I doubt it'll ever connect Perth).
Thought experiment: if a new business (E.g Taco Bell) landed in some central area of Sydney, would someone in the western suburbs consider that accessible to them? How about Newcastle? Wagga Wagga? Albany?
My understanding is that city limits is defined by where you draw that line.
That's my general impression of the book after finishing the book review: an interesting book, maybe even a great book, marred by economic illiteracy and a failure to fully think through the things it's saying. If import substitution is so great, for example, why shouldn't individual neighborhoods within a city erect tariff walls between each other to make even more wealth than import substitution on a city level? If poor areas inherently suffer so much from being tied to rich areas and having to share the same currency, why shouldn't the poor neighborhoods secede from the rich ones to enjoy the benefits of having an independent currency?
And how can import substitution even work on a city level, if cities can't ever actually reduce their imports unless they start producing their own raw materials? Boston in the book's example went from importing tools to importing iron to fuel its tool factory, it didn't reduce its imports so much as push them around to a different sector of the economy. Yes, it saved money by importing raw iron instead of finished tools, but that same effect could be had by just exporting more of something else, especially if the city chose to specialize in producing and exporting that thing to get maximally efficient at it. (A penny earned is a penny saved, as the saying doesn't go.). Or importing stuff then turning around and exporting it at a higher price to somewhere else - Entrepot trade as it's called. What's so special about avoiding imports in particular?
That's the general impression I get from reading the book: lots of puzzlement that neither the book, nor the book review, spotted the standard "Export Good Import Bad" fallacy or "Why can't I just keep dividing my nation into smaller trade areas to do more good more?" question that gets covered in Econ 101. That might be why the book got overlooked by economists... perhaps the book review shouldn't be puzzled why they didn't take the writings of someone who 'never got a college degree in economics' seriously.
"Yes, it saved money by importing raw iron instead of finished tools, but that same effect could be had by just exporting more of something else,"
But the tools are more expensive than the Iron so there is a surplus (how much would depend the quality of the new tools produced and transport costs and other factors). The surplus can then be put to work buying something else.
However, I think you have the direction wrong. Import replacement is just a description of what happened, not a recommendation for cities to engage in it. As cities got richer or started producing more things, entrepreneurs move in to satisfy demand locally instead of through imports. The city didn't set out to replace imports it was a natural process.
A different example would be a small town that has no restaurants. All the citizen travel down the road to the next town that does have restaurants. One day I say "hey, I'd like to run a restaurant". If I and the town are rich enough, I open the restaurant. Now citizens don't have to travel to a different town to go to a restaurant they can just stay here. A surplus may be created through their savings in time and travel costs. Maybe a few years later my restaurant is successful and some farmer in town devotes part of his wheat harvest to baking bread to sell to my restaurant so i dont have to import it from a different town. and so and so fourth. As the city gets bigger the value of the goods that start to get produced there would go up.
Internal variation isn't why the nation is a bad unit, it's because, for larger countries, it's a unit built up of smaller, somewhat independent sub-units (cities). Detroit and Boston are used as examples in the review. The economic collapse of Detroit did not directly cause Boston to collapse. But the economic collapse of Boston's financial district would cause its suburbs to collapse. In many ways, Detroit and Boston are independent economically, but are tied together because of a shared currency. Detroit and Toronto are probably more tied together economically than Detroit and Boston because of proximity and natural trade routes, but the different currencies means they perform differently on a macro level.
I do agree it's often useful to sum up on the country level. Though it's less useful when you are comparing the US/Germany/India/China/Brazil with Switzerland/New Zealand/Singapore/etc.
The reason the city is a meaningful unit is that there is no smaller subunit you can divide it into that is mostly independent. There are some cities in the United States that can’t be properly divided from their neighbors (Austin and San Antonio, Baltimore and Washington) but for most, you can just draw a line where there’s no more houses for several miles, and the vast majority of people inside that line stay inside that line on any given day. National borders aren’t actually quite as clear - there’s much more porousness between Seattle and Vancouver, or between Toronto and Buffalo, than between the pairs of cities that are nominally in the same country (unlike with neighborhoods of different cities).
There are literally no places in the US besides small rural prepper areas that are "mostly independent". Every major metro down to things the size of Cairo Illinois are deeply deeply immersed/immeshed in global trade.
What I mean here is something like that most residents of the region don’t leave the region on most days. Municipalities aren’t like that (plenty of people commute from the suburb to the center city every day), but the urbanized area usually is.
There is a lot more to recon on ice than humans physical locations. Also you are going to k end up with a lot of pretty tiny municipalities under this rubric. Like the previously mentioned international falls.
Those people aren’t commuting to Duluth or Fargo or Winnipeg most days.
I don't mean to suggest that this is the only meaningful level at which to analyze human geography - just that it is a more meaningful one than many of the others that have official or legal status. And yes, there likely will be some very tiny regions on this sort of analysis - but if those people are interacting with each other on most days, but not with anyone else on most days, then that's an interesting and distinctive fact.
Hm, so, as the natural boundaries for calculating housing prices are not cities or states, but neighborhoods and metropolitan areas, so the natural boundaries for efficient economic engines are not nations but conurbations? Sort of a watershed theory of grouping...
Some of this is similar to a crazy theory I cooked up while on a long drive, a number of years ago. I posted it earlier on one of the housing posts, so I'll quote without editing. I welcome any comments ripping it to shreds, and pointing out what huge chunks of human life it casually ignores (a big one is added value, as in the chain from ore to metal to machine part to full assembly). :-)
> America's current population distribution is an artifact of inefficient transportation and slow travel, and it's slowly transitioning to a new equilibrium. (This is deliberately provocative and biased framing, which assumes as "normal" a pattern which we are only moving towards.)
> Ultimately, the interior of the continent is for resource extraction (including such things as farming and the use of cheap hydro-electrical power to work aluminium). Ports at natural harbors and large rivers allow inhabitants to siphon off some of the value of the trade flowing through. Everyone else, including tech workers, might as well live in one giant city, or in the middle of nowhere or in small towns if they can work remotely and choose to. Legacy cultural and industrial centers may hold out for a time, but will eventually succumb to gravity, because resisting requires a constant use of energy. (See also, how so many native languages of the world are dying out, and how American Standard English is effortlessly gaining ground. Resisting this takes active effort; going with the flow takes none.)
> Some jobs, such as resource extraction or creative work, essentially generate wealth ex nihilo. Everything else, from government to schools to restaurants to retail to hairdressers to movie theaters, all of that siphons money out of wealth generation. (This is not meant to be pejorative, merely descriptive.) Wealth flows, like current (i.e. currency) from one person to the next to the next. But each time it flows through a corporation with a non-local HQ, some of it is siphoned away to the location of the HQ. And eventually, to the location of the owners of capital, and while they may invest some of that on a global level, their circles of concern tend to center on their own location, and the governments of their own location siphon off their share.
> Overall, resources and money flow downhill like rivers, seeking the ocean. A little mining town in West Virginia may have one source of generated wealth, and if that source dries up or goes away, the town will slowly shrivel and die. Every time anyone spends money at a chain store or online, wealth leaves and does not return. Yes, yes, equal exchange of value, but even putting aside taxes and profit, something has left that will not return. Draw a line around the town and monitor cash in and cash out, and it will show a steady flow outward. The death knell is when they resort to tourism, an explicit attempt to create artistic value inside the line that will draw in wealth from outside.
The problem is the UK already had its own currency, and the EU-UK trade agreement is sufficiently comprehensive that this is more like “raise a set of random barriers in the service market” than “detach one economy from the other.”
Scotland leaving the UK would be the ultimate test-case; England is overwhelmingly the London area and it’s dependencies and hinterlands, so independent Scotland should se either Edinburgh or Glasgow revive on Jacobs’ theory.
No, Brexit was the _end_ of a test case. Immigration and (incomplete) policy union without fiscal or currency union was an excellent test for her theories, one in which London and Berlin both succeeded and therefore incrementally vindicated the theory. That test period is now over.
This review sparked a lot of interesting ideas. Bravo! Particularly noticing how states are so fleeting and cities are so often immortal, and what implications that has for the basic unit of economic analysis.
I couldn't help thinking as I read, that in a world where Jacobs is correct, what you really need isn't a patchwork of independent city-states as such, but rather a large confederacy with some extremely weird fiscal policies. I can imagine, for example, a world where the west coast of the US becomes "Pacifica" or whatever, and allows Seattle, Portland, San Fransisco, and Los Angeles to each mint their own fiat currencies with oversight by a local 'Fed', and maybe even manage their own internal tax policies up to and including tariffs against other cities in Pacifica. The role of the state, Pacifica, in this would be to oversee and centralize military development (an economic drag, but not as much of one as a war between Seattle and Portland), set a floor for basic human rights (especially exit rights and migration), and manage policy towards rural areas outside major city regions (probably with an archipelago of minor municipal governments, much as it is done today). The state of Pacifica would need to be tax-supported, but without the ability to set fiscal policy, or indeed to even mint its own currency, that would probably have to be done with literal production quotas from each city or something equally strange.
Bremerton could be the federal capital of Pacifica, paying shipyard workers, soldiers, and the coast guard in its own local currency. When there's a border dispute, alleged human rights violation, or other problem which benefits from being passed off to a higher authority, that would also be the currency in which penalties or service fees are denominated, so some corrupt mayor isn't tempted to weasel out of wider obligations by debasing coinage.
I actually had the thought that a currency-less state institution could by constitutional mandate receive a specific fraction of all currency minted by its constituents, so Pacifica would end up with a diverse portfolio of different currencies that represent a known fraction of the city economies in a way that was resistant to debasement. You could in theory tweak this number slightly up as a punitive measure against local municipalities.
But punitive measures also seem a bit too weak, since large institutions are often happy to weather such punishments; they're typically small on the scale of the incentives involved. And they inevitably just pass those costs on to their constituents anyway, meaning the punishment would land on the victims! It seems better to use the usual sort of federal judiciary system, in which violations of state law are anulled outright and lack any claim to legitimacy as an act of the city, and in turn state law is limited in scope by the costitution.
For any given human-rights violation, figure out an acceptable error rate, and a minimum penalty. First incident gets the minimum. Each additional incident within the same institution doubles the penalty, and triggers proportionate follow-up investigation. Doublings are only undone by a contiguous period without confirmed incidents corresponding to the acceptable rate - e.g., if 1/10,000 is tolerable, and plausible opportunities come ten per day, one doubling is reversed per roughly three years clean.
One quibble about Seattle: Boeing doesn't just make military planes, it's one of the biggest civilian plane manufacturers in the world, and has been for a long time. I think currently the civilian side generates about twice as much revenue as the military side, but I don't know how that holds up historically, through all the mergers and whatnot.
Plus, Seattle has a huge port, by at least one metric the 4th largest port in North America (for countainer ports, behind LA, NY, and Savannah, ahead of Vancouver BC and SF). (For sheer tonnage, it doesn't match east coast ports, though.) I have in the past described all the "cool parts" of Seattle as being a wart on the gigantic port complex.
Also, the reason Boeing is near Seattle is cheap electricity via hydroelectric power, for aluminum working. So in an ominous sense, Boeing's location there is another example of an industry making use of local resources, the way Detroit was.
How do you reconcile the theory that `all large polities decline' with the sustained multi-century growth exhibited by such large polities as the USA? For that matter, how do you reconcile the `one country one major city' hypothesis with the state of affairs in the USA, or China, or India, or Germany, all of which seem to have multiple major cities (the US sometimes even has multiple major cities in the same state). And if wealth comes from cities then how does she explain wealth in Switzerland, or New Zealand, neither of which has any cities worth the name? All three conjectures seem pretty load bearing for her thesis, and each one is trivially falsified by data that everyone knows about (and she should have known about). That's probably the most parsimonious explanation for why economists ignore her economic theory - viz. its trivially falsified by looking out of the window.
Meanwhile, if her main `correct prediction' is the decline of Japan...that could alternatively be explained (far more persuasively in my view) by demographics. vs Japan started stagnating when it grew old. No city magic required. As for the inevitable decline of all nations and empires - this is far more parsimoniously explained by `all things end.'
Speculatively, perhaps the USA **is** the city for the planet, unless China becomes so? Some of the dynamics described seem to apply on larger scales as well.
Regarding "one country major city", I'd speculate that the process takes time, and that the more federated the country, the more the individual parts can maintain their own cities. Also, in the USA at least, there's a drain of population from smaller cities toward bigger cities and from there to NYC, which takes active effort to resist. Most of the big cities are ports or hubs for specific high-profile industries, and most of the rest are in decline.
I can't speak to wealth in Switzerland, but from people I know in NZ, I hear that it's poor relative to the USA. Just, "first world poor", not "third world poor" like much of the rest of the Pacific that has good scuba diving (which description also includes Hawaii). Also, Auckland has over a million people; it might not be London or Paris, but it's definitely the single "city" of its country, even if that country is a bit of a backwater. If you were talking about the recent noted increase in wealth, that doesn't seem to be accompanied by a similar growth in GDP, which implies that it might be due to personal wealth of people who happen to live there? (Which might be an explanation for Switzerland, too.)
Most of the increase in wealth in NZ is due to extraordinary growth in property prices, fuelled by both significant population growth in Auckland, but also foreign asset purchases. With that said, Auckland is a legitimate regional hub with a large port; its hinterland is effectively the entirety of the (non-Australian) South Pacific. I’m not sure how large the influx of wealthy foreigners in-situ is, but their asset purchases have been significant.
Speaking as a born-Aucklander (who nevertheless spent most of my life overseas) NZ is not a wealthy country (there is significant emigration to Australia, for one thing), but it maintains a very high HDI with solid social services; I’m not sure there’s a massive quality of life discrepancy between New Zealand and the US even though the latter is significantly more wealthy per-capita.
I can’t comment, but I suspect most Swiss wealth is a product of financial services (like the City of London), prestige industries like watchmaking, and some advanced components manufacturing; I think it goes beyond merely the personal wealth of Swiss residents.
Assertion number one was that cities were the fundamental unit of analysis. To say that the US, a continent sized country, is the city for the planet renders meaningless the entire concept of `city' as well as the thesis. Sure `all cats are black' if you define any white, tabby or ginger cats you encounter to be black as well.
On `one country one major city' - it's not just that the effect takes time, the sign of the time derivative is wrong too. For instance in 1920 NYC had 5% of the US population. Today it has 2.5%. Its similar for GDP - New York has gotten smaller (relative to the US), not larger. Similarly China, India, and Germany are all countries with multiple major cities that show no sign of consolidating into one. Heck, even Brazil and Australia manage two. `One country one megacity' works for a handful of countries (England, France, Indonesia, South Korea), and fails miserably for many others. Its certainly not any kind of universal law.
As for `first world poor' - the whole of Europe (with the exception of tiny enclaves like Switzerland or Norway) is poor relative to the US. So is Canada. `First world poor' (i.e. poor relative to the US) describes almost the entirety of the first world, urban or otherwise.
Did currencies really matter during the gold standard?
Anyway, Switzerland and New Zealand are highly urbanized countries. The theory is not that only the biggest cities in the world thrive, it's that the biggest city in a region with it's own currency/self-determination thrives.
USA's growth wasn't "multi-century", unless "multi" is interpreted in the trivial sense of being more than one. And the mechanisms the book describes to me looks very long-term to me, she mentions the Roman Empire, which stood for at least 3x to 4x to 10x (if you want to count Byzantium) as much as the united states.
The USA and India are huge, federal, and multi-ethnic, that's not the default of the vast majority of nation states. Germany is federal, China is huge and multi-ethnic.
>the inevitable decline of all nations and empires - [can be] far more parsimoniously explained by `all things end.'
Yes, some earlier than others. All elements decay, but each with a different half life. Even subatomic particles decay, again with different characteristics for each type. Some things are so short-lived that scientists debate whether they can be even said to "exist", some so long-lived that scientists are not sure if they will even die.
It's worth asking why nation states and empires are so short-lived compared to (say) their major cities, their language, their religion, or their people (as an ethno-genetic phenomena). JJ is saying becuase they are unstable, they are a high-stress high-friction arragement of matter that wants to collapse.
Are nation states necessarily short lived? Japan seems to have had remarkable continuity. So too does England.
In any case, what falsifiable predictions does her theory make? It seems to claim that nations tend towards a single megacity, which is trivially falsified by multiple counterexamples (USA, China, India and Germany off the top of my head). It also seems to claim that non-urban regions cannot be wealthy, which again is trivially falsified by multiple counterexamples (e.g. Switzerland). Even `empires decay' is pretty dodgy - as you say the Roman empire (via Byzantium) lasted over a thousand years, and outlasted the Fall of Rome, its eponymous city.
`Nations and empires eventually fall' is not a `prediction' for which she deserves any credit. `This too shall pass' is wisdom of the ages, and applies to everything. Cities eventually fall too. Where are Babylon and Uruk?
She does not predict that nations tend towards a single megacity. I am not sure where you get that from.
And I don't believe she says non-urban areas can't be wealthy, just that as areas get wealthy, they tend to get urbanized. (at least this was the pattern until the rise of the early nation states in the mid 1800s and even more so with the rise of the modern nation state post ww2).
You have cited switzerland as a non-urban country a few times, but I don't think thats quite right. Can you define what you think qualifies as an urbanized country? According to the CIA world facebook data that Wikipedia uses, 74% of the swiss population is urbanized. That seems highly urbanized to me. https://en.wikipedia.org/wiki/Urbanization_by_sovereign_state
I don’t know what definition the cia factbook is using but I would say Switzerland has zero cities. The largest agglomeration is Zurich, which at 400k population strikes me as a town with delusions of grandeur. Non Zurich Switzerland (where I lived for a while) barely even rises to town status…a collection of villages connected by excellent infrastructure
From CIA Facebook: urban population, describes the percentage of the total population living in urban areas, as defined by the country.
I didn't research how switzerland defines urban. The population of the Zurich metro area is nearly 2million. I am not sure how that doesn't fit some definition of urban. My definition of urban, is an area of highly dense population. Zurich definitely qualifies regardless of its absolute population.
> `Nations and empires eventually fall' is not a `prediction' for which she deserves any credit. `This too shall pass' is wisdom of the ages, and applies to everything. Cities eventually fall too. Where are Babylon and Uruk?
Even if it's true that "this too shall pass", there still needs to be an explanation for why any particular thing or type of thing ends. Babylon and Uruk fell because of foreign empires. Jacobs seemed to think that virtually all cities eventually decline because of their incorporation into large states. And she suggests some explanations for why large states decline. I agree that without these explanations, random claims that things will eventually end aren't very interesting.
I do agree that her ideas aren't very amenable to falsifiability. Her theories are too easy to adapt to whatever real situation she decides to deal with.
On your first question, maybe the institutional win of the USA is that its federal structure gives the right incentives for city regions to be stable and grow: think of New York still the main finance center, Los Angeles for films, Seattle for its selected high tech, and son on. Maybe Detroit was the outlier as a failed city.
Germany has a similar federal structure with specialized cities: Frankfurt on finance, Stuttgart for industry, and so on.
Maybe there is some insight on fractal constitutional design lurking behind all of this. Nassim Taleb wrote a little bit about that.
The New Zealand case was explored in a book reviewed by Scott, as an outlier case of development that avoids the path of the Asian Tigers.
Why do these authors have to tautologically appeal to "cities" and "nations" and whatnot? Doesn't anybody at least hand-wave to something about "discrete density distributions" or some such?
(disclaimer: I'm totally uneducated on this topic, both economically and mathematically)
It’s not really discrete density as much as interconnections of production and consumption. San Diego and Tijuana are two different cities despite being part of the same discrete density distribution because people in San Diego work and consume in San Diego and vice Vera’s for Tijuana.
Thats exactly what Jane Jacobs is trying to say which is why she uses city-state and not city. Additionally, any good economic analysis, when looking at the US, will use Metropolitan Statistical Areas which attempt to define "discrete density distributions" more or less. (There are other similar concepts like Combined Statistical Area that can be used as well.)
'Import replacement' being used as a main driver of city growth demonstrates the author has a profound misunderstanding of how growth actually happens - by generating efficiency through specialisation, comparative advantage and trade, not via 'import replacement'. This is the case even if import replacement may happen somewhere in that process if there is an efficiency gain to be made (or, as is often the case, import replacement may not happen at all). Seoul, Shenzhen are examples of cities that have grown massively in the recent past by exploiting comparative advantages in manufacturing and exporting (and importing!) ever growing quantities.
Shows me that she doesn't really understand growth. Her further misunderstanding of the value that nation states provide, mainly the public good of national security, also makes me wonder if her ideas are worth consuming.
Seoul is interesting, because, if you look far back enough, it's rather supportive of her theory. It's certainly true in the last decade or two South Korean industries have matured nicely into global competitiveness, but those relative advantages didn't materialize de novo. South Korea pursued economic policies that greatly constrained imports and otherwise forced average South Koreans into buying (inferior) local goods. (Korean cars might be nice now, but they certainly weren't three or four decades ago.) This gave industries breathing room to develop things that don't come together in under a year: technology, supply chains, managerial experience, and a trained and available labor force. If you're interested in reading more about the topic, many of the books and papers by South Korean economist Ha-Joon Chang go into great detail.
Ha joon Chang is just pushing a heterodox theory for personal clout. There's plenty of research to the contrary, and most economists do not support his views.
Chang is quite simply wrong about both the import constraints and their importance as well as why the South Korean industry took off. Ever since Park's US enforced reforms, South Korean growth took off because they were export focused. For more detail read this
Indeed, if you're a poor country, that wants to grow fast, you have to be export focused. Trading can only help you get rich quickly if you're trading with rich people, because they're the only ones with surplus available.
Well, I'd say you need both. Focusing on export only you end up like Bangladesh or Pakistan: you get the production jobs and the pollution and nothing more.
You first have to build up your own industries, then focus them on export without forgetting about your own economy, otherwise you just get exploited.
And it's pretty clear its export-focused garment industry has helped this, even been central to it: https://en.wikipedia.org/wiki/Textile_industry_in_Bangladesh. Things aren't so hot nowadays of course what with the rising food and fuel prices associated with the Ukraine War (https://archive.is/hHgMi), but its certainly doing better than it otherwise would have been, thanks to its exports providing the foreign currency needed for those imports. It's doing a damn sight better than surrounding countries like Sri Lanka and Pakistan, at least. - just look back at what that Pakistani government advisor said to understand just how much they envy Bangladesh's 'exploitation'.
I'm afraid this is backwards. If you're a poor country, you (almost by definition!) have very little by way of demand to support the building up of your own industries. You have to build the industries that can efficiently service demand in rich markets, and use that surplus to invest and consume to keep growing. This 'escalator' of export led growth has worked very successfully for East Asian economies. A domestic or import substitution focus has not worked anywhere.
What the East Asian Counties did right was to take care that the income from the exports get invested in the own productive economies.
I don't know if Pakistan and Bangladesh are the best couterexamples. They were just the first coming to my mind of staying poor despite producing a lot of goods for export.
I think where you're going astray is thinking of exports as not part of 'their own productive economies'. For any small/poor economy, everything being exported is a massive boost to the local productive economy. It generates know how in both businesses and government, jobs for people and capital with which to invest, trade and consume.
> Here, US advice ran up against strong domestic opposition and was
not ultimately taken. Ronald McKinnon of Stanford University, on contract from
USAID, proposed a uniform across the board tariff of 20 percent, with a limited
number of industries protected at 90 percent. Domestic industries, particularly
in agriculture, protested that such a step would bring irreparable harm; exporters
did not push for tariff reductions, because they already had duty-free access to
foreign-produced inputs. Opposition by business groups led to a stalemate in the
interagency tariff-setting process, and duties were reduced only slightly.72
> Korea also gained admission to the GATT, ensuring that it had
nondiscriminatory, most-favored nation (MFN) trading status in other markets.
> The decision to seek admission encountered strong resistance from the
Agriculture-Fishery Committee in the National Assembly, but the cabinet
approved the application in May 1966 (Shim 2010). It then took nearly a year to
win approval from other countries. Although questions were raised about Korea’s
import restrictions, the contracting parties of the GATT did not require any
specific changes in Korea’s trade regime as a condition of entry, and it officially
joined in May 1967
In other words, South Korean miracle was the result of a mercantilist policy with high import tariffs and export subsidies. The main reason they could get away with it was that they were an important US ally.
Correlation is not causation! If import restrictions were truly driving Korean growth, the much more restrictive policies of high exchange rates, allocation/licensing of foreign exchange, would have also driven growth! Such was not the case, and changing these policies in the direction of less restrictive import policies substantially increased imports over the same timeline that exports increased (in fact, S. Korean imports increased more than their exports did, again a common feature in fast growing economies)
> Chang is quite simply wrong about both the import constraints and their importance
which is rather a stronger claim than, yes, there were import constraints but correlation doesn't imply causation.
I don't think South Korea is a good example to follow anyway. It was a very special place after the Korean War and its lessons can't be applied anywhere else.
And I stand behind that original claim. The import constraint correlation not being causation behind growth is what I'm telling you about your reasoning!
Not a misunderstanding. A counter-claim. She claims that the theory of growth by specialization is _wrong_. Most of the detail in this argument is in _The Economy of Cities_, not here.
One of the important points of that argument is that looking at import/export balance will confuse you about when growth happened. The massive visible growth _follows_ the growth in industrial and material capacity.
A counter claim that is substantially wrong is still a misunderstanding. There are mountains of very strong theoretical and empirical reasons to believe that import substitution does not work to drive growth. Most convincing are the examples of India, China, South Korea, that first tried import substitution (sometimes for decades), found it fails miserably, then switched to more open trade and export based on good old comparative advantage and grew very quickly, again for decades.
- what JJ is addressing is not import substitution enforced from the above (often badly: overregulation, getting around the norms by just adding one last bit to a foreign-made product...) but import substitution as something that happened in the course of development, because local businesses found it profitable (though, once the US became independent, it put tariffs in place just like any other government at the time - back then, tariffs were one of the central government's main sources of income, for one thing),
- essentially every time a country has developed, it has done so after a period of import substitution, and not just that, but import-substitution *policies* enforced from above. Not just what we think of as "developing countries", but France and Germany as well (and the US). Whether that's so _because_ of import substitution or in spite of it is another matter.
I understand what she is referring to, but, that 'bottom up substitution' does not add any additional explanatory power beyond what markets, marginal cost and pricing already do.
As to your second point, 'Whether that's so _because_ of import substitution or in spite of it is another matter.' is not another matter, but is the only germane matter at hand.
Do you have good convincing examples of countries that din not first try import substitution?
For me this looks like import substitution didn't cause the growth in itself, but helped to prepare the base for successful export.
This is like saying nobody earns money in high school. This is true and I agree that going to school isn't a god job. So is it nonsense to go to school at all and people should better work on cunstruction sites when they are 18? Most of people earning good money got higher education, so it might be well worth it as a necessary preparation to get a god job later. And still this is no automated path, you need to put some effort in it and can have bad luck anyway. Would you tell your kids not to go to university because you know someone who ended poor despite having a degree?
So the question is, does a phase or certain dose of import substitution increase or decrease the chances to develop wealth in the mid to long term?
If your hypothesis were true these countries would have later succeeded in the same areas in which they first tried to import substitute. In fact, they succeeded in completely different industries(as economic theory would predict) because utilising comparative advantage will often mean that your advantages lie where you don't have to import.
Most high schoolers don't actually go on to have a career in their favorite high school subject.
There is absolutely no reason that a country would have to succeed in the same area that they first try to import substitute. If you're going to assert that, you need some sort of argument rather than just saying it's true because
Actually, what I'm saying is simply the generally agreed upon economic developement pathway. What Erwin (and you) appear to be arguing for is the claim where higher burden of proof rests, so if you have stronger evidence than analogies to high schoolers, feel free to present them.
That does not follow and JJ does not predict it. One of the primary points of value in import substitution is that it can branch off to related industries.
The model of what happened in those cases is roughly an explore/exploit tradeoff. Substitution produced a bunch of skilled capacity in diverse industries, expanding laterally in fields without becoming enormously competitive with the outside world. Then one or more of these lateral expansions _did_ prove internationally competitive, and the growth in that sector switched to producing goods for export rather than spreading out.
For predictions about the future, the JJ model predicts that the exploit mode of growth is _sterile_; it will not produce innovation in other respects, and probably not in its own respects. If it acquires technological advances to its process, it will do so via buyouts and purchases of IP from small companies which opreate in the 'explore' mode.
You can't just say "found it fails miserably" without backing that up. These countries ultimately succeeded, and many countries which did not impose controls that focused on replacing imports have failed, and there is to my knowledge no record of _any_ country _ever_ successfully industrializing without a protectionist phase.
Is it true that the protectionist phase did not produce large legible improvements to GDP? Yes. Did they produce illegible improvements instead? Possibly, but probably not. Does that make it failure? **Not necessarily.** If this process of internal, broad but undirected growth produces large human capital improvements - and we have a pretty strong basis to believe it _does_ from better-documented cases like the bicycle factories of Japan - then this can be and was a success, along a metric we weren't measuring.
As Seoul or Shenzhen grew they engaged in import replacement cosntantly. At some point someone had to open maintenance companies, food distribution companies, janitorial companies, etc. All the support services that come with growing industry. And then firms that service employees: restaurants, appliance stores, car dealerships, etc. At some point these things could have been "imported" from other nearby cities that already had them, but once the demand is high enough someone will looks to open a version within the city itself. Hence the import as now been replaced.
First of all you're talking mainly about services, which are typically not tradable and hence typically not import replaced.
But, as I've said in my responses to others, even where 'import replacement' did happen, it would typically happen only for those goods/services that are cheaper to produce locally. In which case, calling it import replacement adds no explanatory power over standard comparative advantage and price theory.
Summarising and restating what other replies have said below, Jacobs's "import sustitution" successes are for regions behind the technological frontier, and for those places, it's a viable approach, as Alexander Hamilton recognised.
I'll add this: the real key is option value. Do things that allow you to do other things.
(This is where Bangladesh appears to be going wrong, with its singleminded focus on garment manufacture. The jury is still out, though; the ecosystem for servicing and making machines for garment manufacture, market research and marketing, product R&D, and various institutions--labour force education, quality control/standards/metrology, finance, insurance, import-export, raw material R&D and supply--well, building all of those takes a while, and all the bits have to be roughly in balance along the way. Once those are in place for garments, then perhaps they can be turned to other things as well.)
"Import substitution" done right can work for regions behind the technological frontier. It worked for Boston when it was well behind the (English) state of the art in foundries and metalworking. It worked for the Rhine Valley and the Po valley in the 19th century. It worked for Japan in the Meiji era. It worked for the Republic of Korea after WWII. It worked for China. But it isn't easy to do. It's been only partly successful for Malaysia and Thailand, for example.
As above, the main thing to get right is option value.
Option value is the value you get from being able to choose other things to do after you do a thing. Create a metal-working industry for making locomotives and you are then in a position to make all kinds of other machines for all kinds of industries - shipping and fishing, agricultural machinery, textiles, timber milling, mining, oil refining, plastic manufacture, etc. If you're really starting from scratch, start with simple metal hand tools, as China did in the early 1990s.
Choose land-based industries or tourism, by contrast, and the ecosystems for those things can't be adapted to more than a few other industries, if any. Look at Bordeaux and Champagne in France (grapes), or Iowa (corn), or Las Vegas (tourism) in the US.
The second key point is creating the ecosystem. The Shah of Iran's helicopter factory was completely unsupported by the myriad of specialised parts makers, material suppliers and design services that a helicopter factory needs, let alone finance, design and test, R&D, component and material supply, logistics and marketing, or workforce education. You have to start simple and work your way up, building the surrounding ecosystem.
The third key policy is an export requirement. To actually enrich your region by "import replacement", your products and manufacturers have to be world class, or locals will simply import anyway. To ensure that this is the case, manufacturers must be *required* to export a significant part of their production. Seoul's and Shenzen's comparative advantage in imp-ex wasn't intrinsic, it was forced on them.
'Import substitution' will work wonders when when you decide to substitute imports that are cheaper to make and export in your region than wherever you're importing from. It will fail when it's not.
The real key therefore is this - do what you can to let supply, demand and prices do their thing. If that means import substitution is happening as a result, fine. If it's not, also fine! The idea of 'import substitution' is not really adding anything
The idea of _comparative advantage_ is the one that's not adding anything! All it says is that people will buy only things they want, which (a) we already knew and (b) says nothing about _development_. Import replacement, by contrast, produces a theory of growth - if you encourage local companies to form and local branches of companies to diversify their activity, this will produce option value and human capital, making any future growth more durable and probably more likely.
If this is what you know about comparative advantage - 'All it says is that people will buy only things they want', then I'm afraid that isn't true. There's no point in my having actual arguments if you're not going to engage meaningfully. I wish you well.
Policies generally provide government support in one way or another to the local manufacturers. Without an export requirement they fail to do the R&D to produce something that's state of the art, so the whole programme fails. De-industrialisation and low wage service jobs instead of high wage R&D, design and marketing jobs are the results.
Third world national debt is often denominated in USD or EUR. Same with cryptos. If you made a bunch more tiny currencies, people would probably continue exhibiting the same preference for large unified currency blocks, and the real impact would be small as everybody circumvents your new system.
----
Mostly people live in Seattle because it has jobs, even though most services are more expensive than in smaller cities or developing nations. This seems like exactly the opposite of import replacement. People live in Seattle because its a good place to make exports, and not because it has cheap imports.
People have offered to pay me in crypto or in shares, and I always refused these sorts of offers. I mostly want a currency that just works, and I don't have to worry about the possibility of it losing value. As currencies get better and better, they asymptotically approach maximum boringness and reliability, and when you're close to that point then purchasing power of wages dwarfs denomination in importance.
Yakov Feygin describes global currency hegemony as a natural equilibrium point: """ In Charles Kindleberger's work, he defines the function of a monetary hegemon as playing a global coordinating role by running a deficit to provide markets for distressed goods and long-term liquidity, as well as creating both long-term credit taking in deposits and short term liquidity by lending into crises. """ The full piece offers a bit more details on the reasoning ::: https://building-a-ruin.ghost.io/reading-club-update-and-dollars-debt-trade-ext/
Russia can denominate its debt in Rubles, until it invades Ukraine and gets sanctioned, and then investors insist Russia must pay them in USD. You can play with your cryptocurrencies, until the exchange you used turns out to be fraudulent, and then the feds get involved and the exchange has to cough up enough USD to pay back the investors, or face prison time. The smaller currencies can exist as long as they don't move too much relative to USD, but if they do then you see the man who was behind the curtain all along, which usually turns out to be the IMF. Smaller currencies can provide cultural value or low transection fees if they're stable, but if they actually change value in a dramatic way then people don't like it, and then there will be protests about unemployment or inflation or both. Jane Jacobs is proposing that many small currencies that change value all the time would be good, but in reality people who have unstable currencies usually want it to be stable, and all the rich countries have stable currencies.
I am also skeptical that too many currencies are a panacea. In some countries, the US dollar is just the de-facto currency, and the official currency is not competitive. Some countries even try to bind their whole currency to the dollar. West and Central Africa have the CFA Francs, which are two unified currency for a dozen of countries.
So whether it is advisable or not, there is obviously a lot of pressure on small countries to give up their independent currencies and to replace them by a "bigger" currency.
I think we will eventually discover that the “optimal” size of a settlement or polity is a function of our neural hardware and technologies that extend it in various ways. As I write this I’m sitting in a hotel room in Shanghai, in a country that is essentially cashless and requires the citizen to maintain an electronic record of who they are and what they are doing just to live a normal life, even down to very small remote towns. As technology extends our ability to manage complexity, I would expect the size and complexity of “cities” to increase.
Do you have an argument for why this would be a limiting factor? That seems at least contrary to my intuition. A mixture of hierarchies and decentralised control through capitalism seems to do fine at managing pretty much arbitrarily large cities. The other obvious limiting factor is physical transport. The review treats the importance of the costs of transport as so obvious as to not merit discussion even if they are the underlying reason why import replacement would matter at all.
Thank you, clear exposition of interesting ideas. So, has Montreal declined the way she said it would?
Can I imagine Canada letting go of Quebec peacefully? Or Britain Scotland? Yes, isn't that what the referenda were about?
When she says trade between backward and advanced cities is bad, does she mean specifically cases where the backward economy has a lot of money (like Iran) or all cases?
I feel like we'd have to define what 'decline' means to answer that question. Sure Montreal had some difficult years in the 90s but is undergoing something of an urban renaissance these days, fueled by tech jobs and immigration. Which makes me wonder about how much of Jane Jacob's arguments are affected by the rise of the 'knowledge economy'. I lived in the bay area and vancouver before settling here in Montreal and it's got hands down the best quality of life of any big city I've visited in north america imo.
Jane Jacobs had a huge effect on urban economics which is a thriving field of economics. I believe urban economics and her thinking have also deeply affected national statistics and accounts which do a lot of measurement of localized urban economies below the national level. So the conclusion here that she didn’t affect economics isn’t true.
'When the American South seceded from the Union in 1861, the reaction wasn’t “good luck!” even though the Union was itself the result of a secession from Great Britain.'
Okay, this is a great review, and I'm going on a tangent that's mostly irrelevant to the point of the review. But when the American South started seceding. President Buchanan thought it was manageable. Horace Greely, the abolitionist leader, wrote 'Let the erring sisters go'. The North wasn't looking to fight. Lincoln won only after the South boycotted the election. Lincoln did not force the South to boycott the election. The South wanted a fight.
The Fire-Eaters who pushed secession were looking to fight. They said so through 1861. The record is written and clear. Then they got a fight and lost. The South was ruined. Nobody in the South could say it was worth it. So instead they blamed the North, and getting unreconstructed Secesh back inside the US system required the rest of us to be nice to the South. Jim Crow through Wilson's administration and the twenties was about being nice to the South. Letting the popular histories claim the North started it was part of that price. The written records of what secessionists said and wrote before 1861 get stuffed in footnotes, but they are still there.
So far as this tangent is relevant to this fine review, I'd suggest that people who want secession are worse-tempered than the nations they secede from. Quebecois who want secession are touchier and more macho than the Canada they wish to secede from. If there was a fight, the machos would start it.
Great review. Jacobs raises neat questions, even if her preferred answers don't work.
Economists study optimal currency areas. The right size is much larger than a city. How large? Depends on how mobile the wealth and people are. The dollar works better than the euro, because mobile workers and federal benefits make it easier to "even out the boom" between two US states than between two EU countries.
Jacobs is flatly wrong about "stagflation" being the default. Inflation itself is a remarkably modern phenomenon; conversely, lots of countries now have clocked a generation or more of rising income without repeating Japan's ugly 90s. She's right that we don't really understand why some countries keep stalling short of sustained growth, why bad politics in places like Pakistan and Argentina so easily sabotages the growth so many in those countries want. But that seems to be a riddle of politics, not economics.
Since her books, we've seen decades of rapid growth in places like China, India, Taiwan, South Korea, Bangladesh, the Dominican Republic and Malaysia. Poverty isn't conquered worldwide yet. But stagnation, let alone stagflation, doesn't seem inevitable at all.
Her "import replacement" theory is also wrong, if it's meant to predict which cities become rich. Manufacturing exports has been the takeoff recipe that's worked best; business and trade services work for some; no city got rich by trading *less*.
On the other hand, "import replacement" is a pretty nifty description of what happens in the vicinity of a city as it grows and promotes subsidiary economics around it. And her observation that cities are a lot more real than states is brilliant, even if it's harder to use than it looks.
Her predictions are bad, but her descriptions are insightful. I'm very glad of this book review.
This is a very interesting counter-perspective to essay on adding housing to cities, where the economic growth coming out of population growth was treated as automatic.
The underlying assumption (as I understood it, at any rate) in the essay on housing was that more housing automatically leads to more people moving there which automatically creates more business/economic activity/prosperity which then attracts more people (with the implicit debate being whether the attractive multiplier from building more housing ended up being greater than or less than 1). This would be great, because it would effectively mean building more housing is a cheat-code policy for prosperity (at the city level where replacing poorer residents with wealthier residents is a pure positive).
But the implication here is that the impact of housing is swamped by other policy choices: becoming a prosperous city requires careful and intentional management of the economic activity of the city, using policy to guide *what* the people who live there/move there do, what things are imported vs locally sourced, etc. To go back to the Manhattan example from the previous essay, the implication is that policy choices drove the particular type of economic development that occurred leading to the extraordinary desirability of that particular chunk of land.
Hmm I see. I dont believe that Jacobs believes "becoming a prosperous city requires careful and intentional management of the economic activity of the city, using policy to guide *what* the people who live there/move there do, what things are imported vs locally sourced,". She is much more on the Laissez-faire side of things, encouraging decentralizing decision make so much that it's really up to a landowner level not even at a community level.
In Jacob's view restrictions on housing and other activities is really just volunteering to live in the "stagflation" environment she see occurring throughout history or in poor areas. Rich cities should have lots of things including housing. The import replacement stuff is a description of what happens naturally, not a proscription of what cities should undertake.
I wish we could know how she thought containerized shipping and the internet impacted her theories. In business contexts, I've seen lots of discussion about how New York City is effectively closer to London (for example) than it is to the rest of New York State.
If her ideas were applied seriously, I can't help but think a lot of places would simply depopulate, becoming "bypassed places". Natural resources are real and make some places more desirable than others. Looking around New Mexico, where I live, I don't think there'd be much here (well, even less) without the wider network afforded by the United States.
I'm somewhat confused about how stagflation can be the default when the actual default for most of history was...not having currency. Sure, empires mostly minted coins, but that money saw less and less use the further into the hinterlands you looked. Taxes from rural areas were generally collected in goods, not coin. I'm not even sure what inflation would mean in that context. Subsistence farming has many, many downsides but worrying about the food you're going to grow to eat being worth less next year is not one of them. Stagflation makes everyone poorer, but it's distinct from the type of poverty that has existed in most places and times.
I don't agree that money was only used in the centers, at least not in the last 300-500 years. In France, the Franc/livre has been used for centuries, and in French novels (e.g., Dumas), everyone is paying in Francs, even in tiny villages.
And inflation has been a huge topic for centuries. It was a recurring issue in France in the 18th century and one of the main causes of the French revolution.
An important difference is that the value of most coins was derived from their material value, mostly silver or gold, or at least it was backed up by material goods. This didn't change until the end of Bretton Woods agreement in the 1970s.
I agree regarding the last 300-500 years. I should have been clearer that I meant "most of time since the first cities", of which the last 300-500 are a small and weird slice, with the larger point being that "inflation" as a problem only meaningfully exists if you have developed the technology "money" which requires a bunch of other subsidiary social and economic technologies. Poverty predates all of them, and by most measurements has usually been most severe in places where money and those subsidiary technologies were least developed/widespread. Money comes with its own problems, but I get nervous at the implication that those problems are equivalent to or worse than the problems that predate them (e.g. subsistence farming).
Severe inflation means the currency ceases to be an effective store of value, so people stop using it, at least to the extent they can find viable alternatives. That could usefully be considered a big step back toward "not having currency."
That's a fair point, though I'd argue that's only an accurate description of hyperinflation situations, which are quite rare and certainly not what was happening during the stagflation era.
England had currency for hundreds of years without inflation (c. 1000-1500). People in the 1400s were using tables for the weight of a "3 penny loaf" that were written in the 1200s without a problem.
Before Industrialization raised productivity everywhere all at once, and the influx of precious metals from the Aztec and Inca, prices didn't actually change from year to year, or generation to generation.
Can you point to a source for this? In modern terms we define inflation as essentially an average change in price for a large pool of consumer goods, but it's not obvious to me that there *was* a large pool of consumer goods for most of 1000-1500 in England, so I'm curious how inflation is defined. Specifically: we often exclude food prices from inflation measures because they're so volatile and don't necessarily reflect broader market conditions, but in late medieval/early modern England food would have been a much larger percent of the average budget (in towns large enough/specialized enough to see significant currency use, for peasant farmers 1 day of food you grew was reliably worth one day of food), and less staple trade relative to today would have made its prices even *more* volatile, so I'm not sure how it should be counted.
Source is: I was reading historical records in the Edinburgh public library while on vacation + someone else said the same thing on thier blog.
And yeah, the claim here is that there we local and temporary fluctuations in price level, but if I traded you 100 shillings for a pile of tools, food, lumber, etc. In the year 1000, our decendents could trade the same quantity of stuff for 100 shillings in the year 1500
If you mean barter as the synchronous exchange of goods or services of equivalent value to the participants, and money as everything else, sure.
If you count fixed weights of staple goods as money, then that certainly covers more of time than coined money, and introduces the possibility of inflation.
But most small villages and neighboring farmers for most of time exchanged gifts of goods and services that essentially served as social credit for later -- asynchronous bartering of sorts. This only works between people that know one another and who will be present over long periods -- but that describes most peasant farmers, so it worked.
Yes, money existed throughout the middle ages, but that doesn't mean everyone was using it. I'm sure there are better sources, but as it's conveniently accessible online I'll pull from _Money and Coinage in the Middle Ages_ (https://www.jstor.org/stable/10.1163/j.ctv2gjww65):
"[B]y the end of the 6th century fresh coins of silver and copper alloy had effectively vanished. There was no longer even an option of low-value coin. On the other hand, the volatility which had plagued previous generations using base-metal currency was no more. Peasants may well have had less cash extracted from them, and more incentive to engage with an increasingly stable market involving coined money on a more restricted level. This would have contributed to the relative golden age of lighter-exploitation experienced by the peasantry in the post-Roman centuries, though it must be kept in perspective: down to the 13th century (and in many areas much later), most extraction of peasant surplus had been in kind and/or labour rather than in cash." (pp 183-184).
Coining money in large denominations for large-scale trade and state finances made sense even through most of the middle ages. But low-value/base-metal currency required extensive state capacity to mint and distribute, and getting it into wide usage at the peasant level wasn't usually worthwhile. Instead, various versions of manorialism or other taxation saw to the in-kind collection of taxes from the peasantry by local lords, who then participated in markets to varying degrees.
Money existed, but since the overwhelming majority of people were peasant farmers, most people weren't using it in medieval Europe. I definitely can't speak to what was happening in the near-east -- I'd expect that the persistence of the Eastern Roman Empire kept more extensive currency usage alive longer, but I haven't done the reading to know for sure.
I wonder if Jane's theories, on import replacement for example, make any distinction between development versus the mature economic endpoints, travelling hopefully, so to speak, versus arriving, or in other words the process of change versus its results.
Sometimes prosperous cities can become victims of their own success, if circumstances change for example, although admittedly that can take a long time to happen.
I wonder if local sub-national currencies, like the Chiemgauer in Bavaria, or in minor British towns like Bath/Bristol (well aware that others exist) could provided an effective feedback loop for smaller cities in a country.
In turn, this reminds of the Freigeld ideas of Silvio Gesell for minor towns like Wörgl – perhaps every smaller city needs their own currency, and might there be a way to make this compatible with a nation state?
My general impression is that those don't work. Sometimes they work for a few years for sentimental reasons, like in Wörgl. But I don't know of examples where such currencies ever reach an economically relevant level.
The Bristol Pound is used so little (within Bristol) that I'm not sure if most residents have even heard of it - certainly only a very small minority have ever made a transaction with it.
Not saying it's a bad scheme, but I think it'd need see an increase in use of several orders of magnitude before it could be un-pegged from GBP and then serve as a test case for these ideas.
Jacob's views about feedback and scale seem to mirror my own (very depressing) realization about large human societies : They will always be oppressive to somebody.
You can never have a true Democracy in a society with a million+ (I would say even 100K+) people. Insofar as Democracy means anything other than a trivial and tautological "Majority vote lol" rephrasing of the word, it can never be satisfied when too many independent wills are smashed together and forced to live in a single monolithic "Society". It's inherently absurd and unjust, Americans say things like "The Polarization that started in 2016 had made every election a battle with winners and losers" but they don't realize this was always true, they just owe Trump/Social Media the favor that they made it too obvious to be ignored. Every democracy is an institutionalized, ritualized Rule by Conquerors, except nobody dies and the losers have the small consolation that they can try again in 4 years (Unless they are a minority too irrelavant to have significant voting powers, in which case fuck them I guess). This is much more obvious if you had lived in a society that has religious or ethnic tensions, Democracy there is much more of a clusterfuck. But it's always like this to some degree or another even if you don't realize it. For instance :
- Why **Should** a person who doesn't want to live with black people, whose all of their friends and families don't want to live with black people, whose entire city doesn't want to live with black people, suddenly be forced to live with black people ?
- "This is okay because those people are bigots and my morality is better", okay, consider abortion rulings by the supreme court then, it's very likely that there is something there that you hate whatever your opinions on De-Segregation, either RvW or it's strike down.
I always laugh at the (unconscious ?) hypocrisy of people who say "Abortion is aweful and I don't condone it, I just want governments to have no say in the matter", hmm very admirable indeed, now can they replace 'abortion' with 'Segregation' ?t's irrelevant the particular examples I choose and what is my exact stance on them, even more irrelevant is the question of what is the "Correct" stance on them. Sooner or later, you will find yourself a loser in some fight or another. The larger the society, the more bitter the defeat, the more difficult it is to reverse, the worse its consequences on your dignity and your respect for yourself and other people living with you.
Apriori, it's not clear how being a Muslim or a Christian differs from being pro- or anti- abortion, or being pro- or anti- Segregation. Why are the people who hate forcing Muslims or Christians to do things against their religion (lots of people) are suddenly okay with forcing the other side than the one they take in those issues to do things against their belief. Indeed, Religion, as the quintessentially ridiculous/polarizing opinion, should breed almost infinite tolerance in you. If you are not a follower of a certain religion who managed to find enough benevolence in you to tolerate its followers against all your instincts, almost no opinion is too false or too repulsive to be intolerable.
Other socio-political organization don't get a pass either. Consider that Communism works on the small scale : Family, extended family (which can easily reach several hundreds), small businesses. Those units can reach a 1000+ person, say 10000 at most. After that, you start having the feedback nightmare that the Soviet Union in its last years was a parody of. They thought that Computation was the problem, they thought that computers would save them (the plot of Red Plenty), but they were not. Computers need algorithms to run on input data, the algorithms don't exist because you can't formalize human needs as algorithms, and the data doesn't exist because humans don't love to be surveilled 24/7 for every single little need and want they have to be exposed. On a small scale, that's not a problem. Everything is beautiful and legible and consensual, people "fill in the blanks" with heuristics and intuitions and it mostly works out, and when it doesn't the failure isn't too bad.
Hell, theocracy and military juntas don't seem too bad if they are on the scale of a large extended family. I already pretend to be a Muslim in front of my 100+ family and extended family, so what's the big deal. Military juntas don't seem so scary when one of the ruling class is a cousin that I can tell "You're a bunch of stupid nobodies who don't understand shit except weapons and following orders" and be secure that I won't be put in prison.
And the maddening thing is : humans were small scale like this for the ***Vast*** majority of history. Cities, the innovation that introduced Big Societies^TM, were invented in the last 15000 years, they were for a **very** long time hotbeds of disease. They were a failure, people were miserable living in them. Their walls didn't protect them from invading hordes coming from the deserts. Despots loved the centralization of they brought and the easy conquerability. Human Trust doesn't work well with cities and their vast number of strangers, and we had to invent countless inferior substitute from Money to Gods to try to get strangers to trust each other when there is no good reason to do so.
Against all reason, humans kept re-inventing Ants and Bees, only on primate hardware.
---
Great review, I added J. Jacob to my "Small is Beautiful" reading list, a fuzzy category that includes Seeing Like A State.
But democracy *does* mean the majority holding down the minority and ruthlessly pummeling it forever, and nothing else. That's why minorities have to do things like take control of institutions outside of immediate democratic control in order to get any power.
This is an interesting point that democracy is in tension with secession. Democracy means that if 9M people want something and 1M people oppose it, it gets done. Secession means that the 1M people can say "well, not in our region / city / street / house" (whatever is the smallest possible unit of secession).
A related problem is who decides the *shape* of the territory that wants to secede. This would allow various kinds of gerrymandering. Like, if I want to prevent some ethnic minority from seceding, I can split the country into administrative parts so that the minority is divided between multiple parts, being a minority in each of them (as opposed to being a local majority in one part). Thus, the referendum for secession in each officially existing part will fail.
On the other hand, if we say "the minority who wants to secede defines the shape of their wanted territory, and then the referendum is made on that territory", that would allow the minority to choose the area where they live, plus a few arbitrary other pieces of country with sufficiently small population (but maybe great historical value or something).
If a region secedes from a country, can a city in that region secede in turn and join the original country, and can a house in that city secede in turn and join the original region? At what level does the fractal-generating process stop?
A question is not an argument, though it may imply one.
My main worry was about gerrymandering as a strategy to prevent secession. Like, if we adopted on the international level a rule like "a region is legally allowed to secede if they make a successful local referendum about it", the states that want to prevent recession would have an incentive to administratively redefine their "regions" so that no (actual) minority has a local majority in any of the (gerrymandered) regions; so they can never win a regional referendum.
On the other hand, a rule of "the minority defines what its region is (and then tried to do the referendum in that region)" would allow the minority to grab some extra territory. Presumably the people living in that extra territory would object, but would they have legal means to do so?
These technicalities seem important to me, precisely because the legal uncertainty about "what territory *exactly* is seceding?" has a potential to create a military conflict; not necessarily about the secession in abstract, but whether the seceding part gets to take a certain city / river / forest / whatever, or not.
That’s all very abstract. Generally secessionist regions know the area that they want to secede from the larger entity. Scotland doesn’t want northern England just to bulk up the size of independent Scotland, the Catalans don’t want parts of non Catalan Spain.
With regards to gerrymandering , Britain could redefine Scotland to include northern England I suppose, propose a referendum in that new entity, see the Scottish referendum lose, and then declare it over but that’s obviously fraught with danger - not least because northern England would have to be run by local Scottish government for a while. And actual Scotland would be enraged.
By and large, outside the edges, the regions that are separatist are known.
> Britain could redefine Scotland to include northern England
I imagined something like dividing Britain into three vertical regions, calling them e.g. "Eastern Britain", "Central Britain" and "Western Britain". Formally, there would be no such thing as Scotland, and most of the Eastern British, most of the Central British, and most of the Western British would want to stay in Britain.
Imagine that a video comes out showing the government of Myanmar running over its own people with tanks, Tiananmen Square style, to try to put down the currently-raging insurgency the same way the Chinese did. People are outraged, the video captures global attention, and voters are demanding a humanitarian intervention in Myanmar, Kony 2012 style. However, some others fear the video is deep-faked, and warn you to not repeat the mistakes of the Iraqi Baby Murderers (https://en.wikipedia.org/wiki/Nayirah_testimony) and WMD story, lest the invasion be recast as a repeat of Iraq 2003 if the worst should occur.
You meet with your 3 most trusted government ministers to discuss the issue. For national security reasons, they'll only be referred to as A, B, and C:
A thinks the video is real, that you should invade if the video is real and not if it's not, and that you should therefore invade.
B thinks the video isn't real, that you should invade if the video is real and not if it's not, and that therefore you shouldn't invade.
C thinks the video isn't real, but that what the Myanmar government has done is more than enough to justify a humanitarian intervention anyways, and therefore you should invade (but not stake your legitimacy on the video, citing instead their other actions to invade)
You take a vote:
1. Is the video real? 2 out of 3 say no.
2. Should you invade if, and only if, the video is real? 2 out of 3 say yes.
3. Should you invade? 2 out of 3 say... yes.
You double check the results. In this small scale democracy, as simple as possible, on the simplest logical progression possible... the will of the people was to contradict themselves and invade despite being against it.
Nonetheless, there it is: you should go out to the voters and tell them that the video isn't real, there is no justification for invading without the video, and you're going to invade anyways.
What's going on? How can the majority of people be twisted up in knots like this?
Simple: they're different majorities.
As in, for the first vote, the majority was B & C. For the second, the majority was A & B. For the third, the majority was A & C. There is no one singular "Will of the People" - just 3 different Wills disagreeing with each other.
If this was only a single issue vote, there would only be 1 possible majority, so you wouldn't get this problem and things would work as you'd expect. But the moment the issue got complicated enough to deserve multiple issues to vote on, there could be multiple majorities, and there's no guarantee they agree with each other. Individual people can be rational and self-consistent when they vote, but collectives tend to suffer multiple-personality disorder and contradict themselves.
In times past, people spoke of "The Body Politic" in rather literal terms; in present times people still tend to think in terms of "Will of *the* People"; but the truth is, those have just confused us. There are multiple majorities, and they can endlessly beat each other in a rock-paper-scissors dynamic - hence why coalition governments tend to be very fragile and constantly collapse, and coalition systems of politics (e.g. multi-party parliamentary democracies with no limits on minimum party size) tend to produce endless deadlock (e.g. https://www.reuters.com/article/us-eu-summit-belgium/finally-a-government-after-652-days-new-belgian-pm-debuts-at-eu-summit-idUSKBN26M75Y). A majority just isn't as final as people expect, unless you can somehow come to a 100% unanimous consent majority that can't be beaten by any other majority. But otherwise, whatever majority you can imagine, someone else can find the majority that can beat it out of the space of all possible majorities, and use it to overthrow you.
This result is called the "Democratic Trilemma", and it's a generalization of Condorcet's Paradox (https://en.wikipedia.org/wiki/Condorcet_paradox) - you may have noticed this by now since it has a similar "A beats B beats C beats A in an endless cycle" structure, where collective insanity results despite every individual voter behaving exactly as you'd expect. It's related to Arrow's Impossibility Theorem (https://en.wikipedia.org/wiki/Arrow%27s_impossibility_theorem) though distinct from it because Arrow's Theorem is about ranked choices, while the Democratic Trilemma doesn't have to be.
And again, none of this requires people to be selfish, or engaged in a Dictatorship of the Majority, or anything like that. You could have literal Angels as voters and still have this problem: collectives are not people. Majorities are not final. Votes do not make sense, even if every person's individual vote does. But now you know.
(See also, https://www.youtube.com/watch?v=goQ4ii-zBMw [The Mathematical Danger of Democratic Voting], for something very similar to this. By flip-flopping between coalitions, you can accomplish whatever you want; majorities are but tools in the hands of a skilled politician, rather than agents in themselves; and none of this requires the slightest bit of evil or stupidity, just the existence of multiple majorities you can turn on each other.)
> When Jacobs’ aunt arrived as a Presbyterian missionary in 1922, and suggested that they build a church out of stone, the people of Higgins confidently stated that this was impossible: mortar just wasn’t strong enough. “These people came of a parent culture that had not only reared stone parish churches from time immemorial, but great cathedrals,” Jacobs writes, and yet eventually they forgot that stone buildings were a possibility at all.
This is what the MTA sounds like when they talk about subways expansions (or installing things like elevators/platform screen doors).
Overall I liked this review a lot, and it made me respect JJ a lot more than I had before. I still think she made the mistake of being too narrowly focused. She makes good points about decentralization, but a lot of different things can be decentralized, e.g. you could have open free trade between regions but have each region have a different currency/welfare system.
(Also, she seems to mix up inflation and poverty, which are related but really aren't the same thing, in a meaningfully important way. And she's straight-up wrong about Japan afaict, Japan's centralization worked out fine, they just got hit by an aging population.)
I thought it was interesting that your two examples of small nations that we do not see as “failures of unity” are both built on the back of social compacts between three or four significant sociolinguistic groups - if anything, they are extraordinary successes of unity (cf. Belgium or Spain, for instance).
As for the sort of political prescriptions that entails, I’m not sure. Singapore is good at investing in institutions (education, healthcare, urban development), and comparatively less on Western-style welfare. I suspect the dirigiste mode is able to work well on a Singapore scale and in a Singapore context, I’m not sure how extrapolable that is.
<i>I thought it was interesting that your two examples of small nations that we do not see as “failures of unity” are both built on the back of social compacts between three or four significant sociolinguistic groups - if anything, they are extraordinary successes of unity (cf. Belgium or Spain, for instance).</i>
Maybe having multiple significant groups helps prevent one from becoming dominant and passing policies which the other groups perceive as oppressive. Switzerland also probably benefits from its strong tradition of localism -- "Is the President a member of *my* sociolinguistic group?" is a less urgent question if the President has no impact on your day-to-day life.
Perhaps, although I think in Singapore there’s a very clear (and not unfounded) perception of ethnically Chinese economic and political dominance; in any case the country’s whole reason for being is primarily Malaysian Bumiputera politics, which explicitly advantages Malays at the expense of other ethnic groups.
In Singapore at least there is a tension between its formal and arguably very constitutionally significant multiracialism, and the structural advantages accrued to the Chinese majority - there were comments made by a senior figure in the ruling party just a few years back that Singapore was “not ready” for a non-Chinese PM; meanwhile the ceremonial presidential position is allocated specifically on the basis of a racial quota.
Now, with that all said, I think Singapore has been enormously successful at promoting a fairly harmonious society in a region that has struggled with sectarian and ethnic conflict for a long time. I often compare Singapore to Trieste, another diverse port city that sat at the intersection of major powers. As Trieste evidences, though, it’s a fragile position to be in.
I am very confused about the idea of a "city region", on which so much of the analysis seems to rest. Tokyo has one but Sapporo doesn't? Boston has one but Atlanta doesn't? Manila somehow doesn't? I don't get it. And how doesn't Montreal have a city region when it's the dominant city of Francophone Canada?
And Seattle seems like a uniquely terrible example of a city rendered sterile by military production. Being a centre for military aircraft production turned it into a centre for civilian aircraft production. And then being a centre for aircraft production gave it a high tech workforce, which then attracted other companies such as Microsoft.
Yes i wish the review expanded on this much more. I can only guess based on my biased view. But I have no idea why atlanta doesn't have one. maybe that was true at the time the book was written but Atlanta is significantly larger now.
The Seattle piece is similar. Is this the reviewers opening of Seattle now, or is it Jacobs opinion from when the book was written (before tech changed the city).
<i>Stagflation is not a strange monster from legend. It is, Jacobs says, just the normal state of everything. Backward economies are in fact constantly in a state of stagflation. The prices in a poor country like Portugal or India (her two examples) feel low for an American or Canadian, but they’re high for most Portuguese or Indian people. At the same time, Portugal and India provide too few jobs to their residents. Inflation and unemployment are both perennially high, and none of that feels surprising whatsoever.</i>
I'm not an economist, so maybe I've missed something, but this seems completely wrong to me. High prices aren't the same as inflation. In medieval Europe, for example, prices were high relative to what the average person could afford, but inflation was low by modern standards.
<i>Small size also allows more diversity in cultural and economic matters, and here Jacobs waxes philosophical, pointing out that favoring diversity over uniformity is a recent, post-Enlightenment idea that has not yet been fully embraced in politics.</i>
That seems completely backwards to me. Medieval Europe was a bewildering patchwork of sub-national jurisdictions; it was during the Enlightenment that states began imposing greater uniformity on their populations, in the name of efficiency and rationalism.
<i>But that doesn’t happen, because empires always milk their own cities until they become poor.</i>
That seems not to have been the case with ancient Rome (the only empire whose fall I know about in enough detail to comment on). Or at any rate, the provincial areas seem to have become noticeably less wealthy after the fall of the Roman Empire, which doesn't suggest that they were being excessively squeezed by a demanding central government.
"I'm not an economist, so maybe I've missed something, but this seems completely wrong to me. High prices aren't the same as inflation. In medieval Europe, for example, prices were high relative to what the average person could afford, but inflation was low by modern standards."
I am an economist and you're correct here. She is correct about her specific examples though, inflation was high in Portugal and India in the early 1980's.
All empires fall, therefore empires are an inherently unstable system. Yet the history of city states seems much less robust. We used to have plenty of city states in Europe and now the lone example of Singapore.
I think Jacobs would point out that the cities themselves still exist, they just are now part of Nations. So when she says "city states" she does only mean places like Singapore, but cities that are, to a large extent, self sufficient (as self sufficient as any person or place can be in the modern world).
I don't think her mechanism of currency valuation changes could possibly work back when currency was just valuable metals and everyone used the same few types?
To re-use the example of Venice, they started out using Verona's currency, then introduced a more pure and heavier silver coin (the grosso), which was imitated by all their trading partners. And reliable imitation, in a commodity-currency world, means essentially equal value. The byzantine empire's basilikon was a 1-to-1 equivalent to the grosso. This only ended when it was massively devalued. Venice then introduced its gold ducat, which also was copied by all its trading partners (which at that point meant that large chunks of Europe had a local gold coin equivalent to the venetian ducat, which they also called a ducat).
Meanwhile most of the new world, including british colonies there, all standardized on the spanish silver dollar. The US dollar started its life as an exact equivalent.
And modern city states with good economic growth don't have free floating currencies either: Luxembourg's franc was 1-to-1 with the Belgian franc, until both got replaced by the Euro. Hong Kong has generally been pegged to the US dollar (except for a 10 year period after Nixon closed the gold window). Singapore has a floating currency, but their official policy is to maintain a relatively fixed (technically, very-slowly-appreciating) exchange rate against a basket of the currencies they trade against (https://www.mas.gov.sg/monetary-policy/Singapores-Monetary-Policy-Framework/faqs/section-2#S02.2). This means they're actively suppressing the currency-swings framework that Jacobs thinks to be so important.
The mechanism she suggests doesn't seem crazy to me, but none of the obvious candidates seems to have ever followed it.
Yep, this is what I intended to post. Her model *only* works for fiat currencies; if Venice's ducat is 3.55 grams of pure gold, then that's what it's worth regardless of the trade deficit. A lot of peoples in the middle ages didn't even mint their own coins, they just used sequins because those were reliably pure. This is a severe failure of historical comprehension.
That said, I think she's right that this *is* an important feature of fiat currencies which pegs etc. destroy, and in fact has explanatory power over things like the continual collapse of currency pegs (another type of system which is evidently not fit for purpose since it keeps breaking). Also it's trivial to observe that ancient and medieval economies were frightfully inefficient and devaluing the currency (in effect, from an anachronistic perspective, trying to *simulate* fiat currency floating by debasing the content of the implacably-valued metal in each coin) was frequent.
Another thing - So Detroit doesn't have a currency, so no depreciation in value - but for sure they notice the stamp in sales? then of course follows the reduces production and losses of jobs. The feedback exists - lack of sales, but for some reason they couldn't follow through and increase efficiency / reduce prices. (Unions maybe?)
I totally agree that the price of the ducat -- which from my understanding was used interchangeable by merchants with coins by different issuers of similar weight -- is a very wrong example.
Of course, one could speculate to what degree such a mechanism even exists in the case of a supernational currency (e.g. gold, or euros).
If a city has an industry with a few companies producing something much valued elsewhere, they will earn a trade surplus. Eventually craftsmen will end up with much gold in their pockets, and that will gradually raise the local prices of necessities, to perhaps the point where rents and groceries are twice as expensive as elsewhere. Reaching such an equilibrium would take time and be messy (the part of the population not working in exports might not appreciate the price hike much).
With the advent of computers, one could in principle have a virtual local currency on top of a global hard currency. All transactions with the local currency would be emulated using the global currency at current trading value. Wages, rents and costs of local food would be required by law to be denominated to the local currency, while coffee and computers would have a direct global currency price. If the price of the local currency changes, this only affects companies involved in producing exports and anyone wanting imported goods. I guess this would not work because debt is for some reason really important to finance states?
The more I think about it, the more I suspect that the "separate currencies floating freely" and "same currency" situations will actually work out the same. Because that excess of currency on one side is matched by a lack on the other side, and this will encourage goods being sent in the other direction (to use your example, long before necessities double in price, it will probably be worth importing them). Which is exactly what the free-floating currency situation would resolve to.
You're definitely right that hard-money regimes and currency pegs (which are really just two ways of saything the same thing) break Jacobs' recommended optimal currency policy. Usually it's because some powerful interest group benefits. For example, currency pegs help protect corporations who conclude long-term cross-border contracts from having to realize losses on currency swings. Of course, this just builds up stress in the system until one side has to eat all the accumulated losses at once, so in the LONG run it doesn't help, but in the short run the spreadsheet-brains lobby for it, and because they have all the influence, they tend to get their way.
An interesting review of a flawed and dangerous idea: To split the world up in city-states.
The economic problems with the import-replacement hypothesis (if pursued as a policy) has been spelled out by other commentators. But I am alarmed that some US-based commentators seem to actually like this idea from a political perspective, applied to their own country.
Speaking as a European from a small country: Are you not aware that Pax Americana is what makes inhabitants in small countries in Europe, Asia, the Middle East and Africa able to sleep well at night? How do you think we feel about any idea that the US should split up, with the severe weakening of US military might that would follow?
Any idea that might lead to increased political fragmentation of the US is dangerous security-policy nonsense from a small-state perspective - and we constitute the majority of the world’s 194 states.
The world has avoided a new world war since 1945 because everyone, also in the former USSR, knew in their heart of hearts that the world was really unipolar. In the cold war era (1946-1992) the US would have suffered terribly from a nuclear exchange, but the odds were favourable that the US would win in the end. That’s also why Khrushchev gave in during the Cuban missile crisis in 1962. Moving to a multipolar world, as a “let’s strengthen cities at the expense of states” would imply, will create a more unstable and dangerous world.
Thus even if moving toward city states would have made economic sense (which is does not), politically the books this review is based on, peddle a terrible idea. But the review is well written!
Pax Americana has infantilised Europe. Europe should be well capable of defending itself from Russia - apparently bogged down about 100km inside Ukraine and, er, Egypt. Or Turkey. Or whatever else is considered a threat.
Post 9/11 Pax Americana has destabilised Europe which is what happens when you destabilise areas around Europe.
Europe is welcome to invest more in its defense. I seem to recall multiple US administrations begging/cajoling/demanding Europe do so. It is Europeans who prefer to free ride on the American security guarantee.
First, and just for the argument assuming you are right that Western Europe has let their own military readiness slip due to the military shield provided by «papa usa»: Even if so, it is in the self-interest of the US to intervene in the violent ethnic conflicts that beset the European part of the world every 30-50 years or so. Why? Because European armed conflicts have a tendency to spread beyond its borders, making mopping-up much more costly from a US perspective, the longer the US allows the conflict to fester before doing something.
Second, you seem unaware that Western powers for decades after 1992 have tried to woo Russia into the Western camp - which arguably is in the long-term interest of both Russia and Western/Central Europe. It is difficult to do that, while at the same time increase armament, as that would be seen as a hostile signal from a Russian perspective. The dilemma, for Western Europe (and the US) has been that all countries bordering on Russia want to join NATO (or secure protection against the threat of future Russian aggression in other ways) - and it has been difficult for Western powers to outright deny these countries protection (as that would alienate them). Unfortunately, accommodating the perceived security interests of the «new democracies» that share a border with Russia can also be perceived by Russia as hostile acts. In essence, Western policy toward Russia and its neighbors since 1992 has been a case of «damned if you do, damned if you don’t». The result is the present debacle in Eastern Ukraine, which is likely to set back Russian-West/Central European integration at least 50 years.
What makes the present conflict deeply tragic is that integration into the West is in both Russia’s and Western Europe’s long-term interest. Hence Putin’s attempt to topple the government in Kyiv and install a marionette dictator was worse than a crime - it was a mistake.
Russia might still be able to conquer a bit of Eastern Ukraine (the way Putin de facto conquered a bit of Georgia in 2008) - most likely through some type of Korean solution, i.e. a forever-renewed armistice rather that peace proper. But as a young Russian vlogger remarked: «Even if Russia should win the war, Russian youth have lost their future».
The whole wars on Europe every 30-50 years that “extend beyond their borders” is the prior that needs updating here. Not since WWII.
The NATO claim is clearly false. NATO is designed to be anti Russian (ie Soviet) and therefore the Russians clearly feared the expansion.
However the best thing for Europe would have been a European army independent of the US post Cold War, designed for defence only. Any minor post imperial stunts that the French or British get involved in would be on their own dime, but something like the Yugoslavian civil war would see European intervention. (This army might also get involved in Syria etc but that might be fraught with difficulties).
In any case Russia would have no real problem joining that alliance, if even as a semi aligned force.
> The NATO claim is clearly false. NATO is designed to be anti Russian (ie Soviet) and therefore the Russians clearly feared the expansion.
I would argue that NATO is designed as a defensive alliance. It is not designed to help any NATO member annex any state. If Poland decided tomorrow that they wanted to shift their eastern border 50km to the east by military force, I doubt any other NATO member would be willing to risk nuclear war by helping them.
In the Brussels Spring, US and other NATO forces sent tanks into Belgium, which the US considered their client state, and forced a regime change. This is why after the end of the cold war, most countries in western Europe joined the Warsaw pact to be secure from future US interventions. Except that it was the other way round, and most countries in the eastern block were eager to join NATO because they did not desire to remain client states of Russia kept in their place by the threat of military force. This hurts Russia only as far as it restrains its ability to push its smaller neighbors around.
For a superpower, the US was exceptionally well-behaved in Europe since the beginning of the cold war. (Spying on Merkels phone, kidnapping the odd citizen for gitmo and Operation Gladio all pale into comparison to what superpowers do elsewhere.) This is probably why Europeans are mostly fine with being under the Pax Americana in a way I would suspect the peoples in the Americas would not be.
Jacobs did not intend import replacement as a policy to be pursued. It was just a description of what happened in a city in the course of economic growth and development. As cities got richer they naturally replaced some of the things they imported with home grown versions. This worked up and down the value chain. As more a more imports were replaced the city becomes less dependent on other cities for these goods. This is why she sees this as a good unit for study.
Ive tend to think less big the better the state, usually assuming it doesn’t mean continual war, just judging by results.
The problem though, is how do small states just not instantly get gobbled up by big states?
Only back in the distant past (when defenders advantage was bigger) and post 1950’s (when war became rarer) does this seem possible.
Though it’s also worth noting that open borders are very profitable, if Canada had decided to instantly treat Quebec as a foreign nation, with the resulting closed borders/tariffs overall growth surely would have declined.
Seems to me that the system of cooperation between states, such as NATO and EU, is approximately in the right direction. I imagine something like this, just more flexible about things like currency or secession.
Kind of "in essentials unity, in non-essentials liberty, and in all things charity" within the set of countries that agree to play according to these rules.
Yes, the problem is the great exclusion of the global south, and here it can be partially remedied with immigration to great effect, but actually old fashioned ideas of sovereignty literally allow really bad governments to prosper, and maximize the chance that they bring the rest of us down with them, in addition to keeping their people in poverty and ignorance.
Yeah. I don't even know what would be the right solution. "Countries can attack each other whenever they find a good pretext, such as denazification" sounds wrong. "Everyone must respect the sovereignty of the Kim family forever" also sounds wrong. Yet, whatever reason you make about Kim, Putin may say "from my perspective, the same applies to Zelensky".
Within Europe, the "NATO + EU system" can expand gradually, country by country. But it is not obvious how to get something like this also to Africa or South America. (Also, any attempts to do this would immediately be accused of "colonialism".)
Was the example of Boston's early imports from the book? Because Boston's early exports were mostly furs that the settlers trader for with the local Indians. The timber and fish exports came later.
(review author here) Yeah it's originally from the book, but I might have garbled it in retelling it. I don't recall Jacobs mentioning furs, but now that you bring it up it seems right. In any case the argument doesn't really hinge on which natural resources are involved.
An interesting view of the world. However, like many one-sided views, it's easy to find evidence against it. Take Seattle as an example. It was built on military money, and companies like Microsoft and Amazon would certainly not have gone there if it wouldn't be part of the large US market. The same is true to an extent for the Bay Area. Agreed that military research money is different from your average grunt base, but it's still military money. I am also not sure that the various economic centers in Germany would be better off independently.
If Seattle wasn't part of the US its unlikely Bill Gates would have left to go to Harvard and then gone to New Mexico where Microsoft was before going to back to Washington. I dont think it makes sense to try to play these hypotheticals out. Too many variables.
>Let’s take a moment here to appreciate how Jacobs casually destroys ideas so many of us hold dear.
Does she? She's saying they don't work as a financial prop, but I never got the impression people thought the military or welfare were money-makers. The benefits are non-economic, like buying a pet rabbit or going to the movies. You pay the cost of a military to get the benefit of not having Rome burn your town and salt the earth. You pay the cost of welfare for the psychological benefit of not watching people starve.
To be fair, having Rome burn your town is likely to be quite bad for the local economy...
Though I agree, the military doesn't directly benefit the economy in the way private industry does. Rather, it creates the conditions in which the economy can flourish.
Lots of weapons manufacturing goes to other countries. Arms are a huge export industry - especially at the city level. It's inaccurate to describe this as a "transaction of decline". The only way to do so within Jacobs' framework is to think in terms of nations, not cities, and to ignore the international nature of the business.
> nations aren’t the right way to think about wealth.
Well, if you're analyzing *markets*, nations are important because it's almost always far easier for people, goods, capital, etc. to move between places in a single nation than between nations. (Which is one reason why the US federal government taxes incomes at a much higher rate than states -- you can easily flee from one state to another.) As another commenter said, Brexit seems to be a good test case for all of this.
"The idea that black Cantonians [i.e., Canton, Mississippi] began moving to Chicago in droves during the Second World War in order to escape segregation is appealing but not really true. They moved to escape poverty and in most cases the dignity of making a decent living was far more gratifying at first than the dignity of having equal rights under the law. There is nothing comparable in American life today to the amount of financial gain southern blacks could realize instantly by moving less than a thousand miles away, to another part of the same country, and getting the kind of unskilled jobs -- laborer, sales clerk -- that were unavailable to them in Canton." -- "The Origins of the Underclass" by Nicholas Lemann, June, 1986
Though of course, in Latin America there is the equivalent: figuring out how to get into the U.S. by hook or crook.
Promoting in the 80's the idea of cities as places of import substitution is weird as deindustrialization was already under way. I don't see any value in it now.
Read this insanely brilliant essay, especially if you've been trained in economics. This will shake a few brain cells, particularly when applying the import replacement theory to current situations.
This is more than a book review, or rather, more than a typical critique of ideas in book form. This essay explores the ideas in the book(s), applies them to situations to make them easy to understand, and makes you question what you assumed to be as true as gravity.
Umm...the theory reviewed seems trivially wrong and obviously falsified by empirical evidence. See e.g. my comments in this thread, and those of Hank Wilbon and Christophe Biocca. The review shows no awareness of these obvious empirical problems. `Insanely brilliant' is not the description I would use.
"Richard Cantillon, Adam Smith, John Stuart Mill, Karl Marx, John Maynard Keynes. Jacobs explains how they each had their own ideas of how the economy worked, disagreeing over things like whether supply or demand was the main driving mechanism, but they all agreed on a fundamental fact: inflation and unemployment have an inverse relationship to each other, like a seesaw."
I'm interested to see what quotes she has to back this up, but as someone who teaches the History of Economic Thought I don't think this is true of the pre-Keynesians. Unemployment was not generally a big focus of pre-20th-century economists, and Phillips first described the Phillips Curve in 1958.
The description of mid-20th-century economics in the surrounding paragraphs is much better. In simple modern economic terms, we'd say that stagflation is caused by adverse supply shocks; the Keynesian solutions of the time could only shift aggregate demand, and so could only fight inflation by making unemployment worse (and vice-versa). Today we'd say best way to fight stagflation is to find ways to increase aggregate supply; this broadly seems to be what Jacobs thinks her solutions would do, though I'm not convinced they actually would.
When it comes to idle speculating about "national character," it is interesting to think about how the British vs French differ on the Revolution vs Reformism axis. Obviously the French are usually seen as the revolutionary ones, what with the long 19th century being largely the story of them repeatedly overthrowing their government, and the British are seen as the gradual reformers who slowly liberalized, but the British were the original ones to do the whole "overthrow the government, cut off the king's head, and install a revolutionary dictatorship" thing. So what changed? Are the British just more patient, and it was chance that Charles I happened to test their patience past the point of breaking, while the French have more of a hair trigger, and just happened to be doing well enough before the pre-revolution economic crisis (and also by chance had their earlier attempts at rebellion like the Fronde put down successfully)?
Political diversity means political choice and a greater ability to vote with your feet. Competition of governments means they have more incentive not to oppress the people.
Thanks for this fine review! One of the best kinds of reviews is one that alerts the reader to the existence of worthy books he never would have heard about on his own.
The point about currencies is really interesting, it's a form of feedback I think the EU should have taken more seriously, even if there have also been useful effects of the Euro. And I think seeing cities and the key nodes in an economy makes a lot of sense. But I think the historical viewpoint relies in part on a world where everything important*can* be done well at the scale of a city. Much of the value of the modern world's recent technology and growth comes from networks and network effects. Power plants and stable electric grids and the internet work better at larger scale. Maybe it would be better in some sense to achieve that by having free trade and cooperative infrastructure projects among large numbers of relatively independent cities, but I don't know any time or place where that has been done stably/peacefully/efficiently?
Even in ancient times, it took Rome to build the roads and aqueducts and bridges that Europe used for the next millennia, which they wouldn't have done if they hadn't formed the empire. And there's a reason China has the saying that "the empire divided longs to unite, united, longs to divide." And why long-lived companies seem to go through periods of centralizing and unifying control and other periods of letting a thousand flowers bloom. Have humans ever devised a stable system of having a central organization powerful enough to do what's best done at scale without overreaching and taking over things that should be local? I don't really think so.
The Brexit bit makes me wonder. From her arguments it seems pretty germane that Jacobs would consider the Euro an abomination (and I can see a case for it), but the UK didn't have it; instead, Brexit mostly increased friction for trade and immigration, two things that ought to be as free as possible for the model to work. Nevermind that of course Britain itself is an abomination by this logic, with gigantic London almost parasitically sucking dry an impoverished host body.
On welfare or military development, it seems to me that while they are drains on growth, they are to an extent necessary ones; a booming economy alone is no good if a neighbour can stroll in and steal your stuff, or if everyone who isn't strictly of working age is miserable. Economy isn't everything. But the thing I would agree on is that they shouldn't be relied on as engines of development via increased spending. If you want to play Keynes, build infrastructure, not bombs.
Agreed. Under the Jacobs model, the Euro benefits the EU powerhouses (Germany, France) who can export much more at the detriment of south European countries like Greece in a similar way that London benefits from having the rest of the UK to keep the value of the pound in check, I guess?
By contrast, having common trading rules, freedom of movement and no tariffs should not ruin any cities in that model.
Some context on _The Question of Separatism_. A lot of Americans had moved to Canada in the decade or so before Quebec's first Parti Quebecois premier. Many of them had come to Canada to escape the Vietnam war - Canada refused to extradite draft dodgers to the US.
Once there, some number of them made public pronouncements in favour of breaking up their adopted country. Even if they were unilingual anglophones themselves, they knew where they stood on any question of oppression. French speakers qualified as an "oppressed minority", and deserved the power to forbid the speaking of English. The French language would surely disappear in Canada without drastic measures, and must be saved. Unlike native born Canadians, they understood all the issues, all the nuance, and were happy to tell us what we ought to do.
I don't know whether or not any of them knew any of the nuance in the situation, let alone the claims popular among English Quebecers of the provincial government eagerly oppressing linguistic and ethnic minorities. (This is roughly the same time there were violent confrontations about building a golf course on Indian land.) At any rate, as an English Quebecer, I regarded these pro-Quebec Americans with extreme contempt.
Eventually my own government sold me down the river, metaphorically speaking. Quebec got to be exempted from any human rights legislation it chose, as part of the price for staying in the country. Signs in English were forbidden. Many children were forbidden to attend public schools in English even if it was their native tongue. Those who were permitted by law tended to encounter bureaucratic obstacles instead. Businesses above a certain (small) size were required to communicate internally only in French.
Montreal - where most English Quebecers lived - lost most of its head offices and research offices, not to mention swathes of customer service business. Real estate crashed, and Toronto gained from Montreal's losses - they were no longer roughly comparable cities, with Montreal having the edge in cosmopolitanism. Lots of English Quebecers left the province. Some ambitious French Quebecers joined them.
I eventually wound up in the United States, having lost any conscious semblance of patriotism in the process - Canada pretended English Quebecers didn't exist, or didn't deserve to be allowed to both speak their native language and live where they were born. But it's a huge sore spot with me still.
It's also worth mentioning that the prime minister of Canada during much of this was himself a French Canadian from Quebec.
At any rate, that's the context for the second of these books.
For the record I now kind of favour Quebec separating from Canada, provided all Indigenous or otherwise non-francophone areas have the option to separate from Quebec, and there are never any transfer payments. I imagine that most of the resource based wealth in Quebec would separate from it, just as much of the research and head office based wealth already did. (And they've been trying to entice it back ever since...) It's too late for Montreal - its non-francophone immigrant communities are probably long gone, along with much of its English speaking population. But I still want revenge, and while the PQ leaders probably wouldn't do too badly personally (much as I'd like to see them suffer), the children and grandchildren of the gullible fools who voted for them would certainly suffer. And giving them what they asked for - but then sensibly don't vote for - would give me that revenge.
That is how culture wars look like. The language by its characteristics and means of communications cannot be only your private matter unlike sexuality, religion, political views etc. A group of people living closely together needs to decide which language they are going to speak. Some will be winners and others will be losers in this war.
As a side effect, you've given me a way to answer the person who wanted to know why I wanted revenge:
"the question of whose view of freedom or cultural heritage should prevail is a primarily contest of values. "
Precisely. The answer agreed upon by the Pequistes *and* the Oh so proud folks repatriating the constitution: Their values, *not mine*. (Also not the values of native Canadians, who are a far more popular minority in Canada currently.) I get it. I exist for their convenience. They are "better than me". Etc. ad nauseam.
Except I don't agree. But the decision is long settled. Hence the desire for revenge.
Why couldn't you just learn French if you wanted to stay? Or alternatively just accept Quebecker wanted to protect French language and as bilingual system probably wouldn't work and move away?
To me Quebec seems to be doing ok, not as good as the rest of Canada and certainly worse that Toronto but if Jacobs' thesis is correct, the independence would have probably made things better. Or not but if they were at least as good as they are now, it is ok in my view.
Why wouldn't bilingual system work? If there's enough people (at least the majority) who want to communicate in French, and all the official communications are bilingual, why can't French survive indefinitely? Yes, it'd probably not dominate completely, if that what "work" means, but I'm not sure why it couldn't work with any less extreme definition.
Because it runs into a problem – if a person speaking only one language needs to find an entry level work (such as a counter assistant), he needs to speak both languages. In practice it will mean that one language will dominate and all people will be required to speak it while the second language will be spoken only by some people. In practice it would mean that everybody speaks English and French is a minority language. Apparently people in Quebec decided it to be the other way around – everybody should speak French and some can also speak English as a second language.
Almost everyone in Montreal is functionally bilingual (as of ~20 years ago, per personal experience) -- as an Anglo you need to get quite far out in the sticks of Quebec to find places that you can't function with a decent attitude and (terrible) high school French.
The Quebec government doesn't like this, for ideological (AFAICT) rather than practical reasons.
I guess Jane Jacobs would have had issues -- but why would that be necessary?
I can say from the Anglo side that your French needs to be extremely good in Montreal for people not to switch to English as soon as you say like two words -- there are definitely ethnic enclaves within the city where significant numbers of people can't speak French at all; if they want to work at a store they would need to stick to a store serving those enclaves I should think -- not because the people coming to other stores couldn't speak English, but because it would be considered poor customer service to have staff who weren't at least capable of conducting store business in passable French.
I've been to Montreal a couple of years ago, and I never encountered a person who didn't speak passable English. My French pretty much ends at "bonjour" and "merci", but I had zero problem communicating. I think the prevalence of people speaking only French and jobless because of it is greatly exaggerated. And this is confirmed by experience of living in other multi-language environments - it's not that such people don't exist, it's that most of people aren't like that.
> it would mean that everybody speaks English and French is a minority language
I see no problem here with "everybody speaks English". And if Quebecians managed to pass special status for French, this means it's not a minority language but rather the majority speaks it. So they continue speaking it, I don't see how it necessitates banning English.
There will be some people speaking only French and they will rightfully complain that they are being discriminated if services are allowed to provide by people not being able to speak French.
> services are allowed to provide by people not being able to speak French.
I think the word "services" is covering a lot of ground here. For civil servants, a requirement that they can communicate in any language recognized as a local language of the land is reasonable.
For everything else, not so much. Speaking the local language of the law is generally not required for private businesses, nor do I feel it should be. If one wants a baker or bricklayer who speaks the local language, one can always pay a premium to find one.
I feel that trying to protect a local language by legal means is like trying to build a sandcastle in the face of the incoming tide. Unless the French speakers can outcompete both Hollywood and Silicon Valley, there will always be certain areas where English will have an edge. This does not mean that French is doomed to die out.
In Scandinavia, I assume that most working age adults are conversant in English, and that English is actually used for more international work environments (like academia). This does not mean that their national languages are in the process of dying, it seems the majority of people prefers them for everyday use.
For France (but not Quebec) especially, I am especially annoyed by coercive laws meant to protect French (like the radio song language ratio mandates) given that the French republics used coercive laws for a century to wage a campaign of elimination against local minority languages like Breton and Basque.
The town I live in has a large Asian minority, with the largest group being Korean. If they ever become 50.1% of the population and outlaw the use of English except in private, why don't I just learn Korean? I'm only 68, I should be able to learn it in a few weeks.
Yes, you would be required to learn Korean in such a case. But it is not the process of a few weeks. You can learn a second language for many years and more and that's fine.
Most likely you already had many chances to learn Korean many years ago if their population was near to 50%. I started learning Spanish when I temporarily lived in Chicago because too many signs were in Spanish and I thought that I should be able to read them.
A fundamental problem with separatism is that it is never scale invariant.
So you have Canada, then Quebec, then perhaps a Korean majority town, then a Hindi majority neighborhood containing a Turkish majority tenement building containing a flat with a Spanish speaking family and an Italian au-pair.
I do not think that coercive legal means will improve outcomes at any stage. Letting people use whatever language they like best (so the top national newspapers are in English, regional news are mostly in French, local advertisements are in Korean or Hindi and the black board on the ground floor is in Turkish) feels much more painless.
"Why couldn't you just learn French if you wanted to stay?"
Because learning a second language is extremely difficult and time consuming? Because few people ever achieve native fluency? Because he suddenly found himself to be a disadvantaged minority? Because the Anglosphere is easy to move to?
You can achieve near native fluency if you start young but in general you are right. Still, it is rare when you need to be at a native level, only some jobs require it.
I know this comment section doesn't really encourage uncharitable, mocking paraphrasing, but I really don't know how to read this comment other than as "if you don't like being an oppressed language minority then just stop being a minority lol, like if you don't want to be oppressed for not speaking the majority language just learn it lol." I'm sorry if that's uncharitable, but the sentiment itself is quite uncharitable. Have you considered that even if an oppressed language minority COULD learn the majority language to get along, the point being made is that they SHOULDN'T have to? It's a question of morality, autonomy, and dignity, not ability.
(Edit to add that the OP wasn't even complaining about having to learn French, but about being outright prevented from using English, which is a point even beyond the question of "just" learning the majority language)
I don't think that the person was outright prevented from using English. I cannot even imagine how that would be even possible to enforce unless in China or a similar place. Here we are all on this forum using English even though it is not my native language. And believe me, it is not easy for me, I am struggling a lot with English.
I totally understand that we all would prefer using our native language whenever possible. However, the world is not always allowing us to. Sometimes people move to another country where they need to learn another language, sometimes your own country or region change the official language for whatever reason and you have to learn a new language as if you had immigrated to another country. It is great that in case when you didn't like that, you also had an option to move. Some people may not have that opportunity.
Most people move to other country despite linguistic disadvantages this move causes to them. Therefore for me it is quite unusual to hear that some people move because they decided not to learn another language. But of course, it wasn't only because of that, the other place apparently also provided better opportunities. I just wanted to better understand the motivations and attitudes people express when they refuse to learn another language as compared to simply choosing to accept linguistic change.
Alright, I'm sorry if my comment came off as harsh. I suppose the point I was trying to make is that even though English was obviously not being completely banned in even household use, if the OP is correct it was being heavily restricted in its ability to be used in business or educational contexts, even in traditionally English-speaking parts of Quebec. What I was trying to get at then, is that this seems like a legitimate thing for those affected to see as unjust, and to desire an institutional redress for (i.e. in having the policies seen as unjust be undone), rather than expecting that they simply knuckle down and either deal with it or leave. While the policies in the end might in fact be for some greater good, I think it also shouldn't be surprising that those being disadvantaged for the sake of that alleged good might engage in politics of resistance or resentment when their own linguistic autonomy is the price of that good, and is being taken from them without asking.
I can understand the feelings. That's why I am saying that to me this question about state language looks like a culture war which unfortunately is unavoidable and where one side is going to win leaving the other side unhappy.
The vast majority of anglophone Quebecers do speak French. We have to learn it in school, pass French exams, serve customers in French, etc. Not everyone is equally fluent, but it would be rare for someone here not to speak any French.
Regardless of our ability to speak French, we still get upset about laws banning use of English.
I don't understand these comments about banning use of English. Even though Canada indeed became very totalitarian during covid with vaccine mandates and extreme completely unnecessary lockdowns, are you really prevented from speaking English with your friends and family? Reading books in English online and in paper format etc.?
You're missing the context to know which laws I'm referring to. The most recent controversy is over a law banning certain people from getting public services in English and preventing people from working in English at companies with at least 25 staff or at federally regulated business. Previously people were allowed to use English for these. Anglophones are unhappy about these new laws banning use of English.
There are no laws against speaking any language in private with your friends and family, obviously. Such a law would be both unenforceable and unpopular with everyone.
As an immigrant to Montreal I find this analysis to be needlessly pessimistic, and perhaps not very reflective of the current situation. Sure the 90s were tough but the city is doing pretty darn great these days with what I see as the highest quality of life of any north american city.
"its non-francophone immigrant communities are probably long gone, along with much of its English speaking population" - if anything immigration has increased a lot (though not as much as some parts of anglo Canada), and along with it the non-francophone immigrant population.
The notwithstanding clause was more of a sop to the conservative anglophone provinces necesarry for a supermajority. At the time conservatives believed that the charter was antidemocratic because it limited provincial, and thus popular sovereignty. It was used mostly as a protest in quebec except for the sign law until recently.
> Jacobs doesn’t actually give a clear argument why. Maybe that was in her previous book, The Economy of Cities. So far as I can see, her reasoning is, ironically, a bit tautological: “all developing economic life depends on city economies; it depends on them by definition because, wherever economic life is developing, the very process itself creates cities and has probably always done so.”
She does give an explanation in The Economy of Cities, but it's that same explanation, and yes, it is absolutely tautological. She presents a (very much unsupported) theory that this has been true all the way back to the very first city to ever exist, and at no point does she provide any quantitative support for any of her arguments.
This is Jane Jacobs's principal sin. She never, *ever* gives numbers. And if she did, they would be used like an exotic spice to draw attention to her theorycrafting, not a basis for changing her mind.
> For Jacobs, virtually all city development can be seen through the lens of import replacement (which, to be clear, has approximately nothing to do with policies of import substitution industrialization; import replacement is not a policy, but a naturally arising free market phenomenon).
No, in Jacobs's view they *are* linked and import substitution industrialization is one of her primary forward-looking policy prescriptions. She'd prefer the 'auto-tariff' approach of free-floating currency exchange rates but she does actually support this.
And one other comment:
> Can you imagine if the Our World in Data charts had to show separate lines for the Electorate of Saxony, the Prince-Bishopric of Augsburg, the Duchy of Brunswick-Lüneburg, and about 1,800 other semi-sovereign states? Can you imagine traveling around if each of them had its own currency?
Fortunately, programmatic currency exchange is now easy and the drawbacks have become minimal.
(review author here) Thanks for this feedback! I'm not sure about "in Jacobs's view they *are* linked and import substitution industrialization is one of her primary forward-looking policy prescriptions". When she discusses Uruguay, she points out that its attempt to fix its economy through import substitution industrialization went disastrously.
> Fortunately, programmatic currency exchange is now easy and the drawbacks have become minimal.
Yeah, Jacobs actually says that computers are on their way to solving this, and she says this in 1984. I agree that today the convenience argument for currencies isn't very strong at all.
An obvious prerequisite for this discussion is that geographical proximity is important. I wonder how the increasing interconnectivity, ever increasing fraction of digital goods and services that do not care about geography, post-COVID remote work opportunities, etc change the city-centric trajectory of economic advancement.
> Currencies, Jacobs explains, function as automatic tariffs (to protect local industry from foreign imports) and automatic export subsidies
Is there some way to get the benefits of this feedback loop without the inconvenience of having a ton of different currencies? Like, could metro regions just have regular old tariffs and export subsidies, set by an "automatic" formula?
More generally, I'm confused why currency/monetary policy is the important factor that makes large nations doomed to fail, as opposed to the other stuff that tends to distinguish nations from smaller entities (legal power over its citizens, having a military, controlling immigration, etc.).
There’s a political program in here that people could like: something mixing this, Napoleon of Notting Hill, and James Scott with a view to re-establishing city states, possibly with “something something communitarianism” thrown in as well.
Has anyone thought to examine the Mongol Empire? In particular, the Jochid horde implemented devolved currencies and politics. Might such a system work as a model for a decentralized, yet (usually) unified state?
Thank you for sharing this! As I hope is evident, I found it delightfully stimulating.
In my own amateur engagement with economics, I have asked for households to be the basic unit of economic analysis but, of course, households exist immediately in networked relation to people and places. Maybe cities is best.
As for left and right, it seems Jane Jacobs accepted that private profiteering would continue playing it's preferred role as driver of the economy. I read she preferred merchants to rent-seekers which suggests to me she was making the mistake that all apologists for empire seem to make. That is, she was vastly overestimating the moral and humane sensibilities of her capitalist cohort.
I realize that's a bold statement given I've only been introduced to her today. I doubt she thought of herself as an apologist. It sounds like she was working towards deep structural transformation in the study of economics. Her ideas and analysis as you've presented them are useful and compelling. I think they reveal her humane sensibilities. I also feel a bit justified in my declaration by the fact that she consciously places her work in the tradition of Adam Smith whom I've read was mortified to discover how quickly his cohort abandoned any moral sensibility that stood in the way of profit.
I said all that so I could speak about welfare. The general welfare is one of the few legitimate purposes of government. But, we live in empire where whatever is good for the profiteers is, a priori, deemed good for the general welfare. Empire cannot conceive a welfare greater than its own. I/me/mine is the extent of its conception of the good.
In that worldview, care for those that fall outside the circle of my concern is understood as charity. Welfare is politicized charity. It is not justice. Any real leftist would gladly give it up in favor of a economy designed to serve a commonwealth belonging to the people and not the privateers.
As long as government is the means by which the wealthy play their game of thrones, there can be no justice, economic or otherwise.
A lot of comments are picking on Jacobs' theory of stagflation for being, ya know, egregiously wrong. I think the charitable thing here is to recognize that she got caught up trying to tie her theories to a happenin' economic event of the time, and that her overall theory makes more sense if you find/replace "stagflation" with "slower economic growth since the 1960s." Slow economic growth, unlike stagflation, has a pretty good argument for being the default human state.
2) the fact that economists threw out their models because of stagflation tells us how limited the models were. Stagflation was easy to explain for the “layman”
Jeepers, stop whipping your favourite hobby horse mate, and learn some economics. You may actually find you've picked up useful tools with which to understand the world. Here's a good place to start - https://mru.org/principles-economics-microeconomics
I end up seeing this as an optimization process: there is a situation where a good or service is expensive. There's a way to provide the same service in a cheaper way, so eventually this is noticed, someone resolves the inefficiency and provides the same service for less money (and takes a cut of the difference in profit). It's like taking a step in a gradient descent algorithm.
In the examples given here, the inefficiencies tend to be geographical and political - the cost of labor, the cost of transport, the markup of the merchant/exporter, tariffs, etc... All of those can be eliminated through import replacement by a city.
But that's not always the way of inefficiencies. As other commenters pointed out, it's often cheaper to import a certain good or service from someone else who is specialized to provide that good or service to you. As transporting goods and information becomes cheaper, it probably makes sense for many cities to instead do export replacement - taking an inefficient local industry and replacing it with a cheaper import.
The whole anti-fragile angle points out another dimension - risk. We tend to avoid over-optimizing things because it creates very brittle systems. So this is something that cities and nations also need to consider. Perhaps it's better to import-replace something, even if it's more expensive to produce it locally, since it provides you with some redundancy and resilience when compared to depending on a specialized peer.
One could also see nations as the natural outcomes of the gradient descent processes in other dimensions. Managing a myriad of fluctuating currencies has historically been intractable, so people ended up settling on unified currencies for the sake of predictability and stability. Similar forces in the dimensions of culture, military/safety, laws and other areas contribute to the stability of nations in their current form.
I read the argument in the book as: nations impose artificial constraints on cities and prevent them from following the economic gradient. But nations themselves are (perhaps local, rather than global) peaks in their own gradient.
So eventually it all kind of becomes a porridge of "everything is complicated" and I end up thinking that perhaps this is not a useful way to think about things after all.
What is it about economics that seems to cause people who don't really have a strong grasp of it feel they are qualified to offer broad theoretical or empirical claims about it. I mean, based on a quick Google she seems to just be a journalist without substantial STEM background much less a grounding in macroeconomic theory.
I can understand (tho feel it's largely unwarranted) why some people would be skeptical orthodox economists are justified in their views. However, in any other field if you hadn't mastered the math and empirical literature you wouldn't dare take the leap from skepticism to proposing your own theory.
Hell, even the global warming skeptics don't claim to offer their own alternative climate model. So why is econ treated like voting: something any idiot is justified in formulating their own theory about.
Probably because macroeconomics pretend it’s a hard empirical and theoretical science when in reality it’s just smart people playing games with math? It’s not their fault, studying a complex, dynamic, chaotic system on the scale of a nation’s economy is not something we have the scientific tools for currently. But there does not appear to be any acknowledgement that their models provide zero predictive power. What we are left with in macro is philosophy -- all the dsge models in the world tell you nothing about the actual macroeconomy, how to grow it or how to manage it, they are simply far too underpowered to capture the real dynamics at play (as 2008 made painfully clear). Jacob’s philosophy at least investigates the fundamental creative forces that generate true prosperity.
Because economics isn’t anything approaching a science and you might as well ask a journalist.
I think the mathematics in economics is largely cargo cult anyway. Mathematics, outside of pure mathematics, is a tool. If you write complex economic equations they had better work.
I liked Will Wilkinson's phrase "the United Nations fallacy" for treating countries as equivalent, regardless of size, because they are legally considered to have equal status. Unfortunately, his Flybottle blog is no longer available, and I believe he even blocked access to the Internet Archive.
Stagflation is not the normal state of things, because inflation is not the normal state of things. Prices that are high relative to incomes is not "inflation", because that's a level, whereas inflation is a rate of change.
I lived in Northern Quebec when I was a kid (1 to 9). 1955 - 1964. Rouyn-Noranda, about 350 miles NNW of Montreal.
The schools were separate, French and English. I feel like I had about one french class a week. The only memory I have is Mrs. Riley (my third grade teacher) holding a drawing of a cow ( it was the first time I had ever seen one) and saying “La Vache.”
When I met a French Canadian boy for the first time, who actually lived right next-door to me he was fluent in English. His father didn’t speak a word of it and made it clear that he didn’t care.
It was a very important mining town and the managerial / executive people were all anglo. The “brains” people were not only Anglo but British and Australian (my father being one of them.) It was Apartheid.
Montreal got clobbered by the Separatist movement. I was living and working in Toronto in the 70s and the relocation was palpable. I was a commercial film editor and the migration of all the major ad agencies to TO bought me a lot of dinners.
Montreal in the 90s was dead. I visited. So many storefronts on the main street with plywood in the windows. I believe it’s had a bit of a renaissance at least partly due to high tech film effects innovation (SoftImage). McGill U is a premier school in computer science I believe. Good music as well, but that’s always been true. Go Leonard!!
Libertarian is an easy title, but it sounds like she was just a big believer in subsidiarity (though the term is usually used with reference to Catholic Social Teaching)
Wow, that was a really compelling argument not to take her stuff seriously. If that's an accurate account it's just psuedo-intellectual vague theory building that avoids testable claims and creates a false sense of erudition all serving to create sufficient complication that the author can use their narrative control to support their pet theory.
I mean the whole thing about cities being the correct unit of analysis was a red flag! One of the hallmarks of this kind of thing is a theoretical claim that feels substantive at an emotional level but doesn't really have any clear substance (cities are the proper unit of analysis). It just serves to create the appearance of intellectual work when all that's really going on is the author is redescribing things in a way that appeals to them.
Nothing wrong with that on it's own. But it's almost always a kind of trick. Once they've asked you to look at the world with their lens they tend to simply presume that if you're still reading you'll nod along when the presume that lens offers some kind of unifying explanation of whatever seems important.
Why it would be a limiting factor is a good question, and I had to think for a bit to work out why I think so. On the premise, a mixture of hierarchies and decentralised control is too broad a brush I think. Where command & control are weak, the decentralisation doesn’t step in: Tokyo and Shanghai handle their size much better than São Paulo and Delhi. The main difference I can identify is the level of centralised control that is able to be exerted. So I conclude that decentralised cities can grow to a certain level but above that level it takes centralised management to prevent diminishing returns.
My view of cities is a bit different although I don't disagree with Jane Jacobs in general.
If we consider "modern" society as layers of complexity enabled by basic surpluses in food and energy - where does the complexity take form? Cities. The dominance is financial, social, manufacturing, etc etc - all outcomes of greater complexity.
That's the core advantage of cities vs. the rural countryside despite the rural countryside literally feeding and providing the raw materials for the survival of the overall system.
In addition, cities in a democratic system have more votes - and increasing urbanization leads to increasing relative political power. Absolute population dominance in a democratic voting system is precisely why the Constitution instituted Senatorial equivalence in voting between states as opposed to absolute votes - the electoral system. At the beginning of the United States - the Founding Fathers were very fearful that the high population states of Virginia, Pennsylvania and New York (in that order) would dominate the rest of the 13 states.
Now combine the control over complexity (because of location) plus political dominance - you end up with the rural countryside being unable to defend its economic interests against the urban centers' interests.
This same kind of dynamic rose with European nations, the West in general vs. the rest of the world. Even if critical minerals, food, energy or other resources - which are literally the foundation of Western standards of living upon which the West is dependent - are absolutely critical for the West, the same types of dominance exerted by cities on the rural countryside leads to low commodity prices in favor of "complex" "advanced economy" products such as finance.
Under this model - the decline of American cities is directly a function of the decline of many aspects of complexity, the decline itself not restricted just to cities. The outsourcing of manufacturing to China is the most egregious example.
I really like the review. But import substitution is considered by the vast majority of economists of all political persuasions as a bad theory. It predates JJ as well. The part about the value of the exports is right. But because increased transaction costs increase all costs, the idea that tariffs via unique currency or taxes will boost a developing economy isn't accepted. A history of the rise and decline of the idea can be found here. https://www.nber.org/system/files/working_papers/w27919/w27919.pdf
Also, I I wouldn't call her an accidental moderate, but rather a type of distributist.
I don't know of any economic historians who argue of productive capacity increased as a result of these tariffs. I could be mistaken, and you may point me in the right direction. Make an argument?
That the US became a major manufacturing country behind a wall of tariffs is an empirical fact. I take no argument to authority from economics - the entire field is highly suspect.
Were there major economies at the time that were not behind similar tariff walls? If not, the fact that you stated seems like it provides essentially no evidence either way as to whether tariffs boost an economy.
What about Asia? Aren't their tariffs generally very low these days by historic standards? How do you square your theory with the fact that China's industrial capacity boomed in the recent free trade era rather than being decimated by cheap imports from Western countries?
Protective barriers are so great. Why not have them everywhere? Why should Delaware depend on Pennsylvania and Massachusetts instead of rolling their own and getting rich?
I do see a real problem with taking a central word like 'import substitution' and then arguing about the concept that is generally associated with that word without taking into account the how it was meant and used in context.
This is true for many of the commentators here as well as in the linked paper.
As a naive thinker in economic terms I understood the essence of JJ as:
- you have to manage a balance of exports and imports for every given economic entity ( I would not narrow this to cities as she does)
- if you run a trade deficit or want to grow your economy start by increasing and diversifying your production ( as opposed to attract more people or foreign investment)
- when choosing what goods to start producing, pick something you are currently importing, that gives several benefits:
- a local market exists without local competition
- if frees import capacity for other goods
- you can get direct feedback about quality and improvements
- chances are that your neighboring economies also import this, so you have a potential export market.
There are many arguments presented here against 'import substitution' as a general concept, or why it is no economic miracle cure. But I didn't see anything convincing against the points above.
It is similar in the linked paper:
The economists listed as early proponents of the idea of import substitutions weren't proven wrong, as they had a very differentiated view from the beginning and did see the limits. The problem is the people picking up on a idea and following it without understanding or even for different motivations. When this goes wrong the whole idea sounds like a bad idea from the beginning and of course people talk less about it and avoid the specivic term because they don't want to be associated with the failure. But this doesn't provide evidence against the insights of the economists at the beginning.
> 'when choosing what goods to start producing, pick something you are currently importing, that gives several benefits:'
This is where the whole thing breaks down. When you're a small/poor place, what you're currently importing is not necessarily (and should not be) a guide to what you should be producing! You should be looking only at what you can produce and sell efficiently. And ideally, sell efficiently in other places, because you're a small/poor place, so there's not much of a market to sustain or grow your production locally. In the last few decades this has many that countries with lots of cheap labour have led with export oriented manufacturing for apparel, light manufactures, automobiles etc, very few of which were in their import basket!
Well, there you are assuming that a small/poor place can easily find markets elsewhere for whatever it is that it will start producing (no doubt rather clumsily at first). That was much harder when travel/communication/freight was more expensive and unreliable.
I don't know what point you're trying to make. But note that even back when travel/communication etc was more expensive and unreliable, trading points are typically where cities came up, implying that trade was enormously valuable even when places were small, and small/poor places were finding things to export (and import).
I'm a moderate between import substitution and export specialization. Maybe export brings more money in the short and mid term, but can get a country locked in as a resource extraction organization only which would hamper human capital development in the long run.
I think "Economists examined her theories and found them wanting" is the most likely explanation. The ironic part is that "The EU is too big" actually *was* a mainstream economic argument for decades (keyword "Optimal Currency Area"). But the argument was "the EU should be half as big as it is", not "Hamburg and Munich should suceed from Germany", which seems insane.
Also, I really wish this review had looked at the data since 1980 to try to see how the theories held up or didn't since the book was written.
I'm very fond of Jane Jacobs and have long seen her as one of the great thinkers of the 20th century. She got the importance of cities correctly, but didn't address the importance of nations. The Roman Empire might only have dominated for a millennium and a few centuries beyond, but that empire did have a good long run. Cities don't function alone. You could take her taxonomy of rural areas and do a similar taxonomy of cities. You have to understand cities in the context of larger entities like nations and empires.
An organic model can help. Cells are a basic unit of biology. Each cell can perform a broad variety of functions. Each cell has a metabolism with inputs, outputs and the ability to reproduce. Understanding how individual cells work is important, but cells live in ecological niches where the work with other organisms and modify the world around them. One of those niches is as part of a multicellular organism.
A cell may survive on its own, but it serves a cell well to join a biofilm when attacked or to join with other cells to disperse spores. In multicellular organisms, cells specialize. Outer cells may suppress the reproduction of inner cells, but the resulting organism is more effective than any of its cells. They all do better. Your liver cells accept their role as the toxic waste dump of your body and your brain cells call dibs on your body's sugar supply. Your muscles accept commands even if they have to dip into anaerobic reserves.
A city often does better as a tributary within a powerful nation than as an independent entity. Interstate anarchy, you and what army, can be expensive. When the Egyptian branch of Alexander's broken empire neared collapse around 200BC, Rome was called and effectively took over. This had a cost to the cities of the Eastern Mediterranean, but they still did better under Roman rule than in constant warfare. It isn't always about armies. The EU with its euro provides an export moat for Germany. Germany alone would have an expensive currency, but sharing its currency with the rest of Europe puts a lid on euro exchange rates making it hard to undercut Germany with a cheap currency.
Jacobs focused on cities and did a lot of important and original thinking. Still, her focus was limited. Look at what I call the Crystalization of Europe. For a long time after the Roman collapse, it was effectively a continent of city states each with a backwater. Then, after the Black Death, Western Europe began to crystalize with powerful cities accumulating empires. It started in Spain and Portugal, but then spread east to England and France and finally to Italy and Germany. Each crystalization built a nation, imposed a national culture and language, and then built an external empire. Given the forces involved, I would not be surprised if this happened elsewhere as well.
Like General Relativity, Jacobs theory of cities was a breakthrough but incomplete. So much of economics starts with a political theory (h/t to Joan Robinson) and tries to wedge the real world into it often ignoring basic accounting that is obvious to even a street vendor. Jacobs started with observations and came up with a theory that lined up with experience and simple concepts of accounting.
It's interesting that you use the word ecology. The main impression I get when I read Cities and the Wealth of Nations is that the economy of a city is akin to an ecosystem. What is described as an import-replacing city is merely a healthy system resilient enough such that the loss of any species does not significantly affect the whole, or where the resulting void can be quickly filled. A transplant region is a food web which is artificial and top-heavy, while a supply region lacks diversity and therefore cannot be built upon. Imports are really dead animals brought in from outside. Regional cities are sparse ecosystems with vulnerable keystone species.
You bring up the point that cities declined with the fall of the Roman Empire and recovered with the rise of nation states. Viewed from the ecological lens, it's clear that the economy of each city can be made more resilient through increased interaction between them, using the analogy of species which cross ecosystems. But the actual main issue is that it is impossible for any single city to be fully self-reliant. They require armies for self defense, roads for inter-city trade, and growth will always require more food and people. However, the items mentioned above are all commodities, as whether the food or person comes from one nation or another is really irrelevant. So I don't think it's correct to say that Jacobs understates the importance of nations. A stable nation minimizes disturbances to the ecosystems within it, which is certainly helpful. But the city is the actual goal, the complicated ecology which is rare and difficult to form. That's what really matters.
That's fair. I probably shouldn't have said that Jacobs understates the importance of nations, but rather that her book was about cities not nations. A city doesn't absolutely need a nation. Look at the Hanseatic League which organized intercity trade. On the other hand, cities do better when there is some higher level organization such as an empire, nation or trading league to provide stability and a framework for trade.
P.S. The term ecology comes from "oikos" which means household. Economics comes from the same root.
Question: if Japan is so overwhelmingly doninated by Tokyo that there’s a good case to be made for rough parity between Tokyo-centric concerns and Japan-wide ones, why did Jacobs make a prediction of decline in the 1990s? Seems hard to chalk that up to the kind of principal-agent type problem that characterizes her viewpoint.
First, I found the book review engaging and compelling throughout, so thank you for this! As I am digesting it, I find myself convinced by the economic arguments, though frustrated that's the only lens brought to viewing development.
It seems so obvious that there are other necessary criteria for economic development that are not touched on, primarily security. City-states had this phenomenon (let's say it's correlated but maybe it's causation) where warrior societies would spawn that decide simply let's take their stuff. That has all sorts of implications for coordination between cities, security investments, and insider/outsider views of who a city might feel comfortable paying tribute/taxes to.
Similarly, currency and state-sanctioned violence are downstream of the legal system, which in turn is downstream of cultural values. I struggle just remembering state-level legal distinctions when driving across borders, and I have to imagine city-state level distinctions were constant sources of misunderstandings, frustrations, and abuse (think: Ohio targeting out-of-state speeders for tickets on steroids). I would imagine that to regulate city-states to certain sizes, only to be out-competed by regions that could provide more consistency over more domains where security and some culturally-shared view of fairness was sufficient for commerce to proceed.
This is one of those books that I would file under 1970s weirdness. (Yes, I know, technically it was published in 1980, but it was written in the 1970s.) You could write some crazy stuff back then and still be published and respectable.
The idea that nations should be broken up into city-states is just so deligtfully kooky, I don't even really want to dunk on it. It's like dunking on a clown. Plus, if we could get SF into its own nation and build a wall around it, it might be worth crashing the economy and plunging society into a dark age.
You know. Pros and cons.
I do feel compelled to point out, though, that the story of the 20th century is to a large extent the story of cities becoming less and less relevant. It used to be that factories and industry were located in cities. But as transportation networks matured and environmental concerns proliferated, the idea of having heavy industry in cities became a bit silly. Now the triple whammy of increasing crime rates, skyrocketing costs of living, and the COVID-era forced work-from-home orders are starting to do the same for commercial activity in cities.
There are increasingly few economic reasons to live in a city. Increasingly it is just a lifestyle choice.
"If any of these separatists got their way, we can be sure that the new nation of Quebec, Scotland, or Catalonia would then oppose further separatism in the strongest terms."
One of the funniest things about the recent Catalan push for separatism is "Tabarnia", a satirical mirror of the Catalan independence movement which demands independence for the Tabarnian region *of* Catalonia from the larger polity. The independence activists went *insane with rage* at the demands and claims of the Tabarnienses even though these were deliberately exactly identical to the activists' own claims visavi Spain.
A quick google tells me that the region is fictional. Catalan independence, like all independence movements, depends on the separatists having actual historical cultural affinity within the separatist region and differences from the state they are now in. Not unlike Scotland and Britain.
Of course it's fictional, it's a satire. The point of Tabarnia is that it's a subregion which A, is against independence (i.e. its culture has an affinity with Spain rather than some obsolete twelfth-century horseshit), and B, contains most of the actual rich/productive/populous parts of Catalonia, making it analogous to Catalonia's position as a rich part of Spain.
The argument is that the Tokyo based central government is unproductively subsidizing the rest of the country thus both spending its own economic surplus and undermining the growth of other regions that themselves could be more robust regional city economies. Or the Tokyo metro area’s integration is good, but the national reliance on Tokyo is bad.
Is it that impossible to induce "import replacement" for cities that are within larger nations? Why can't Montreal do import replacement today, and why would it be able to if Quebec separated from Canada? Is it just the currency feedback loops? In that case what if Quebec stayed within Canada, but was given its own currency?
"It is why nations and empires always centralize everything into one large city, whether that’s Paris, London, Tokyo, or Toronto, or ancient Rome: that city, being the largest, is simply the only one for which national-level currency feedback works fine."
Which is why Washington D.C. is the largest city in the US.
I mean, it could be that one of the reasons why the US has become so economically dysfunctional is that the national-level currency feedback doesn't work for anywhere. The government is centralized in DC, while the financial sector is centralized in NYC.
`So economically dysfunctional' needs to be justified. The US is both the largest rich country and the richest large country, and almost uniquely among the developed world it is still growing...
I probably should have phrased this as 'financially dysfunctional'. News stories about the financial mess the US is currently in are all over the place. US household debt is also at record levels.
I see many people are arguing about the failings of her theory in regards to "import replacement", "stagflation", whether a city really is the best unit to analyse wealth, and on the "currency feed back loop" thing.
All of those things are outside my expertise, so I'm grateful people are pointing out those problems. But what *really* caught my attention here is her model in regards to economic forces radiating from a city and the rural regions affected by it. No one seems to be talking about it, and I find myself curious if there is any validity to it, and would be grateful if someone with the apropriate expertise could comment on it.
What if, instead of the model being worded as "economic forces radiate from the city to the rural areas", it's the obvious "people vote with their feet and are attracted by more attractive living conditions"? With the examples she gave, it seems like two sides of the same coin.
I mean, I feel like that only the "jobs force" and "places people abandon" falls under that. I don't necessarily think any of the individual parts of the model is that revolutionary or anything. "Introducing a new technology in a region might displace workers there" and "a region dependent on exports to a single city will be sensitive to economic pertubations on that city" aren't exactly novel insights either, but I find the framework as whole interesting nonetheless.
I don't read any of her insights as particularly novel or revolutionary, but her insights (and the insights of James C. Scott's (of Seeing Like a State) and maybe those of David Graeber) are useful for pointing out the pitfalls of high modernist central plans, or planned economies - which continue to appeal, even to arm chair planners, because who can resist dreaming up plans?
I guess that their tl;dr would be that society is messy and dynamic, and flexibility and small-ness will continue to have merit next to the relatively slow and rigid central state planning.
This is my first time reading about import replacement, and I gather that it's largely known as a bad theory. I'd like to know if there's a similar theory that's more specific, which is more well respected?
As I understand, import replacement is an argument in favor of specialization within the city (relatively to the rural surroundings), but for generalization within the nation.
But on the national level, there's a balance to be struck between extreme specialization, and extreme generalization. With extreme specialization the country gets a globally competitive product to base their economy on, so they can import everything else - but it's fragile to put all eggs in one basket (not to mention that you miss the synergistic effects of having many industries).
With extreme generalization, the country imports nothing and might as well have closed borders, and thus it's a sure recipe to fall behind globally, which will bite your ass eventually (is North Korea a fair example?).
I don't know what "import replacement" is most often criticised for, but I'd guess it's that when it's taken to its extreme, the country (or the city) misses out on the positive effects of specialization and trade outside the city? In other words, when a country does it, it misses out on the positive effects of globalisation?
Would separation even be necessary? If we can somehow figure out which area belongs to a city area like she claims with scotland and london, we must have some certain metrics to determine this. Couldnt these be used to figure out which areas would need to switch it up? Using metrics instead of currencies as a guide.
"They were making the classic mistake of treating poverty as a mystery and wealth as a given, when in fact poverty is the normal order of things and wealth, when it does occur, is what warrants an explanation."
I recently heard an argument going much the opposite way, that up until 'The Wealth of Nations' everyone took *poverty* as the given, and its fresh perspective was to suggest that sustainably increased wealth was in fact possible. Malthus and Ricardo, after all, saw poverty as the natural state of mankind. Adam Smith meanwhile needed to investigate this new weird thing, increasing wealth.
> Jacobs doesn’t actually give a clear argument why. Maybe that was in her previous book, The Economy of Cities. So far as I can see, her reasoning is, ironically, a bit tautological: “all developing economic life depends on city economies; it depends on them by definition because, wherever economic life is developing, the very process itself creates cities and has probably always done so.
If you want a non-tautological argument for or against this, you should look to "The Dawn of Everything: A New History of Humanity" by David Graeber and David Wengrow. You can have a high population density without any centralized power. You can have highly organized bureaucracy without high population density. The universal use of "city" hides a bunch of wrong assumptions about what's necessary for social organization.
What is your definition of "city", and what happens to your argument if you taboo "city"? Something like, "economic activity is going to be concentrated in the regions of highest population density, and economic activity drives increased population densities"? I agree with this in broad strokes, but it doesn't seem strictly true. In most cases, in fact, on small enough scales, it seems like the local maxima of population density don't overlap with the local maxima of economic activity? You have apartment buildings in some neighborhoods and office buildings / marketplaces/ stores in other neighborhoods.
The point I was making, though, was that the argument probably becomes more clear when you pull apart the different components of "city", rather than treating "city" as a homogenous category. For example, Wikipedia says
> A city is a human settlement of a notable size.[1][2][a] It can be defined as a permanent and densely settled place with administratively defined boundaries whose members work primarily on non-agricultural tasks.
For the purposes of this argument, it seems like "densely settled place" is absolutely essential, "permanent" is maybe important, but "administratively defined boundaries" is absolutely not essential, for example.
Maybe the book itself is different, but after reading this review, I don't feel like I have a nuts-and-bolts understanding how growth works in Jacobs' view. A standard introductory economics textbook will talk about things like specialization and division of labor, gains from trade, and savings and investment. These factors explain where the things that are necessary for growth come from. Here it sounds like people just decide to make factories, and so they do.
> All empires eventually collapse. This is not what we would expect if empires were a good economic arrangement. If they only ever got wealthier and wealthier, they wouldn’t disintegrate into various separatist factions or end in foreign conquest.
This seems a bit simplistic... empire collapse is related to an enormous array of factors. Sometimes they're economic, but related to very empire-specific factors, like the accumulation of wealth in religious temples in Bagan. But they may also be related to climate, as happened to the Maya, as well as with the Bronze Age collapse. Or there might be new technological development which shifts the balance of power (Bronze Age collapse again). Or there's a succession crisis, or plague, or some other factor. None of these tell you much about what the optimal area for a single connected economic area is.
edit: Forgot to mention, that free trade is generally considered an incredible economic boon to all entities involved. The fact that the US Constitution forbids states from passing tariffs means that the entire US can freely move goods and services around (well, mostly) and probably contributed to is developing into such a rich and powerful country. (On the other hand, its size is probably also contributing to its current political disfunction, but that's not an economic problem).
As an Atlantic Canadian with a father who grew up in suburban Montreal in the 50s through 70s, I feel like this review is targeted at me in some ways.
Two things are notable about Atlantic Canada that line up very nicely with the theories Jacobs describes - it has one decent urban center (Halifax, in Nova Scotia) when it really should have two (PEI is too small to really have one for the purposes of this discussion). Why? Because in New Brunswick, there are three cities - Saint John, Fredericton, and Moncton. Moncton exists to be a railroad crossroads and with government funding, Fredericton exists entirely to be the capital, and Saint John has actual industry etc. But the government has never liked Saint John, so instead of one big city and two small ones there are three cities of roughly similar scales. It is very dumb.
Second, Atlantic Canada used to be the economic heartland of Canada. But the various local industries got bought out or expanded west. And once the Atlantic Canadian operations were branch plants, they were more vulnerable to being shut down. Basically, Atlantic Canada transitioned from being a network of its own cities and industry to being the outsourced industries of cities outside Atlantic Canada. And then, unsurprisingly, those eventually went away.
(To be fair, Atlantic Canada has also just been hurt by the passage of time. PEI, for example, used to have a very solid industrial base in brickmaking and wooden ship-building. It is fair to say demand for both has declined, even locally, and transitioning to other industries is not necessarily straightforward. Though, really, the bit where it is economically viable to buy bricks from China vs locally also explains a lot).
I am almost certain that she is wrong about separation being the answer - separation does not preclude poverty. People and capital are still perfectly capable of abandoning one region for another, even across borders.
On the currency side, I think there's a bit of a trap in that having a smaller currency could usually be helpful but having the most important currency is even more helpful. Like, Italy would be better off with it's own currency than with using the Euro, but would be even better off if the Euro some day replaced the dollar as the worlds reserve currency. That would create incentive to plow on hoping to eventually take the number one spot.
Interesting stuff, and I love TDALOGAC, but doesn't the city economics thing fail empirically in a pretty obvious way? In the US, New York, Los Angeles, Phoenix, Miami, the San Francisco metropolis, Atlanta, and various other cities all seem to be doing very well. And cities do specialize in different industries to some extent and trade with each other, much more than countries trade internationally. This all basically seems to work well, which Jacobs' theory would predict is impossible.
Similarly, in Germany, to my limited knowledge, Berlin, Hamburg, Munich, Frankfurt, and so on all seem fine.
So, I think it's an interesting lens. Yes, cities should be a more important unit of economic analysis, and they need to produce something valuable to prosper. But in fact they do prosper, and Jacobs' analysis ultimately fails pretty badly.
I don't think it's just a few. I think the average US city is doing at least as well as the US overall (with rural areas doing worse). Jacobs' theory just doesn't fit the data very well, especially the part which claims each nation has to reduce itself to a single city. If the theory says unicorns don't exist, but there are lots of unicorns running around, you basically have to drop the theory. Disproof by counterexample.
I'd agree with Breaker and ignore hand wavey data people have not looked as as 'evidence' of anything. The small and medium cities are doing quite badly across most of the US outside of the large cities and even many of those are doing quite terribly for the common person. Looking at stock markets or rental costs going up as a 'good thing' is an elite's point of view pushed by billionaire owned media whose millionaire talking mouths tell us those things are good. Rent going up is in fact bad for a commoner.
If one looks at the real data of the various counties which have gone bankrupt in various ways and blue collar jobs which pay well having gone the way of the dodo, then they can see how these places are struggling. More than half of the US is desperately poor, unable to endure a $500 unexpected bill and living paycheck to paycheck. The 'richest nation on the planet' is filled with almost nothing but poor people and this is somehow not obvious or not something the lites care about as it doesn't' bother them where they live in isolated rich enclaves.
The recent bruhaha about the decline of San Fransisco and LA are only catching attention or surprise from the elites because they can actually observe this as they drive into their silicon valley offices and broadcast their message through the loud channels reserved for their voices for everyone else to hear what they think, want, and fell about any given topic. Meanwhile Any rotting midwestern town fallen into ruin and drug addiction could have told you about what it is like to see so much homelessness, crime, addiction, and poverty decades ago.
Your two examples can be explained by the fact that the USA and Germany have good federal constitutions. There may be a lesson on fractal government structure lurking behind all of this. Maybe a country should have a federal structure only if it has a set of specialized cities as described by Jacobs.
Thanks - this is great! I still have somehow never read Jacob’s, despite being a huge fan of urbanism generally. I’ve seen her ideology as being most closely tied to that of Friedrich Hayek, who is usually thought of as a libertarian of sorts. I hadn’t heard as much about the rest of the economic and political work of hers that makes this even more clear than Death and Life.
I always think that cities are an underappreciated unit of analysis, and nations are an overemphasized one. I would have thought there are better ways to make unions work (and that the EU has an interesting mix of unity and laxity that avoids some of the problems she mentions).
In this view and in realty, the endless outsourcing and neoliberal pyramid scheme style capitalism has indeed impoverished and hollowed out the economies of western nations where these ideas were applied. A growing National economy with a rising gdp does nothing and tells us nothing useful about the direction a nation is going.
I’d rather be richer in a flat economy than poorer in a richer gdp. Wealth concentration is extreme and wages have been flat in a permanent recession for workers in almost all places in the USA for over 50 years. Forget gdp as your city and your job prospects crumble. Who cares of so,e billionaire gets minted from your old job which was outsourced to China. or mexico? Some rich guy got richer in New York or London, and we should what? Celebrate from our impoverished hovels as all the wealth is extracted into the stock exchange? No thanks. Any economist priest will be happy to tell me ‘it doesn’t work that way according to my religion’ but it doesn’t matter what those dog mouths of the elite say or think, people know their lives are much much worse and getting worse still as their cities crumble due to outsourcing.
Things which are objectively bad for common peope such as National disasters, wars, and financialisation where wealth is hyper concentrated into non productive Wall Street hands into soaring stock markets divorced from reality…are all in fact very very good for the gdp numbers. This false image and the ideology and cult of economists with their high priests in the central banks who issue decrees out of one side of their mouth and praise the non existent free markets out of the other side of their mouths are nothing but a self serving ideology and cult of kleptocracy and plutocracy to take from everyone and give to themselves.
The rise or fall of gdp can mean many things with a lot of them being bad things for regular people. While a cities focus is seemingly far superior, it is not fool proof either, but is a far better indicator of true prosperity for the common people. Sentiment, scale, interconnectedness, and the concept of feedback in general works better at a smaller scale. You don’t need a think tank to run polls which are framed to support their ideology to run a city, the sentiment and state of affairs is clear enough. One can only be so out of touch and blind to the streets they live on.
I’d say the failure of modern cities has to do with the extraction and the isolationist practices of the elites who run them from afar. No longer do the elites run businesses locally, go to school or university locally, or even live locally except in extremely isolated elite enclaves. Funny that…the poor in ghettoes and the rich in enclaves. When you cut off true feedback, you ruin everything.
What we have now is rampant cannibalism and the war of cities and powers. Forget National horses, nyc is at war with Detroit and it won the war. The most corrupt places such as New York wield National taxes and power to steal, and extract from other cities. Nyc is a vampire city which has consumed other cities and disrupted the virtuous prosperity loop of import replacement. Now we see cities like Detroit were taken over by stock markers, a most vile creation, and the wealth from Detroit was extracted.
Your well paid blue collar job and rich import reducing economy was stolen and turned into a long forgotten bonus or stock bump for some uncaring fsr away elite in nyc who have a great reason and academy of ideas to explain to you why you should be happy they stole from you and accept it was a ‘law of economical thst they take your prosperity and you suffer. The moment a cheaper mine to strip became an option, it was taken. Far away from the city minded elite of Ford who realised the simple idea that he wanted his own workers to be able to afford the cars produced locally.
Globalism is a worse cancer than nationalism and has destroyed the foundation of prosperity. Jacobs may not have out it in such blunt terms, but this is the simple and easy to observe truth. Prosperity is based on your local relationships. The jobs you can get around you, price of the house down the street or the cost of groceries or the crime rate in your neighbourhood are what makes life good or bad. Not the far flung idiotic data on National rental price trends which mean nothing as your city and suburban can be doing something else entirely.
So, the reason the "conurbation" became Toronto instead of Montreal is like this.
Before the war, Canada had been conceived as basically a British empire resource extraction zone. It did undergo fits and starts of independent industrial and commercial development, but Canadian elites generally preferred the resource extraction model and extensive rather than intensive growth. Economic development lagged and Canada, while it continued to experience mass immigration, actually needed the immigrants just to maintain the existing population levels given outflows to, mostly, the United States.
After the war, and especially after the Suez Crisis, it was obvious to everyone that the extractive development model was at an end. (Note that it was NOT extractive in terms of extractive institutions, except of course in our apartheid-like Indian Act ghettoes. We had a relatively clean system, but it was like that of Montana or Alaska today, only kept clean from the outside pressure.) So we had to restructure our economy, which meant a lot of stuff closed, a lot of stuff opened, and there was just a need to do big reshuffles of corporate structures anyway, including of physical corporate office spaces.
Simultaneously, Quebec was undergoing a revolutionary transformation akin in many ways to the American Black struggle that was occurring, including in the bad ways, such as inner city disorder and corresponding "English flight." Even down to Jewish businesses being driven out or boycotted as oppressors, that kind of thing. People were looking around at New York City, at Paris. The world political system as a whole just seemed very unstable. Decamping a few hundred miles up the St Lawrence Seaway to the shores of Lake Ontario just made every kind of sense in the world. Actually, the corporate headquarters that are even left in Montreal are mainly state-owned enterprises; quasi-state-owned-enterprises; there under some sort of semi-corrupt regulatory deal; etc. Something like Ubisoft Montréal, pbuh, is much more the model for development in that city going forward.
As far as I know (both from reading Cities and the Wealth of Nations and from reading the review here) Jacobs never discussed the economic literature on optimal currency areas. That's probably one reason why her work hasn't received a lot of attention from mainstream economists. To convincingly argue that each major city should be it's own currency area, you have to understand the case for believing that optimal currency areas are larger than that. If Jacobs never even tried to understand the counterarguments to her position, it probably made sense for mainstream economists to ignore her.
Something about the idea of moving towards the city state seemed wrong to me and it's borders. The problem is borders. The US has several cities that are fairly equivalently nice places to live and you can fluidly move between them without worrying about immigration and work visas. That's great for wotkers. What if you're not born in LA but you want to make movies? What if you're born in LA but want to do Biotech? Mobility is great for talented people with specific passions.
Your own country can be clever about allowing the immigration you need to get access to passionate, talented people from elsewhere, but that can't guarantee your own people will be accepted elsewhere on similar terms. This is why Brexit felt like such a loss for people in the UK: they lost access to vast swaths of opportunity.
Worse, immigration is hard for democracies because so much of what makes democracies functional depends on the collective power of voters, but non-voters don't have power. As someone who dealt with marriage-based immigration in the US I can confidently say that most of the harm is not maliciousness but rather simple bureaucratic bitrot thanks to a structurally-guaranteed lack of supervision by voters. The bias towards big countries or supernational entities like the EU could come from the tendency of democracies to let immigration get annoying.
Some sophisticated global treaty on the right to immigrate could make it easier to contemplate secession: it would allow the antifragility benefits of Brexit without the heartbreak.
This states that import substitution industrialization has "approximately nothing to do with" import replacement, due to the first being a policy and the second a (possible) phenomenon, that's fine, but it does seem to me that Jacob's argument lends some credence to the policy.
If "import replacement" is indeed such an indispensable path toward growth and we can expect it to be difficult for especially undeveloped places, it would seem like interventions to encourage it would be a natural step. Not "draining away funds" and separatism seem considerably more round-about methods.
And just fyi, the evidence against import substitution industrialization isn't nearly as strong as it may seem, it likely only coincided with the debt crisis and it's not as if rejecting it for completely free trade is the undisputed path toward growth, the story is much more complicated. For an actual economist, look to: https://rodrik.typepad.com/dani_rodriks_weblog/2007/08/does-import-sub.html
Full political separatism seems like a very dramatic solution for the problem she identifies. If the problem is having a shared currency, why not just stop having one? It wouldn't be that inconvenient either, in my experience modern payment networks can handle foreign currencies at low costs and with very little friction. By contrast full political separation introduces a myriad of costs and frictions that are worth a lot to avoid. And hard as it is to imagine every city (or state, or province) issuing its own currency, it's surely much easier than to imagine every city (or state, or province) becoming fully independent.
For people who like this sort of thing, ie books that care more about intellectual rigor than reaching the “correct” conclusion, read Bertrand Russell’s _The Practice and Theory of Bolshevism_ (1920).
It’s kinda amazing how much he got right so early — and the reasons he got it right are especially important given the double-think one is expected to engage in as part of Woke.
"But Detroit exports might not go down in the first place if their currency is not being inflated by being part of a larger currency that's highly in demand, right? Like what happened to manufacturing in the UK after finance got big."
Right, that's Dutch Disease. Norway parked their oil profits in a sovereign wealth fund, which has stocks and bonds and other financial assets that are supposed to increase in value over time, and their currency stayed relatively stable and they didn't have this problem. In your proposed UK situation, the countryside and small cities have a different currency than London, and the value of the London Pound increases when their financial services become more in demand, and this is deflation ( because prices are going down). Deflation is what happened to bitcoin, and everybody goes nuts about the London Pound, saying to buy and hold. Londoners don't want to spend their LPs, because the price will probably go up, so they start to treat the LP like a financial asset, and use something else, perhaps British Pounds, as their day to day currency for transactions. Eventually the bubble pops, etc etc.
Alternatively, London could implement a massive stimulus plan while the London central bank eases quantitatively. This would counter deflation and hold the currency value steady. Entrepeneurs will borrow money in London and start businesses there, attracting employees from the countryside, and hollowing out manufacturing, which is the same result as with a unified currency.
The main point is: currencies should fluctuate as little as possible, while financial assets can vary. If you achieve stability, then the differences between currencies are mostly fictive and they're just different denominations of the same thing.
"Internal devaluation is a lot harder than an exchange rate that automatically adjusts." From psychological and political perspectives, you're right that there's a huge difference, because if your nominal wages are steady then you can pretend nothing is happening. From an economic perspective, your real wages have decreased either way.
"But might it not be better if the pain is diluted among all of Detroit rather than concentrated into one specific industry?"
... maybe? ? It's not obvious to me either way. I guess high interest rates would hit construction, and domestic car sales, and decrease entrepreneurship, and impose austerity. The effects of high interest rates are not spread evenly. Are they better or worse? I don't know. Maybe you could say that a Detroit Dollar with high interest rates would keep Detroit together but stagnant, while the US dollar with low interest rates would disperse Detroitians to areas with more opportunity. That sounds more like a tradeoff and matter of preference, rather than the Detroit Dollar being a win-win.
This reminds me of an essay by a contributor to Palladium Mag who argued that a federal government only works for nations with powerful cities (which in Jacobs terms, would be cities with regions), citing that for example New York attracts finance, Seattle attracts some high tech, and so on. The same happens in Germany, especially with Frankfurt on finance and the south with automobile industry.
Maybe nations should periodically redraw regional borders according to city regions and get separate statistics on them.
People get extremely defensive about this when you want to apply it to the United States, even non-US people are convinced that the only thing preventing the outbreak of world war 3 is the metaphorical boot on the throat of the the rest of the world that the US has. I contend that it is in fact the other way around: if the US broke up then wars and military spending would decrease around the world.
Pretty much the only reason Quebec and indeed other regions on Canada like BC and Alberta stay together is because of the threat that the United States presents. If the US broke up then Quebec would be independent within a decade at the latest. Sure, maybe the US launching a hot war against Canada is unrealistic but if Canada was split up into its Provinces then it's likely that they will be slowly absorbed into the US. Some might say that this has already happened. It's a matter of degrees really, but Canada staying united slows down and limits that process.
There is an optimal size for countries, very roughly more 5 to 50 million people (but it depends a lot on local conditions, like density and natural borders). Every town having its own currency isn't optimal and I'm sceptical of every city too. There is a trade-off between the inefficiency of a sprawling bureaucratic empire and a small town that isn't able to generate sufficient specialisation of its population.
It's hard to say what the optimal size for a state should be but it's clearly neither one world government nor Pitcairn Island (pop. ~50). It's somewhere in the middle, and for my money I'd say 25 million people. Plus or minus to fit into existing geographic and demographic zones.
One thing is for absolute sure though: the existing system is very sub-optimal and it's hard not to think that everyone who supports it (which is most people) are hopelessly biased, somehow thinking that society has reached perfection even though there are new countries forming every decade.
One only needs to look at Iberia to see the absurdities. It contains four sovereign states: Spain, Portugal, Andorra, and Great Britain and Northern Ireland (Gibraltar). A large section of Spain speaks Portuguese (Galicia), somehow everyone thinks Andorra being independent is okay and perfectly viable but Catalonia is not okay. Spain protests British control of Gibraltar mightily while brazenly defending its two colony cities in Morocco.
Redrawing the world's borders into better sized, better optimised states (absorbing some, like Monaco and Djibouti, breaking up others like the US and China) is the single best thing that can be done to improve the world. It would get every sovereign state on an even footing and end (almost all) wars. And most of all it would massively increase trust levels around the world, greatly boosting efficiency (lawyers—AKA trust-substitutes—are expensive).
Interesting ideas. I have added her books on my list. I am not persuaded she is correct, however. It appears you can explain the decline of cities by IQ and how agglomeration effects appear to snowball up to a certain level.
Absent agglomeration benefits, I am skeptical the relative prosperity of today would be possible.
Some thoughts on Jacobs generally. In terms of "urban planning" she has a real bad case of "metropolis brain".
Her work is full of ideas and thoughts on urban development that are great for Manhattan Island, and stupid for Atlanta or Denver, much less Green Bay.
It seems like this has also bled over into her reading of economics. Even my wife who is generally all in for her sort of woo, doesn't find it particularly compelling.
In particular I find her contrast between "planned areas" and "organic growth" pretty disingenuous. Almost everyone there is "organic growth" was once a "planned area". It is just not a distinction that cuts of lot of ice in reality. Most places are initially developed according to some specific plan.
And the lovely organic neighborhood you love in 2010 or 1950 was once a planned development 50-100 years before.
Additionally, the hatred of the big urban renewal "projects' she helped spearhead, sort of just completely ignores that they were a solution (and an effective one) to the issue of favellas/shantytowns which were absolutely a feature of the 1930s US.
So you have these housing projects built to solve a problem. They solve it. And then they get trashed because they didn't solve a bunch of other issues (which were serious problems, but just weren't part of the initial scope).
You mean to tell me this giant warren of apartments we built to replace the favellas and provide better more stable housing for their residents isn't as functional and healthy as a 50 year old neighborhood? Who knew!?!?!
The case for separation of Norway/Sweden seems a bit thin to me. Maybe it was a good idea for them politically or socially, but the economic case doesn't hold - at least as presented. Here's an expansion of that OurWorldInData graph, adding in Finland and Denmark to give us an idea of what else was happening regionally:
Everyone experiences the same drops for the world wars. Everyone seems to rebound about the same way. (Except Finland in WWII, oddly, which was directly invaded by Russia and a major source of fighting, but whatever.) Nothing exciting happens in 1905, nothing is different for two countries that doesn't happen to the others. If you're seeing a signal in the noise on this graph, it's because you're squinting hard enough to fool yourself.
When I read the description of Jane Jacobs, erudite, no higher education, engaging writing style, I was reminded of Gershon Legman (although they differ in many other aspects). It appears they were high school classmates in Scranton.
I find this compelling, but I also find it tough to square with the clear existence of the Northeast corridor/megaregion/acela region. If nationhood is imposed from the top by military and political concerns, the Northeast Corridor's status above it's constituent cities, but below it's nation suggests that there is more to the wealth of nations than just cities.
I'm getting to this very late, and only have undergrad econ courses for expertise. But I was left pretty confused on the whole "stagflation as default" and "stagflation as mystery" thing.
What I learned (this was just undergrad!) is that the correlation between inflation and unemployment is dependent on the *cause*. This wasn't obvious in the 70s, but is pretty straightforward now, and fits with the theory.
If the demand curve shifts, inflation and unemployment are inversely correlated. This is hard to do without pictures, but if you know the econ 101 supply/demand curves, imagine the demand one moving to the right (this would represent some kind of stimulus). More people want the same amount of stuff, so producers can charge more (inflation goes up). But also they're producing more, so they hire more (unemployment goes down). And eventually they hit full employment or whatever, so they just need to raise wages, and you end up in roughly the same place for purchasing power -- the costs all went up, but the wages went up roughly in proportion. In the inverse case (the stock market crashes, people lose their savings, so demand shifts left), costs go down, but you're producing less so unemployment goes up, yada yada yada.
But if the *supply* curve shifts left (let's say, by oil shocks in the 70s), the correlation is reversed. There's less to sell, but demand is static, so prices go up (inflation). At the new equilibrium, less is sold, so you need fewer employees, so unemployment also goes up. And the labor market hits a new equilibrium where wages stay the same or go down (stagnation). Ergo, stagflation.
This is obviously the idealized econ model and obviously these things don't respond exactly this way in practice, but my point is the theory holds up, there isn't some stagflation mystery.
On top of that, stagflation means that overall purchasing power goes *down*. It can't decline forever; old society can't be in a perpetual state of stagflation. Old society is just plain old poor -- purchasing power isn't going down, it's just not very high.
What's confusing to me is like...I assume Jane Jacobs knows a lot more about this than I do? So I'm not sure if I'm misunderstanding, or if the terms meant something different than how I learned, or if the modern understanding of what causes this is last-20-years recent and this was a big mystery then that's mostly been debunked.
Contra Jacobs: She says "So Detroit doesn’t get the signal that it should buy less stuff from other cities and replace the missing imports with local production. Instead, it just declines." But that's not true, Detroit *gets less money*, and as a consequence it imports less, which is called decline. And in default, labor becomes cheaper making it profitable to transfer some production from elsewhere to Detroit.
Also, during most of history, really until Nixon took the U.S. off the gold standard, most currencies were pegged to precious metals, so the fact that different cities used different coinage was not significant. (The currencies that were unpegged usually became inflated very quicly and ceased being the basis of trade.)
I think a good example is the euro. It was widely understood at the time that the euro meant that different countries had to have the same monetary policy. And during the European debt crisis, the problem with that became manifest.
In the United States we deal with this via "fiscal transfers"; the parts of the country doing well subsidize the parts doing poorly via the federal budget. There is no official fiscal transfer mechanism in the EU. But I recall during that crisis commentators noting that the Greek government debt was small enough that it could be bailed out without problems, and that there were strangely large and growing balances between the ECB and the national central banks that *could* be interpreted as the Bundesbank financing the Greek government, despite Merkel sternly insisting that the Greeks had to pay their own way.
And the euro hasn't broken up. I suspect that in practice, the costs of differing currencies are greater than the costs of straitjacketing multiple economies into one monetary policy.
This is a great review of two great books. To this contrarian observer, however, a few counterexamples occur, possibly undermining some of Jacobs’ argument.
The reviewer brings up Germany under the Holy Roman Empire (which, as we recall, was neither holy, Roman, nor an empire). It makes a great case study. The entire region was a poor backwater for most of its history, despite being fragmented into a multitude of little states. Its rise only began after the Bismarckian unification, and what a rise it was - Germany went from being one of the poorest regions of Europe to one of the richest in under 30 years. Furthermore, wealth did not become concentrated in the capital city - instead a significant number of regional centers was created, each making large contributions to the imperial economy. Now, it is true that these cities predate the empire - they were the capitals of predecessor states - but given Jacobs’ argument as I understand it, they should have atrophied in favor of Berlin. This obviously did not happen - in fact, Berlin never even became the wealthiest city of the Reich. This structure continues to this day, and while Germany is certainly draining wealth from the rest of the EU, benefits are distributed rather widely in the country.
Germany is not the only example of a multi-city polity. The United States, for one, has several regional conurbation centers, and a capital that is not only relatively economically unimportant but is mostly a receiver of transfers from the rest of the nation. For a time, New York did threaten to become the sole economic center, but the threat was not fulfilled. For this we can perhaps thank old George and his insistence on a Southern capital, but not solely. Just as significantly, the rise first of Chicago and then Los Angeles and the Bay Area appear to fly in the face of Jacobs’ line of argument. Similarly, China, despite being a unified empire for most of the past 2000 years, posesses a number of regional urban centers, some of which, like Shenzhen, are of very recent origin. Once again, the capital is far from the richest city in the country.
Another quibble has to do with Jacobs’ thesis regarding automatic exchange-rate-based economic stabilization is that it only functions if the currencies are commodity-based. Fiat currency disrupts the relationship between surpluses, deficits, and rates because governments gain the ability and the irresistible temptation to create money out of thin air, distorting the feedback mechanism. Furthermore, resulting inflation only enriches asset owners, mostly at the expense of producers who are thereby impoverished. It is such an important factor, as It seems to me, that money-printing ought to be included among Jacobs’ transactions of decline. In point of fact, a significant plurality of empire dissolutions, barring defeat in major wars, did result from significant currency debasements.
Finally, it should be mentioned that a multitude of regions does not necessarily imply diversity of currencies. Today’s global economy is essentially a dollar zone with other currencies struggling for relevance. This, according to Jacobs, should create one-way wealth flow to the issuer, the United States, which is clearly not occurring. In fact, the opposite seems to have been the case - the USA first became wealthy in a much more multi-polar world.
All in all, Jacobs’ argument is mostly convincing but the above issues would have to be taken into account to elevate it to a coherent theory.
"Small size also allows more diversity in cultural and economic matters, and here Jacobs waxes philosophical, pointing out that favoring diversity over uniformity is a recent, post-Enlightenment idea that has not yet been fully embraced in politics.
"We can see analogs everywhere. Europe, split into numerous small countries from the Middle Ages onward, became far more advanced than China, which has been unified more often than not. The city-states of ancient Greece and Renaissance Italy are seen as golden ages of Western civilization, even if they weren’t part of larger political units and therefore constantly went to war with one another."
The kind of diversity that is good in these examples isn't multi-cultural, local diversity. It's basically the opposite: regional isolation, preventing the free mixing of people / tech / arts / languages from different regions. Essentially, segregation. It's an evolutionary phenomenon, displayed by the law of island biogeography, and by the rapid rate of change in dialects in mountainous regions, and in earlier times when transportation was slow. This isolation leads to faster evolution because it prevents the fittest organisms or technologies or music or whatever is evolving from taking over everywhere, which is called premature convergence, and is a huge problem in genetic algorithms. I don't have time to explain what that is; presumably you can google it.
Thank you for this extremely interesting discussion of valuable insights from Jane Jacobs, which tend to be overlooked. One of my own complaints about economic data for years now has been "USA" aggregate data, which is about as helpful as "EU" aggregate data. For example, when discussing property price booms and busts, the USA has 3 distinct types of urban area (identified by Glaeser and others) with widely differing responses to demand inputs for housing. Highly elastic housing supply in many cities, leads to a boom in construction without excessive price inflation. Unfortunately, the urban areas with inelastic housing supply and hence price volatility, are also significant. It is much too complex to discuss the range of implications here, but they are many. This would be a very good example to study, of the differences between cities that evolve their own policy directions and achieve outcomes that are beneficial to them and could be emulated by others.
Just one more point I would like to make, that you might think worth considering, is the difference between positive-sum wealth creation, and zero-sum wealth transfers / economic rent. This is an important factor in the big picture you are discussing. "CITIES" can actually be generators of "primary economic income" from actual positive-sum wealth creation like manufacturing, but the attitudes of elites considering "urban planning" tends to despise these kinds of cities, and regard rent-seeking, wealth-transfer benefitting cities like Global Finance epicenters and Capital cities as the model "because they generate wealth". The tall buildings, apartment living, subways etc are mistaken for "the way to urban success" in a kind of Cargo-cult mentality, while the "urban sprawl" of "urban" economies that actually create wealth, positive-sum, and provide a wide range of opportunities for wealth-creating small entrepreneurs to make a modest start, is despised. Ultimately, it is the latter kind of urban economy that has driven the process of wealth creation that has been spun off into the havens of the economic rent-accumulating sectors in places like New York and London. These latter successes owe a lot to an increased share of wealth in the overall economy, having been captured by banking and finance, for example; or by an ever-bloating administrative State - none of which is good for the common interest.
Germany is an interesting exception in that it has a "system of cities" none of which is the dominant economic rent-seeker from the rest.
Aligning regulations and jurisdiction is a headache but a solvable one
Maintaining peace is a bigger problem, it should be analyzed from the perspective of modern warfare. My guess is that there nation-scale still makes sense, but progressively less so
There have been times/places where everything was city-states (classical Greece, renaissance Italy, the Holy Roman Empire, Sengoku period Japan), and they were not good times/places to live.
I don't know how strongly that argues against what Jane Jacobs actually said, but to me it's a pretty strong argument against the "everything should be a city-state" point that the review suggests she almost said.
Renaissance historian Ada Palmer has a nice essay touching on the difference between a cultural golden age and a period you'd necessarily want to live.
https://www.exurbe.com/black-death-covid-and-why-we-keep-telling-the-myth-of-a-renaissance-golden-age-and-bad-middle-ages/
I'm a bit wary of trusting a post that makes dramatic claims such as a gradual but severe drop in quality of life over the 1200s-1500s period without sources.
That's pretty standard history though.
[citation needed]
My fave is The Great Wave by Hackett Fisher who covers the period along with others. You could try The Third Horseman or anything else on the Black Death and its relationship to the Renaissance.
I've never read anything about the period to the contrary... as one instance Tuchman's "A Distant Mirror" drives the point home across every dimension that the 14th century in Europe was just a bad, bad time.
The 14th century is generally not considered part of the Renaissance.
I think the relevant question would be "were they better than contemporaneous, larger, more centralized entities like Persia, etc."
Comparing the city states of ancient Greece to modern nations is not going to be very informative.
As the reviewer him/herself said, the city-states were constantly at war against each other, with obviously negative consequences for their citizens' quality of life. If you lived in a large state such as Persia, you might be oppressed by a despot, but you might also be less likely to be killed in battle or starve to death when a rival city-state lays siege to your city-state, so... the centralized states might come out ahead on the less-likely-to-die-a-brutal-death metric?
Most everywhere was constantly at war with each other back then. It isn't obvious to me that citizens of Greek city states were more likely to die or starve than Persian citizens. Life sucked back then.
I could tell an equally compelling story as you have just outlined bout why the Greek city states were better and it would be just as unsupported by evidence.
-edit- This sounded a little more aggressive/snarky than I intended. What I was trying to convey is that that's certainly possible, but so is the converse. Finding out what the actual answer is would be interesting.
No worries!
You are correct; my post was pure speculation. On second thought, you're right that size does not guarantee stability/non-violence. China has been huge for multiple centuries, and it's had its share of violence due to both rebellions/civil wars and Mongol invasions.
What we need is a Steven Pinker-style analysis: was the rate of violent death per capita in ancient history higher in large nations/empires or in small city-states?
I think perhaps Greek cities and Sengoku era Japanese cities were sufficiently different (i.e. not quite technologically able to have the level of trading and manufacturing centers that Jacobs considers important for the city dynamics) than the more modern city states that Jacobs is thinking of. But yes, starting perhaps with imperial Athens, you start getting the city-hinterlands+trade dynamic (rather than just a Greek-era city with its surrounding farms).
To the question of "quality of life," I do think however that there is good evidence that Renaissance Italian city states (especially Venice), the free cities of the Holy Roman Empire (particularly in the north) and the essentially city-provinces of the Low Countries DID in fact have higher quality of life (and better along a lot of other features) than not only the primarily agrarian/herding populations of everywhere else, but the cities of the large empires.
To specifically the question of how much violence, my understanding of the Greek city-state era wars is that they were constant but not very destructive - they didn't have good siege equipment and most cities had walls, and so the "wars" were often decided usually in 1 day somewhat-ceremonial battles with relatively low casualties (and no longer campaigns where disease/starvation would set in, until things like the Peloponesian War), and didn't usually result in destruction for the losing city.
I am pretty sure that simply by definition, the existence of a city: lots of people living relatively densely together implies a lower level of violence that what researchers/archeologists theorize/see in pre-city life, which seems to have have rampant intra- and inter-group violence. The process that allows a group to have a non-currently-on-fire city probably necessitates a central (within the confines of the city anyway) authority that suppresses violence and certain cultural (self-domestication) changes to tolerate that. I don't know if Pinker or other similar researchers have compared urban to non-urban violence, the #'s I've seen are usually (no doubt to Jacobs' dismay) at the nation-level, but you might be able to proxy by comparing countries we knew to have relatively higher urban populations.
That is the complete opposite impression of city-state warring that I've gotten from the writing of Bret Devereaux. Even if your city walls repel all attacks, a war is destructive to everyone and everything around it, meaning the undefended villages of the peasantry and their farmland. Not just from enemy forces, but (and perhaps especially) from defending forces as well.
Is that what we need? As mentioned, city-states and empires in ancient history are not a good comparison for the modern world. We seem to have gotten pretty good at not going to war with each other as much. Would that change if we go back to smaller nations, now that the mutual benefits of peaceful trade are obvious to most? If not, that undercuts one of the largest downsides of city-states.
We've got good at not going to war with each other as much because we live under a (mostly benevolent) hegemony. This requires a hegemon, which must be a large state.
Just to flag: tracking relative death rates between urban and rural areas from violence is a problem that is hard even today. Entire teams of political scientists have devoted their careers to this.
Why does this happen? Urban areas are more likely to have monuments, histories, chronicles, newspapers, etc. to record news of deaths
There is also the theory that the reason European weapons and sailing technology eclipsed Chinese, was that European countries had been in a state of conflict with each other for centuries, spurring competitive development, while China had recently entered an era of peace and had no peer rivals until the Europeans showed up.
So while the peace of the Ming dynasty might have been nice for the people then, in the long term it disadvantaged their descendants.
Or so that theory goes.
True, but the states in this context were not necessarily city states. The biggest gap in European warmaking came with Napoleonic wars and absolutist nation states. At the same time, the theory claims that the Chinese were able to keep pace when they had two or three larger states infighting, e.g. Song vs Xia vs Liao
Weapons, maybe; sailing technology, not so much, because even in a divided China most warfare would be land-based and so wouldn't spur advances in navigation or boat-building. I suspect the real reason why Europe pulled ahead in sailing terms is simply that foreign trade was more important in Europe than in was in East Asia, where merchants were generally frowned on and international trade was conducted in a limited manner under the pretense of "gift exchanges".
I believe the story is the Chinese intentionally abandoned building big ocean-going vessels because rising merchant economic and political power posed a threat to the existing elite:
"From 1405 to 1433, large fleets commanded by Admiral Zheng He – under the auspices of the Yongle Emperor of the Ming dynasty – traveled to the Indian Ocean seven times. This attempt did not lead China to global expansion, as the Confucian bureaucracy under the next emperor reversed the policy of open exploration and by 1500, it became a capital offence to build a seagoing junk with more than two masts.[18] Chinese merchants became content trading with already existing tributary states nearby and abroad. To them, traveling far east into the Pacific Ocean represented entering a broad wasteland of water with uncertain benefits of trade."
https://en.wikipedia.org/wiki/Chinese_exploration
Also Europe has wildly more coast and more usable coast for seafaring than China. China has mostly river based trade. Europe has an insane amount of coastline and invagination.
I don't know if it is still en vogue, but the explanation for why China's development didn't keep up with the industrializing West was a 'high level equilibrium trap'.
Basically, China's production systems were advanced enough without significant mechanization, that there was no benefit (and therefore incentive) to going through the early awkward stages of industrialization.
But I think that centralization still would have had to play a role. In a more decentralized environment, -someone- would have had the right conditions and made the jump, and then everyone else would have to do so too to stay competitive.
I think that is too simple. Take Germany before 1871, which the review brings up. It consisted of a huge number of tiny states. But those were not constantly at war with each other. At least not more than big states were at this time.
But it was a severely underdeveloped region of Europe. And then quite suddenly, after the unification of 1871, Germany got a huge and long-lasting economic boom which brought it among the top industrialized and powerful European nations within just 40 years.
The problem was not that the petty states were at war with each other. It's that economy of scale was impossible in petty states, that you had to cross dozens of borders with customs within 100km. And don't underestimate that you had no unified regulations. Apart from the currencies, there was no unified time. You had hundreds of different "time zones", and train rides were ridiculously complicated for that reasons.
Germany was technologically advanced but politically fragmented. It was noted for its innovations in mining, manufacturing and materials. The lack of political unity held it back. There were dozens of tolls along the Rhine raising the cost of shipping. Napoleon reduced the number of administrative districts from over 240 to a bit over 90 when he invaded.
This is what I was thinking while reading the review. It feels like Jacobs is comfortable leaning on contradictory ideas so long as she can think up an anecdote in her mind to tell a just-so story, but doesn't spend much time on counter-examples. Germany is a great example of when unification worked wonders. The US left the British Empire, sure, when there was a 6-month communications delay, but seems to have thrived in a nation covering a whole continent after that. It seems to me that her ideas about nations were already empirically wrong when she wrote them.
I'm relistening to Mike Duncan's revolutions podcast and especially the Haitian revolution makes me wonder how much would be different if there had been Twitter and Email during the French Revolution
Excellent podcast.
How many of the petty states were large enough to generate a Jacobsian "city-region"? Bavaria, surely, for Munich. Maybe Hanover? Wurtemberg, centered on Stuttgart? I don't know enough about German geography or municipal history to say.
Don’t people generally view classical Greece and renaissance Italy as golden ages though? The problem they highlight (particularly Italy), is the threat of larger neighbours; you may not be interested in empire, but empire is interested in you.
Yeah, but at least in case of renaissance Italy, it's because they judged them based on historical artifacts, and historical artifacts were produced by the wealthy and their artist proteges. Once you start reconstructing human health, economy, etc., what emerges is a consistent picture of decline, and the artifacts stop being a symbol of flourishing, and start being one of wealthy elite siphoning all resources and squandering them on vanity projects (and war).
The Netherlands were no bigger than Italian states when they defeated a much larger Spain and became the next economic powerhouse of Europe. (Nor was, say, Switzerland.) Size wasn't decisive, asabiyyah was.
There is also the fact that Constantinople fell to the Turks only once, so the influx of scholars and manuscripts and technical know how that it brought about was not a renewable resource.
Have you got a source for decline in Italy in the renaissance?
...if you don't mind a book (in particular, one with a final chapter titled "Conclusion: The Fundamental Incompatibility of Market Economies with Long-Run Prosperity"), "The Invisible Hand?" by Bas Van Bavel has an entire chapter on it.
Edit: Now that I think of it, the entire book is essentially one big counterpoint/complement for Jane Jacobs' ideas, as much of it is about the cities' growth impoverishing the countryside and eventually destroying the foundations of their own well-being.
For example - one of the trends, in Italian cities in particular, was their specialization in luxury goods - which amounted to import substitution a rebours - replacing a thriving industry capable of serving the local population with an export-oriented vestige. This makes sense, nominally, luxury goods are more profitable, they justify higher wages necessary for a place with a higher cost of living, etc. It still amounts to de-industrialization and leads to economic decline.
Golden age of what? Culturally, they were golden ages. Politically, they were disasters. Interstate anarchy makes for good fantasy fiction, but it is hell to live under. One of the reason for Rome's success was that it offered allies and even former enemies a square deal, an idea anathema to the ancient Greeks. An extended treaty negotiation lacks the drama of a good battle scene.
Depends on what you're looking for? Slaughter and patronage of high culture is probably not what the man on the street wants.
"In Italy for thirty years under the Borgias, they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace, and what did that produce? The cuckoo clock."
Not sure if I'd choose anywhere else BESIDES classical greece during the time period -- i mean, obviously it would be bad if you were a slave, but slavery was everywhere
"everything should be a city-state". Ideally, yes. Ideally they shouldn't have armies nor even weapons, or anything that saps resources from noble goals.
But it's like nobody asks "why do nation and multi-nation states arise"? and the answer to me is "to protect you against other states".
Yep. There was an essay I read a while back talking about how after the invention of the cannon, small European states essentially became militarily non-viable. In the Middle Ages, castles and walled cities could withstand a siege for months or even years when the only tactics they had to worry about were big rocks being hurled into the walls or tunnels being dug underneath them, and thus a small state could often withstand attacks from much larger ones, but cannons changed the equation for good. As war become more and more of an industrial endeavor over the next few centuries, this promoted further state consolidation, because being able to marshal more resources more quickly became a key to victory.
The world would be amazing if we didn't need to worry about "might makes right" and criminals. Lets just pretend they don't exist!
It seems like one way to ease the lack of feedback to cities that Jacobs points out is a YIMBY-like openness to internal migration. It’s certainly not as effective as currency feedback in terms of helping places, but it seems like it’s relatively effective at helping people: your city is failing, so move to a city that’s not failing!
True enough, but that ignores the stickiness of location. People are really resistant to moving for many reasons, not least of which is the non-liquidity of housing, but also including existing networks of family and friends.
It also doesn't fix the city (city region?). Ideally we would have a uniform spread of thriving, dynamic cities around the globe, not just a half-dozen megalopolis areas and everything else poor resource-extraction areas.
So the Census actually has fairly good data on this! https://www.census.gov/data/tables/time-series/demo/geographic-mobility/historic.html
It varies quite a bit by year, but on average, over the last 10 years, 60-65% of moves have been within the same county. The is lower than I'd thought - I'd have guess 75% of moves were with in the same area.
There is also a data set on the distance people moved if they moved inter county. These are the buckets and the median % for each since 2005:
Less than 50 miles - 40.1
50 to 199 miles - 21.3
200 to 499 miles - 14.5
500 miles or more - 24.6
There is a note in the data that numbers before 2005 are less reliable (not sure why). There doesn't appear too much fluctuation in the numbers and surprisingly, you wouldn't really know covid happened just looking at this data set.
Anyway. It's definitely true that people want to stay in the place they live, but that's not true of everyone who moves. And we have to wonder, if certain desirable cities were cheaper, would more people move there? Or the converse, if certain undesirable areas were less desirable because of lack of support of being in a "good" city-state, would more people move. I dont know. Its an interesting question.
I think the answer to the second question is that way more people would move. We can look at immigration to US for evidence of this. The US standing in for the desirable city state and latin america and other developing countries standing in for the less desirable city states. The answer to the first question is less clear - we'd more city level data before starting to generate good hypotheses.
I think that's an underrated plus for the United States historically. People were more likely to move than jobs rather than staying in their region, although I think geographical mobility has declined over the last few decades.
Internal migration poses a lot of the same problems that migration between countries does. (Ethnic/cultural change, exacerbation of existing inequality, overcrowding, "brain drain" from rural areas or from economically declining cities). This is especially the case in a country like India that includes many different ethno-national groups: mass migration, if it happened on a large scale, could change the ethnic and linguistic composition like Madras or Bangalore. (It *doesn't* happen as much as other countries, probably partly because of the language barriers, which I think is good).
Why do you consider brain drain a problem? To me it seems like an obviously good thing that brains move from where demand for them is low to where demand for them is high.
This was great, it introduced an idea that I hadn't heard of/considered before and that seems at least somewhat compelling. My guess about at least part of why her ideas may not have caught hold as strongly in mainstream economics is a lack of quantitative predictions. Modern Economics (for both better and worse) is built on a foundation of math and quantitative analysis. It's great to have a good idea, but then you need to figure out a way to make testable hypotheses using data you can actually collect. If you can't do that, then you aren't going to get more than a shrug.
But assuming for a moment that this is all 100% correct, it does imply a somewhat depressing conclusion: Human flourishing seems to be self limiting (at least in the rate of increase) due to the combination of the economic reality that smaller, more dynamic entities are what drive growth, but human psychology leads to ever greater agglomeration and centralization. When societies become successful, they are driven to kill the very thing that gave them their success.
I hope she is at least wrong in part, because I'm quite skeptical that we will overcome the psychological part anytime soon.
Tantalizingly, the biggest reasons for centralization were a) language, and b) contract enforcement. If AI solves the first and blockchain the second, small might actually become efficient again....
How will blockchain solve contract enforcement? If you pay me to deliver you apples, and I pocket your payment and don’t deliver apples, how are you helped by our contract being on the blockchain? How about if the blockchain says you own a house but I am squatting in it. Will the blockchain come kick me out?
Don't be obnoxious, that's a bullshit counterargument and you know it.
> If you pay me to deliver you apples, and I pocket your payment and don’t deliver apples, how are you helped by our contract being [recorded by law]? How about if the [law] says you own a house but I am squatting in it. Will the [law] come kick me out?
I have replaced 'blockchain' with 'law' and left these literally precisely the same in all relevant aspects. Enforcement still needs to be done, and is entirely independent of how the system for dispute resolution of contracts functions.
Large polities result (usually) in large homogeneous systems of law for resolving contracts, which means that contracts can be made across long distances and the proper resolution of disputes stays unambiguous. Smart contracts, decentralized or otherwise, can replace this function of large polities.
My point was that you need a meatspace authority that handles enforcement. That means you need a state. Blockchain can't replace it. And what counts as a contract is whatever the enforcement authority will enforce.
Sure, lots of different sovereign authorities could choose to enforce the same smart contracts. They could also choose to enforce the same dumb contracts, or follow the same legal code. I don't see how blockchain is any kind of difference in kind here.
No one was at any point claiming smart contracts, or anything else, would replace the state. City-states are still states.
The comment by Earnest Prabhakar to which I responded (with the argument that you characterized as obnoxious) literally claimed that blockchain was going to solve the problem of contract enforcement.
*You* don’t seem to be making this claim but ‘no one’ is flatly false. Also in *your* utopia of city states - what prevents them from being gobbled up by larger states?
Meatspace authority does not equal "state".
A couple of enforcer bots on a DAO will do
Enforcer bots don't exist, not currently and not in the near term. And they won't have meatspace authority unless the men with guns stand aside and let them go about their business.
If you are saying `skynet plus terminators can replace the state,' well, duh.
Not sure why you're getting such vitriol. Solved is to strong (but then again I would hardly say the current legal framework has solved it either), but blockchain does open up a lot of options around escrow kinds of setups and reputational tracking that are difficult otherwise without a trusted, strong 3rd party.
For example in the apples case they payment can be provably placed on the blockchain in a smart contract that is only released when both parties sign off on the transaction (or in tranches, or whatever other schedule with mutual agreement) or by default if the fail to dispute the transaction. Depending on how we want the incentives to land there could be small cost to dispute or we can rely on reputational effects to be incentive enough to come to an agreement. In the failed case the payment is burned and both parties end up worse off. Or they could also agree on 3rd party to adjudicate disputes (or even several) that could release the funds to one party or the other, etc.
there won't be any physical houses. all houses will be in the metaverse, which itself will be governed through blockchains
Uhhuh.
The kind of responses I've been getting makes me uncertain whether you are taking the piss or really mean this.
HA, if we have a smart contracts then it is impossible for either of us to lose money. We will just write it into the contract that we both come out ahead and the magic of blockchain will make it so!
is there any theory that says language and contract enforcement are what created / is maintaining centralization? On the creation side, seems to me that countries/empires mostly got built through military might, that language only became centralized as a consequence rather than cause of centralized military/government power, and that similarly uniform contract enforcement was rendered only necessary because the unified political power wanted to integrate the economy. As for maintenance, sure language and contract laws are part of what binds nations together, but I'd be hard pressed to cite them as the top 2 pieces of mortar, nor do I think that if you resolved these two everything would just naturally dissolve.
There’s plenty of historical evidence that linguistic grouping (literally “nations”) preceded political union (literally “nation-state”). On the other hand, it is certainly fair to claim that contract enforcement is just part of being a state, not really a cause for union. My point is merely that to “displace” a centralized union, an alliance of city states would need -some- mechanism to provide neutral contract enforcement between them, and blockchain -could- help with that.
Perhaps a better metaphor is that, if the US didn’t have to worry about foreign wars, it would have remained a loose (and squabbling!) collection of independent states. However, once it unified, a (mostly) common legal framework boosted large-scale economic development. The hope is that it might be possible to get most of the economic benefit without the downsides of centralization.
There is also plenty of historical evidence of the exact opposite. More in fact.
Not so. If the EU kept a lot of regulatory unity but abandoned the Euro and went back to small currencies, that would be fine and get most of the benefits. So you can get centralization with economic growth, if you understand what you need.
Saying that (urban, free-market) import replacement has "approximately nothing" to do with (national, government-encouraged) import substitution doesn't seem right. I mean yeah there's an important distinction between the two but they're clearly related...
And both of them are diametrically opposed to the ideas of specialization and comparative advantage.
I can see that there is _some_ sanity to the idea of import replacement. A decent sized city should have e.g. car repair businesses rather than shipping malfunctioning cars to the nearest other city that _does_ have a car repair shop. Shipping costs still matter for some things (and they used to matter far more in centuries past). Having a person "at the scene" makes sense for some things.
But
- Some import replacement is flat out impossible. *Elements* are not distributed uniformly and invariably in amounts and concentrations which are economical to mine. Should New York City try to mine its own copper within its borders?
- Some industrial infrastructure has _immense_ capital costs and makes no sense to duplicate in each city. Should each city have its own 7 nm integrated circuit fabrication facility? Or satellite launch capability?
- Some enterprises make no sense to replicate at all. Should variants of Windows be coded in each city?
The efficiency of specialization is a tradeoff against resiliency and robustness, case in point : a single ship stuck at the suez canal for less than a week had made the entire world shit its pants and prices worldwide starting to rise.
The cult of efficiency goes against decades of good engineering practice, which advocates always leaving slack and safety margins for when the inevitable unexpected happens.
Your points are all somewhat true (mostly just 1 and 2 though), but they are more like necessary evils, not things to be celebrated and accepted, and certainly not things to be replicated elsewhere. They are unfortunate facts of the world to be grudgingly tolerated and worked around.
(1) Yes, natural elements are not evenly distributed. But does it matter ? Do tuna cans have to be made of <element 1> when they can equally well be made of <element 2> ? Is it necessary to use the wood-dependent pencils when your city don't have forests, instead of just pens (which, I assume, can be made out of glass, plastic, metal, most anything that
can contain ink. And I assume ink is not a problem).
I don't know how much the authors (of both the book and the review) look at it like that, but I see Import-Replacement as a gradual and spectrum-ish process. That is, if you start buying <thing> from the country next door instead of from another continent, that's still Import Replacement to some degree. If the cities within a country (or within a language or within a shared culture, because countries are fake as the book says) start buying from each other, better still.
If instead of importing pencils for X million dollars, you instead import pens for X/2 million dollars (because they are cheaper to make, break less, etc...), that's still Import Replacement, you replaced X/2 million dollars worth of what you import. If you have glass/metal factories, you can start manufacturing the bodies of the pens and then fill them with imported ink that only cost you X/10, now you replaced (9/10)X million dollars. Then you can start manufacturing the ink itself out of imported chemical that only cost you X/100, and on and on and on. The natural end state of this is that you manufacture everything from the atoms upwards. You don't need to reach this state, you can stop short at compounds and above, or you can go beyond the atom (manufacture atoms themselves from sub-atomic materials you got from other atoms) when/if the tech gets crazy and transhumanistic enough.
But the point is, the scarce atoms that your land was born without is the only true hard limit imposed on you, most everything else is just how much you are willing to lazy it out.
(2) Those things are usually a sliding scale of complexity. To take your first example, your circuit fabs don't have to be all 7 nm, they can be 50 or 100 or 500. The chip in your fridge doesn't have to be a cutting edge super-duper fucktronic-8000 capable of running GTA V, it just has to be the bare minimum that can run the limited software required of it. So don't build a 7 nm fab, build a 500 nm fab, which is early 90s tech. When you want the latest laptops and smartphones, go for the imported 7 nm stuff, for everything else, stop fetshizing needless electronization and miniaturizing. As a matter of fact, this will actually save you from the cringe-worthy disaster that is the "IoT" trend, where even the godforsaken sex toys have wifi in them. Needless internet connectivity everywhere, needless displays everywhere, needless dog-slow UIs everywhere, "Touch Screen Menus" at restaurants because why the fuck not. All of this is because of how utterly easy it is to electronize something.
As for satellite launches, that's actually an example of (1) not (2) : Most favorable satellite launch sites are at special geographies, like the equator-near USA states (Florida, Texas) and also Kazakhstan (former USSR) for some reason, I forgot the physical reason why but it's something to do with Earth's rotation. Satellite rockets are actually not that hard, they are just ICBMs that never hit a target, their historical lineage makes that very clear. Any country that has developed or bought ICBMs by whatever means or expertise necessary could potentially, theoretically, launch a satellite, if geography wasn't a problem.
But again, how often do you really want to launch a satellite ? It's okay to never Import-Replace something that was never really a noticeable part of your budgetary.
(3) Yes, Windows should be open source, and I should be free to specialize it however the duck I want. Not only each city should have their own version of windows, each **Family** or **Person** should make their own version of Windows, or at any rate should have the freedom to do so. Windows isn't like that of course, which is one reason why it should be thrown in the garbage heap, replaced by Linux, the clearly superior alternative. With Linux, (3) is not an absurdity, it's a truism.
Thanks very much for the detailed comment. It will take me a while to respond.
Thanks vey much!
Yes, the Ever Given jam of the Suez Canal is a good example of the disadvantages of trade. Nonetheless, such incidents are uncommon. Both efficiency and robustness are valuable goals. I, personally, tend to be risk-averse, and would prefer to see more emphasis placed on robustness, but I don't control the tradeoffs.
Note also that locality is not always the more robust choice. Yes, it avoids the hazards of shipping. But other hazards may dominate. Hypothetically, suppose that 10 cities consume widgets, and one widget-stamping machine can supply one city's need for widgets. If production is centralized in one city, that city can keep one spare widget-stamping machine on hand for 10% of their total capital cost. If each city independently maintains its own widget-stamping machine, then keeping one spare machine doubles their capital cost - and they may well decide not to keep a spare. In this case, the centralized "imported" option with one spare on hand is more robust than the local case.
Re elements: "Do tuna cans have to be made of <element 1> when they can equally well be made of <element 2> ?" Does happen, but I think it is more the exception than the rule. E.g. if one needs an unreactive liquid metal at room temperative, one's choices are mercury. If one needs a replacement optical amplifier compatible with the existing fiber optic communications infrastructure, one's choices for the amplifying atoms are erbium. In biology, if one wants to grow a green plant, the central atom in chlorophyll has to be magnesium. If one wants B12 to avoid pernicious anemia, the central atom has to be cobalt. If one want to maintain a healthy thyroid, one needs iodine as an integral part of the hormones it secretes. In each of these cases, no other element can be substituted.
I agree that import replacement is a spectrum-ish process. In the extreme case, one could argue for each individual to be self-sufficient. This maximizes the range of skills that each individual has, and, by the same token, it maximizes the range of skill that each individual _must_ have. "Jack of all trades, master of none." If one pursues autarky on a larger scale - municipal, national, or continental, one allows more specialization and better mastery of the particular skills one specializes in, but increases dependence on people specializing on different skills, with vulnerability to transport interruptions or breakdowns in agreements. You mention, as part of the spectrum, moving imports from intercontinental to intracontinental international, to intranational interurban, to intraurban. Yes, the physical length of the supply chain shrinks with each of these moves, but, again, this requires shoehorning all of the skills required into a smaller and smaller group of people. I'm a bit skeptical of your pen example. Bringing a larger fraction of the cost of a pen into a city doesn't necessarily mitigate the risk of a cutoff of a critical component, even if that component is only a small part of the cost of goods.
Re 500 nm IC fabs: I took a look at https://en.wikipedia.org/wiki/List_of_semiconductor_fabrication_plants and I'm honestly not sure what to make of what I see. TSMC has, as I expected, astoundingly expensive, productive, and high-tech fabs, e.g. Fab 18 (P1-P3), costing 17.08 billion dollars, processing 120,000 wafers/month, and achieving 5nm channel lengths. I honestly wasn't expecting anyone to be running anything with feature sizes an order of magnitude larger, but there are some e.g. Intel's Fab 68, costing 2.5 billion, processing 30,000–52,000 wafers/month with a feature size of 65nm. As I said, I'm not sure what to make of this. An order of magnitude in linear size implies a two order of magnitude loss in devices per unit area. Yeah, the cost to build it was a factor of 7 lower, but it still seems strange that it can compete with a fab with a hundred times its device density. Given that it exists and is still running, I'm not sure what that implies for wanting each city to have a non-bleeding-edge IC fab.
Re electronizing: Why the hostility? I'm not a fan of IoT for household stuff. I tend to refer to internet-connected fridges and thermostats as "hacker-ready". But electronics has its uses. For instance, I bought a really cheap digital kitchen scale that turns out to have part-per-thousand accuracy. Part of this is probably because a cheap microprocessor can internally calibrate a cheap, probably rather nonlinear force sensor and correct for it, and correct for where on the measuring plate a weight is positioned. Why denigrate this?
Re operating systems
I should have been clearer. What I had in mind was each city having programmers who coded an OS from scratch themselves. Why solve a problem that has already been solved by someone else, when the solution can be either cheaply or freely copied? I've used both Windows and Linux, and I've compiled lots of code over the years, but I've never had a need to recompile Linux, let alone modify its source code. Even forgetting a _fully_ local, coded-from-scratch OS for a city and considering just modifications to Linux source code - how often do people really want to do this? If e.g. one changes how 'ls' works - um, do you really want any otherwise-sharable shell script to break?
>Thanks vey much!
You're welcome, Jeff. Please don't take my hostility the wrong way, it's not directed at you, it's directed at the lazy corporations who keep shoving badly secured computers into our devices (which work perfectly good without computers), I hate the kool-aid behaviour and the copy-cat imitation, and I hate that people uncritically see it as "progress!!!" and "more computers!!!" and not as the big big problem it is.
>Note also that locality is not always the more robust choice.
Ok, fair, noted. I do think that locality is always the freedom-maximizing Moloch-minimizing option though. Like, to put it very bluntly, you just open yourself to so much shit when you depend on people. And I hate that the direction of history always goes against that, always towards the ugly, oppressive, giant, ant-like colonies of insignificant humans, and never towards beautiful, consensual, small, and human-like groups of humans who matter. Even the Internet, the thing we once "Declared its Independence", devolved to the same thing.
>Bringing a larger fraction of the cost of a pen into a city doesn't necessarily mitigate the risk of a cutoff of a critical component
Hmmm, how so ? If you import 5 different things from 5 places, then any problem at any of the 5 places can disrupt you. If you import just 1 thing, only a disruption at that particular thing's source can disrupt you.
Ok, I'm making a lot of implicit assumptions here (that 1 thing == 1 source, and that all sources are roughly equally likely or at least comparely likely to be disrupted), but they are not completely unreasonable assumptions, and they are satisfied in practice reasonably often.
>Why the hostility?
Because corporations keep taking choice from me. If they just offered **The option** of buying computer-enabled things, I would have made fun of that, yes, but I would respect their dedication to serve many different tastes. Right now they are just "Fuck you, we're going to put 75 computers in your product, and you're going to like it and give us money". Look at the sad state of Smart TVs, we're stuck with inferior, bloated, proprietary, insecure pieces of shit that probably spy on us with abandon, and you can't go back to "Good old TVs", there is no good old now. Do you want this to be the state of all other things ?
Computers are awesome, okay ? That much I very much agree on. I have read SciFi and I do want to live in a world where widespread computation and networked devices make everything easier. The thing is, I don't trust corporations to run the computers. I don't trust their quality, their security, their motives, their everything. "IoT" should have stayed a scifi concept till people with better intention and competence implement it, the moment consumer corporations learned about it, it turned to shit.
>Why solve a problem that has already been solved by someone else, when the solution can be either cheaply or freely copied?
Robustness. Remember LeftPad ? It's an extreme example, I admit. But multiple people all depending on 1 thing is legitimately a scary thing, even if that thing is as rock solid as Linux.
Re-Inventing the wheel is a time honored tradition of programming. Remember when some XML advocate was like "Why reinvent the wheel" at json and the people who did json replied at his blog "The nice thing about reinventing the wheel is you can actually get a round one this time". Reinventing the wheel is educational and mind-changing.
I agree that the vast majority of time you are better off choosing some thing that already works, and this is all pretty tangential to the main ideas and I don't think that JJ would have seriously argued against Open Source if she was aware of the culture. I'm not sure it's a fair rephrasing of her idea that "Everything should be made from scratch", Software is special. But even in software, you're better off reinventing a wheel from time to time.
"it's directed at the lazy corporations who keep shoving badly secured computers into our devices (which work perfectly good without computers)" That's a good point. My late wife and I purchased a toaster oven about 2 years ago. It has a dozen buttons, a dial that serves three different functions (and is also a button for one function). I'd wanted one with a temperature control connected to a dumb thermostat and an on/off switch. I _think_ we searched for the simplest one, but couldn't find a simpler one. At least it isn't connected to the internet. Still, featuritis bit it pretty hard.
"Ok, fair, noted. I do think that locality is always the freedom-maximizing Moloch-minimizing option though. Like, to put it very bluntly, you just open yourself to so much shit when you depend on people." I agree that depending on other people is risky, and I even agree that the risk goes up somewhat with distance, but I don't think it goes up very fast with distance. I just bought a cheap magnetic stirrer from China, which arrived and worked with no problems. I also transferred some money between two sibling credit unions within the United States (which is also where I am) and it took 33 emails and 6 phone calls to get that straightened out. "beautiful, consensual, small, and human-like groups of humans who matter" - on an urban scale plenty of human interactions are non-consensual, hence "You can't fight city hall." Maybe Dunbar-number-sized bands of 150 people avoid this, but cities are typically 10,000 times this size.
"If you import 5 different things from 5 places, then any problem at any of the 5 places can disrupt you. If you import just 1 thing, only a disruption at that particular thing's source can disrupt you" Ok, you are considering a case where the disruption is roughly equally probable and equally disruptive for the 5 parts, and I agree with your analysis for that case. I had in mind a case where one part is particularly critical (e.g. a bleeding edge microprocessor or an ultra low noise first stage amplifier) and everything else can be supplied from an alternate source.
"The thing is, I don't trust corporations to run the computers. I don't trust their quality, their security, their motives, their everything." That's fair. About the only case where I trust any organization is where I have a live option to switch easily to their competition, and where working out which one actually offers the better deal isn't a monumental task. This is rare.
"Remember LeftPad ?" Ok, though if LeftPad had actually been copied into the code using it, it wouldn't have been an external dependency, and the mess wouldn't have happened. It is also a kind-of weird case in terms of the type of problem and the types of organizations involved. A namespace collision. An open source developer colliding with a company (I never did figure out who claimed the "Kik" trigram first...). The open source developer unpublishing his code. If the whole thing had happened in a single city and both developers had been open source it isn't clear that it would have been any cleaner, though I _do_ agree that if LeftPad itself had been independently implemented then the mess wouldn't have happened (or if it was physically copied rather than referenced - but then maintenance needs to track down copies...).
Our toaster has only two dials and somehow 15 different functions, and does none of them well.
Just put some more goddamn buttons on it you idiots. You are totally breaking the device in the name of having an I-phone UI.
I think you are just wildly underselling how much on a day-to-day basis people choose efficiency over robustness when given the choice.
It is all well and good to say "wouldn't you rather live in a more sefl-reliant1990s Denver where the chance of total economic collapse was .01% instead of a 2020s Denver where the chance of total economic collapse is .1%"?
"No."
"Come on 1990s computer sand cars aren't that much worse? if you zoom out enough it is basically the same exact thing"
"Yes they are and Yes I will notice"
And I agree with you in some ways to be clear. I do think we push too hard towards efficiency at the cost of all else. But it is a hard thing to actually fight.
I was wondering about why the import replacement should work at all. Is it all about transportation costs? If so, it could explain why it makes sense to produce iron tools in Boston rather that in London, but maybe not so if the tools are produced in a nearby city.
Transportation costs (and hazards) indeed. Probably also hazards of agreements failing (your supplier's rulers just declared war on your rulers, and honoring the contract is now "trading with the enemy"). To a small extent broadening the set of natural hazards one is subject to: You need parts from 21 suppliers spread across half the world and are now much more interested in earthquakes or violent weather in _all_ of their locations.
intuitively, it seems like import replacement works better with higher shipping costs and higher communications/agreement costs. If shipping costs are very low, and it is easy to specify exactly what you want and get it from a distant provider, then it's going to be pretty hard for a local company to take over that production. On the other hand, if shipping costs are high, and it's difficult to get the distant provider to listen to your specific needs, there's an opening for a local business that will be more responsive, and that will be able to save you on shipping costs.
Basically agreed. With low enough shipping costs "https://www.amazon.com/World-Flat-History-Twenty-first-Century/dp/0374292884". And this is _mostly_ the direction of recent history. Unfortunately, my rulers and China's rulers have been growling at each other a lot, which can screw up agreements with distant producers.
It clicked for me immediately, although I can see why it might not be universal.
E.g if you are Boston, buying tools from Europe - you need those tools. Going without is not optional - without the tools (presumably used for farming and construction) you'd starve. No matter how much you get screwed on the price, you will buy those tools. If they send you crap tools, well, you're stuffed. If you want a specific kind of tool to work for your own environment, they're not gonna develop it for you specifically unless you pay a lot, and if they do you'll be charged a premium.
Applied to a vital import, it's a bit akin to rent - as long as you need it, you are at mercy of the producer of this good.
In the Boston example, starting their own foundry and making their tools is a bit like buying a house - suddenly, they are no longer at the mercy of their tool suppliers. If you want a particular kind of tool that the Europeans don't need, you can just develop it yourself. Obviously the business can still screw the customer, but poaching a blacksmith to start a competing business from Boston to Boston is much easier than Europe to Boston.
It's sorta like the teach a man to fish parable.
Yes, although those disadvantages of imports decrease a lot in cases where there are multiple potential suppliers. You still don't get tools for your local environment, but if you can buy generic iron tools from London or Stockholm or Berlin the case for making them in Boston gets weaker.
I think it's also an alignment of interests, for the case of keeping production of tools in Boston specifically. It's totally possible for all the tool-makers in Europe to realise that hey, actually, we can form a cartel and keep the price for tools artificially high. (Modern equivalents - pharmaceutical companies banding together to protect their right to price life saving medicines, OPEC for oil production).
If your producers of vital goods are local, it's much easier to force them to capitulate to your demands against their own interests. E.g oil and gas companies operating in Australia often have a quota they need to sell on the domestic market as a condition of production, which keeps the natural gas you need for domestic and industrial use cheap. For geographically bound natural resources, you can bully an overseas company into this kind of thing. For manufactured import goods, you usually can't, e.g how in most socialised healthcare systems the government is paying the likes of Pfizer, Novartis etc the difference between what the consumer pays and what the companies demand - that being said Eli Lilly is based in the US and the US is just letting them charge whatever to patients, so it's both a can and a want issue).
Ok, yes that could happen. One of the best-documented cartels, https://en.wikipedia.org/wiki/Phoebus_cartel included both US and European companies and made the lifetime of light bulbs artificially short for consumers in all their areas. So, like your example of Eli Lilly, the local potential remedy actually failed.
If I'm understanding Jane correctly, it's not about costs at all, at least not directly. It's about the natural tendency for economic corrections when a balance of trade is too one-sided. Using Boston as a cheap source of raw resources and a market for finished goods is great for London, but bad for Boston. London gets richer, Boston remains poor. Inasmuch as Boston continues to exist, there is considerable pressure to develop replacement options for London-produced goods. From a worldwide perspective, the most productive use is for Boston to remain poor and London to get even richer. This is not good for Boston, though, or the people that live there.
This goes back to the ducats - where if they are too expensive people will look for alternatives that are cheaper. When they are cheap, other localities would like to buy more goods from them which increases their sales and boosts their economies.
Incidentally, if you recall the crisis in Greece a few years ago, it was fundamentally a problem of the Euro (shared currency). Because Germany and France were on the same currency as Greece, the Greeks could not revalue (that's a bit of an oversimplification, but it happens naturally) their currency to make their goods cheaper. German goods should have been more expensive, but with the shared currency the value of that currency is automatically the same anywhere that uses it. The same is true in the US (Jane used the Detroit example) between high value areas that are rich (New York, etc.) and poor areas like rural Alabama.
I read it as decreasing external dependency by climbing the tech tree. If you learn how to fix a leaky pipe, you don't need to blow all your disposable income on a plumber. Similarly, if you learn how to blacksmith, you don't need to blow all your tax revenue on imported iron.
I don't think it needs to apply to all industries and products to be meaningful.
London may have had an advantage in providing complex goods because of capital investment and network effects. The question for Boston is did it have an advantage providing goods to Boston. While Boston didn't have the capital goods or the human capital they also didn't have to deal with shoppingy. Boston may be worse then other cities at producing a good bit still be the best at producing that good for Boston consumers.
Jane is directly contradicting the idea of comparative advantage. When Boston starts making tools, they will be inferior in every relevant respect. They will be cheaper because London's prices are inflated by the trade imbalance. London being rich, they will charge more for the same goods. Bostonians being poor, they are willing to make and sell the goods for less, opening a new market. This is how China/Taiwan/Korea and other rapidly developing nations did it. They started industries to sell goods much cheaper because their costs (including but not limited to wages) were so much lower. GM in 1980 was paying $18.44/hour for autoworkers, which is about $150,000 inflation adjusted today. There was apparently a lot of contention about how much Japanese workers were actually making (union negotiations resulted in people on both sides offering counterclaims and such), but I think the rate for the Japanese was about $8-12/hour. By that point the Japanese cars were also very high quality, which is why there was so much consternation about the imports in the early 80s. Detroit didn't adjust, and the city collapsed. The city once had a population of over 1.8 million, which has dropped to 632,000 and still shrinking today.
The idea that is being sought is that of dynamic comparative advantage. Specialisation and trade based on it make us all richer right now. But a city/region/country wants to move up the value chain and have comparative advantage in 'better' things.
The argument here seems to be that this process relies on dynamic cities. I don't think it is just that but it could be part of the picture.
I think it's an interesting point that your example of sensible import replacement is actually about services, not goods. The cost of transporting goods these days is mostly pretty low. But you can't transport dental services, you either need to go to a dentist in your town or you need to make the long trek to a town with a dentist.
It's hard to imagine a small remote town these days being transformed by the arrival of a tool factory, but easy to imagine one being transformed by the arrival of a supermarket.
Good point! Many Thanks!
The point of import replacement seems to me that successful dynamic cities don't replace _all_ imports but they do replace _some_ (progressively more and more), which is entirely in line with specialization and comparative advantage. Big cities both import and export a great deal of varied goods, but they don't entirely depend on the basic tech/services from the outside. I agree that the review didn't emphasize this point, plausibly leading to confusion.
_Do_ successful dynamic cities replace more and more imports? Or do they grow in other ways - particularly if shipping costs are low, and they don't have a comparative advantage in producing an import. E.g. Silicon Valley uses plenty of paper, but I'm not aware of them having or planning to add a paper mill.
(review author here)
Yeah, I agree this is something useful to emphasize. I don't think Jacobs says anywhere that cities should become self-sufficient and that specialization is bad. But to get to a point where a city can develop new specializations and meaningfully contribute to trade with other advanced cities, it needs to be economically dynamic, which is difficult to achieve and according to Jacobs is only attainable if you do a large degree of import replacement first.
When you strip the thesis down this much then "Duluth" is a dynamic/advanced city.
My interpretation of Jacobs’ view of import substitution is that it’s kind of just a fancy name for the emergent phenomenon of the situation where transaction costs result in comparative advantage for localized production. Might still be worth naming the phenomenon for purposes of development economics but it seems like it’s kind of just tacking a name on to a higher-level phenomenon / high level of abstraction of basic microeconomic predictions.
I think it's much more about a balanced trading balance and harvesting the value added by production and generating high value jobs at the same time.
I think the review is quite clear that replacing imports is important especially when you have a export deficit or are exporting mostly raw materials. This is not about being self sufficient, but about realizing when it is time to diversify (find and fill a new market). Doing so is easiest in a market that already exists locally without local competitors. So in the hard time of starting you have the benefits of local trust and less shipping costs, plus the potential to export later when you made it to become competitive.
(review author here)
I think you're right that this is awkwardly worded, but I meant to put the distinction in strong terms because it seems to be a very common misinterpretation of Jacobs's ideas. In fact you can see this misinterpretation occur many times right here in the comments, which suggests I haven't made the distinction clear enough. "Import replacement" according to Jacobs is something that *happens*, not something that you *do*, but people interpret her as suggesting that governments should take actions to do it, which as far as I understand is the opposite of what she says (in fact she brings up how trying to do import substitution in Uruguay was a disaster).
Could you solve this without separatism by having each city issue its own currency?
IANAE (I Am Not An Economist), so this is pulled directly out of my backside, but I see a *lot* of problems with this.
Our federal government doesn't just issue currency; it does complex maneuvers to maintain the value of that currency, based on analysis I don't even pretend to understand. Can such sophisticated apparatus be successfully created at the level of each city? And if it can't, then what? If Chicago's currency crashes, do we just say, "Well, looks like Chicago is f**ked, that's the price they pay for having an independent currency"?
When you say *each city* has its own currency, do you mean every single city, or is there a size cutoff? If there is a size cutoff, what happens to smaller towns - do they share the currency of the large city nearest to them? And if so, doesn't that recreate the problem Jane Jacobs was complaining about? If Bumblecluck, Illinois, population 5,000, shares its currency with Chicago, then Bumblecluck is artificially sheltered by Chicago's economic success (or unfairly crushed by Chicago's failure).
Also, wouldn't this make traveling around the US a pain? Imagine having to do currency exchange every time you want to fly to an academic conference in Boston or visit extended family in Ohio. It would suck!
Also also, since you're proposing that all these cities with their different currencies are still part of one country, presumably all residents would still have to pay federal taxes. How would that work? Let's say you live in San Antonio - do you pay your taxes in San Antonio dillos*, or in DC dollars? If you earn San Antonio dillos but owe your federal taxes in DC dollars, what conversion rate do you use? What happens to the value of the DC dollar in April, when millions of Americans suddenly have to convert their San Antonio dillos and Cleveland buckeyes and Seattle salmons and Boston beaners and so on into DC dollars in order to pay their federal taxes?
This idea, while appealing at first, seems to me to be a fustercluck of epic proportions. Again, IANAE, if there are any economists among our commenters, please tell me where I'm wrong!
*an affectionate nickname for the San Antonio currency based on the armadillo on the one-dillo coin.
Sounds like fun :)
I do recall a lot of problems back when the EU adopted the Euro. Different countries, when shorn of the ability to manipulate their own currency, had serious problems involving trade and deficits.
Possibly we just notice the problems involved in a transition, no matter which way it goes. But it should be possible to go back to that example, look at the problems, and come up with theories on what would happen if it all suddenly reversed.
You make a good point about the Euro, but this is the opposite of what Scott proposes. If we unwound the Euro, we would go back to the standard model of one nation-state = one currency. Scott is proposing one nation-state = many currencies, one for each (major) city. It's as if Berlin and Hamburg and Cologne were each to get a different currency.
Doesn't it sort of depend on how much we consider the EU to be a single entitiy? As in, the problems Berlin and Hamburg and Cologne faced under the Deutsche Mark, should be a smaller version of the problems Paris and Rome and Madrid face under the Euro?
Whereas before adopting the Euro...it had the currency changing problem.
Good news! Computers are really good at currency exchange.
Sure, but pricing FOREX risk into every contract gets old fast.
"When you say *each city* has its own currency, do you mean every single city, or is there a size cutoff?"
One data point in our current, nation-based world: Liechtenstein uses the Swiss franc as its currency, rather than a currency of its own.
The thing is, if you've "pegged your currency" to some other currency, you can change your mind when it stops working well. It often doesn't happen, but it can be done. (OTOH, trade agreements can make this difficult.)
As Patrick McKenzie likes to say, "a currency peg is a story, with an arbitrary beginning and middle, and the ending '...and then it broke'."
I mean that is the story of every single human artifact or institution. It is hardly a knock down argument against it.
True, but some institutions are longer-lasting than others, and break less catastrophically. I think his point was "a currency peg is an attempt to say that one thing is the same as a thing that is fundamentally not the same thing; if you put a lot of effort into maintaining that fiction you can keep it going for a while, but eventually reality will catch up with you." But I liked his phrasing better.
Interesting, I didn't know that.
Many Thanks! I suspected, but didn't know, it till I looked up Liechtenstein a few minutes ago.
"Moving from the krone to the franc: In 1924, the Principality of Liechtenstein turned its back on the Austrian krone and adopted Switzerland’s national currency, somewhat clandestinely at first and then officially."
https://blog.nationalmuseum.ch/en/2022/01/swiss-franc-in-liechtenstein/
Many Thanks!
"Montenegro is a country in South-Eastern Europe, which is neither a member of the European Union (EU) nor the Eurozone; it does not have a formal monetary agreement with the EU either. However, it is one of the two territories (along with Kosovo) that has unilaterally adopted the euro[a] in 2002 as its de facto domestic currency."
https://en.wikipedia.org/wiki/Montenegro_and_the_euro
And they aren't a member of the EU, though they are a member of the EEA trading treaty. And presumably they could change their currency if they thought it was worth the bother. Which make it not an argument against the proposed idea. or at least not really.
This makes me wonder whether there would be a way of addressing this problem by having a nation issue several different currencies...but how should the differences between them be structured. Should it be based on something like a stock exchange? Who do you want to invest your savings in?
I think (with computers) it *MIGHT* be possible to create a system like that that's better than the current system. But this doesn't mean the system created *would* be better.
"And presumably they could change their currency if they thought it was worth the bother."
Yup. My point in citing this data point is that Liechtenstein _didn't_ find it worth the bother to create their own currency. I agree that computers make it easier to maintain a new currency now than in past centuries. I suspect that there are still tradeoffs. If nothing else, a currency for a tiny nation is going to have fewer people holding it and a thinner market than a major currency. At some point, mere statistical fluctuations will become a problem. ( "The currency was fine till the one investor with 10% of the foreign holdings of it had a manic episode..." )
>Also, wouldn't this make traveling around the US a pain?
If we're imagining something as radical as all major US cities having their own currencies, I don't think it's a stretch to assume currency exchange would look much more seamless than what we currently have.
>taxes
Just simplify the tax code to the extent that rEfUnDs no longer exist, and the IRS can do a conversion every time it receives a withholding or estimated payment. (Again, we are in fantasy land anyways)
But yeah I have no idea how we'd get there from here.
When different banks in the US issued their own bank notes prior to the establishment of greenbacks, it was typically fairly seamless to exchange notes between different banks in New England via the Suffolk System. And that was without the information technology we have today. So I suspect it wouldn't be that much of a problem.
People here have not responded well to this in the past but all of this can pretty simply be accomplished using crypto currency which has pretty effective solved the "how do I nearly seamlessly convert between different currencies which fluctuate in relative value problem". From your perspective as a consumer the price of the goods themselves would change while staying in your local denomination. There are all sorts of tax schemes that could work but I thought some of the benefit would be further federalization.
The legacy financial system handles this pretty well too - I've been able to use my British debit and credit cards abroad without problems for as long as I can remember.
This does rely on a lot more moving parts though while a colored coins/fungible token based solution can do it all atomically with better transparency and lower fees. The legacy financial system relies on a lot of complicated deals between banks in different regions for settlement that would only get more complicated if you multiplied the number of currencies.
>lower fees.
Sure it can...
ethereum L2s have fees so low they aren't worth considering, thousandths of a penny. Legacy banking institutions have a lot of surprising moving parts. Most traditional cards in my experience chart around a 3% transaction fee. I understand the well has been poisoned by a hundred thousand shills but not everyone interested in crypto is trying to scam you.
Yeah, lots of good points here. My biggest gripes are the following (actual economist here, though monetary economics has never been my forte):
0. I am probably strawmanning the argument of the book here, so please tell me where I get it wrong, but if we take this idea to the level of states, it would suggest that developing countries should let their exchange rates slide (even help them, if there are forces going against it) and the real economy will sort itself out. I think we all agree that growth is more complicated than that. Yes, it is possible that there are some countries that are held back _only_ by a stupid exchange rate regime, but still, come on.
1. Wages and rents (the prices of labor and land, two main factors of production) are already lower in Detroit than in SF. So if you want to start a business that uses lots of labor and land, you are already kind of getting the right price signals from Detroit. Yes, I am ignoring the role that capital plays here in the production, but more on that later.
2. The idea that exchange rate movements help trade balances to correct themselves is of course not new and admittedly a clever one, but it is kind of a special case. Nowadays, the flows that govern exchange rates are not those of goods, but those of financial investments. Granted, I cannot quote figures here, but it I guess it is quite easy to do some rudimentary research here. So if you want the FX->trade balance idea to work, you need to make sure that the "price signal" sent by low Detroit export of goods is not muddied up by foreigners using their NY or DC dollars to buy up cheap Detroit land or high-yield Detroit bonds. (Federal taxation is just one example of this, although the most important from a historical point of view and the hardest to get rid of). Which bring us to...
3. ... capital controls and other regulatory issues? Detroit will probably have to set up their own Fed, even just to manage their own financial system, and it will have to commit strict floating of the Detroit dollar and very probably stopping the engineers working in all those new Detroit factories to save in Florida dollars (where they want to retire or in, gasp, Canadian dollars (which in general will offer some protection against exchange rate fluctuations). I think it is a very hard sell politically, especially that monetary policy has just gotten drastically closer the average voter.
There is probably a lot of things that I have gotten wrong/omitted, but I guess the point I am trying to make is that the existence of the exchange rate channel is not the panacea that some people might make it out to be.
Isn't intentionally deflating the value of their money something China has been repeatedly accused of? That is, creating an artificial advantage in exports by making their people poorer? Or, more to their situation, keeping them from gaining the benefits of the increased trade in order to build their industrial capacity instead.
Yes several Asian countries very specifically did this. Use exchange rates to keep your boot on the throat of domestic consumption so that the surplus from your export economy can be poured back into economic development instead of "wasted" on consumption of consumer goods/services.
And it is generally great economic policy if you just care about growing the economy and not "fairness" or whatever.
During the first half of the 19th century individual U.S. banks issued their own currencies. Hundreds of them, and it definitely did create some of the problems that you're anticipating with city currencies.
RE: taxes, each locality would definitely have to pay taxes in their local currency or nobody would actually use the local currencies. In the modern post-gold-standard world of fiat currency, the only thing besides inertia that keeps the currency valuable is that the government requires you to pay your taxes with it. If federal taxes were in DC dollars, everyone would keep using them for day-to-day transactions as well.
I live in a country with less people than Chicago and that has a completely independent currency. A few years ago it was the 10th most traded currency in the world, it has dropped a few places since then though. The place hasn't exploded and in fact is considered to be notably stable.
I note also that small EU countries like Czechia pay their confederal taxes despite not using the Euro. They seem fine.
So, yes, you are wrong about this.
I think she might agree it would help, if each city region (when it got to a sufficient GDP) started its own (crypto?) currency.
But you'd still have the problem that they're bound by the national policy. If they want to change their laws or tax policy to redirect $ to building that local industry, or spend less on "transactions of decline", they would be non-sovereign and therefore unable to do so. (Obviously some level of federalism that let them control that AND their own coins, could work!)
Why not a separate cryptocurrency for each *individual*? Let's assume that it would be technically easy, like not even much programming required, because all those currencies would reuse the same few algorithms only with different constants. Let's assume everyone would have a simple application that would support all these currencies, and could simply convert from and to any. If you are in a shop, your augmented reality glasses automatically translate all the prices into your currency based on current exchange rates. In other words, let's assume away all the friction that is typically involved in currency exchange.
How would this look like? I have no idea, seriously, it just seems interesting to follow the idea to its extreme and see exactly where it breaks.
Individuals are too small to pick up more than one or two industries to a useful level. The theory seems to go, if a city imports too little so it’s currency goes down, locals stop being able to afford things from other cities, but that removes external competition as a barrier to business. There’s no reason to encourage internal business within an individual.
Ah. I guess individuals do not need price signals in the form of private currency, because they already have sufficient price signals in the form of "how much money do I have".
So the hypothetical smallest unit that could benefit from (a hypothetical frictionless) currency could be a family. Like, my kids could get their pocket money in our private currency, and when the family budget is tight, I could simply update the exchange ratio of the private currency to euro. Which from my kids' perspective would mean that the chocolate is more expensive, however the opportunities to make money by mowing the neighbor's lawn are more attractive. (I would need to think longer about exactly this would work.)
The other benefit of balanced trade is that the currency itself is regulated by supply and demand, not just widgets. If the US has a trade deficit, that means dollars are leaving the US, which floods the foreign market with dollars, which causes demand for the dollar to weaken, which increases the friction on the outflow of dollars. the system is self-stabilizing.
If your kids are only receiving an allowance from you, the currency flows in only one direction. And then you have none of the benefits and all of the complexity of managing a currency.
I think every person having their own currency would be exactly the same as everyone having 1 currency, just instead of everyone varying by how much currency they had (you have 100 dollars, I have 1) everyone would vary based on the worth of their currency (your Villiam-bucks would be worth 100 of my Brian-pesos), and would largely be the same result (minus the transaction costs of converting.)
If every person had their own currency, it would be a de facto return some form of barter system. It's nonsense for a Walmart employee to have a personal currency. How would they get paid and/or pay others?
The importance of transaction costs feels like it's being overlooked here, and something that's so thoroughly overlooked by Jacobs that it's part of what takes her into such bizarre territory. The whole reason for currency is to reduce transaction costs.
Reductions in various transaction costs is the argument for having cities, and it's the argument for having countries. I'm not sure if it's just the reviewer's oversight, or that of Jacobs herself, but the omission of an open discussion of how transaction costs would be impacted in many of the proposed 'solutions' makes it impossible to see the obvious tradeoffs those policies are asking people to undergo. Nearly every proposal seeks to increase transaction costs on everyone.
Indeed, Ronald Coase famously debated people who misinterpreted his Nobel-winning work, noting that they were omitting the all-important factor of transaction costs in their discussions. Transaction costs are what gave Uber the edge over taxis, why people choose chain hotels over local motels, and they're why Europe went to a common currency.
I think in this case it was just a thought experiment where the (very high - as you point out) transaction costs would be ignored.
In terms of real proposals, I think both Jacobs and the Optimal Currency Area theory people would pick a size much larger than 1 (or even 100,000 people) person for each currency. The size of the units either proposes are pretty big, such that after enacting such a regime (magically?) there would probably be fewer total currencies in the world, potentially reducing transaction costs, but possibly increasing them as most of the small currencies currently in existence don't handle a lot of transactions.
At that point we're not arguing about whether there are transaction costs, just how much. There has to be some point in the conversation where a real economist would start talking about tradeoffs.
What do you give up when you start implementing Jacobs' ideas? What's the magnitude of the cost vs. the benefit, and who pays that? Is the trade worth it? I don't think it is for most of the proposals presented in the review.
> Why not a separate cryptocurrency for each *individual*?
That may or may not be a good idea in reality, but it sounds like a great premise for an SF story!
(My favourite SF story on these lines, Ken MacLeod's *Newton's Wake*, sadly didn't go into details about the reputation-based post-capitalist economy. "How am I paying for all this?" "Don't worry about it, your credit and interest are high.")
I'm not a finance guy, but I wonder to what degree some financial asset that cashes out to a "share" of the city itself would serve this purpose, without supplanting the Dollar (or whatever) itself. Like some kind of bond or something.
It does occur to me that the closest thing to a "share" in the city itself (if the city does well, I do well) would just be real estate... but that makes for a poor currency.
I'm also not a finance guy, but if I understand the argument correctly, currency changes only affect people whose incomes are denominated in that currency. So just creating the financial asset alone wouldn't change anything.
Makes sense
Incomes or expenses. If the city government charged a Georgist LVT denominated in their local currency, that'd compel businesses interested in the best locations to obtain said currency, a hassle which they'd likely find ways to pass on to their customers.
John Law tried something like this with the French Louisiana territory (structuring a currency as an equity rather than a debt instrument). It ended terribly although the only author I’ve read who discusses it chalks it up to external conspiracy by French banking interests as much or more to any internal flaws.
dollars are just bonds with a maturity of 0, and bonds are just dollars with a maturity above 0. Central banks are called banks because buying a bond is equivalent to depositing money in a local bank, if you squint.
REIT shares are fairly tradeable, and there are a bunch of projects trying to tokenise real estate. If you did manage to create a frictionless currency backed by real estate assets in a single city, what do you think would happen?
I wonder if it would be kept in line just below the national currency, just because it's less liquid and otherwise there's arbitrage opportunities
Also not an economist, but I'm interested in international trade.
All the different cities would need an overarching currency to trade between each other, a national reserve currency I guess.
You could have that currency be the US dollar and have each city-currency pegged to it, but I think that's effectively the same as everyone just using the dollar anyway.
If you wanted to keep the city-currencies sovereign they'd need to have floating exchange rates. In which case it's likely that the national reserve currency would become the city-currency of the most powerful, economically important city. Which would give that city enormous leverage in trade relations between cities, analogous to the position the dollar holds in international trade (the dollar is the main international reserve currency). It'd probably create much larger power imbalances between regions (i.e. different currency zones) than the ones mention in the review.
Cities who's currency held the status of national reserve currency would be in a position to create a commodity by fiat (their own currency) that stays in high demand even if that currency isn't backed by the production of real goods or service, because it's now needed for intra-national trade. Allowing them to run perpetual trade deficits within some limit, i.e. reserving goods and services without providing them in return, effectively extracting tribute from cities lower down the currency hierarchy.
Some of one, some of the other - I would assume that by law, the national reserve currency would be the USD, which would remain the currency in which national taxes were paid, federal payments disbursed, and Federal Reserve bonds bought and sold. The NYSE might continue to price in USD or might switch to Yorkers or whatever the NYC currency is called. (Initially, Yorkers and USD would probably be de facto pegged, but assuming JJ was right, they would gradually uncorrelate as Angelas and San Francs and Dallars got more meaningful.)
And even if that wasn't true - the USD is the global reserve currency. Why would we expect a national reserve currency to behave differently? And is the global reserve currency being USD actually bad, or extracting tribute from smaller countries? I believe it is not.
Chat gpt says it does.
"You
Is the US able to practice seignorage in international trade due to the dollar's status as the international reserve currency?
AI
Certainly! The United States has historically benefited from the seigniorage income generated by the global use of the U.S. dollar. Seigniorage is the profit gained by a government from issuing currency. As the world's reserve currency, the U.S. dollar is in high demand and is widely used in global transactions. This has allowed the United States to issue more currency than it would otherwise be able to, providing an additional source of income. Let me know if you have any other questions!"
I don’t think saying that ChatGPT says something is any more authoritative than saying “some random person on the internet thinks so”.
I think if you wanted to make this work, national taxes would have to be collected in local currencies. Otherwise there's too little incentive to actually use them instead of just continuing to do everything in USD.
This is exactly correct.
First potential failure mode which springs to mind is "company town" scrip, trapping people because it makes low-level trade with the outside world nearly impossible. To avoid that, I'd say the city-level currencies should be purely electronic, with an official exchange rate to some broader nation's paper-and-coin currency, and such exchanges kept as frictionless as possible. Land value taxes, utility bills, and bureaucrat salaries would presumably be denominated in the local currency, but federal obligations wouldn't, so major businesses and the local government itself would both need to keep the rate in mind as part of routine operations.
Maybe mandate that the exchange rate can't stay fixed - say, every week, at exactly four in the morning on Monday, it has to either decrease 20% or increase 25%. When the situation is stable, that means it'll just keep oscillating between the same two values on odd and even numbered weeks, but the possibility of disproportionate windfall from a disruption to that pattern would keep arbitrageurs interested in hunting for clues of potentially unsustainable market imbalances.
Her argument was pretty strictly based on economics. To the extent that it stripped out both spending on military and on welfare programs. I don't know whether she considered public health. Etc.
As a strictly economic argument I find it quite plausible. This doesn't mean that it's valid in a larger context, which includes non-economic variables.
Mandating exchange rates by fiat loses you almost all the benefits. The **whole point** of having your own currency is that the exchange rates naturally float and this has salutary effects on the local economy by encouraging import replacement when the economy is weak and the purchasing of imports from other, weaker economies when the local economy is strong.
Defining an official exchange rate but having it shift at predictable intervals is a deliberate compromise between that long-term benefit, and the short-term convenience of keeping prices predictable - which is important for letting poor people participate at all. If whoever's setting the official rate tries to push it in the direction opposite where it would naturally float, their peg probably gets broken before the end of the week.
The US economic system is based on ever-increasing debt. This is extremely bad, unless you are the global reserve currency. The US maintains global reserve currency status by being the largest economy, having military dominance, enforcing consistent enough trade and contract law, and indeed, running a massive deficit (issuing a massive amount of bills and bonds which can be held by surplus countries and traded in the world's largest and most liquid market).
The US would be in deep trouble if it transitions away from this arrangement (or maybe more accurately, when we lose global reserve currency status, say in 100 or 200 years, the nation's economy will be devastated).
Repharse: The US will be in deep troubleas it transitions away from this arrangement.
This transition should be expected to occur within 20 years. Possibly 10. Both China and the EU are acting to weak the US dominance. India too, but that currently looks a distant third. Within 20 years I expect there to be a dominant triad, with the US fading in relative status. (Yeah, this is a pretty uncertain projection. Emerging trends, say AI, or biotech, could totally swamp this. But it's what looks most probable to me. If it's robotics, then Japan could end up the dominant country...it they're lucky and play their cards right.)
China lacks the confidence of the global market due to poor rule of law (rule of Xi will trump rule of law). That and poor naval/global military projection capability mean that the yuan cannot become the world's reserve currency yet. IMO, the EU will not last.
Everyone else's economic system is *also* based on increasing debt. They aren't reserve currencies and they are doing just fine. Therefore, I call bullshit.
I disagree. They are in trouble.
When everyone is in trouble, nobody is.
all governments going bankrupt just means nobody wants hard currency and everybody hoards toiletpaper and we get hyperinflation. So.......... stagflation.
I'm not an economist, but I suspect the answer is that cities should have their own currencies, *in addition* to a national and supranational currency. The idea would be that trade within the city mostly takes place in citycoin, regional import/export is handled by moneychanging/devaluation, and national/international trade is denominated in nationalcoin and maybe pays taxes to the nation directly. So not only could you gauge the relative trade power of cities among each other, but also the gain from nationalism/internationalism directly, via the rate of local vs national coin.
That's clearly what she's recommending. It definitely has it's points, but I'm not sure it would work. A common currency is a lot of what holds a nation together. Note that Britain, the only EU member with its own currency, and which had a lot of other special privileges, is the only member to have withdrawn.
It probably makes great economic sense, but economics isn't the whole of life. There are non-economic reasons, e.g., to support the military. What's bad is that this tends to get out of control. Similarly for welfare. In the case of welfare, however, I really think that it should be a local matter, and the Supreme Court was wrong when it threw out a residency requirement for assistance. That would allow welfare to be scaled to local needs and capabilities, which is what should happen.
OTOH, it's worth remembering that the State Banks didn't have a great track record. Well, states aren't cities, but they're *closer* to being cities than the US govt. is.
Britain wasn't the only EU member with its own currency. The Eurozone != EU.
Who else? Lichtenstein isn't a member of the EU, only of the EEA (if I have that acronym correct).
Bulgaria, Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden according to the Eurozone wikipedia article.
Of those Denmark is a good example. The others either aren't a member of the EU or are in the process of adopting the Euro.
You're wrong. Sweden is a member of the EU and not in the process of adopting EUR.
I don't even see why the currency is needed. Glasgow or Manchester have the same currency as London but that doesn't mean there is no price feedback. Doing almost anything in Manchester or Glasgow is cheaper than doing it in London.
Why isn't this enough to move business back to regional cities to capitalise on the cheaper prices.
Because it doesn't encourage Glaswegians and Mancunians to set up their own local businesses, and therefore uses Glasgow or Manchester as a supply region for labor, or an abandoned region like Napizaro.
If there is a Glaswedget currency, everyone in Glasgow has an incentive to purchase goods from within Glasgow, where their money goes further, thus keeping the money in Glasgow, encouraging the formation of local businesses in Glasgow, and in Keynesian terms increasing the funds multiplier rate of stimulus. This creates new economic capacity and new local wealth.
There's nothing about calling a currency "Glaswedget" that automatically makes it "go further" within Glasgow. The US dollar goes further in places that are not the US, e.g. due to lower labor costs. Sometimes it goes so much further that it makes economic sense to buy stuff cheap in one place, pay to transport it somewhere else and sell it for more there, and we call that trade. This applies whether the buying and selling happens in the same currency or not.
When a Glaswegian decides whether to buy from Glasgow or Manchester, they decide based on the different prices and transportation costs for the two places. The greater distance from Manchester *already* incentivizes Glaswegians to buy local. If they decide to order from Manchester instead, that indicates that there's a price difference large enough to make transportation worth it.
If you now denominate prices in Glaswedgets and Manchesthares, controlled by the cities' respective governments, you're adding risk from exchange rate fluctuations into the mix, because maybe the Glaswegian government decides to massively devalue the Glaswedget and you can no longer get enough Manchesthares to pay your Mancunian supplier, so that further encourages buying local. That might be good for Glasgow – except that this effect relies on the (at least perceived) risk of the Glaswegian government deciding to massively devalue the Glaswedget, which might be very bad for Glasgow!
So I'm not sold on the idea that giving every city control over their own currency is going to be an obvious boon to the local economy.
(Note that at least in the review's portrayal of Jacob's argument, government interventions directly manipulating the value of currency don't feature at all, which means that all effects described are independent of whether it's the cities' own currency or that of some larger state – the feedback mechanism described consists of fluctuations in the relative price of goods that would happen no matter what currency you measure them in, or even if you barter without using currency at all.)
In principle it may be true that a local currency does not actually strengthen the effect. Empirically, that seems to be false. Divided currencies result in divided centers of economic activity.
Currency itself is also a commodity, subject to supply and demand. The desire to buy things from Glasgow (with Glaswedgets) is what would drive up demand for the Glaswedget. Unlike Venice however, I don't think Glasgow offers anything uniquely special, so the premium wouldn't be that high.
The petrodollar, on the other hand, has a much stronger reason for its premium.
When I read this in 2016, my proposal was that each of the US states issue its own currency, and the feds continue to issue USD, where taxes must be paid in USD and federal reserve bonds are bought and sold in USD. This wouldn't fix California (which is Too Damn Big) and would be pretty confusing around NYC (Connecticut, New Jersey, even Philadelphia) and New England (much of NH, CT, and RI are effectively part of the Boston conurbation), but would do a lot of this.
Corollary thought: JJ probably *wouldn't* have been for Brexit. The UK already had a separate currency, and a city which was the economically-defining touchstone for that currency. Sharing regulatory systems with the currency union is not, in principle, a big deal.
States are even worse than nations as a unit. Cities very often span state borders, in ways that they don’t span national borders quite as often. (St Louis, New York, Philadelphia, Washington, Chicago, Cincinnati, and Portland all span state borders, while only Detroit and San Diego span national borders.)
Don't forget International Falls!
I'm a radical decentralist, but I also take seriously the argument that most Caribbean countries are too small to have their own currency:
https://rasheedgriffith.substack.com/p/notes-towards-caribbean-dollarization
I would go one step further: Could you solve this without different currencies?
My major takeaway is that each city/region needs a balanced economy with balanced imports and exports and a fair share of high value production.
The extra currency is just a tool to generate a feedback loop if (high value) production is too low. Can we generate and communicate this feedback in another way without the drawbacks of different currencies mentioned below?
Theoretically maybe, but then you get into the problem of centralized decisions in very complicated economies. It's very easy to make mistakes, whereas a separate currency by its very nature will tend to correct the imbalance. People can try to cheat the system (as China was accused of during their growth) but always at a cost. Chinese people stayed poor, which helped keep prices lower for longer and encourage additional industries to be built.
I'm surprised no one has yet suggested Keynes's idea of Bancor. I still don't know quite how to explain it in full... but the short version is that it's the halfway point between:
"Every nation gets its own currency, things get chaotic."
&
"Every nation has to use the same currency, and sucks to be you if that currency winds up not being right for you."
Bancor is instead the idea that,
"Every nation gets to have its own currency... BUT we'll also have an overarching global currency, for providing a nice simple universal unit of account everyone can use to handle international trade, and to help coordinate the response to international economic issues."
You could run Bancor within a single nation by replacing every instance of "nation" within that description with "city" and "international" with "national":
"Every city gets to have its own currency... BUT we'll also have an overarching national currency, for providing a nice simple universal unit of account everyone can use to handle national trade, and to help coordinate the response to national economic issues."
That would be especially nice for dealing with the issue Jane Jacobs identifies with some cities running perpetual trade surpluses and others running perpetual trade deficits, because the international economic issue Bancor was built around solving was that exact issue: some nations running perpetual trade surpluses and others running perpetual trade deficits. If you want to read more about this, see https://en.wikipedia.org/wiki/Bancor & https://theweek.com/articles/626620/how-john-maynard-keynes-most-radical-idea-could-save-world
(I must admit in all honesty, I am especially biased towards Bancor because it incorporates some Control Theory with its penalties for excessive trade surpluses and deficits - I'd personally prefer more and deeper applications of Control Theory to economics, but it's a nice start. Us engineers will convert everyone to using PID controllers for everything someday, I tell you, anything and everything that requires more balance than just 'playing things by ear' can provide. The math is simple and elegant at heart, not intimidating at all. But until then, I'll settle for advocating for Bancor, and the first steps towards applying Control Theory to economics.)
Early in the history of the US, different states issued their own currencies (some cities and banks even I believe). It introduces a lot of other challenges, I dont know which way the scale tips once you add it all up.
Some economists have suggested that the US should at least have a few regional currencies: https://www.chicagofed.org/-/media/publications/working-papers/2001/wp2001-22-pdf.pdf
My thoughts on reading this were more along the lines of, "is it possible to find some other mechanism to replicate this feedback effect that ISN'T separate currencies?". Currency exchanges are a pain and we all know it. A multiplicity of separate currencies has this effect of increasing value to local purchases vs far purchases, but is there a reason to think that other rules or mechanics couldn't?
I am by no means an expert on economics, but I was under the impression that "optimum currency areas" were a well-known topic of study with quantitative (testable?) predictions, and that the generally accepted theory in this regard suggests optimal areas larger than single urban areas.
I was a little surprised not to see any reference to this in the article, and whether there is some synthesis possible between Jabobs' ideas and optimum currency area theory.
this is a good point, I think that theory was solidified after Jacobs' time (I may be wrong). But certainly I think she would agree with it - pointing out that in the EU, having them all use the Euro, when many places in the EU are those city hubs, and others are those hinterlands and "other types of places" she describes, using the same currency makes little sense. (There's the added non-Jacobs wrinkle that beyond that, each of those EU sub-nations can do their own spending policy, which adds another thing that can be out of whack to the monetary policy).
Not an economist, but at least the articles on Google seem to say that most OCA economists thought the Euro was a good idea, because Europe was an OCA. They are revising their opinions after the Greece incident, but they still seem to support much larger areas than city states.
I think you are right that they thought that, I am just implying that it was a mistake (and one that Jacobs might have identified) and if they would've thought about it more, there were some big red flags for "all of Europe being an OCA" even beyond Greece. (north vs south Italy, Iberia vs England/France/Germany, West Germany vs ex-East Germany or any other ex-Warsaw Pact country)
I think Jacobs might agree that the OCA size for parts of Europe IS larger than just the city state, and would encompass those "city regions", some of which are larger than some countries that had their own currencies pre-euro.
I think the concept that SamLL is proposing is that OCA and Jacobs' ideas are similar, and I think he is right, with OCA being more of a general theory, and Jacobs' ideas as an explanation of the mechanics of *why* a given region should have one currency - because that region's economy is driven by whichever city is its primary economic engine.
I did some research on whether Canada was an optimal currency area, around the turn of the century. It actually has very little to do with the author’s concerns. Optimal currency area theory is mostly about monetary policy and whether central bank reactions will be hampered by different regions facing different monetary/economic shocks at the same time. There’s also an exchange rate tie-in, as monetary policy always ties to exchange rates, but It only has a tenuous relationship to long term development economics.
Her argument is basically that the optimal currency area theorists are wrong and long term import substitution is more important in local economic development than effective medium-term monetary policy. Unfortunately she seems to downplay a lot of basic ideas in international economics. It’s always a mistake to take one economic idea (import substitution, productive advantage, labour v capital, competition, effective laws and contract enforcement, costs, government planning, work ethic, scale, technology, education, health, etc.) and make it the most important one for development. It’s easy to see the flaw here: why a city and not a district? Where does the city’s border get drawn? Why not each factory be a city with its own currency? (Which actually existed for many businesses in Canada at one point.) There is a reductio waiting where every “city” produces one thing for export, and the world returns to barter since there are no common currencies. Even if there is a benefit to having a currency for each city, there are also advantages to uniting economies into larger areas. (To be fair, it sounds like in the end she suggests experimenting to see what actually works, which is often good economics.)
Ironically, the evidence I found was that Quebec fit pretty neatly within the Canadian currency union - it was Saskatchewan that really didn’t fit.
"It’s easy to see the flaw here: why a city and not a district?...Why not each factory be a city with its own currency?"
What if an industry is doomed for some reason besides having too strong a currency? Like I don't know, a town that makes type writers or fax machines. In that case, a declining currency for the whole town would support the growth of new industries, right? One town has enough labor mobility that industry in one part can replace industry in another, which is not nearly as true for an entire country.
Yes, I think we agree. Labor mobility is one offsetting factor that makes currency unions larger than a single product/business valuable.
Diversification of production also provides a form of insurance against product failure for a region.
I think most economists would argue that there are many other pros to currency unions - enough that going larger than a single city is economically optimal even if labour mobility or import substitution. start to decrease.
Maybe so, although it's hard to believe that rust belts would not benefit from having their own currency.
>The prices in a poor country like Portugal or India (her two examples) feel low for an American or Canadian, but they’re high for most Portuguese or Indian people. At the same time, Portugal and India provide too few jobs to their residents. Inflation and unemployment are both perennially high, and none of that feels surprising whatsoever.
This is an egregious mistake. Expensive != inflation.
You’re completely right of course. I will note that stagflation is indeed common in poor countries - Haiti for example has an unemployment rate of of 14.6% and an inflation rate of 34% - but it’s not a rule and it’s not accurate to describe stagflation as being synonymous to poverty.
Inflation was not common prior to the rise of central bank fiat currencies. When everyone is using Spanish pieces of eight (still referenced in pirate movies), the only shock to the money supply is if gold is discovered.
a growing economy need a growing money supply. if you don't grow the money supply you or stop the economy from growing or you get deflation.
Prior to the establishment of the Federal Reserve the US economy was able to grow despite not being able to just print more money. Nowadays inflation is expected and the absence of it can cause problems, in a different context monetary stability is the norm.
they found more gold.
They did find more gold, but the long run trend was still toward deflation due to productivity increases.
This is a fascinating review, well deserving of a spot among the finalists! I had never heard of either of these books. Thank you to whoever wrote this review!
Jane was clearly a brilliant and original thinker, but I can't help thinking that she has overlooked many things. (Epistemic status: wild-ass speculation from a non-economist; please tell me where I'm wrong.)
The way Jane tells it, it's so simple: divide the world into smaller units, each unit will be incentivized to produce stuff and export stuff; prosperity for all! In reality, well...
/laughs-sobs in Sub-Saharan Africa
There are plenty of small countries that would benefit tremendously from import replacement and yet continue to be stuck in subsistence-level agriculture and poverty. If Jane is right, then why hasn't the end of colonization unleashed a ton of productivity and prosperity everywhere? She makes very insightful points about the disadvantages of empire and size, but she overlooks some basics like "infrastructure" and "good institutions" and "cultural norms against corruption and nepotism" and "strong rule of law" and such. Being small and locally controlled and having your own currency is clearly NOT sufficient for a strong economy!
Second, the reviewer says that Jane would have applauded Brexit. From my very cursory skimming of The Economist magazine, I get the impression that Brexit has been an economic disaster for the UK, so much so that Scotland wants to leave the UK *and rejoin the EU*! If autonomy is all that and a basket of roses, why would Scotland want to join the EU? What does the EU offer that Jane could not see? Why hasn't the UK blossomed post-Brexit, contrary to what we might have guessed based on Jane's writings?
Third, our old friend Moloch comes a-knocking. "Si vis pacem, para bellum." It's all well and good to have a bunch of right-sized somewhat-larger-than-city-states, as long as all these entities agree to cooperate and not attack/conquer each other. All it takes is one Putin to ruin it for everyone.
Regarding preparing for war, we could always follow the example of the Delian League. One country takes the lead with the armed forces, and all the other countries contribute either people or equipment or cash. That ended well for Melos!
The easy answer regarding Brexit, per Cummings anyway, is that it gave the UK the opportunity for innovation after ridding itself of Brussels red tape etc. The abject failure of Johnson's premiership, followed by Truss, Sunak, have failed to take advantage, instead largely recapitulating the same problems, partially motivated by negotiations. C.f. UK and EU on destructive AI regulation.
As for Scotland, that's even easier. The place was an enormous net receiver of EU money, and if the UK isnt resurgent its obvious why they'd prefer to go back.
Much of UK science was EU funded, so Brexit was initially a step backwards in innovation. It's also hard to plug the research funding gap yourself when you have fundamental economic woes, which you do, because of Brexit.
The idea that red tape, AK A regulation is a 100% negative is naive. It's hard to get rid of red tape, because much of it is useful. Nowhere has ever turned itself into a utopia just by making a bonfire of regulation.
Some of it is useful and some of it is a net loss. I don't think it need to be as drematic as a bonfire to be worthwhile. Getting rid of the worst regulations and tweaking other tradeoffs to better suit your individual situation should increase growth.
Even if the UK used that control wisely it might not be worth loosing frictionless access to an enormous market.
Which brings me to a disagreement I have with Jane (if she was anti EU in all its forms). City states are great for somethings but I'd expect a collective of city states that all agree to certain standards to make trade easier would out preform city states who are all completely individual
> Getting rid of the worst regulations and tweaking other tradeoffs to better suit your individual situation should increase growth.
Good governance is good. Good governance is also difficult. The problem of getting rid of bad regulation isn't fundamentally different to the problem of implementing good regulation, and that's the problem everyone is failing at to some extent. It's pointless to blame the UK government for not getting rid of all the bad regulation, when neither you nor they know exactly what is. Populist politics keeps underestimating just how complex everything is. "Burn it all" is popular because it is simple.
No argument from me.
"Populist politics keeps underestimating just how complex everything is. "Burn it all" is popular because it is simple."
And there's the problem, in a nutshell.
This reminds me of Scott's brilliant "Mistake vs. Conflict" post on Slate Star Codex.
Do you have any sources for Scotland being a net beneficiary of the EU? Scottish government figures disagree for the most recent years.
https://sp-bpr-en-prod-cdnep.azureedge.net/published/2018/9/28/European-Union-funding-in-Scotland/SB%2018-61.pdf
(Since the Scottish government is well known for dodgy financial figures, I'm not citing this to prove you wrong, but I haven't found anything to support that myself.)
In any case, if Scotland was a net beneficiary of EU funding then the same would be true of all regions of the UK outside of London. The biggest beneficiaries of the EU within the UK were rural Wales and Cornwall (through the regional development fund) but I don't recall them being hotbeds of EU support, unlike London, the biggest contributor.
Seems I'm out of date on Scotish transfers, thanks. That said, distributed net costs from cities clearly don't bother people much (as you point our regarding London), whereas the loss of ag, fishing, and other targeted subsidies is felt much more keenly by those communities.
It shouldn't necessarily be a surprise that Cornwall and Wales have reacted differently to Scotland so far since those areas are much more tightly integrated with the English core.
Again, I'm not trying to be rude but, if you're out of date, do you have a source that Scotland was ever a net beneficiary? I question that because (according to the Scottish government) Scotland was a net contributor to the UK treasury between 1980 and 2012.
If you look at the voting figures for the referendum you'll see that the areas of Scotland with more agriculture, fishing and rural development subsidies were much more in favour of Brexit than the central belt, so I'm curious to know why you argue that economic self-interest would be driving the Scottish view on Brexit in a way that's different from similar areas in the rest of the UK.
If you ask me, the main difference is that Scottish people who resented their situation could blame the UK government, and had no need to turn against the EU.
Edit: plus Scotland had lower immigration.
I've never suggested EU transfers were a driving force for Scottish views on Brexit. I'm saying the removal of those transfers without commensurate post-Brexit benefits from London is likely a driving force behind Scottish desires to leave the UK and rejoin the EU. Essentially: things were better before, and I want to go back. That people don't realise what they have until its gone is nothing new.
As for Scottish/EU transfers, the key here is not how much money goes to/from the UK, or even the public sector net contribution you were talking about earlier, but rather the total EU money in/out of Scotland. I confess I was rushed during my first reply to you, so was mostly taking your word for it. You're right to point out the public sector was a net contributor, to the tune of £0.46b/year, but this surplus is entirely wiped out once non-public sector subsidies are taken into account:
Agricultural subsidies were ~£0.6b/year
Other reported subsidies (social funding, rural development, fisheries) were ~£0.15b/year, likely much higher in the final analysis once other EU programmes, such as those listed at the end of the report, are included.
So Scotland was a net beneficiary to the tune of ~£200m/year. However a proper accounting would also include the impact of favourable loans from the EIB, which amounted to ~£2b/year (prior to the Brexit vote anyway, after which point it dropped considerably).
Clearly this wasn't widely known or appreciated. So when the demographics that previously received wildly disproportionate net transfers started to hurt as the 'transactions of decline' dried up, it should be no surprise that they began to favour a return to the old system.
What I'm claiming is that isn't at all true that Scottish opinions on Brexit today are a case of 'you don't know what you've got till it's gone'. The day after the referendum, Nicola Sturgeon argued Scotland was being dragged out of the EU against its will. This is the 'material change' argument which justified the push for a second referendum. But if you look at poll trackers, this has no more support now than it did on results day. A priori, your narrative would be plausible, but as far as I can see the evidence doesn't agree.
Instead, the idea of rejoining the EU is simply a perfectly logical step for independence supporters. The SNP sell the idea that Scotland is a nation with a different set of values to England, and that independence would allow the country to become more socially democratic, and fairer. Since Denmark, for example, shows this is perfectly possible within the EU, there is no contradiction at all there. Libertarians and Brexiteers might be surprised to hear that Scots would throw off the yoke of Westminster just to replace it with Brussels, but that's just a fundamental misunderstanding of the main motivations behind independence.
Finally, to the figures. You've essentially just doubled the 'money in', because the subsidies you're talking about are paid by the EU to national governments, and comprise the 'public sector receipts' the report is dealing with. Private sector receipts are a minority of total funding. See Box 1 on page 10 here:
https://researchbriefings.files.parliament.uk/documents/CBP-7886/CBP-7886.pdf
> From my very cursory skimming of The Economist magazine, I get the impression that Brexit has been an economic disaster for the UK
The Economist is well-known to be a fanatical europhiliac rag. They will downplay or omit any mention of positive benefits of Brexit but trumpet and exaggerate temporary setbacks or difficulties resulting from it.
The UK has not yet had a chance to benefit fully from Brexit because most British politicians and civil servants are abject cowards who can't bear to part with their EU comfort blanket and have done their utmost to sabotage and prevent any positive developments stemming from Brexit.
>The Economist is well-known to be a fanatical europhiliac rag
Or...Most economists are anti Brexit.
Politics is the mind killer and brexit was very political.
I'd expect many of the economists writers to be part of the tribe whose members must hate brexit to be admitted.
So are they making up the figures, or the conclusions?
They are making up projections which they present as facts, same as they always do.
Nothing to add, and I don't really need to get in a discussion about it anyway. But if I had the option to press "like" or "+1" or whatever I'd have pressed it. I don't know the etiquette on this site for "hear hear" posting.
"My genius plan would have worked just fine if not for literally everyone hating my plan and making it fail on purpose out of sheer spite" doesn't rank high in my hierarchy of excuses, especially since when it comes to politics, "will everyone hate it" is also part of what one has to consider when assessing a plan .
Obviously not everybody hated it -- it passed, after all. The ruling class hated it and tried to have it overturned, but if we're going to accept that as a reason not to leave the EU we might as well just give up on the whole notion of democracy.
I'd say that the Brexit people were sold on / voted for didn't actually have much overlap with the 'actual plan' (going by Cummings) for how to benefit from Brexit. The impression I get is that very few people outside of the ruling class knew what the actual idea was, instead being persuaded by the same playbook developed during the Alternative Vote referendum. I know I spent a lot of time thinking "clearly there are people much smarter than me who think Brexit is a good idea" and trying in vain to find their arguments, and it wasn't until reading Cummings years later that I managed to find it. In the posts explaining it he was clear that they didn't think people would vote for what they wanted to do, so they found a different framing for the idea which was more appealing to their target audience. Even then, he stresses that they couldn't have won if it weren't for exceptional luck and an unusually incompetent opposition.
The results of the Brexit and (much moreso) the Alternative Vote referendums did really shake my faith in democracy in the modern era though, with the sentiment towards an idea being increasingly decoupled from reality.
It's almost impossible to separate this from the object-level question, but in general it seems like a bad idea for the demos to insist on a policy the ruling class hates. By definition, it is the ruling class which is tasked with implementing the policy. The ruling class may be motivated by a strong public service ethos (as is the self-perception of the British ruling class), but even so it's difficult to implement a policy effectively if you think it's stupid and/or evil. Of course it's much worse if the ruling class is self-serving (as cynics tend to assume).
Maybe, but then that removes one of the main advantages of democracy, i.e., that it governs in the interests of the people as a whole rather than of a narrow political elite.
Democracy has been a fudge since the time of Solon.
<i>Second, the reviewer says that Jane would have applauded Brexit. From my very cursory skimming of The Economist magazine, I get the impression that Brexit has been an economic disaster for the UK, so much so that Scotland wants to leave the UK *and rejoin the EU*!</i>
In addition to what Alethios and John R Ramsden have already said, Britain went into lockdown not long afterwards, and then after *that* the war in Ukraine pushed up the price of fuel and hence of everything else that involves fuel in its production/distribution, which, it turns out, is everything. These factors would clobber the British economy even in a world where Britain was still part of the EU.
<i>If autonomy is all that and a basket of roses, why would Scotland want to join the EU?</i>
Scotland is (or was) a big net receiver of EU funds. Also, globalism is such a powerful belief system among western elites, that even nationalist leaders want to be part of big supra-national organisations.
>These factors would clobber the British economy even in a world where Britain was still part of the EU.
Numerous studies have shown that Brexit is having an additional effect, eg.
https://obr.uk/forecasts-in-depth/the-economy-forecast/brexit-analysis/#assumptions
https://www.piie.com/research/piie-charts/uk-and-global-economy-after-brexit
I've asked Alethios the same question above, but do you have any sources on Scotland being a big net receiver of EU funds?
The thing about Brexit is that the main disadvantage , the return of complex frictional trade, is a stone cold certainty, but the advantages are distant and vague.
The disadvantages are real, and trade friction is only one of them. If there are honestly projected economic benefits, I haven't read about them.
OTOH, there are clear non-economic benefits. AFAIKT, one of the main drivers of BREXIT was the intent to exclude immigrants.
Which led to a labour shortage.
Dunno. The whole article we are discussing is about the advantages of not living under a one size fit all regime, yet you choose to focus on the frictional costs.
you can change what is administered at each organizational level. (similar to federalism in the US)
You could, for example, have an European Union that:
For military defense against Putin: had a unified, NATO-style organization with either an alliance based force or just a unified single military controlled by some supra-national office like NATO.
For currency: had "optimal currency area" style currencies, maybe 6-7 in Europe, similar to what Jacobs proposes.
For trade/tariffs: free trade between members, and agreement to negotiate collective trade/tariffs agreements with outside countries.
For domestic/spending policy: total federalism on some issues, agreement to abide by generally set limits on human rights, spending limits, etc...
And so on.
Scotland voted heavily against Brexit and had only barely stayed in the UK with an earlier referendum. It was expected at the time that Brexit would make the Scots want independence more, but David Cameron had gambled & won with the Scottish referendum and figured (incorrectly this time) he could do it again.
I agree that Jane overlooked many things, but she didn't say everything would go well automatically if only the entities are the right size.
I see her main point in explaining mechanisms at work. Having a separate currency for a city gives one regulating mechanism to help keeping the balance, I didn't understand that this is a cure for everything.
About Sub-Saharan Africa: many of the conditions she describes for rural regions and the western powers have little incentive to change this as they like to get cheap commodities and export their valuable goods. This is like the example of London and Boston in colonial times. Many African countries don't even have full sovereignty yet e.g. by CFA-Franc, foreign sponsored corrupt governments and even uninvited foreign military bases. The example of a country pushing for African sovereignty is Libya, you know how this ended?
Power politics in general is one of the topics Jane seems to ignore completely. Of course it is not so important for the economic mechanisms she was exploring, but it is necessary to explain the world or even change it for the better.
(review author here!)
Jacobs actually does touch upon decolonization briefly in the book. She notes that it usually makes things worse at first, because colonies tend to not have well-developed cities, and the loss of the link to the colonial empire means the loss of the link to dynamic cities. The economy of Belgian Congo was mostly dependent on Brussels, not Leopoldville/Kinshasa. Independent DR Congo doesn't have Brussels anymore, but Kinshasa can't replace it because it isn't a good import-replacing city. Whether Kinshasa becomes one depends on many factors, including all the ones you mention, like good institutions and regional conflict.
Jacobs would, of course, totally agree with you that "being small and locally controlled and having your own currency is clearly NOT sufficient for a strong economy."
It’s not just separating smaller regions - it’s separating regions that are economically cohesive, likely because of urban geography. I think of the city as the region where people regularly travel on a daily/weekly basis. But African national borders famously don’t often respect the meaningful geographic and cultural divisions on the ground.
This was a great review and a great post. I could not stop reading it.
I wonder what Jacobs and those who support her theories think about autonomous regions like Tyrol (shared by Italy and Austria) and The Basque Country (shared by Spain and France).
Both regions are incredibly wealthy and are in constant negotiations with the centralized states with regards to the sharing of power and economy. I was very impressed when I visited these regions and felt that more places could use this system.
I wonder if Jacobs thought that the centralized governments would eventually make these regions poor?
I wonder whether this is a more general phenomenon: Regions that have alternatives have more leverage in negotiations with nation states. Also, it would be interesting to know whether this only leads to reallocation of resources from other regions that have no such leverage or whether it leads to an actual economic growth.
Spain is an interesting case study, because various ethnonational subregions do enjoy relative autonomy within the larger nation-state. Catalonia isn't the only one. Asturias has its own language and a measure of self-rule. It's economy was dependent on raw material exports, and now relies on tourism. I don't know much about the details.
So this all can be condensed into two points?
1. Some economic activity is conducive to development, some isn’t.
2. Currency rate fluctuations are a feedback loop that encourages the right kind of activity.
Could it be possible to think of a smart set of regulations, some kind of adaptive taxes/subsidies perhaps, that would have the same effect?
>2. Currency rate fluctuations are a feedback loop that encourages the right kind of activity.
... but only in units that are the right size for feedback to take effect. You can't strap a motor to Earth and try to pilot it purely by feedback, by the time you will "feel" anything, it would already be too late. Feedback is just the "Fail Early, Fail Often" ideology, or Agile as the software folks love to call it. You have to be sufficiently small to do it, babies can fall, but grown men can't.
The example demonstrate it, Detroit's Industry failed, but instead of that failure feeding back into the decision-making of Detroit, it fed back into the decision-making of the entire USA, which is too large, too busy, too blind, and too powerless to correctly interpret the feedback and take corrective action. It's like a student who keep studying the wrong way, failing exams, but their failing grades are intercepted by their protective parents. The student knows they are failing and that what they are doing is wrong, but they never know the exact questions they got wrong or even how many of them, the feedback keeps getting intercepted by the large entity above them.
Ideally feedback is a lot more than "Fail Early, Fail Often". Feedback ought to be "notice a correction is needed and make it". The "Fail Early" only applies in a situation where the design was wrong, there wasn't feedback, or the feedback wasn't properly interpreted and acted upon. Ideally you avoid failure by incremental changes. This doesn't always work, but it often does.
I was thinking in this direction too. But You don't have to go that far, even gathering the right regional statistics and communicating awareness for these mechanisms and the current situation could help. Or to consider this in public spending by preferring local offers even if they are x% more expensive than the lowest bid.
Your question goes completely against Jacob's view of the situation. So there must be more to it than just the two points you list for her to come to such a radically different view.
Sorry, I’m confused. It may well be that my summary of the contestant’s summary of the book is entirely incorrect. But do you have a specific argument?
I dont believe Jacobs would have written an entire book, that she was apparently very proud of based on the quotes in this article, that boiled down to just two points.
Additionally, Jacobs would not believe there is a "smart set of regulations, some kind of adaptive taxes/subsidies perhaps, that would have the same effect". She would have likely seen this as quixotic and was very against top down decision making.
So I, quite glibly and dismissively, was trying to imply that maybe you have missed something if you boiled down the review to those two points and your take away was to ask something the reviews subject would have been very against. I should not have been such a jerk about it!
The central premise seems to be pretty in line with Austrian theory - "mal-investments wreck the economy". Her value adding insights seem to be "hey there's a ton of bad investment / underinvestment happening because of signal distortion that we haven't really been seeing. Large regional currencies disguise important signals and the things large regions do to try to pacify peripheries don't give back as much as they cost and slowly drain everything" and secondly "you might think the former statement suggests that maybe we need to go down even further and assess within cities or even at the individual level, but no, actually cities are the right unit to consider economics".
The former is pretty in line with previous economic theory and makes apparent sense.
I'm not nearly so convinced of the latter. This focus on import replacement feels like a special case and not a precondition. Trade is good where there's comparative advantage and literally creates wealth. You could not make a struggling city prosperous by nudging it to replace imports. Rather, it seems like in some notable cases where places happened to, by chance, find themselves in a situation where it suddenly made tremendous economic sense to replace imports, doing so made them a lot of wealth very quick, which makes sense. All at once they started pocketing the costs previously paid in shipping and tariffs. I'd really like to know a lot more about the specific mechanisms by which those 5 forces create the declining towns mentioned, because overall the USA seems to be a tremendous counter point to her thesis. There are a large number of massive economic centers that are very successful and growing rapidly, even if you can pick out a biggest, and many didn't do it by a process of replacing imports generally.
An alternative model of events that maybe fit the same data:
People will agglomerate where a combination of factors make productivity high. Some of these factors are things like natural resources, availability of labor, access to capital. Two other notable factors are economic and governmental policy, and the network (agglomeration) effect.
Starting from a state of some distribution of economic centers of various size, in large economic centers there is high productivity due at least in large part to it's large network. It's trend however is for natural resources to drain and more importantly for local policy to be captured, lowering productivity.
In some small regions, there will be plenty of access to resources, sufficient access to labor. Capital in the modern world is relatively fluid. As long as a locality keeps their policy good, at some point somewhere the scale is going to tip - someone considering their next venture will weigh the large network of the large center against it's low natural resources, poor access to cheap labor, and / or constrictive local policy, and choose the smaller center.
This creates a cascade because now the smaller center has more capital and a larger network, making the next venture more likely to pick it. In very short order, there is a sudden shift of economic activity from various places to this new center, which _looks_ like import replacement, because it's suddenly producing a lot of activity.
The city might still be right unit if economic analysis but I'm not convinced. But the proposed solution for economic crises is "keep policy that makes it easy to be productive and stop making mal investments"
I feel like the definition of a city here as it relates to import substitutions is that a "city" can be thought of not just as the actual literal city center but as a sort of center of gravity/watershed. Economic activity concentrates in a "point" where transaction costs are comparatively negligible, though Manhattan is obviously a lot bigger than a 1 dimensional point in physical reality. That point, which is "the city" exerts a zone of influence around it until you either reach bypassed land or cross a watershed. For any pair of cities one will have the comparative advantage in any given good only in an environment of no transaction costs. Import Substitution is the process of burning through all the goods where you normally would have not had comparative advantage but need to produce it yourself because of transaction costs. Cities like Gary, Indiana withered not necessarily due to losing their comparative advantage in their specific thing, that was just a symptom of the fact transaction costs had plummeted to the point where it no longer needed to be a separate watershed. Gary was downgraded from an independent economic center to de facto part of Chicago's gravity well. It was only a matter of time until it ended up collapsing like the moon entering the roche limit. That's why the UK is pretty much a one city country now and why Gary painfully transformed from a full city to a glorified highway pitstop town.
I think this explains some of the mystery of the middle income trap and Japan's apparent success with protectionist tariffs to get their industry kickstarted despite the usual objection of comparative advantage.
Agree with that.
"Import substitution" seems to vaguely gesture at the concept of "catch-up growth", when a developing nation begs borrows or steals technology from developed nations. That's all well and good. A nation, state, city or village can benefit from copying successful enterprises and institutions built elsewhere. But comparative advantage and win/win benefits from trade are such fundamental economic ideas that to ignore them seems crankish.
I understand "import substitution" here as a quite specific advice: start diversifying your production with some good you now import.
This will combine several benefits:
- balance your imports/exports or allow more imports of other goods.
- create jobs that create value
- keep the return of capital within the local economy
- generate the means and expertise for future exports
This is not meant to replace all trade and get self sufficient, but to catch up to level were win/win trade is possible or to maintain this equal level
I had been viewing Import Substitution as more fundamental, making the city or even neighborhood the right level of economic analysis: it's essentially specialization. If you're subsitence farming or cash crop farming or drilling oil, that's the only thing to do, but if you suddenly have enough concentration of people to allow specialization OR it makes economic sense to have some of your banana pickers become candle makers because candles got more relatively expensive, then you can start to have a self-sufficient economy. I'm not sure exactly how the leap goes to working up the value chain, which always seemed like the end goal in my studies of development, but some level of specialization seems like the right step to get there
Or better yet - if a city is failing it's like a company is failing. Either it's mismanaged and you can save it by fixing it's policy to allow productive use of its capacity, or it just isn't a good idea and we'd be better off letting it fail and having those people move to a different economic center where they will produce more.
A policy stance that might come out of that seems to be "let's make it easy and profitable for people to move around quickly so they can get to economically productive cities and out of bad ones"
Furthering that point: having a common currency, culture, army, laws, etc. across multiple cities near each other geographically helps make it easy for people to move from one to another. Call it a "Nation" perhaps?
It's not that simple. Sometimes the environment you're operating in changes, and you can't change to accommodate it. Say 1/4 of your cities wealth comes from selling buggy whips, and cars are taking over the transportation business. You've now got a city that 1/4 too large for it's base. That you can import a replacement industry is usually a pipe-dream. The pure economics answer is to get rid of the now-excess 1/4 of your population. Perhaps, however, that would have undesirable consequences. Welfare will probably hold them locked in place. And they don't WANT to learn a new trade "I make buggy whips, and so did my father before me!" (If you don't like buggy whips, you can find your own analogies, they're all around us.) So what do you do?
It's a real problem. You can find examples all around the country. Back before transportation was so good and government so central you could find abandoned towns all around where a resource had failed. Coal mines, silver mines, etc. The town was just abandoned. That's an approach that works, but it makes you really unpopular with those forced to abandon their home. But a city is a much bigger problem. A mining town had perhaps 500 people. (That's a guess, there was one with a population of 15000, but its an extreme outlier). A small city has about 100,000 people. That's a lot of people to get unhappy with you. And when it keeps happening...well, even over generations it contributed to political instability. So you'd *better* be funding your military.
You're right. I'm not super convinced by the concept of "import replacement" generally, although there are clearly cases where it does work.
Every major city has a large professional-managerial class, which relies on laptops and cell phones, which are invariably imported. Would, say, NYC or London be better off if their people said, "Let's do import replacement! Let's stop importing all our laptops and cell phones and build them here instead, starting with the microprocessors!"
Would it make sense for every major city to have its own microprocessor fab? Based on recent experiences with trying to relocate more microprocessor manufacturing to the US, I would say the answer is no. The "let's have every region make as much stuff as possible to replace imports" philosophy runs counter to the specialization and economies of scale that are among the strengths of modern economy.
I’ve seen Jacobs and Hayek compared explicitly before, so the Austrian connection sounds right.
I have a lot of issues with the Jacobs view of the world. She’s right of course that the nation state is an abstraction that contains a lot of internal variation, but so too is a city! Western Sydney is substantially poorer than the Northern Beaches. The Bronx is poorer than Manhattan.
It’s often useful to sum up these areas with differing economic circumstances as “Sydney” or “New York”, just as it’s often useful to sum up Auckland and Christchurch as “New Zealand”. But I don’t see a principled reason to embrace the city as the fundamental economic unit.
I’m also deeply unconvinced by the idea of import replacement being an especially important process. It seems to imply that the more things a city produces for itself the more it will grow, while in reality it seems to me that the largest cities have the most trade.
Suppose we have a factory town that imports food and exports widgets. If the demand for widgets collapses and they turn to subsistence farming, that’s “import replacement” but it doesn’t seem like a step in the right direction economically. Conversely if the price of widgets goes up and they can start importing more stuff, that seems like a good thing, even though it’s kind of the opposite of import replacement.
The example with the factory, that's not import replacement - sounds more like import cessation.
My understanding is import replacement is about independence without loss of standard of living. E.g if Japan figures out how to build some kind of miracle renewable energy which is reliable and scalable enough to supply their entire country, this will replace their natural gas imports entirely without dragging down standard of living.
(Because in the case if subsistence farming, as soon as you get money again you'll go straight back to importing food - import replacement is about imports stopping voluntarily and not because you can't afford it).
I sort of understand why cities should be seen as a single economic unit - you can commute to work/goods and services from Western Sydney to the CBD (in fact, many people do) and you very much can't from Higgins to NYC. If one day there is a bullet train that makes it so that it'll take $10 and an hour each way to go from Sydney to Melbourne or vice versa, it'll probably make sense to consider them the same urban area too, but still consider Adelaide, Brisbane and Perth separate (unless you loop them into the same bullet train but I doubt it'll ever connect Perth).
Thought experiment: if a new business (E.g Taco Bell) landed in some central area of Sydney, would someone in the western suburbs consider that accessible to them? How about Newcastle? Wagga Wagga? Albany?
My understanding is that city limits is defined by where you draw that line.
That's my general impression of the book after finishing the book review: an interesting book, maybe even a great book, marred by economic illiteracy and a failure to fully think through the things it's saying. If import substitution is so great, for example, why shouldn't individual neighborhoods within a city erect tariff walls between each other to make even more wealth than import substitution on a city level? If poor areas inherently suffer so much from being tied to rich areas and having to share the same currency, why shouldn't the poor neighborhoods secede from the rich ones to enjoy the benefits of having an independent currency?
And how can import substitution even work on a city level, if cities can't ever actually reduce their imports unless they start producing their own raw materials? Boston in the book's example went from importing tools to importing iron to fuel its tool factory, it didn't reduce its imports so much as push them around to a different sector of the economy. Yes, it saved money by importing raw iron instead of finished tools, but that same effect could be had by just exporting more of something else, especially if the city chose to specialize in producing and exporting that thing to get maximally efficient at it. (A penny earned is a penny saved, as the saying doesn't go.). Or importing stuff then turning around and exporting it at a higher price to somewhere else - Entrepot trade as it's called. What's so special about avoiding imports in particular?
That's the general impression I get from reading the book: lots of puzzlement that neither the book, nor the book review, spotted the standard "Export Good Import Bad" fallacy or "Why can't I just keep dividing my nation into smaller trade areas to do more good more?" question that gets covered in Econ 101. That might be why the book got overlooked by economists... perhaps the book review shouldn't be puzzled why they didn't take the writings of someone who 'never got a college degree in economics' seriously.
"Yes, it saved money by importing raw iron instead of finished tools, but that same effect could be had by just exporting more of something else,"
But the tools are more expensive than the Iron so there is a surplus (how much would depend the quality of the new tools produced and transport costs and other factors). The surplus can then be put to work buying something else.
However, I think you have the direction wrong. Import replacement is just a description of what happened, not a recommendation for cities to engage in it. As cities got richer or started producing more things, entrepreneurs move in to satisfy demand locally instead of through imports. The city didn't set out to replace imports it was a natural process.
A different example would be a small town that has no restaurants. All the citizen travel down the road to the next town that does have restaurants. One day I say "hey, I'd like to run a restaurant". If I and the town are rich enough, I open the restaurant. Now citizens don't have to travel to a different town to go to a restaurant they can just stay here. A surplus may be created through their savings in time and travel costs. Maybe a few years later my restaurant is successful and some farmer in town devotes part of his wheat harvest to baking bread to sell to my restaurant so i dont have to import it from a different town. and so and so fourth. As the city gets bigger the value of the goods that start to get produced there would go up.
Internal variation isn't why the nation is a bad unit, it's because, for larger countries, it's a unit built up of smaller, somewhat independent sub-units (cities). Detroit and Boston are used as examples in the review. The economic collapse of Detroit did not directly cause Boston to collapse. But the economic collapse of Boston's financial district would cause its suburbs to collapse. In many ways, Detroit and Boston are independent economically, but are tied together because of a shared currency. Detroit and Toronto are probably more tied together economically than Detroit and Boston because of proximity and natural trade routes, but the different currencies means they perform differently on a macro level.
I do agree it's often useful to sum up on the country level. Though it's less useful when you are comparing the US/Germany/India/China/Brazil with Switzerland/New Zealand/Singapore/etc.
The reason the city is a meaningful unit is that there is no smaller subunit you can divide it into that is mostly independent. There are some cities in the United States that can’t be properly divided from their neighbors (Austin and San Antonio, Baltimore and Washington) but for most, you can just draw a line where there’s no more houses for several miles, and the vast majority of people inside that line stay inside that line on any given day. National borders aren’t actually quite as clear - there’s much more porousness between Seattle and Vancouver, or between Toronto and Buffalo, than between the pairs of cities that are nominally in the same country (unlike with neighborhoods of different cities).
There are literally no places in the US besides small rural prepper areas that are "mostly independent". Every major metro down to things the size of Cairo Illinois are deeply deeply immersed/immeshed in global trade.
What I mean here is something like that most residents of the region don’t leave the region on most days. Municipalities aren’t like that (plenty of people commute from the suburb to the center city every day), but the urbanized area usually is.
There is a lot more to recon on ice than humans physical locations. Also you are going to k end up with a lot of pretty tiny municipalities under this rubric. Like the previously mentioned international falls.
Those people aren’t commuting to Duluth or Fargo or Winnipeg most days.
I don't mean to suggest that this is the only meaningful level at which to analyze human geography - just that it is a more meaningful one than many of the others that have official or legal status. And yes, there likely will be some very tiny regions on this sort of analysis - but if those people are interacting with each other on most days, but not with anyone else on most days, then that's an interesting and distinctive fact.
Hm, so, as the natural boundaries for calculating housing prices are not cities or states, but neighborhoods and metropolitan areas, so the natural boundaries for efficient economic engines are not nations but conurbations? Sort of a watershed theory of grouping...
Some of this is similar to a crazy theory I cooked up while on a long drive, a number of years ago. I posted it earlier on one of the housing posts, so I'll quote without editing. I welcome any comments ripping it to shreds, and pointing out what huge chunks of human life it casually ignores (a big one is added value, as in the chain from ore to metal to machine part to full assembly). :-)
> America's current population distribution is an artifact of inefficient transportation and slow travel, and it's slowly transitioning to a new equilibrium. (This is deliberately provocative and biased framing, which assumes as "normal" a pattern which we are only moving towards.)
> Ultimately, the interior of the continent is for resource extraction (including such things as farming and the use of cheap hydro-electrical power to work aluminium). Ports at natural harbors and large rivers allow inhabitants to siphon off some of the value of the trade flowing through. Everyone else, including tech workers, might as well live in one giant city, or in the middle of nowhere or in small towns if they can work remotely and choose to. Legacy cultural and industrial centers may hold out for a time, but will eventually succumb to gravity, because resisting requires a constant use of energy. (See also, how so many native languages of the world are dying out, and how American Standard English is effortlessly gaining ground. Resisting this takes active effort; going with the flow takes none.)
> Some jobs, such as resource extraction or creative work, essentially generate wealth ex nihilo. Everything else, from government to schools to restaurants to retail to hairdressers to movie theaters, all of that siphons money out of wealth generation. (This is not meant to be pejorative, merely descriptive.) Wealth flows, like current (i.e. currency) from one person to the next to the next. But each time it flows through a corporation with a non-local HQ, some of it is siphoned away to the location of the HQ. And eventually, to the location of the owners of capital, and while they may invest some of that on a global level, their circles of concern tend to center on their own location, and the governments of their own location siphon off their share.
> Overall, resources and money flow downhill like rivers, seeking the ocean. A little mining town in West Virginia may have one source of generated wealth, and if that source dries up or goes away, the town will slowly shrivel and die. Every time anyone spends money at a chain store or online, wealth leaves and does not return. Yes, yes, equal exchange of value, but even putting aside taxes and profit, something has left that will not return. Draw a line around the town and monitor cash in and cash out, and it will show a steady flow outward. The death knell is when they resort to tourism, an explicit attempt to create artistic value inside the line that will draw in wealth from outside.
One thought reading this was that Brexit should be a great test case.
The problem is the UK already had its own currency, and the EU-UK trade agreement is sufficiently comprehensive that this is more like “raise a set of random barriers in the service market” than “detach one economy from the other.”
Scotland leaving the UK would be the ultimate test-case; England is overwhelmingly the London area and it’s dependencies and hinterlands, so independent Scotland should se either Edinburgh or Glasgow revive on Jacobs’ theory.
No, Brexit was the _end_ of a test case. Immigration and (incomplete) policy union without fiscal or currency union was an excellent test for her theories, one in which London and Berlin both succeeded and therefore incrementally vindicated the theory. That test period is now over.
This review sparked a lot of interesting ideas. Bravo! Particularly noticing how states are so fleeting and cities are so often immortal, and what implications that has for the basic unit of economic analysis.
I couldn't help thinking as I read, that in a world where Jacobs is correct, what you really need isn't a patchwork of independent city-states as such, but rather a large confederacy with some extremely weird fiscal policies. I can imagine, for example, a world where the west coast of the US becomes "Pacifica" or whatever, and allows Seattle, Portland, San Fransisco, and Los Angeles to each mint their own fiat currencies with oversight by a local 'Fed', and maybe even manage their own internal tax policies up to and including tariffs against other cities in Pacifica. The role of the state, Pacifica, in this would be to oversee and centralize military development (an economic drag, but not as much of one as a war between Seattle and Portland), set a floor for basic human rights (especially exit rights and migration), and manage policy towards rural areas outside major city regions (probably with an archipelago of minor municipal governments, much as it is done today). The state of Pacifica would need to be tax-supported, but without the ability to set fiscal policy, or indeed to even mint its own currency, that would probably have to be done with literal production quotas from each city or something equally strange.
Very insightful! Lots to chew over...
Bremerton could be the federal capital of Pacifica, paying shipyard workers, soldiers, and the coast guard in its own local currency. When there's a border dispute, alleged human rights violation, or other problem which benefits from being passed off to a higher authority, that would also be the currency in which penalties or service fees are denominated, so some corrupt mayor isn't tempted to weasel out of wider obligations by debasing coinage.
I actually had the thought that a currency-less state institution could by constitutional mandate receive a specific fraction of all currency minted by its constituents, so Pacifica would end up with a diverse portfolio of different currencies that represent a known fraction of the city economies in a way that was resistant to debasement. You could in theory tweak this number slightly up as a punitive measure against local municipalities.
But punitive measures also seem a bit too weak, since large institutions are often happy to weather such punishments; they're typically small on the scale of the incentives involved. And they inevitably just pass those costs on to their constituents anyway, meaning the punishment would land on the victims! It seems better to use the usual sort of federal judiciary system, in which violations of state law are anulled outright and lack any claim to legitimacy as an act of the city, and in turn state law is limited in scope by the costitution.
For any given human-rights violation, figure out an acceptable error rate, and a minimum penalty. First incident gets the minimum. Each additional incident within the same institution doubles the penalty, and triggers proportionate follow-up investigation. Doublings are only undone by a contiguous period without confirmed incidents corresponding to the acceptable rate - e.g., if 1/10,000 is tolerable, and plausible opportunities come ten per day, one doubling is reversed per roughly three years clean.
Anything that makes my home (Seattle) *more* beholden to the dysfunction of California than the current US federal system gets a no from me.
No reason it can't mint an additional currency in which the federal business is conducted.
One quibble about Seattle: Boeing doesn't just make military planes, it's one of the biggest civilian plane manufacturers in the world, and has been for a long time. I think currently the civilian side generates about twice as much revenue as the military side, but I don't know how that holds up historically, through all the mergers and whatnot.
Plus, Seattle has a huge port, by at least one metric the 4th largest port in North America (for countainer ports, behind LA, NY, and Savannah, ahead of Vancouver BC and SF). (For sheer tonnage, it doesn't match east coast ports, though.) I have in the past described all the "cool parts" of Seattle as being a wart on the gigantic port complex.
https://en.wikipedia.org/wiki/List_of_busiest_container_ports
Also, the reason Boeing is near Seattle is cheap electricity via hydroelectric power, for aluminum working. So in an ominous sense, Boeing's location there is another example of an industry making use of local resources, the way Detroit was.
Boeing’s presence could also be explained by the $8 billion tax break package? (https://crosscut.com/2020/02/5-things-boeings-tax-break-money-could-buy-instead)
Originally sited for the lumber used in aircraft structure.
Ah, very true, Boeing is older than aluminum construction. :-)
I think the tax break is mostly a tool to shift the amount of investment the company makes in its facilities in WA state rather than South Carolina.
How do you reconcile the theory that `all large polities decline' with the sustained multi-century growth exhibited by such large polities as the USA? For that matter, how do you reconcile the `one country one major city' hypothesis with the state of affairs in the USA, or China, or India, or Germany, all of which seem to have multiple major cities (the US sometimes even has multiple major cities in the same state). And if wealth comes from cities then how does she explain wealth in Switzerland, or New Zealand, neither of which has any cities worth the name? All three conjectures seem pretty load bearing for her thesis, and each one is trivially falsified by data that everyone knows about (and she should have known about). That's probably the most parsimonious explanation for why economists ignore her economic theory - viz. its trivially falsified by looking out of the window.
Meanwhile, if her main `correct prediction' is the decline of Japan...that could alternatively be explained (far more persuasively in my view) by demographics. vs Japan started stagnating when it grew old. No city magic required. As for the inevitable decline of all nations and empires - this is far more parsimoniously explained by `all things end.'
To take a stab:
Speculatively, perhaps the USA **is** the city for the planet, unless China becomes so? Some of the dynamics described seem to apply on larger scales as well.
Regarding "one country major city", I'd speculate that the process takes time, and that the more federated the country, the more the individual parts can maintain their own cities. Also, in the USA at least, there's a drain of population from smaller cities toward bigger cities and from there to NYC, which takes active effort to resist. Most of the big cities are ports or hubs for specific high-profile industries, and most of the rest are in decline.
I can't speak to wealth in Switzerland, but from people I know in NZ, I hear that it's poor relative to the USA. Just, "first world poor", not "third world poor" like much of the rest of the Pacific that has good scuba diving (which description also includes Hawaii). Also, Auckland has over a million people; it might not be London or Paris, but it's definitely the single "city" of its country, even if that country is a bit of a backwater. If you were talking about the recent noted increase in wealth, that doesn't seem to be accompanied by a similar growth in GDP, which implies that it might be due to personal wealth of people who happen to live there? (Which might be an explanation for Switzerland, too.)
Most of the increase in wealth in NZ is due to extraordinary growth in property prices, fuelled by both significant population growth in Auckland, but also foreign asset purchases. With that said, Auckland is a legitimate regional hub with a large port; its hinterland is effectively the entirety of the (non-Australian) South Pacific. I’m not sure how large the influx of wealthy foreigners in-situ is, but their asset purchases have been significant.
Speaking as a born-Aucklander (who nevertheless spent most of my life overseas) NZ is not a wealthy country (there is significant emigration to Australia, for one thing), but it maintains a very high HDI with solid social services; I’m not sure there’s a massive quality of life discrepancy between New Zealand and the US even though the latter is significantly more wealthy per-capita.
I can’t comment, but I suspect most Swiss wealth is a product of financial services (like the City of London), prestige industries like watchmaking, and some advanced components manufacturing; I think it goes beyond merely the personal wealth of Swiss residents.
Assertion number one was that cities were the fundamental unit of analysis. To say that the US, a continent sized country, is the city for the planet renders meaningless the entire concept of `city' as well as the thesis. Sure `all cats are black' if you define any white, tabby or ginger cats you encounter to be black as well.
On `one country one major city' - it's not just that the effect takes time, the sign of the time derivative is wrong too. For instance in 1920 NYC had 5% of the US population. Today it has 2.5%. Its similar for GDP - New York has gotten smaller (relative to the US), not larger. Similarly China, India, and Germany are all countries with multiple major cities that show no sign of consolidating into one. Heck, even Brazil and Australia manage two. `One country one megacity' works for a handful of countries (England, France, Indonesia, South Korea), and fails miserably for many others. Its certainly not any kind of universal law.
As for `first world poor' - the whole of Europe (with the exception of tiny enclaves like Switzerland or Norway) is poor relative to the US. So is Canada. `First world poor' (i.e. poor relative to the US) describes almost the entirety of the first world, urban or otherwise.
Did currencies really matter during the gold standard?
Anyway, Switzerland and New Zealand are highly urbanized countries. The theory is not that only the biggest cities in the world thrive, it's that the biggest city in a region with it's own currency/self-determination thrives.
If Switzerland is urbanized, then the word urban has no meaning.
By some measures, Mongolia is one the countries most fitting of the label "city state"!
https://medium.com/migration-issues/who-is-the-city-statey-ist-of-them-all-fccd76f8e683
USA's growth wasn't "multi-century", unless "multi" is interpreted in the trivial sense of being more than one. And the mechanisms the book describes to me looks very long-term to me, she mentions the Roman Empire, which stood for at least 3x to 4x to 10x (if you want to count Byzantium) as much as the united states.
The USA and India are huge, federal, and multi-ethnic, that's not the default of the vast majority of nation states. Germany is federal, China is huge and multi-ethnic.
>the inevitable decline of all nations and empires - [can be] far more parsimoniously explained by `all things end.'
Yes, some earlier than others. All elements decay, but each with a different half life. Even subatomic particles decay, again with different characteristics for each type. Some things are so short-lived that scientists debate whether they can be even said to "exist", some so long-lived that scientists are not sure if they will even die.
It's worth asking why nation states and empires are so short-lived compared to (say) their major cities, their language, their religion, or their people (as an ethno-genetic phenomena). JJ is saying becuase they are unstable, they are a high-stress high-friction arragement of matter that wants to collapse.
Are nation states necessarily short lived? Japan seems to have had remarkable continuity. So too does England.
In any case, what falsifiable predictions does her theory make? It seems to claim that nations tend towards a single megacity, which is trivially falsified by multiple counterexamples (USA, China, India and Germany off the top of my head). It also seems to claim that non-urban regions cannot be wealthy, which again is trivially falsified by multiple counterexamples (e.g. Switzerland). Even `empires decay' is pretty dodgy - as you say the Roman empire (via Byzantium) lasted over a thousand years, and outlasted the Fall of Rome, its eponymous city.
`Nations and empires eventually fall' is not a `prediction' for which she deserves any credit. `This too shall pass' is wisdom of the ages, and applies to everything. Cities eventually fall too. Where are Babylon and Uruk?
She does not predict that nations tend towards a single megacity. I am not sure where you get that from.
And I don't believe she says non-urban areas can't be wealthy, just that as areas get wealthy, they tend to get urbanized. (at least this was the pattern until the rise of the early nation states in the mid 1800s and even more so with the rise of the modern nation state post ww2).
You have cited switzerland as a non-urban country a few times, but I don't think thats quite right. Can you define what you think qualifies as an urbanized country? According to the CIA world facebook data that Wikipedia uses, 74% of the swiss population is urbanized. That seems highly urbanized to me. https://en.wikipedia.org/wiki/Urbanization_by_sovereign_state
I don’t know what definition the cia factbook is using but I would say Switzerland has zero cities. The largest agglomeration is Zurich, which at 400k population strikes me as a town with delusions of grandeur. Non Zurich Switzerland (where I lived for a while) barely even rises to town status…a collection of villages connected by excellent infrastructure
From CIA Facebook: urban population, describes the percentage of the total population living in urban areas, as defined by the country.
I didn't research how switzerland defines urban. The population of the Zurich metro area is nearly 2million. I am not sure how that doesn't fit some definition of urban. My definition of urban, is an area of highly dense population. Zurich definitely qualifies regardless of its absolute population.
I think ‘as defined by the country’ is doing a lot of work here. I stand by my original statement.
(review author here)
> `Nations and empires eventually fall' is not a `prediction' for which she deserves any credit. `This too shall pass' is wisdom of the ages, and applies to everything. Cities eventually fall too. Where are Babylon and Uruk?
Even if it's true that "this too shall pass", there still needs to be an explanation for why any particular thing or type of thing ends. Babylon and Uruk fell because of foreign empires. Jacobs seemed to think that virtually all cities eventually decline because of their incorporation into large states. And she suggests some explanations for why large states decline. I agree that without these explanations, random claims that things will eventually end aren't very interesting.
I do agree that her ideas aren't very amenable to falsifiability. Her theories are too easy to adapt to whatever real situation she decides to deal with.
On your first question, maybe the institutional win of the USA is that its federal structure gives the right incentives for city regions to be stable and grow: think of New York still the main finance center, Los Angeles for films, Seattle for its selected high tech, and son on. Maybe Detroit was the outlier as a failed city.
Germany has a similar federal structure with specialized cities: Frankfurt on finance, Stuttgart for industry, and so on.
Maybe there is some insight on fractal constitutional design lurking behind all of this. Nassim Taleb wrote a little bit about that.
The New Zealand case was explored in a book reviewed by Scott, as an outlier case of development that avoids the path of the Asian Tigers.
Why do these authors have to tautologically appeal to "cities" and "nations" and whatnot? Doesn't anybody at least hand-wave to something about "discrete density distributions" or some such?
(disclaimer: I'm totally uneducated on this topic, both economically and mathematically)
It’s not really discrete density as much as interconnections of production and consumption. San Diego and Tijuana are two different cities despite being part of the same discrete density distribution because people in San Diego work and consume in San Diego and vice Vera’s for Tijuana.
Thats exactly what Jane Jacobs is trying to say which is why she uses city-state and not city. Additionally, any good economic analysis, when looking at the US, will use Metropolitan Statistical Areas which attempt to define "discrete density distributions" more or less. (There are other similar concepts like Combined Statistical Area that can be used as well.)
'Import replacement' being used as a main driver of city growth demonstrates the author has a profound misunderstanding of how growth actually happens - by generating efficiency through specialisation, comparative advantage and trade, not via 'import replacement'. This is the case even if import replacement may happen somewhere in that process if there is an efficiency gain to be made (or, as is often the case, import replacement may not happen at all). Seoul, Shenzhen are examples of cities that have grown massively in the recent past by exploiting comparative advantages in manufacturing and exporting (and importing!) ever growing quantities.
Shows me that she doesn't really understand growth. Her further misunderstanding of the value that nation states provide, mainly the public good of national security, also makes me wonder if her ideas are worth consuming.
Yup. See https://astralcodexten.substack.com/p/your-book-review-cities-and-the-wealth/comment/16327283
Seoul is interesting, because, if you look far back enough, it's rather supportive of her theory. It's certainly true in the last decade or two South Korean industries have matured nicely into global competitiveness, but those relative advantages didn't materialize de novo. South Korea pursued economic policies that greatly constrained imports and otherwise forced average South Koreans into buying (inferior) local goods. (Korean cars might be nice now, but they certainly weren't three or four decades ago.) This gave industries breathing room to develop things that don't come together in under a year: technology, supply chains, managerial experience, and a trained and available labor force. If you're interested in reading more about the topic, many of the books and papers by South Korean economist Ha-Joon Chang go into great detail.
Ha joon Chang is just pushing a heterodox theory for personal clout. There's plenty of research to the contrary, and most economists do not support his views.
Read this for a rebuttal and a closer to consensus view on him https://eh.net/book_reviews/kicking-away-the-ladder-development-strategy-in-historical-perspective/
Chang is quite simply wrong about both the import constraints and their importance as well as why the South Korean industry took off. Ever since Park's US enforced reforms, South Korean growth took off because they were export focused. For more detail read this
https://www.piie.com/publications/working-papers/hermit-kingdom-miracle-han
Indeed, if you're a poor country, that wants to grow fast, you have to be export focused. Trading can only help you get rich quickly if you're trading with rich people, because they're the only ones with surplus available.
Well, I'd say you need both. Focusing on export only you end up like Bangladesh or Pakistan: you get the production jobs and the pollution and nothing more.
You first have to build up your own industries, then focus them on export without forgetting about your own economy, otherwise you just get exploited.
Wait, what? Bangladesh is an economic miracle compared to Pakistan, a former member of the Pakistani government publicly wondered in a Pakistani newspaper if his country would be reduced to begging for foreign aid from Bangladesh (a country they had invaded and massacred within living memory: https://en.wikipedia.org/wiki/Bangladesh_Liberation_War#Atrocities) by 2030: https://thefinancialexpress.com.bd/economy/bangladesh/pakistan-may-seek-aid-from-bangladesh-in-2030-former-wb-adviser-says-1622030199
And it's pretty clear its export-focused garment industry has helped this, even been central to it: https://en.wikipedia.org/wiki/Textile_industry_in_Bangladesh. Things aren't so hot nowadays of course what with the rising food and fuel prices associated with the Ukraine War (https://archive.is/hHgMi), but its certainly doing better than it otherwise would have been, thanks to its exports providing the foreign currency needed for those imports. It's doing a damn sight better than surrounding countries like Sri Lanka and Pakistan, at least. - just look back at what that Pakistani government advisor said to understand just how much they envy Bangladesh's 'exploitation'.
I'm afraid this is backwards. If you're a poor country, you (almost by definition!) have very little by way of demand to support the building up of your own industries. You have to build the industries that can efficiently service demand in rich markets, and use that surplus to invest and consume to keep growing. This 'escalator' of export led growth has worked very successfully for East Asian economies. A domestic or import substitution focus has not worked anywhere.
I'm sorry, I was a little short in my answer.
I did say 'both'.
What the East Asian Counties did right was to take care that the income from the exports get invested in the own productive economies.
I don't know if Pakistan and Bangladesh are the best couterexamples. They were just the first coming to my mind of staying poor despite producing a lot of goods for export.
I think where you're going astray is thinking of exports as not part of 'their own productive economies'. For any small/poor economy, everything being exported is a massive boost to the local productive economy. It generates know how in both businesses and government, jobs for people and capital with which to invest, trade and consume.
From your second link:
> Here, US advice ran up against strong domestic opposition and was
not ultimately taken. Ronald McKinnon of Stanford University, on contract from
USAID, proposed a uniform across the board tariff of 20 percent, with a limited
number of industries protected at 90 percent. Domestic industries, particularly
in agriculture, protested that such a step would bring irreparable harm; exporters
did not push for tariff reductions, because they already had duty-free access to
foreign-produced inputs. Opposition by business groups led to a stalemate in the
interagency tariff-setting process, and duties were reduced only slightly.72
> Korea also gained admission to the GATT, ensuring that it had
nondiscriminatory, most-favored nation (MFN) trading status in other markets.
> The decision to seek admission encountered strong resistance from the
Agriculture-Fishery Committee in the National Assembly, but the cabinet
approved the application in May 1966 (Shim 2010). It then took nearly a year to
win approval from other countries. Although questions were raised about Korea’s
import restrictions, the contracting parties of the GATT did not require any
specific changes in Korea’s trade regime as a condition of entry, and it officially
joined in May 1967
In other words, South Korean miracle was the result of a mercantilist policy with high import tariffs and export subsidies. The main reason they could get away with it was that they were an important US ally.
Correlation is not causation! If import restrictions were truly driving Korean growth, the much more restrictive policies of high exchange rates, allocation/licensing of foreign exchange, would have also driven growth! Such was not the case, and changing these policies in the direction of less restrictive import policies substantially increased imports over the same timeline that exports increased (in fact, S. Korean imports increased more than their exports did, again a common feature in fast growing economies)
Your parent comment stated that
> Chang is quite simply wrong about both the import constraints and their importance
which is rather a stronger claim than, yes, there were import constraints but correlation doesn't imply causation.
I don't think South Korea is a good example to follow anyway. It was a very special place after the Korean War and its lessons can't be applied anywhere else.
And I stand behind that original claim. The import constraint correlation not being causation behind growth is what I'm telling you about your reasoning!
Not a misunderstanding. A counter-claim. She claims that the theory of growth by specialization is _wrong_. Most of the detail in this argument is in _The Economy of Cities_, not here.
One of the important points of that argument is that looking at import/export balance will confuse you about when growth happened. The massive visible growth _follows_ the growth in industrial and material capacity.
A counter claim that is substantially wrong is still a misunderstanding. There are mountains of very strong theoretical and empirical reasons to believe that import substitution does not work to drive growth. Most convincing are the examples of India, China, South Korea, that first tried import substitution (sometimes for decades), found it fails miserably, then switched to more open trade and export based on good old comparative advantage and grew very quickly, again for decades.
There are two things here:
- what JJ is addressing is not import substitution enforced from the above (often badly: overregulation, getting around the norms by just adding one last bit to a foreign-made product...) but import substitution as something that happened in the course of development, because local businesses found it profitable (though, once the US became independent, it put tariffs in place just like any other government at the time - back then, tariffs were one of the central government's main sources of income, for one thing),
- essentially every time a country has developed, it has done so after a period of import substitution, and not just that, but import-substitution *policies* enforced from above. Not just what we think of as "developing countries", but France and Germany as well (and the US). Whether that's so _because_ of import substitution or in spite of it is another matter.
I understand what she is referring to, but, that 'bottom up substitution' does not add any additional explanatory power beyond what markets, marginal cost and pricing already do.
As to your second point, 'Whether that's so _because_ of import substitution or in spite of it is another matter.' is not another matter, but is the only germane matter at hand.
Do you have good convincing examples of countries that din not first try import substitution?
For me this looks like import substitution didn't cause the growth in itself, but helped to prepare the base for successful export.
This is like saying nobody earns money in high school. This is true and I agree that going to school isn't a god job. So is it nonsense to go to school at all and people should better work on cunstruction sites when they are 18? Most of people earning good money got higher education, so it might be well worth it as a necessary preparation to get a god job later. And still this is no automated path, you need to put some effort in it and can have bad luck anyway. Would you tell your kids not to go to university because you know someone who ended poor despite having a degree?
So the question is, does a phase or certain dose of import substitution increase or decrease the chances to develop wealth in the mid to long term?
If your hypothesis were true these countries would have later succeeded in the same areas in which they first tried to import substitute. In fact, they succeeded in completely different industries(as economic theory would predict) because utilising comparative advantage will often mean that your advantages lie where you don't have to import.
Why on Earth does that follow?
Most high schoolers don't actually go on to have a career in their favorite high school subject.
There is absolutely no reason that a country would have to succeed in the same area that they first try to import substitute. If you're going to assert that, you need some sort of argument rather than just saying it's true because
Actually, what I'm saying is simply the generally agreed upon economic developement pathway. What Erwin (and you) appear to be arguing for is the claim where higher burden of proof rests, so if you have stronger evidence than analogies to high schoolers, feel free to present them.
That does not follow and JJ does not predict it. One of the primary points of value in import substitution is that it can branch off to related industries.
The model of what happened in those cases is roughly an explore/exploit tradeoff. Substitution produced a bunch of skilled capacity in diverse industries, expanding laterally in fields without becoming enormously competitive with the outside world. Then one or more of these lateral expansions _did_ prove internationally competitive, and the growth in that sector switched to producing goods for export rather than spreading out.
For predictions about the future, the JJ model predicts that the exploit mode of growth is _sterile_; it will not produce innovation in other respects, and probably not in its own respects. If it acquires technological advances to its process, it will do so via buyouts and purchases of IP from small companies which opreate in the 'explore' mode.
You can't just say "found it fails miserably" without backing that up. These countries ultimately succeeded, and many countries which did not impose controls that focused on replacing imports have failed, and there is to my knowledge no record of _any_ country _ever_ successfully industrializing without a protectionist phase.
Is it true that the protectionist phase did not produce large legible improvements to GDP? Yes. Did they produce illegible improvements instead? Possibly, but probably not. Does that make it failure? **Not necessarily.** If this process of internal, broad but undirected growth produces large human capital improvements - and we have a pretty strong basis to believe it _does_ from better-documented cases like the bicycle factories of Japan - then this can be and was a success, along a metric we weren't measuring.
As Seoul or Shenzhen grew they engaged in import replacement cosntantly. At some point someone had to open maintenance companies, food distribution companies, janitorial companies, etc. All the support services that come with growing industry. And then firms that service employees: restaurants, appliance stores, car dealerships, etc. At some point these things could have been "imported" from other nearby cities that already had them, but once the demand is high enough someone will looks to open a version within the city itself. Hence the import as now been replaced.
First of all you're talking mainly about services, which are typically not tradable and hence typically not import replaced.
But, as I've said in my responses to others, even where 'import replacement' did happen, it would typically happen only for those goods/services that are cheaper to produce locally. In which case, calling it import replacement adds no explanatory power over standard comparative advantage and price theory.
Summarising and restating what other replies have said below, Jacobs's "import sustitution" successes are for regions behind the technological frontier, and for those places, it's a viable approach, as Alexander Hamilton recognised.
I'll add this: the real key is option value. Do things that allow you to do other things.
(This is where Bangladesh appears to be going wrong, with its singleminded focus on garment manufacture. The jury is still out, though; the ecosystem for servicing and making machines for garment manufacture, market research and marketing, product R&D, and various institutions--labour force education, quality control/standards/metrology, finance, insurance, import-export, raw material R&D and supply--well, building all of those takes a while, and all the bits have to be roughly in balance along the way. Once those are in place for garments, then perhaps they can be turned to other things as well.)
"Import substitution" done right can work for regions behind the technological frontier. It worked for Boston when it was well behind the (English) state of the art in foundries and metalworking. It worked for the Rhine Valley and the Po valley in the 19th century. It worked for Japan in the Meiji era. It worked for the Republic of Korea after WWII. It worked for China. But it isn't easy to do. It's been only partly successful for Malaysia and Thailand, for example.
As above, the main thing to get right is option value.
Option value is the value you get from being able to choose other things to do after you do a thing. Create a metal-working industry for making locomotives and you are then in a position to make all kinds of other machines for all kinds of industries - shipping and fishing, agricultural machinery, textiles, timber milling, mining, oil refining, plastic manufacture, etc. If you're really starting from scratch, start with simple metal hand tools, as China did in the early 1990s.
Choose land-based industries or tourism, by contrast, and the ecosystems for those things can't be adapted to more than a few other industries, if any. Look at Bordeaux and Champagne in France (grapes), or Iowa (corn), or Las Vegas (tourism) in the US.
The second key point is creating the ecosystem. The Shah of Iran's helicopter factory was completely unsupported by the myriad of specialised parts makers, material suppliers and design services that a helicopter factory needs, let alone finance, design and test, R&D, component and material supply, logistics and marketing, or workforce education. You have to start simple and work your way up, building the surrounding ecosystem.
The third key policy is an export requirement. To actually enrich your region by "import replacement", your products and manufacturers have to be world class, or locals will simply import anyway. To ensure that this is the case, manufacturers must be *required* to export a significant part of their production. Seoul's and Shenzen's comparative advantage in imp-ex wasn't intrinsic, it was forced on them.
'Import substitution' will work wonders when when you decide to substitute imports that are cheaper to make and export in your region than wherever you're importing from. It will fail when it's not.
The real key therefore is this - do what you can to let supply, demand and prices do their thing. If that means import substitution is happening as a result, fine. If it's not, also fine! The idea of 'import substitution' is not really adding anything
The idea of _comparative advantage_ is the one that's not adding anything! All it says is that people will buy only things they want, which (a) we already knew and (b) says nothing about _development_. Import replacement, by contrast, produces a theory of growth - if you encourage local companies to form and local branches of companies to diversify their activity, this will produce option value and human capital, making any future growth more durable and probably more likely.
I'm sorry, I would request that you learn what comparative advantage is before attempting a serious discussion. It may prove very useful to you! Here's a very good short video that clarifies the concept - https://mru.org/courses/principles-economics-microeconomics/comparative-advantage-definition-tasmania
I know what you're talking about better than you do, Nimrod. Get some actual arguments.
If this is what you know about comparative advantage - 'All it says is that people will buy only things they want', then I'm afraid that isn't true. There's no point in my having actual arguments if you're not going to engage meaningfully. I wish you well.
I don't follow the export requirement point. Why would we assume domestic goods never improve enough to be exported without mandates?
Policies generally provide government support in one way or another to the local manufacturers. Without an export requirement they fail to do the R&D to produce something that's state of the art, so the whole programme fails. De-industrialisation and low wage service jobs instead of high wage R&D, design and marketing jobs are the results.
That doesn't follow. The incentive to catch up to global markets is adequately provided by the money that exists in those markets. No need for quotas.
Third world national debt is often denominated in USD or EUR. Same with cryptos. If you made a bunch more tiny currencies, people would probably continue exhibiting the same preference for large unified currency blocks, and the real impact would be small as everybody circumvents your new system.
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Mostly people live in Seattle because it has jobs, even though most services are more expensive than in smaller cities or developing nations. This seems like exactly the opposite of import replacement. People live in Seattle because its a good place to make exports, and not because it has cheap imports.
But what matters to competitiveness is what currency the wages are denominated in, no?
People have offered to pay me in crypto or in shares, and I always refused these sorts of offers. I mostly want a currency that just works, and I don't have to worry about the possibility of it losing value. As currencies get better and better, they asymptotically approach maximum boringness and reliability, and when you're close to that point then purchasing power of wages dwarfs denomination in importance.
Not sure what your point is. Small countries and city states with their own currencies exist and thrive, no?
Yakov Feygin describes global currency hegemony as a natural equilibrium point: """ In Charles Kindleberger's work, he defines the function of a monetary hegemon as playing a global coordinating role by running a deficit to provide markets for distressed goods and long-term liquidity, as well as creating both long-term credit taking in deposits and short term liquidity by lending into crises. """ The full piece offers a bit more details on the reasoning ::: https://building-a-ruin.ghost.io/reading-club-update-and-dollars-debt-trade-ext/
What does that have to do with whether smaller currencies are beneficial for those who have them?
Russia can denominate its debt in Rubles, until it invades Ukraine and gets sanctioned, and then investors insist Russia must pay them in USD. You can play with your cryptocurrencies, until the exchange you used turns out to be fraudulent, and then the feds get involved and the exchange has to cough up enough USD to pay back the investors, or face prison time. The smaller currencies can exist as long as they don't move too much relative to USD, but if they do then you see the man who was behind the curtain all along, which usually turns out to be the IMF. Smaller currencies can provide cultural value or low transection fees if they're stable, but if they actually change value in a dramatic way then people don't like it, and then there will be protests about unemployment or inflation or both. Jane Jacobs is proposing that many small currencies that change value all the time would be good, but in reality people who have unstable currencies usually want it to be stable, and all the rich countries have stable currencies.
There are lots of ways in which your interests aren’t aligned with the long-term growth of your country.
Even nations act as if they prefer shared stable currencies, like Turkey having EUR denominated bonds.
I am also skeptical that too many currencies are a panacea. In some countries, the US dollar is just the de-facto currency, and the official currency is not competitive. Some countries even try to bind their whole currency to the dollar. West and Central Africa have the CFA Francs, which are two unified currency for a dozen of countries.
So whether it is advisable or not, there is obviously a lot of pressure on small countries to give up their independent currencies and to replace them by a "bigger" currency.
I think we will eventually discover that the “optimal” size of a settlement or polity is a function of our neural hardware and technologies that extend it in various ways. As I write this I’m sitting in a hotel room in Shanghai, in a country that is essentially cashless and requires the citizen to maintain an electronic record of who they are and what they are doing just to live a normal life, even down to very small remote towns. As technology extends our ability to manage complexity, I would expect the size and complexity of “cities” to increase.
Do you have an argument for why this would be a limiting factor? That seems at least contrary to my intuition. A mixture of hierarchies and decentralised control through capitalism seems to do fine at managing pretty much arbitrarily large cities. The other obvious limiting factor is physical transport. The review treats the importance of the costs of transport as so obvious as to not merit discussion even if they are the underlying reason why import replacement would matter at all.
Thank you, clear exposition of interesting ideas. So, has Montreal declined the way she said it would?
Can I imagine Canada letting go of Quebec peacefully? Or Britain Scotland? Yes, isn't that what the referenda were about?
When she says trade between backward and advanced cities is bad, does she mean specifically cases where the backward economy has a lot of money (like Iran) or all cases?
I feel like we'd have to define what 'decline' means to answer that question. Sure Montreal had some difficult years in the 90s but is undergoing something of an urban renaissance these days, fueled by tech jobs and immigration. Which makes me wonder about how much of Jane Jacob's arguments are affected by the rise of the 'knowledge economy'. I lived in the bay area and vancouver before settling here in Montreal and it's got hands down the best quality of life of any big city I've visited in north america imo.
Jane Jacobs had a huge effect on urban economics which is a thriving field of economics. I believe urban economics and her thinking have also deeply affected national statistics and accounts which do a lot of measurement of localized urban economies below the national level. So the conclusion here that she didn’t affect economics isn’t true.
'When the American South seceded from the Union in 1861, the reaction wasn’t “good luck!” even though the Union was itself the result of a secession from Great Britain.'
Okay, this is a great review, and I'm going on a tangent that's mostly irrelevant to the point of the review. But when the American South started seceding. President Buchanan thought it was manageable. Horace Greely, the abolitionist leader, wrote 'Let the erring sisters go'. The North wasn't looking to fight. Lincoln won only after the South boycotted the election. Lincoln did not force the South to boycott the election. The South wanted a fight.
The Fire-Eaters who pushed secession were looking to fight. They said so through 1861. The record is written and clear. Then they got a fight and lost. The South was ruined. Nobody in the South could say it was worth it. So instead they blamed the North, and getting unreconstructed Secesh back inside the US system required the rest of us to be nice to the South. Jim Crow through Wilson's administration and the twenties was about being nice to the South. Letting the popular histories claim the North started it was part of that price. The written records of what secessionists said and wrote before 1861 get stuffed in footnotes, but they are still there.
So far as this tangent is relevant to this fine review, I'd suggest that people who want secession are worse-tempered than the nations they secede from. Quebecois who want secession are touchier and more macho than the Canada they wish to secede from. If there was a fight, the machos would start it.
The north didn't decide to be "nice" to the south. it just got tired of doing anything else.
Great review. Jacobs raises neat questions, even if her preferred answers don't work.
Economists study optimal currency areas. The right size is much larger than a city. How large? Depends on how mobile the wealth and people are. The dollar works better than the euro, because mobile workers and federal benefits make it easier to "even out the boom" between two US states than between two EU countries.
Jacobs is flatly wrong about "stagflation" being the default. Inflation itself is a remarkably modern phenomenon; conversely, lots of countries now have clocked a generation or more of rising income without repeating Japan's ugly 90s. She's right that we don't really understand why some countries keep stalling short of sustained growth, why bad politics in places like Pakistan and Argentina so easily sabotages the growth so many in those countries want. But that seems to be a riddle of politics, not economics.
Since her books, we've seen decades of rapid growth in places like China, India, Taiwan, South Korea, Bangladesh, the Dominican Republic and Malaysia. Poverty isn't conquered worldwide yet. But stagnation, let alone stagflation, doesn't seem inevitable at all.
Her "import replacement" theory is also wrong, if it's meant to predict which cities become rich. Manufacturing exports has been the takeoff recipe that's worked best; business and trade services work for some; no city got rich by trading *less*.
On the other hand, "import replacement" is a pretty nifty description of what happens in the vicinity of a city as it grows and promotes subsidiary economics around it. And her observation that cities are a lot more real than states is brilliant, even if it's harder to use than it looks.
Her predictions are bad, but her descriptions are insightful. I'm very glad of this book review.
Thank you! I suspected as much, but it's good to hear someone with expertise nail it down.
Still, I found the review very enlightening, even though I don't agree with Jacob's conclusions.
This is a very interesting counter-perspective to essay on adding housing to cities, where the economic growth coming out of population growth was treated as automatic.
Can you expand on this? I don't see the two ideas to running counter to each other.
The underlying assumption (as I understood it, at any rate) in the essay on housing was that more housing automatically leads to more people moving there which automatically creates more business/economic activity/prosperity which then attracts more people (with the implicit debate being whether the attractive multiplier from building more housing ended up being greater than or less than 1). This would be great, because it would effectively mean building more housing is a cheat-code policy for prosperity (at the city level where replacing poorer residents with wealthier residents is a pure positive).
But the implication here is that the impact of housing is swamped by other policy choices: becoming a prosperous city requires careful and intentional management of the economic activity of the city, using policy to guide *what* the people who live there/move there do, what things are imported vs locally sourced, etc. To go back to the Manhattan example from the previous essay, the implication is that policy choices drove the particular type of economic development that occurred leading to the extraordinary desirability of that particular chunk of land.
Hmm I see. I dont believe that Jacobs believes "becoming a prosperous city requires careful and intentional management of the economic activity of the city, using policy to guide *what* the people who live there/move there do, what things are imported vs locally sourced,". She is much more on the Laissez-faire side of things, encouraging decentralizing decision make so much that it's really up to a landowner level not even at a community level.
In Jacob's view restrictions on housing and other activities is really just volunteering to live in the "stagflation" environment she see occurring throughout history or in poor areas. Rich cities should have lots of things including housing. The import replacement stuff is a description of what happens naturally, not a proscription of what cities should undertake.
Ah, then I had misunderstood Jacob's view.
I wish we could know how she thought containerized shipping and the internet impacted her theories. In business contexts, I've seen lots of discussion about how New York City is effectively closer to London (for example) than it is to the rest of New York State.
If her ideas were applied seriously, I can't help but think a lot of places would simply depopulate, becoming "bypassed places". Natural resources are real and make some places more desirable than others. Looking around New Mexico, where I live, I don't think there'd be much here (well, even less) without the wider network afforded by the United States.
I'm somewhat confused about how stagflation can be the default when the actual default for most of history was...not having currency. Sure, empires mostly minted coins, but that money saw less and less use the further into the hinterlands you looked. Taxes from rural areas were generally collected in goods, not coin. I'm not even sure what inflation would mean in that context. Subsistence farming has many, many downsides but worrying about the food you're going to grow to eat being worth less next year is not one of them. Stagflation makes everyone poorer, but it's distinct from the type of poverty that has existed in most places and times.
I don't agree that money was only used in the centers, at least not in the last 300-500 years. In France, the Franc/livre has been used for centuries, and in French novels (e.g., Dumas), everyone is paying in Francs, even in tiny villages.
And inflation has been a huge topic for centuries. It was a recurring issue in France in the 18th century and one of the main causes of the French revolution.
An important difference is that the value of most coins was derived from their material value, mostly silver or gold, or at least it was backed up by material goods. This didn't change until the end of Bretton Woods agreement in the 1970s.
I agree regarding the last 300-500 years. I should have been clearer that I meant "most of time since the first cities", of which the last 300-500 are a small and weird slice, with the larger point being that "inflation" as a problem only meaningfully exists if you have developed the technology "money" which requires a bunch of other subsidiary social and economic technologies. Poverty predates all of them, and by most measurements has usually been most severe in places where money and those subsidiary technologies were least developed/widespread. Money comes with its own problems, but I get nervous at the implication that those problems are equivalent to or worse than the problems that predate them (e.g. subsistence farming).
Ah ok, then we agree on this. And I do agree that money is an awesome invention, and the pros heavily outweigh the cons.
Severe inflation means the currency ceases to be an effective store of value, so people stop using it, at least to the extent they can find viable alternatives. That could usefully be considered a big step back toward "not having currency."
That's a fair point, though I'd argue that's only an accurate description of hyperinflation situations, which are quite rare and certainly not what was happening during the stagflation era.
England had currency for hundreds of years without inflation (c. 1000-1500). People in the 1400s were using tables for the weight of a "3 penny loaf" that were written in the 1200s without a problem.
Before Industrialization raised productivity everywhere all at once, and the influx of precious metals from the Aztec and Inca, prices didn't actually change from year to year, or generation to generation.
Can you point to a source for this? In modern terms we define inflation as essentially an average change in price for a large pool of consumer goods, but it's not obvious to me that there *was* a large pool of consumer goods for most of 1000-1500 in England, so I'm curious how inflation is defined. Specifically: we often exclude food prices from inflation measures because they're so volatile and don't necessarily reflect broader market conditions, but in late medieval/early modern England food would have been a much larger percent of the average budget (in towns large enough/specialized enough to see significant currency use, for peasant farmers 1 day of food you grew was reliably worth one day of food), and less staple trade relative to today would have made its prices even *more* volatile, so I'm not sure how it should be counted.
Source is: I was reading historical records in the Edinburgh public library while on vacation + someone else said the same thing on thier blog.
And yeah, the claim here is that there we local and temporary fluctuations in price level, but if I traded you 100 shillings for a pile of tools, food, lumber, etc. In the year 1000, our decendents could trade the same quantity of stuff for 100 shillings in the year 1500
Money is as old as history. Only very primitive societies survive on barter. Even a village can’t do without money.
If you mean barter as the synchronous exchange of goods or services of equivalent value to the participants, and money as everything else, sure.
If you count fixed weights of staple goods as money, then that certainly covers more of time than coined money, and introduces the possibility of inflation.
But most small villages and neighboring farmers for most of time exchanged gifts of goods and services that essentially served as social credit for later -- asynchronous bartering of sorts. This only works between people that know one another and who will be present over long periods -- but that describes most peasant farmers, so it worked.
Most villages when and where? Money existed in medieval Europe, and Islam. Here’s the list.
https://en.m.wikipedia.org/wiki/Category:Medieval_currencies
Yes, money existed throughout the middle ages, but that doesn't mean everyone was using it. I'm sure there are better sources, but as it's conveniently accessible online I'll pull from _Money and Coinage in the Middle Ages_ (https://www.jstor.org/stable/10.1163/j.ctv2gjww65):
"[B]y the end of the 6th century fresh coins of silver and copper alloy had effectively vanished. There was no longer even an option of low-value coin. On the other hand, the volatility which had plagued previous generations using base-metal currency was no more. Peasants may well have had less cash extracted from them, and more incentive to engage with an increasingly stable market involving coined money on a more restricted level. This would have contributed to the relative golden age of lighter-exploitation experienced by the peasantry in the post-Roman centuries, though it must be kept in perspective: down to the 13th century (and in many areas much later), most extraction of peasant surplus had been in kind and/or labour rather than in cash." (pp 183-184).
Coining money in large denominations for large-scale trade and state finances made sense even through most of the middle ages. But low-value/base-metal currency required extensive state capacity to mint and distribute, and getting it into wide usage at the peasant level wasn't usually worthwhile. Instead, various versions of manorialism or other taxation saw to the in-kind collection of taxes from the peasantry by local lords, who then participated in markets to varying degrees.
Money existed, but since the overwhelming majority of people were peasant farmers, most people weren't using it in medieval Europe. I definitely can't speak to what was happening in the near-east -- I'd expect that the persistence of the Eastern Roman Empire kept more extensive currency usage alive longer, but I haven't done the reading to know for sure.
I wonder if Jane's theories, on import replacement for example, make any distinction between development versus the mature economic endpoints, travelling hopefully, so to speak, versus arriving, or in other words the process of change versus its results.
Sometimes prosperous cities can become victims of their own success, if circumstances change for example, although admittedly that can take a long time to happen.
I wonder if local sub-national currencies, like the Chiemgauer in Bavaria, or in minor British towns like Bath/Bristol (well aware that others exist) could provided an effective feedback loop for smaller cities in a country.
In turn, this reminds of the Freigeld ideas of Silvio Gesell for minor towns like Wörgl – perhaps every smaller city needs their own currency, and might there be a way to make this compatible with a nation state?
My general impression is that those don't work. Sometimes they work for a few years for sentimental reasons, like in Wörgl. But I don't know of examples where such currencies ever reach an economically relevant level.
The Bristol Pound is used so little (within Bristol) that I'm not sure if most residents have even heard of it - certainly only a very small minority have ever made a transaction with it.
Not saying it's a bad scheme, but I think it'd need see an increase in use of several orders of magnitude before it could be un-pegged from GBP and then serve as a test case for these ideas.
Jacob's views about feedback and scale seem to mirror my own (very depressing) realization about large human societies : They will always be oppressive to somebody.
You can never have a true Democracy in a society with a million+ (I would say even 100K+) people. Insofar as Democracy means anything other than a trivial and tautological "Majority vote lol" rephrasing of the word, it can never be satisfied when too many independent wills are smashed together and forced to live in a single monolithic "Society". It's inherently absurd and unjust, Americans say things like "The Polarization that started in 2016 had made every election a battle with winners and losers" but they don't realize this was always true, they just owe Trump/Social Media the favor that they made it too obvious to be ignored. Every democracy is an institutionalized, ritualized Rule by Conquerors, except nobody dies and the losers have the small consolation that they can try again in 4 years (Unless they are a minority too irrelavant to have significant voting powers, in which case fuck them I guess). This is much more obvious if you had lived in a society that has religious or ethnic tensions, Democracy there is much more of a clusterfuck. But it's always like this to some degree or another even if you don't realize it. For instance :
- Why **Should** a person who doesn't want to live with black people, whose all of their friends and families don't want to live with black people, whose entire city doesn't want to live with black people, suddenly be forced to live with black people ?
- "This is okay because those people are bigots and my morality is better", okay, consider abortion rulings by the supreme court then, it's very likely that there is something there that you hate whatever your opinions on De-Segregation, either RvW or it's strike down.
I always laugh at the (unconscious ?) hypocrisy of people who say "Abortion is aweful and I don't condone it, I just want governments to have no say in the matter", hmm very admirable indeed, now can they replace 'abortion' with 'Segregation' ?t's irrelevant the particular examples I choose and what is my exact stance on them, even more irrelevant is the question of what is the "Correct" stance on them. Sooner or later, you will find yourself a loser in some fight or another. The larger the society, the more bitter the defeat, the more difficult it is to reverse, the worse its consequences on your dignity and your respect for yourself and other people living with you.
Apriori, it's not clear how being a Muslim or a Christian differs from being pro- or anti- abortion, or being pro- or anti- Segregation. Why are the people who hate forcing Muslims or Christians to do things against their religion (lots of people) are suddenly okay with forcing the other side than the one they take in those issues to do things against their belief. Indeed, Religion, as the quintessentially ridiculous/polarizing opinion, should breed almost infinite tolerance in you. If you are not a follower of a certain religion who managed to find enough benevolence in you to tolerate its followers against all your instincts, almost no opinion is too false or too repulsive to be intolerable.
Other socio-political organization don't get a pass either. Consider that Communism works on the small scale : Family, extended family (which can easily reach several hundreds), small businesses. Those units can reach a 1000+ person, say 10000 at most. After that, you start having the feedback nightmare that the Soviet Union in its last years was a parody of. They thought that Computation was the problem, they thought that computers would save them (the plot of Red Plenty), but they were not. Computers need algorithms to run on input data, the algorithms don't exist because you can't formalize human needs as algorithms, and the data doesn't exist because humans don't love to be surveilled 24/7 for every single little need and want they have to be exposed. On a small scale, that's not a problem. Everything is beautiful and legible and consensual, people "fill in the blanks" with heuristics and intuitions and it mostly works out, and when it doesn't the failure isn't too bad.
Hell, theocracy and military juntas don't seem too bad if they are on the scale of a large extended family. I already pretend to be a Muslim in front of my 100+ family and extended family, so what's the big deal. Military juntas don't seem so scary when one of the ruling class is a cousin that I can tell "You're a bunch of stupid nobodies who don't understand shit except weapons and following orders" and be secure that I won't be put in prison.
And the maddening thing is : humans were small scale like this for the ***Vast*** majority of history. Cities, the innovation that introduced Big Societies^TM, were invented in the last 15000 years, they were for a **very** long time hotbeds of disease. They were a failure, people were miserable living in them. Their walls didn't protect them from invading hordes coming from the deserts. Despots loved the centralization of they brought and the easy conquerability. Human Trust doesn't work well with cities and their vast number of strangers, and we had to invent countless inferior substitute from Money to Gods to try to get strangers to trust each other when there is no good reason to do so.
Against all reason, humans kept re-inventing Ants and Bees, only on primate hardware.
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Great review, I added J. Jacob to my "Small is Beautiful" reading list, a fuzzy category that includes Seeing Like A State.
Heh, was there ever even a high-school lunch room that was "a true Democracy"?
But democracy *does* mean the majority holding down the minority and ruthlessly pummeling it forever, and nothing else. That's why minorities have to do things like take control of institutions outside of immediate democratic control in order to get any power.
This is an interesting point that democracy is in tension with secession. Democracy means that if 9M people want something and 1M people oppose it, it gets done. Secession means that the 1M people can say "well, not in our region / city / street / house" (whatever is the smallest possible unit of secession).
A related problem is who decides the *shape* of the territory that wants to secede. This would allow various kinds of gerrymandering. Like, if I want to prevent some ethnic minority from seceding, I can split the country into administrative parts so that the minority is divided between multiple parts, being a minority in each of them (as opposed to being a local majority in one part). Thus, the referendum for secession in each officially existing part will fail.
On the other hand, if we say "the minority who wants to secede defines the shape of their wanted territory, and then the referendum is made on that territory", that would allow the minority to choose the area where they live, plus a few arbitrary other pieces of country with sufficiently small population (but maybe great historical value or something).
If a region secedes from a country, can a city in that region secede in turn and join the original country, and can a house in that city secede in turn and join the original region? At what level does the fractal-generating process stop?
Your last paragraph is the slippery slope argument.
Slippery slope may be fallacious logic, but it is a perfectly respectable argument.
A question is not an argument, though it may imply one.
My main worry was about gerrymandering as a strategy to prevent secession. Like, if we adopted on the international level a rule like "a region is legally allowed to secede if they make a successful local referendum about it", the states that want to prevent recession would have an incentive to administratively redefine their "regions" so that no (actual) minority has a local majority in any of the (gerrymandered) regions; so they can never win a regional referendum.
On the other hand, a rule of "the minority defines what its region is (and then tried to do the referendum in that region)" would allow the minority to grab some extra territory. Presumably the people living in that extra territory would object, but would they have legal means to do so?
These technicalities seem important to me, precisely because the legal uncertainty about "what territory *exactly* is seceding?" has a potential to create a military conflict; not necessarily about the secession in abstract, but whether the seceding part gets to take a certain city / river / forest / whatever, or not.
That’s all very abstract. Generally secessionist regions know the area that they want to secede from the larger entity. Scotland doesn’t want northern England just to bulk up the size of independent Scotland, the Catalans don’t want parts of non Catalan Spain.
With regards to gerrymandering , Britain could redefine Scotland to include northern England I suppose, propose a referendum in that new entity, see the Scottish referendum lose, and then declare it over but that’s obviously fraught with danger - not least because northern England would have to be run by local Scottish government for a while. And actual Scotland would be enraged.
By and large, outside the edges, the regions that are separatist are known.
> Britain could redefine Scotland to include northern England
I imagined something like dividing Britain into three vertical regions, calling them e.g. "Eastern Britain", "Central Britain" and "Western Britain". Formally, there would be no such thing as Scotland, and most of the Eastern British, most of the Central British, and most of the Western British would want to stay in Britain.
the shape is decided by whoever has more men with guns. democracy just skips the gun part by taking a headcount.
There's an even simpler example of the difficulty that comes from a naive view of democracy colliding with the reality of it: https://philosophicaldisquisitions.blogspot.com/2015/02/the-democratic-trilemma-is-democracy.html, the part that goes "3. The Trilemma Illustrated". I'll take the liberty of updating its example for the modern age:
Imagine that a video comes out showing the government of Myanmar running over its own people with tanks, Tiananmen Square style, to try to put down the currently-raging insurgency the same way the Chinese did. People are outraged, the video captures global attention, and voters are demanding a humanitarian intervention in Myanmar, Kony 2012 style. However, some others fear the video is deep-faked, and warn you to not repeat the mistakes of the Iraqi Baby Murderers (https://en.wikipedia.org/wiki/Nayirah_testimony) and WMD story, lest the invasion be recast as a repeat of Iraq 2003 if the worst should occur.
You meet with your 3 most trusted government ministers to discuss the issue. For national security reasons, they'll only be referred to as A, B, and C:
A thinks the video is real, that you should invade if the video is real and not if it's not, and that you should therefore invade.
B thinks the video isn't real, that you should invade if the video is real and not if it's not, and that therefore you shouldn't invade.
C thinks the video isn't real, but that what the Myanmar government has done is more than enough to justify a humanitarian intervention anyways, and therefore you should invade (but not stake your legitimacy on the video, citing instead their other actions to invade)
You take a vote:
1. Is the video real? 2 out of 3 say no.
2. Should you invade if, and only if, the video is real? 2 out of 3 say yes.
3. Should you invade? 2 out of 3 say... yes.
You double check the results. In this small scale democracy, as simple as possible, on the simplest logical progression possible... the will of the people was to contradict themselves and invade despite being against it.
Nonetheless, there it is: you should go out to the voters and tell them that the video isn't real, there is no justification for invading without the video, and you're going to invade anyways.
What's going on? How can the majority of people be twisted up in knots like this?
Simple: they're different majorities.
As in, for the first vote, the majority was B & C. For the second, the majority was A & B. For the third, the majority was A & C. There is no one singular "Will of the People" - just 3 different Wills disagreeing with each other.
If this was only a single issue vote, there would only be 1 possible majority, so you wouldn't get this problem and things would work as you'd expect. But the moment the issue got complicated enough to deserve multiple issues to vote on, there could be multiple majorities, and there's no guarantee they agree with each other. Individual people can be rational and self-consistent when they vote, but collectives tend to suffer multiple-personality disorder and contradict themselves.
In times past, people spoke of "The Body Politic" in rather literal terms; in present times people still tend to think in terms of "Will of *the* People"; but the truth is, those have just confused us. There are multiple majorities, and they can endlessly beat each other in a rock-paper-scissors dynamic - hence why coalition governments tend to be very fragile and constantly collapse, and coalition systems of politics (e.g. multi-party parliamentary democracies with no limits on minimum party size) tend to produce endless deadlock (e.g. https://www.reuters.com/article/us-eu-summit-belgium/finally-a-government-after-652-days-new-belgian-pm-debuts-at-eu-summit-idUSKBN26M75Y). A majority just isn't as final as people expect, unless you can somehow come to a 100% unanimous consent majority that can't be beaten by any other majority. But otherwise, whatever majority you can imagine, someone else can find the majority that can beat it out of the space of all possible majorities, and use it to overthrow you.
This result is called the "Democratic Trilemma", and it's a generalization of Condorcet's Paradox (https://en.wikipedia.org/wiki/Condorcet_paradox) - you may have noticed this by now since it has a similar "A beats B beats C beats A in an endless cycle" structure, where collective insanity results despite every individual voter behaving exactly as you'd expect. It's related to Arrow's Impossibility Theorem (https://en.wikipedia.org/wiki/Arrow%27s_impossibility_theorem) though distinct from it because Arrow's Theorem is about ranked choices, while the Democratic Trilemma doesn't have to be.
And again, none of this requires people to be selfish, or engaged in a Dictatorship of the Majority, or anything like that. You could have literal Angels as voters and still have this problem: collectives are not people. Majorities are not final. Votes do not make sense, even if every person's individual vote does. But now you know.
(See also, https://www.youtube.com/watch?v=goQ4ii-zBMw [The Mathematical Danger of Democratic Voting], for something very similar to this. By flip-flopping between coalitions, you can accomplish whatever you want; majorities are but tools in the hands of a skilled politician, rather than agents in themselves; and none of this requires the slightest bit of evil or stupidity, just the existence of multiple majorities you can turn on each other.)
> When Jacobs’ aunt arrived as a Presbyterian missionary in 1922, and suggested that they build a church out of stone, the people of Higgins confidently stated that this was impossible: mortar just wasn’t strong enough. “These people came of a parent culture that had not only reared stone parish churches from time immemorial, but great cathedrals,” Jacobs writes, and yet eventually they forgot that stone buildings were a possibility at all.
This is what the MTA sounds like when they talk about subways expansions (or installing things like elevators/platform screen doors).
Overall I liked this review a lot, and it made me respect JJ a lot more than I had before. I still think she made the mistake of being too narrowly focused. She makes good points about decentralization, but a lot of different things can be decentralized, e.g. you could have open free trade between regions but have each region have a different currency/welfare system.
(Also, she seems to mix up inflation and poverty, which are related but really aren't the same thing, in a meaningfully important way. And she's straight-up wrong about Japan afaict, Japan's centralization worked out fine, they just got hit by an aging population.)
I thought it was interesting that your two examples of small nations that we do not see as “failures of unity” are both built on the back of social compacts between three or four significant sociolinguistic groups - if anything, they are extraordinary successes of unity (cf. Belgium or Spain, for instance).
As for the sort of political prescriptions that entails, I’m not sure. Singapore is good at investing in institutions (education, healthcare, urban development), and comparatively less on Western-style welfare. I suspect the dirigiste mode is able to work well on a Singapore scale and in a Singapore context, I’m not sure how extrapolable that is.
<i>I thought it was interesting that your two examples of small nations that we do not see as “failures of unity” are both built on the back of social compacts between three or four significant sociolinguistic groups - if anything, they are extraordinary successes of unity (cf. Belgium or Spain, for instance).</i>
Maybe having multiple significant groups helps prevent one from becoming dominant and passing policies which the other groups perceive as oppressive. Switzerland also probably benefits from its strong tradition of localism -- "Is the President a member of *my* sociolinguistic group?" is a less urgent question if the President has no impact on your day-to-day life.
Perhaps, although I think in Singapore there’s a very clear (and not unfounded) perception of ethnically Chinese economic and political dominance; in any case the country’s whole reason for being is primarily Malaysian Bumiputera politics, which explicitly advantages Malays at the expense of other ethnic groups.
In Singapore at least there is a tension between its formal and arguably very constitutionally significant multiracialism, and the structural advantages accrued to the Chinese majority - there were comments made by a senior figure in the ruling party just a few years back that Singapore was “not ready” for a non-Chinese PM; meanwhile the ceremonial presidential position is allocated specifically on the basis of a racial quota.
Now, with that all said, I think Singapore has been enormously successful at promoting a fairly harmonious society in a region that has struggled with sectarian and ethnic conflict for a long time. I often compare Singapore to Trieste, another diverse port city that sat at the intersection of major powers. As Trieste evidences, though, it’s a fragile position to be in.
Joseph Heath's essay here is about the US, but the contrast with Singapore's stance is interesting:
https://americanaffairsjournal.org/2021/08/why-are-racial-problems-in-the-united-states-so-intractable/
Great review.
I am very confused about the idea of a "city region", on which so much of the analysis seems to rest. Tokyo has one but Sapporo doesn't? Boston has one but Atlanta doesn't? Manila somehow doesn't? I don't get it. And how doesn't Montreal have a city region when it's the dominant city of Francophone Canada?
And Seattle seems like a uniquely terrible example of a city rendered sterile by military production. Being a centre for military aircraft production turned it into a centre for civilian aircraft production. And then being a centre for aircraft production gave it a high tech workforce, which then attracted other companies such as Microsoft.
Yes i wish the review expanded on this much more. I can only guess based on my biased view. But I have no idea why atlanta doesn't have one. maybe that was true at the time the book was written but Atlanta is significantly larger now.
The Seattle piece is similar. Is this the reviewers opening of Seattle now, or is it Jacobs opinion from when the book was written (before tech changed the city).
<i>Stagflation is not a strange monster from legend. It is, Jacobs says, just the normal state of everything. Backward economies are in fact constantly in a state of stagflation. The prices in a poor country like Portugal or India (her two examples) feel low for an American or Canadian, but they’re high for most Portuguese or Indian people. At the same time, Portugal and India provide too few jobs to their residents. Inflation and unemployment are both perennially high, and none of that feels surprising whatsoever.</i>
I'm not an economist, so maybe I've missed something, but this seems completely wrong to me. High prices aren't the same as inflation. In medieval Europe, for example, prices were high relative to what the average person could afford, but inflation was low by modern standards.
<i>Small size also allows more diversity in cultural and economic matters, and here Jacobs waxes philosophical, pointing out that favoring diversity over uniformity is a recent, post-Enlightenment idea that has not yet been fully embraced in politics.</i>
That seems completely backwards to me. Medieval Europe was a bewildering patchwork of sub-national jurisdictions; it was during the Enlightenment that states began imposing greater uniformity on their populations, in the name of efficiency and rationalism.
<i>But that doesn’t happen, because empires always milk their own cities until they become poor.</i>
That seems not to have been the case with ancient Rome (the only empire whose fall I know about in enough detail to comment on). Or at any rate, the provincial areas seem to have become noticeably less wealthy after the fall of the Roman Empire, which doesn't suggest that they were being excessively squeezed by a demanding central government.
"I'm not an economist, so maybe I've missed something, but this seems completely wrong to me. High prices aren't the same as inflation. In medieval Europe, for example, prices were high relative to what the average person could afford, but inflation was low by modern standards."
I am an economist and you're correct here. She is correct about her specific examples though, inflation was high in Portugal and India in the early 1980's.
All empires fall, therefore empires are an inherently unstable system. Yet the history of city states seems much less robust. We used to have plenty of city states in Europe and now the lone example of Singapore.
Enjyoable nonetheless.
I think Jacobs would point out that the cities themselves still exist, they just are now part of Nations. So when she says "city states" she does only mean places like Singapore, but cities that are, to a large extent, self sufficient (as self sufficient as any person or place can be in the modern world).
I don't think her mechanism of currency valuation changes could possibly work back when currency was just valuable metals and everyone used the same few types?
To re-use the example of Venice, they started out using Verona's currency, then introduced a more pure and heavier silver coin (the grosso), which was imitated by all their trading partners. And reliable imitation, in a commodity-currency world, means essentially equal value. The byzantine empire's basilikon was a 1-to-1 equivalent to the grosso. This only ended when it was massively devalued. Venice then introduced its gold ducat, which also was copied by all its trading partners (which at that point meant that large chunks of Europe had a local gold coin equivalent to the venetian ducat, which they also called a ducat).
Meanwhile most of the new world, including british colonies there, all standardized on the spanish silver dollar. The US dollar started its life as an exact equivalent.
And modern city states with good economic growth don't have free floating currencies either: Luxembourg's franc was 1-to-1 with the Belgian franc, until both got replaced by the Euro. Hong Kong has generally been pegged to the US dollar (except for a 10 year period after Nixon closed the gold window). Singapore has a floating currency, but their official policy is to maintain a relatively fixed (technically, very-slowly-appreciating) exchange rate against a basket of the currencies they trade against (https://www.mas.gov.sg/monetary-policy/Singapores-Monetary-Policy-Framework/faqs/section-2#S02.2). This means they're actively suppressing the currency-swings framework that Jacobs thinks to be so important.
The mechanism she suggests doesn't seem crazy to me, but none of the obvious candidates seems to have ever followed it.
Yep, this is what I intended to post. Her model *only* works for fiat currencies; if Venice's ducat is 3.55 grams of pure gold, then that's what it's worth regardless of the trade deficit. A lot of peoples in the middle ages didn't even mint their own coins, they just used sequins because those were reliably pure. This is a severe failure of historical comprehension.
That said, I think she's right that this *is* an important feature of fiat currencies which pegs etc. destroy, and in fact has explanatory power over things like the continual collapse of currency pegs (another type of system which is evidently not fit for purpose since it keeps breaking). Also it's trivial to observe that ancient and medieval economies were frightfully inefficient and devaluing the currency (in effect, from an anachronistic perspective, trying to *simulate* fiat currency floating by debasing the content of the implacably-valued metal in each coin) was frequent.
Another thing - So Detroit doesn't have a currency, so no depreciation in value - but for sure they notice the stamp in sales? then of course follows the reduces production and losses of jobs. The feedback exists - lack of sales, but for some reason they couldn't follow through and increase efficiency / reduce prices. (Unions maybe?)
I totally agree that the price of the ducat -- which from my understanding was used interchangeable by merchants with coins by different issuers of similar weight -- is a very wrong example.
Of course, one could speculate to what degree such a mechanism even exists in the case of a supernational currency (e.g. gold, or euros).
If a city has an industry with a few companies producing something much valued elsewhere, they will earn a trade surplus. Eventually craftsmen will end up with much gold in their pockets, and that will gradually raise the local prices of necessities, to perhaps the point where rents and groceries are twice as expensive as elsewhere. Reaching such an equilibrium would take time and be messy (the part of the population not working in exports might not appreciate the price hike much).
With the advent of computers, one could in principle have a virtual local currency on top of a global hard currency. All transactions with the local currency would be emulated using the global currency at current trading value. Wages, rents and costs of local food would be required by law to be denominated to the local currency, while coffee and computers would have a direct global currency price. If the price of the local currency changes, this only affects companies involved in producing exports and anyone wanting imported goods. I guess this would not work because debt is for some reason really important to finance states?
The more I think about it, the more I suspect that the "separate currencies floating freely" and "same currency" situations will actually work out the same. Because that excess of currency on one side is matched by a lack on the other side, and this will encourage goods being sent in the other direction (to use your example, long before necessities double in price, it will probably be worth importing them). Which is exactly what the free-floating currency situation would resolve to.
You're definitely right that hard-money regimes and currency pegs (which are really just two ways of saything the same thing) break Jacobs' recommended optimal currency policy. Usually it's because some powerful interest group benefits. For example, currency pegs help protect corporations who conclude long-term cross-border contracts from having to realize losses on currency swings. Of course, this just builds up stress in the system until one side has to eat all the accumulated losses at once, so in the LONG run it doesn't help, but in the short run the spreadsheet-brains lobby for it, and because they have all the influence, they tend to get their way.
An interesting review of a flawed and dangerous idea: To split the world up in city-states.
The economic problems with the import-replacement hypothesis (if pursued as a policy) has been spelled out by other commentators. But I am alarmed that some US-based commentators seem to actually like this idea from a political perspective, applied to their own country.
Speaking as a European from a small country: Are you not aware that Pax Americana is what makes inhabitants in small countries in Europe, Asia, the Middle East and Africa able to sleep well at night? How do you think we feel about any idea that the US should split up, with the severe weakening of US military might that would follow?
Any idea that might lead to increased political fragmentation of the US is dangerous security-policy nonsense from a small-state perspective - and we constitute the majority of the world’s 194 states.
The world has avoided a new world war since 1945 because everyone, also in the former USSR, knew in their heart of hearts that the world was really unipolar. In the cold war era (1946-1992) the US would have suffered terribly from a nuclear exchange, but the odds were favourable that the US would win in the end. That’s also why Khrushchev gave in during the Cuban missile crisis in 1962. Moving to a multipolar world, as a “let’s strengthen cities at the expense of states” would imply, will create a more unstable and dangerous world.
Thus even if moving toward city states would have made economic sense (which is does not), politically the books this review is based on, peddle a terrible idea. But the review is well written!
Pax Americana has infantilised Europe. Europe should be well capable of defending itself from Russia - apparently bogged down about 100km inside Ukraine and, er, Egypt. Or Turkey. Or whatever else is considered a threat.
Post 9/11 Pax Americana has destabilised Europe which is what happens when you destabilise areas around Europe.
Europe is welcome to invest more in its defense. I seem to recall multiple US administrations begging/cajoling/demanding Europe do so. It is Europeans who prefer to free ride on the American security guarantee.
Me: Europe needs to spend more on its defence.
You: No. Europe needs to spend more on its defence.
Your priors need updating.
First, and just for the argument assuming you are right that Western Europe has let their own military readiness slip due to the military shield provided by «papa usa»: Even if so, it is in the self-interest of the US to intervene in the violent ethnic conflicts that beset the European part of the world every 30-50 years or so. Why? Because European armed conflicts have a tendency to spread beyond its borders, making mopping-up much more costly from a US perspective, the longer the US allows the conflict to fester before doing something.
Second, you seem unaware that Western powers for decades after 1992 have tried to woo Russia into the Western camp - which arguably is in the long-term interest of both Russia and Western/Central Europe. It is difficult to do that, while at the same time increase armament, as that would be seen as a hostile signal from a Russian perspective. The dilemma, for Western Europe (and the US) has been that all countries bordering on Russia want to join NATO (or secure protection against the threat of future Russian aggression in other ways) - and it has been difficult for Western powers to outright deny these countries protection (as that would alienate them). Unfortunately, accommodating the perceived security interests of the «new democracies» that share a border with Russia can also be perceived by Russia as hostile acts. In essence, Western policy toward Russia and its neighbors since 1992 has been a case of «damned if you do, damned if you don’t». The result is the present debacle in Eastern Ukraine, which is likely to set back Russian-West/Central European integration at least 50 years.
What makes the present conflict deeply tragic is that integration into the West is in both Russia’s and Western Europe’s long-term interest. Hence Putin’s attempt to topple the government in Kyiv and install a marionette dictator was worse than a crime - it was a mistake.
Russia might still be able to conquer a bit of Eastern Ukraine (the way Putin de facto conquered a bit of Georgia in 2008) - most likely through some type of Korean solution, i.e. a forever-renewed armistice rather that peace proper. But as a young Russian vlogger remarked: «Even if Russia should win the war, Russian youth have lost their future».
The whole wars on Europe every 30-50 years that “extend beyond their borders” is the prior that needs updating here. Not since WWII.
The NATO claim is clearly false. NATO is designed to be anti Russian (ie Soviet) and therefore the Russians clearly feared the expansion.
However the best thing for Europe would have been a European army independent of the US post Cold War, designed for defence only. Any minor post imperial stunts that the French or British get involved in would be on their own dime, but something like the Yugoslavian civil war would see European intervention. (This army might also get involved in Syria etc but that might be fraught with difficulties).
In any case Russia would have no real problem joining that alliance, if even as a semi aligned force.
> The NATO claim is clearly false. NATO is designed to be anti Russian (ie Soviet) and therefore the Russians clearly feared the expansion.
I would argue that NATO is designed as a defensive alliance. It is not designed to help any NATO member annex any state. If Poland decided tomorrow that they wanted to shift their eastern border 50km to the east by military force, I doubt any other NATO member would be willing to risk nuclear war by helping them.
In the Brussels Spring, US and other NATO forces sent tanks into Belgium, which the US considered their client state, and forced a regime change. This is why after the end of the cold war, most countries in western Europe joined the Warsaw pact to be secure from future US interventions. Except that it was the other way round, and most countries in the eastern block were eager to join NATO because they did not desire to remain client states of Russia kept in their place by the threat of military force. This hurts Russia only as far as it restrains its ability to push its smaller neighbors around.
For a superpower, the US was exceptionally well-behaved in Europe since the beginning of the cold war. (Spying on Merkels phone, kidnapping the odd citizen for gitmo and Operation Gladio all pale into comparison to what superpowers do elsewhere.) This is probably why Europeans are mostly fine with being under the Pax Americana in a way I would suspect the peoples in the Americas would not be.
Pax Americana is as much about keeping European countries from fighting EACH OTHER as it is about keeping Russia out of Europe.
Jacobs did not intend import replacement as a policy to be pursued. It was just a description of what happened in a city in the course of economic growth and development. As cities got richer they naturally replaced some of the things they imported with home grown versions. This worked up and down the value chain. As more a more imports were replaced the city becomes less dependent on other cities for these goods. This is why she sees this as a good unit for study.
Ive tend to think less big the better the state, usually assuming it doesn’t mean continual war, just judging by results.
The problem though, is how do small states just not instantly get gobbled up by big states?
Only back in the distant past (when defenders advantage was bigger) and post 1950’s (when war became rarer) does this seem possible.
Though it’s also worth noting that open borders are very profitable, if Canada had decided to instantly treat Quebec as a foreign nation, with the resulting closed borders/tariffs overall growth surely would have declined.
War becoming rarer post 1950 is a consequence of the Pax Americana, not because homo sapiens has evolved past war.
Seems to me that the system of cooperation between states, such as NATO and EU, is approximately in the right direction. I imagine something like this, just more flexible about things like currency or secession.
Kind of "in essentials unity, in non-essentials liberty, and in all things charity" within the set of countries that agree to play according to these rules.
Yes, the problem is the great exclusion of the global south, and here it can be partially remedied with immigration to great effect, but actually old fashioned ideas of sovereignty literally allow really bad governments to prosper, and maximize the chance that they bring the rest of us down with them, in addition to keeping their people in poverty and ignorance.
Yeah. I don't even know what would be the right solution. "Countries can attack each other whenever they find a good pretext, such as denazification" sounds wrong. "Everyone must respect the sovereignty of the Kim family forever" also sounds wrong. Yet, whatever reason you make about Kim, Putin may say "from my perspective, the same applies to Zelensky".
Within Europe, the "NATO + EU system" can expand gradually, country by country. But it is not obvious how to get something like this also to Africa or South America. (Also, any attempts to do this would immediately be accused of "colonialism".)
Was the example of Boston's early imports from the book? Because Boston's early exports were mostly furs that the settlers trader for with the local Indians. The timber and fish exports came later.
(review author here) Yeah it's originally from the book, but I might have garbled it in retelling it. I don't recall Jacobs mentioning furs, but now that you bring it up it seems right. In any case the argument doesn't really hinge on which natural resources are involved.
An interesting view of the world. However, like many one-sided views, it's easy to find evidence against it. Take Seattle as an example. It was built on military money, and companies like Microsoft and Amazon would certainly not have gone there if it wouldn't be part of the large US market. The same is true to an extent for the Bay Area. Agreed that military research money is different from your average grunt base, but it's still military money. I am also not sure that the various economic centers in Germany would be better off independently.
If Seattle wasn't part of the US its unlikely Bill Gates would have left to go to Harvard and then gone to New Mexico where Microsoft was before going to back to Washington. I dont think it makes sense to try to play these hypotheticals out. Too many variables.
This seems not to be an argument against nation states, but rather one against common currencies.
>Let’s take a moment here to appreciate how Jacobs casually destroys ideas so many of us hold dear.
Does she? She's saying they don't work as a financial prop, but I never got the impression people thought the military or welfare were money-makers. The benefits are non-economic, like buying a pet rabbit or going to the movies. You pay the cost of a military to get the benefit of not having Rome burn your town and salt the earth. You pay the cost of welfare for the psychological benefit of not watching people starve.
To be fair, having Rome burn your town is likely to be quite bad for the local economy...
Though I agree, the military doesn't directly benefit the economy in the way private industry does. Rather, it creates the conditions in which the economy can flourish.
Lots of weapons manufacturing goes to other countries. Arms are a huge export industry - especially at the city level. It's inaccurate to describe this as a "transaction of decline". The only way to do so within Jacobs' framework is to think in terms of nations, not cities, and to ignore the international nature of the business.
> nations aren’t the right way to think about wealth.
Well, if you're analyzing *markets*, nations are important because it's almost always far easier for people, goods, capital, etc. to move between places in a single nation than between nations. (Which is one reason why the US federal government taxes incomes at a much higher rate than states -- you can easily flee from one state to another.) As another commenter said, Brexit seems to be a good test case for all of this.
"The idea that black Cantonians [i.e., Canton, Mississippi] began moving to Chicago in droves during the Second World War in order to escape segregation is appealing but not really true. They moved to escape poverty and in most cases the dignity of making a decent living was far more gratifying at first than the dignity of having equal rights under the law. There is nothing comparable in American life today to the amount of financial gain southern blacks could realize instantly by moving less than a thousand miles away, to another part of the same country, and getting the kind of unskilled jobs -- laborer, sales clerk -- that were unavailable to them in Canton." -- "The Origins of the Underclass" by Nicholas Lemann, June, 1986
Though of course, in Latin America there is the equivalent: figuring out how to get into the U.S. by hook or crook.
Promoting in the 80's the idea of cities as places of import substitution is weird as deindustrialization was already under way. I don't see any value in it now.
Read this insanely brilliant essay, especially if you've been trained in economics. This will shake a few brain cells, particularly when applying the import replacement theory to current situations.
This is more than a book review, or rather, more than a typical critique of ideas in book form. This essay explores the ideas in the book(s), applies them to situations to make them easy to understand, and makes you question what you assumed to be as true as gravity.
Umm...the theory reviewed seems trivially wrong and obviously falsified by empirical evidence. See e.g. my comments in this thread, and those of Hank Wilbon and Christophe Biocca. The review shows no awareness of these obvious empirical problems. `Insanely brilliant' is not the description I would use.
"Brilliantly insane", perhaps?
"Richard Cantillon, Adam Smith, John Stuart Mill, Karl Marx, John Maynard Keynes. Jacobs explains how they each had their own ideas of how the economy worked, disagreeing over things like whether supply or demand was the main driving mechanism, but they all agreed on a fundamental fact: inflation and unemployment have an inverse relationship to each other, like a seesaw."
I'm interested to see what quotes she has to back this up, but as someone who teaches the History of Economic Thought I don't think this is true of the pre-Keynesians. Unemployment was not generally a big focus of pre-20th-century economists, and Phillips first described the Phillips Curve in 1958.
The description of mid-20th-century economics in the surrounding paragraphs is much better. In simple modern economic terms, we'd say that stagflation is caused by adverse supply shocks; the Keynesian solutions of the time could only shift aggregate demand, and so could only fight inflation by making unemployment worse (and vice-versa). Today we'd say best way to fight stagflation is to find ways to increase aggregate supply; this broadly seems to be what Jacobs thinks her solutions would do, though I'm not convinced they actually would.
> Well. As this review is written, in March 2023, French people are rioting because the government is pushing the age of retirement from 62 to 64.
That fact is often contrasted with the fact that the UK raised the retirement age from 65 to 68 with scarcely a murmur.,
When it comes to idle speculating about "national character," it is interesting to think about how the British vs French differ on the Revolution vs Reformism axis. Obviously the French are usually seen as the revolutionary ones, what with the long 19th century being largely the story of them repeatedly overthrowing their government, and the British are seen as the gradual reformers who slowly liberalized, but the British were the original ones to do the whole "overthrow the government, cut off the king's head, and install a revolutionary dictatorship" thing. So what changed? Are the British just more patient, and it was chance that Charles I happened to test their patience past the point of breaking, while the French have more of a hair trigger, and just happened to be doing well enough before the pre-revolution economic crisis (and also by chance had their earlier attempts at rebellion like the Fronde put down successfully)?
I like secessionism, but for a different reason.
Political diversity means political choice and a greater ability to vote with your feet. Competition of governments means they have more incentive not to oppress the people.
Thanks for this fine review! One of the best kinds of reviews is one that alerts the reader to the existence of worthy books he never would have heard about on his own.
The point about currencies is really interesting, it's a form of feedback I think the EU should have taken more seriously, even if there have also been useful effects of the Euro. And I think seeing cities and the key nodes in an economy makes a lot of sense. But I think the historical viewpoint relies in part on a world where everything important*can* be done well at the scale of a city. Much of the value of the modern world's recent technology and growth comes from networks and network effects. Power plants and stable electric grids and the internet work better at larger scale. Maybe it would be better in some sense to achieve that by having free trade and cooperative infrastructure projects among large numbers of relatively independent cities, but I don't know any time or place where that has been done stably/peacefully/efficiently?
Even in ancient times, it took Rome to build the roads and aqueducts and bridges that Europe used for the next millennia, which they wouldn't have done if they hadn't formed the empire. And there's a reason China has the saying that "the empire divided longs to unite, united, longs to divide." And why long-lived companies seem to go through periods of centralizing and unifying control and other periods of letting a thousand flowers bloom. Have humans ever devised a stable system of having a central organization powerful enough to do what's best done at scale without overreaching and taking over things that should be local? I don't really think so.
The Brexit bit makes me wonder. From her arguments it seems pretty germane that Jacobs would consider the Euro an abomination (and I can see a case for it), but the UK didn't have it; instead, Brexit mostly increased friction for trade and immigration, two things that ought to be as free as possible for the model to work. Nevermind that of course Britain itself is an abomination by this logic, with gigantic London almost parasitically sucking dry an impoverished host body.
On welfare or military development, it seems to me that while they are drains on growth, they are to an extent necessary ones; a booming economy alone is no good if a neighbour can stroll in and steal your stuff, or if everyone who isn't strictly of working age is miserable. Economy isn't everything. But the thing I would agree on is that they shouldn't be relied on as engines of development via increased spending. If you want to play Keynes, build infrastructure, not bombs.
Agreed. Under the Jacobs model, the Euro benefits the EU powerhouses (Germany, France) who can export much more at the detriment of south European countries like Greece in a similar way that London benefits from having the rest of the UK to keep the value of the pound in check, I guess?
By contrast, having common trading rules, freedom of movement and no tariffs should not ruin any cities in that model.
Great first review, thanks!
Some context on _The Question of Separatism_. A lot of Americans had moved to Canada in the decade or so before Quebec's first Parti Quebecois premier. Many of them had come to Canada to escape the Vietnam war - Canada refused to extradite draft dodgers to the US.
Once there, some number of them made public pronouncements in favour of breaking up their adopted country. Even if they were unilingual anglophones themselves, they knew where they stood on any question of oppression. French speakers qualified as an "oppressed minority", and deserved the power to forbid the speaking of English. The French language would surely disappear in Canada without drastic measures, and must be saved. Unlike native born Canadians, they understood all the issues, all the nuance, and were happy to tell us what we ought to do.
I don't know whether or not any of them knew any of the nuance in the situation, let alone the claims popular among English Quebecers of the provincial government eagerly oppressing linguistic and ethnic minorities. (This is roughly the same time there were violent confrontations about building a golf course on Indian land.) At any rate, as an English Quebecer, I regarded these pro-Quebec Americans with extreme contempt.
Eventually my own government sold me down the river, metaphorically speaking. Quebec got to be exempted from any human rights legislation it chose, as part of the price for staying in the country. Signs in English were forbidden. Many children were forbidden to attend public schools in English even if it was their native tongue. Those who were permitted by law tended to encounter bureaucratic obstacles instead. Businesses above a certain (small) size were required to communicate internally only in French.
Montreal - where most English Quebecers lived - lost most of its head offices and research offices, not to mention swathes of customer service business. Real estate crashed, and Toronto gained from Montreal's losses - they were no longer roughly comparable cities, with Montreal having the edge in cosmopolitanism. Lots of English Quebecers left the province. Some ambitious French Quebecers joined them.
I eventually wound up in the United States, having lost any conscious semblance of patriotism in the process - Canada pretended English Quebecers didn't exist, or didn't deserve to be allowed to both speak their native language and live where they were born. But it's a huge sore spot with me still.
It's also worth mentioning that the prime minister of Canada during much of this was himself a French Canadian from Quebec.
At any rate, that's the context for the second of these books.
For the record I now kind of favour Quebec separating from Canada, provided all Indigenous or otherwise non-francophone areas have the option to separate from Quebec, and there are never any transfer payments. I imagine that most of the resource based wealth in Quebec would separate from it, just as much of the research and head office based wealth already did. (And they've been trying to entice it back ever since...) It's too late for Montreal - its non-francophone immigrant communities are probably long gone, along with much of its English speaking population. But I still want revenge, and while the PQ leaders probably wouldn't do too badly personally (much as I'd like to see them suffer), the children and grandchildren of the gullible fools who voted for them would certainly suffer. And giving them what they asked for - but then sensibly don't vote for - would give me that revenge.
That is how culture wars look like. The language by its characteristics and means of communications cannot be only your private matter unlike sexuality, religion, political views etc. A group of people living closely together needs to decide which language they are going to speak. Some will be winners and others will be losers in this war.
Thank you for the nuanced comment.
As a side effect, you've given me a way to answer the person who wanted to know why I wanted revenge:
"the question of whose view of freedom or cultural heritage should prevail is a primarily contest of values. "
Precisely. The answer agreed upon by the Pequistes *and* the Oh so proud folks repatriating the constitution: Their values, *not mine*. (Also not the values of native Canadians, who are a far more popular minority in Canada currently.) I get it. I exist for their convenience. They are "better than me". Etc. ad nauseam.
Except I don't agree. But the decision is long settled. Hence the desire for revenge.
Why revenge? Help me to understand it.
Why couldn't you just learn French if you wanted to stay? Or alternatively just accept Quebecker wanted to protect French language and as bilingual system probably wouldn't work and move away?
To me Quebec seems to be doing ok, not as good as the rest of Canada and certainly worse that Toronto but if Jacobs' thesis is correct, the independence would have probably made things better. Or not but if they were at least as good as they are now, it is ok in my view.
Why wouldn't bilingual system work? If there's enough people (at least the majority) who want to communicate in French, and all the official communications are bilingual, why can't French survive indefinitely? Yes, it'd probably not dominate completely, if that what "work" means, but I'm not sure why it couldn't work with any less extreme definition.
Because it runs into a problem – if a person speaking only one language needs to find an entry level work (such as a counter assistant), he needs to speak both languages. In practice it will mean that one language will dominate and all people will be required to speak it while the second language will be spoken only by some people. In practice it would mean that everybody speaks English and French is a minority language. Apparently people in Quebec decided it to be the other way around – everybody should speak French and some can also speak English as a second language.
Almost everyone in Montreal is functionally bilingual (as of ~20 years ago, per personal experience) -- as an Anglo you need to get quite far out in the sticks of Quebec to find places that you can't function with a decent attitude and (terrible) high school French.
The Quebec government doesn't like this, for ideological (AFAICT) rather than practical reasons.
If everyone is functionally bilingual then where is the problem for everyone to switch to French?
I guess Jane Jacobs would have had issues -- but why would that be necessary?
I can say from the Anglo side that your French needs to be extremely good in Montreal for people not to switch to English as soon as you say like two words -- there are definitely ethnic enclaves within the city where significant numbers of people can't speak French at all; if they want to work at a store they would need to stick to a store serving those enclaves I should think -- not because the people coming to other stores couldn't speak English, but because it would be considered poor customer service to have staff who weren't at least capable of conducting store business in passable French.
I've been to Montreal a couple of years ago, and I never encountered a person who didn't speak passable English. My French pretty much ends at "bonjour" and "merci", but I had zero problem communicating. I think the prevalence of people speaking only French and jobless because of it is greatly exaggerated. And this is confirmed by experience of living in other multi-language environments - it's not that such people don't exist, it's that most of people aren't like that.
> it would mean that everybody speaks English and French is a minority language
I see no problem here with "everybody speaks English". And if Quebecians managed to pass special status for French, this means it's not a minority language but rather the majority speaks it. So they continue speaking it, I don't see how it necessitates banning English.
There will be some people speaking only French and they will rightfully complain that they are being discriminated if services are allowed to provide by people not being able to speak French.
> services are allowed to provide by people not being able to speak French.
I think the word "services" is covering a lot of ground here. For civil servants, a requirement that they can communicate in any language recognized as a local language of the land is reasonable.
For everything else, not so much. Speaking the local language of the law is generally not required for private businesses, nor do I feel it should be. If one wants a baker or bricklayer who speaks the local language, one can always pay a premium to find one.
I feel that trying to protect a local language by legal means is like trying to build a sandcastle in the face of the incoming tide. Unless the French speakers can outcompete both Hollywood and Silicon Valley, there will always be certain areas where English will have an edge. This does not mean that French is doomed to die out.
In Scandinavia, I assume that most working age adults are conversant in English, and that English is actually used for more international work environments (like academia). This does not mean that their national languages are in the process of dying, it seems the majority of people prefers them for everyday use.
For France (but not Quebec) especially, I am especially annoyed by coercive laws meant to protect French (like the radio song language ratio mandates) given that the French republics used coercive laws for a century to wage a campaign of elimination against local minority languages like Breton and Basque.
The town I live in has a large Asian minority, with the largest group being Korean. If they ever become 50.1% of the population and outlaw the use of English except in private, why don't I just learn Korean? I'm only 68, I should be able to learn it in a few weeks.
Does it make sense now?
Yes, you would be required to learn Korean in such a case. But it is not the process of a few weeks. You can learn a second language for many years and more and that's fine.
Most likely you already had many chances to learn Korean many years ago if their population was near to 50%. I started learning Spanish when I temporarily lived in Chicago because too many signs were in Spanish and I thought that I should be able to read them.
A fundamental problem with separatism is that it is never scale invariant.
So you have Canada, then Quebec, then perhaps a Korean majority town, then a Hindi majority neighborhood containing a Turkish majority tenement building containing a flat with a Spanish speaking family and an Italian au-pair.
I do not think that coercive legal means will improve outcomes at any stage. Letting people use whatever language they like best (so the top national newspapers are in English, regional news are mostly in French, local advertisements are in Korean or Hindi and the black board on the ground floor is in Turkish) feels much more painless.
"Why couldn't you just learn French if you wanted to stay?"
Because learning a second language is extremely difficult and time consuming? Because few people ever achieve native fluency? Because he suddenly found himself to be a disadvantaged minority? Because the Anglosphere is easy to move to?
You can achieve near native fluency if you start young but in general you are right. Still, it is rare when you need to be at a native level, only some jobs require it.
I know this comment section doesn't really encourage uncharitable, mocking paraphrasing, but I really don't know how to read this comment other than as "if you don't like being an oppressed language minority then just stop being a minority lol, like if you don't want to be oppressed for not speaking the majority language just learn it lol." I'm sorry if that's uncharitable, but the sentiment itself is quite uncharitable. Have you considered that even if an oppressed language minority COULD learn the majority language to get along, the point being made is that they SHOULDN'T have to? It's a question of morality, autonomy, and dignity, not ability.
(Edit to add that the OP wasn't even complaining about having to learn French, but about being outright prevented from using English, which is a point even beyond the question of "just" learning the majority language)
I don't think that the person was outright prevented from using English. I cannot even imagine how that would be even possible to enforce unless in China or a similar place. Here we are all on this forum using English even though it is not my native language. And believe me, it is not easy for me, I am struggling a lot with English.
I totally understand that we all would prefer using our native language whenever possible. However, the world is not always allowing us to. Sometimes people move to another country where they need to learn another language, sometimes your own country or region change the official language for whatever reason and you have to learn a new language as if you had immigrated to another country. It is great that in case when you didn't like that, you also had an option to move. Some people may not have that opportunity.
Most people move to other country despite linguistic disadvantages this move causes to them. Therefore for me it is quite unusual to hear that some people move because they decided not to learn another language. But of course, it wasn't only because of that, the other place apparently also provided better opportunities. I just wanted to better understand the motivations and attitudes people express when they refuse to learn another language as compared to simply choosing to accept linguistic change.
Alright, I'm sorry if my comment came off as harsh. I suppose the point I was trying to make is that even though English was obviously not being completely banned in even household use, if the OP is correct it was being heavily restricted in its ability to be used in business or educational contexts, even in traditionally English-speaking parts of Quebec. What I was trying to get at then, is that this seems like a legitimate thing for those affected to see as unjust, and to desire an institutional redress for (i.e. in having the policies seen as unjust be undone), rather than expecting that they simply knuckle down and either deal with it or leave. While the policies in the end might in fact be for some greater good, I think it also shouldn't be surprising that those being disadvantaged for the sake of that alleged good might engage in politics of resistance or resentment when their own linguistic autonomy is the price of that good, and is being taken from them without asking.
I can understand the feelings. That's why I am saying that to me this question about state language looks like a culture war which unfortunately is unavoidable and where one side is going to win leaving the other side unhappy.
The vast majority of anglophone Quebecers do speak French. We have to learn it in school, pass French exams, serve customers in French, etc. Not everyone is equally fluent, but it would be rare for someone here not to speak any French.
Regardless of our ability to speak French, we still get upset about laws banning use of English.
I don't understand these comments about banning use of English. Even though Canada indeed became very totalitarian during covid with vaccine mandates and extreme completely unnecessary lockdowns, are you really prevented from speaking English with your friends and family? Reading books in English online and in paper format etc.?
You're missing the context to know which laws I'm referring to. The most recent controversy is over a law banning certain people from getting public services in English and preventing people from working in English at companies with at least 25 staff or at federally regulated business. Previously people were allowed to use English for these. Anglophones are unhappy about these new laws banning use of English.
There are no laws against speaking any language in private with your friends and family, obviously. Such a law would be both unenforceable and unpopular with everyone.
As an immigrant to Montreal I find this analysis to be needlessly pessimistic, and perhaps not very reflective of the current situation. Sure the 90s were tough but the city is doing pretty darn great these days with what I see as the highest quality of life of any north american city.
"its non-francophone immigrant communities are probably long gone, along with much of its English speaking population" - if anything immigration has increased a lot (though not as much as some parts of anglo Canada), and along with it the non-francophone immigrant population.
The notwithstanding clause was more of a sop to the conservative anglophone provinces necesarry for a supermajority. At the time conservatives believed that the charter was antidemocratic because it limited provincial, and thus popular sovereignty. It was used mostly as a protest in quebec except for the sign law until recently.
Having read (and reviewed, at length, conclusion post here: https://thepdv.wordpress.com/2016/03/31/the-economy-of-cities-plainly-delivered-verdict/) The Economy of Cities, and read Cities and the Wealth of Nations, I have some corrections.
> Jacobs doesn’t actually give a clear argument why. Maybe that was in her previous book, The Economy of Cities. So far as I can see, her reasoning is, ironically, a bit tautological: “all developing economic life depends on city economies; it depends on them by definition because, wherever economic life is developing, the very process itself creates cities and has probably always done so.”
She does give an explanation in The Economy of Cities, but it's that same explanation, and yes, it is absolutely tautological. She presents a (very much unsupported) theory that this has been true all the way back to the very first city to ever exist, and at no point does she provide any quantitative support for any of her arguments.
This is Jane Jacobs's principal sin. She never, *ever* gives numbers. And if she did, they would be used like an exotic spice to draw attention to her theorycrafting, not a basis for changing her mind.
> For Jacobs, virtually all city development can be seen through the lens of import replacement (which, to be clear, has approximately nothing to do with policies of import substitution industrialization; import replacement is not a policy, but a naturally arising free market phenomenon).
No, in Jacobs's view they *are* linked and import substitution industrialization is one of her primary forward-looking policy prescriptions. She'd prefer the 'auto-tariff' approach of free-floating currency exchange rates but she does actually support this.
And one other comment:
> Can you imagine if the Our World in Data charts had to show separate lines for the Electorate of Saxony, the Prince-Bishopric of Augsburg, the Duchy of Brunswick-Lüneburg, and about 1,800 other semi-sovereign states? Can you imagine traveling around if each of them had its own currency?
Fortunately, programmatic currency exchange is now easy and the drawbacks have become minimal.
(review author here) Thanks for this feedback! I'm not sure about "in Jacobs's view they *are* linked and import substitution industrialization is one of her primary forward-looking policy prescriptions". When she discusses Uruguay, she points out that its attempt to fix its economy through import substitution industrialization went disastrously.
> Fortunately, programmatic currency exchange is now easy and the drawbacks have become minimal.
Yeah, Jacobs actually says that computers are on their way to solving this, and she says this in 1984. I agree that today the convenience argument for currencies isn't very strong at all.
An obvious prerequisite for this discussion is that geographical proximity is important. I wonder how the increasing interconnectivity, ever increasing fraction of digital goods and services that do not care about geography, post-COVID remote work opportunities, etc change the city-centric trajectory of economic advancement.
> Currencies, Jacobs explains, function as automatic tariffs (to protect local industry from foreign imports) and automatic export subsidies
Is there some way to get the benefits of this feedback loop without the inconvenience of having a ton of different currencies? Like, could metro regions just have regular old tariffs and export subsidies, set by an "automatic" formula?
More generally, I'm confused why currency/monetary policy is the important factor that makes large nations doomed to fail, as opposed to the other stuff that tends to distinguish nations from smaller entities (legal power over its citizens, having a military, controlling immigration, etc.).
I mean, I am of the view that her whole thesis is nonsense on stilts, in which case there is nothing to explain…
There’s a political program in here that people could like: something mixing this, Napoleon of Notting Hill, and James Scott with a view to re-establishing city states, possibly with “something something communitarianism” thrown in as well.
Has anyone thought to examine the Mongol Empire? In particular, the Jochid horde implemented devolved currencies and politics. Might such a system work as a model for a decentralized, yet (usually) unified state?
Thank you for sharing this! As I hope is evident, I found it delightfully stimulating.
In my own amateur engagement with economics, I have asked for households to be the basic unit of economic analysis but, of course, households exist immediately in networked relation to people and places. Maybe cities is best.
As for left and right, it seems Jane Jacobs accepted that private profiteering would continue playing it's preferred role as driver of the economy. I read she preferred merchants to rent-seekers which suggests to me she was making the mistake that all apologists for empire seem to make. That is, she was vastly overestimating the moral and humane sensibilities of her capitalist cohort.
I realize that's a bold statement given I've only been introduced to her today. I doubt she thought of herself as an apologist. It sounds like she was working towards deep structural transformation in the study of economics. Her ideas and analysis as you've presented them are useful and compelling. I think they reveal her humane sensibilities. I also feel a bit justified in my declaration by the fact that she consciously places her work in the tradition of Adam Smith whom I've read was mortified to discover how quickly his cohort abandoned any moral sensibility that stood in the way of profit.
I said all that so I could speak about welfare. The general welfare is one of the few legitimate purposes of government. But, we live in empire where whatever is good for the profiteers is, a priori, deemed good for the general welfare. Empire cannot conceive a welfare greater than its own. I/me/mine is the extent of its conception of the good.
In that worldview, care for those that fall outside the circle of my concern is understood as charity. Welfare is politicized charity. It is not justice. Any real leftist would gladly give it up in favor of a economy designed to serve a commonwealth belonging to the people and not the privateers.
As long as government is the means by which the wealthy play their game of thrones, there can be no justice, economic or otherwise.
A lot of comments are picking on Jacobs' theory of stagflation for being, ya know, egregiously wrong. I think the charitable thing here is to recognize that she got caught up trying to tie her theories to a happenin' economic event of the time, and that her overall theory makes more sense if you find/replace "stagflation" with "slower economic growth since the 1960s." Slow economic growth, unlike stagflation, has a pretty good argument for being the default human state.
Yah, except she'd never have made that kind of mistake if she was trying to tie together her theories about physics without a physics degree.
1) Economics really isn’t physics.
2) the fact that economists threw out their models because of stagflation tells us how limited the models were. Stagflation was easy to explain for the “layman”
Jeepers, stop whipping your favourite hobby horse mate, and learn some economics. You may actually find you've picked up useful tools with which to understand the world. Here's a good place to start - https://mru.org/principles-economics-microeconomics
Yeah, the whole thing about stagflation doesn’t seem particularly relevant to the idea of cities being the lynchpin of economic development.
I end up seeing this as an optimization process: there is a situation where a good or service is expensive. There's a way to provide the same service in a cheaper way, so eventually this is noticed, someone resolves the inefficiency and provides the same service for less money (and takes a cut of the difference in profit). It's like taking a step in a gradient descent algorithm.
In the examples given here, the inefficiencies tend to be geographical and political - the cost of labor, the cost of transport, the markup of the merchant/exporter, tariffs, etc... All of those can be eliminated through import replacement by a city.
But that's not always the way of inefficiencies. As other commenters pointed out, it's often cheaper to import a certain good or service from someone else who is specialized to provide that good or service to you. As transporting goods and information becomes cheaper, it probably makes sense for many cities to instead do export replacement - taking an inefficient local industry and replacing it with a cheaper import.
The whole anti-fragile angle points out another dimension - risk. We tend to avoid over-optimizing things because it creates very brittle systems. So this is something that cities and nations also need to consider. Perhaps it's better to import-replace something, even if it's more expensive to produce it locally, since it provides you with some redundancy and resilience when compared to depending on a specialized peer.
One could also see nations as the natural outcomes of the gradient descent processes in other dimensions. Managing a myriad of fluctuating currencies has historically been intractable, so people ended up settling on unified currencies for the sake of predictability and stability. Similar forces in the dimensions of culture, military/safety, laws and other areas contribute to the stability of nations in their current form.
I read the argument in the book as: nations impose artificial constraints on cities and prevent them from following the economic gradient. But nations themselves are (perhaps local, rather than global) peaks in their own gradient.
So eventually it all kind of becomes a porridge of "everything is complicated" and I end up thinking that perhaps this is not a useful way to think about things after all.
What is it about economics that seems to cause people who don't really have a strong grasp of it feel they are qualified to offer broad theoretical or empirical claims about it. I mean, based on a quick Google she seems to just be a journalist without substantial STEM background much less a grounding in macroeconomic theory.
I can understand (tho feel it's largely unwarranted) why some people would be skeptical orthodox economists are justified in their views. However, in any other field if you hadn't mastered the math and empirical literature you wouldn't dare take the leap from skepticism to proposing your own theory.
Hell, even the global warming skeptics don't claim to offer their own alternative climate model. So why is econ treated like voting: something any idiot is justified in formulating their own theory about.
Probably because macroeconomics pretend it’s a hard empirical and theoretical science when in reality it’s just smart people playing games with math? It’s not their fault, studying a complex, dynamic, chaotic system on the scale of a nation’s economy is not something we have the scientific tools for currently. But there does not appear to be any acknowledgement that their models provide zero predictive power. What we are left with in macro is philosophy -- all the dsge models in the world tell you nothing about the actual macroeconomy, how to grow it or how to manage it, they are simply far too underpowered to capture the real dynamics at play (as 2008 made painfully clear). Jacob’s philosophy at least investigates the fundamental creative forces that generate true prosperity.
Because economics isn’t anything approaching a science and you might as well ask a journalist.
I think the mathematics in economics is largely cargo cult anyway. Mathematics, outside of pure mathematics, is a tool. If you write complex economic equations they had better work.
I liked Will Wilkinson's phrase "the United Nations fallacy" for treating countries as equivalent, regardless of size, because they are legally considered to have equal status. Unfortunately, his Flybottle blog is no longer available, and I believe he even blocked access to the Internet Archive.
Stagflation is not the normal state of things, because inflation is not the normal state of things. Prices that are high relative to incomes is not "inflation", because that's a level, whereas inflation is a rate of change.
I lived in Northern Quebec when I was a kid (1 to 9). 1955 - 1964. Rouyn-Noranda, about 350 miles NNW of Montreal.
The schools were separate, French and English. I feel like I had about one french class a week. The only memory I have is Mrs. Riley (my third grade teacher) holding a drawing of a cow ( it was the first time I had ever seen one) and saying “La Vache.”
When I met a French Canadian boy for the first time, who actually lived right next-door to me he was fluent in English. His father didn’t speak a word of it and made it clear that he didn’t care.
It was a very important mining town and the managerial / executive people were all anglo. The “brains” people were not only Anglo but British and Australian (my father being one of them.) It was Apartheid.
Montreal got clobbered by the Separatist movement. I was living and working in Toronto in the 70s and the relocation was palpable. I was a commercial film editor and the migration of all the major ad agencies to TO bought me a lot of dinners.
Montreal in the 90s was dead. I visited. So many storefronts on the main street with plywood in the windows. I believe it’s had a bit of a renaissance at least partly due to high tech film effects innovation (SoftImage). McGill U is a premier school in computer science I believe. Good music as well, but that’s always been true. Go Leonard!!
Libertarian is an easy title, but it sounds like she was just a big believer in subsidiarity (though the term is usually used with reference to Catholic Social Teaching)
Cities grow the same way mold does; in congenial circumstances.
Geography has been the primary driver of where we put our cities for a long time. Las Vegas is an anomaly.
Wow, that was a really compelling argument not to take her stuff seriously. If that's an accurate account it's just psuedo-intellectual vague theory building that avoids testable claims and creates a false sense of erudition all serving to create sufficient complication that the author can use their narrative control to support their pet theory.
I mean the whole thing about cities being the correct unit of analysis was a red flag! One of the hallmarks of this kind of thing is a theoretical claim that feels substantive at an emotional level but doesn't really have any clear substance (cities are the proper unit of analysis). It just serves to create the appearance of intellectual work when all that's really going on is the author is redescribing things in a way that appeals to them.
Nothing wrong with that on it's own. But it's almost always a kind of trick. Once they've asked you to look at the world with their lens they tend to simply presume that if you're still reading you'll nod along when the presume that lens offers some kind of unifying explanation of whatever seems important.
Sorry, I'm just being irked.
Why it would be a limiting factor is a good question, and I had to think for a bit to work out why I think so. On the premise, a mixture of hierarchies and decentralised control is too broad a brush I think. Where command & control are weak, the decentralisation doesn’t step in: Tokyo and Shanghai handle their size much better than São Paulo and Delhi. The main difference I can identify is the level of centralised control that is able to be exerted. So I conclude that decentralised cities can grow to a certain level but above that level it takes centralised management to prevent diminishing returns.
Excellent writeup about a great find.
My view of cities is a bit different although I don't disagree with Jane Jacobs in general.
If we consider "modern" society as layers of complexity enabled by basic surpluses in food and energy - where does the complexity take form? Cities. The dominance is financial, social, manufacturing, etc etc - all outcomes of greater complexity.
That's the core advantage of cities vs. the rural countryside despite the rural countryside literally feeding and providing the raw materials for the survival of the overall system.
In addition, cities in a democratic system have more votes - and increasing urbanization leads to increasing relative political power. Absolute population dominance in a democratic voting system is precisely why the Constitution instituted Senatorial equivalence in voting between states as opposed to absolute votes - the electoral system. At the beginning of the United States - the Founding Fathers were very fearful that the high population states of Virginia, Pennsylvania and New York (in that order) would dominate the rest of the 13 states.
Now combine the control over complexity (because of location) plus political dominance - you end up with the rural countryside being unable to defend its economic interests against the urban centers' interests.
This same kind of dynamic rose with European nations, the West in general vs. the rest of the world. Even if critical minerals, food, energy or other resources - which are literally the foundation of Western standards of living upon which the West is dependent - are absolutely critical for the West, the same types of dominance exerted by cities on the rural countryside leads to low commodity prices in favor of "complex" "advanced economy" products such as finance.
Under this model - the decline of American cities is directly a function of the decline of many aspects of complexity, the decline itself not restricted just to cities. The outsourcing of manufacturing to China is the most egregious example.
I really like the review. But import substitution is considered by the vast majority of economists of all political persuasions as a bad theory. It predates JJ as well. The part about the value of the exports is right. But because increased transaction costs increase all costs, the idea that tariffs via unique currency or taxes will boost a developing economy isn't accepted. A history of the rise and decline of the idea can be found here. https://www.nber.org/system/files/working_papers/w27919/w27919.pdf
Also, I I wouldn't call her an accidental moderate, but rather a type of distributist.
The US became a world power behind a wall of tariffs.
I don't know of any economic historians who argue of productive capacity increased as a result of these tariffs. I could be mistaken, and you may point me in the right direction. Make an argument?
That the US became a major manufacturing country behind a wall of tariffs is an empirical fact. I take no argument to authority from economics - the entire field is highly suspect.
Were there major economies at the time that were not behind similar tariff walls? If not, the fact that you stated seems like it provides essentially no evidence either way as to whether tariffs boost an economy.
Post hoc ergo proctor hoc.
Oops, propter
Not sure if you are agreeing with him or me.
There are plenty of economies that grew well behind protective barriers, yes. Look at Asia. Not sure how that helps the argument.
What about Asia? Aren't their tariffs generally very low these days by historic standards? How do you square your theory with the fact that China's industrial capacity boomed in the recent free trade era rather than being decimated by cheap imports from Western countries?
They also maintained an internal free trade union, which was a large aspect of the constitution. Was this a mistake?
No. Why is that relevant.
Protective barriers are so great. Why not have them everywhere? Why should Delaware depend on Pennsylvania and Massachusetts instead of rolling their own and getting rich?
I do see a real problem with taking a central word like 'import substitution' and then arguing about the concept that is generally associated with that word without taking into account the how it was meant and used in context.
This is true for many of the commentators here as well as in the linked paper.
As a naive thinker in economic terms I understood the essence of JJ as:
- you have to manage a balance of exports and imports for every given economic entity ( I would not narrow this to cities as she does)
- if you run a trade deficit or want to grow your economy start by increasing and diversifying your production ( as opposed to attract more people or foreign investment)
- when choosing what goods to start producing, pick something you are currently importing, that gives several benefits:
- a local market exists without local competition
- if frees import capacity for other goods
- you can get direct feedback about quality and improvements
- chances are that your neighboring economies also import this, so you have a potential export market.
There are many arguments presented here against 'import substitution' as a general concept, or why it is no economic miracle cure. But I didn't see anything convincing against the points above.
It is similar in the linked paper:
The economists listed as early proponents of the idea of import substitutions weren't proven wrong, as they had a very differentiated view from the beginning and did see the limits. The problem is the people picking up on a idea and following it without understanding or even for different motivations. When this goes wrong the whole idea sounds like a bad idea from the beginning and of course people talk less about it and avoid the specivic term because they don't want to be associated with the failure. But this doesn't provide evidence against the insights of the economists at the beginning.
> 'when choosing what goods to start producing, pick something you are currently importing, that gives several benefits:'
This is where the whole thing breaks down. When you're a small/poor place, what you're currently importing is not necessarily (and should not be) a guide to what you should be producing! You should be looking only at what you can produce and sell efficiently. And ideally, sell efficiently in other places, because you're a small/poor place, so there's not much of a market to sustain or grow your production locally. In the last few decades this has many that countries with lots of cheap labour have led with export oriented manufacturing for apparel, light manufactures, automobiles etc, very few of which were in their import basket!
Well, there you are assuming that a small/poor place can easily find markets elsewhere for whatever it is that it will start producing (no doubt rather clumsily at first). That was much harder when travel/communication/freight was more expensive and unreliable.
I don't know what point you're trying to make. But note that even back when travel/communication etc was more expensive and unreliable, trading points are typically where cities came up, implying that trade was enormously valuable even when places were small, and small/poor places were finding things to export (and import).
+1
+1
I'm a moderate between import substitution and export specialization. Maybe export brings more money in the short and mid term, but can get a country locked in as a resource extraction organization only which would hamper human capital development in the long run.
I think "Economists examined her theories and found them wanting" is the most likely explanation. The ironic part is that "The EU is too big" actually *was* a mainstream economic argument for decades (keyword "Optimal Currency Area"). But the argument was "the EU should be half as big as it is", not "Hamburg and Munich should suceed from Germany", which seems insane.
Also, I really wish this review had looked at the data since 1980 to try to see how the theories held up or didn't since the book was written.
I'm very fond of Jane Jacobs and have long seen her as one of the great thinkers of the 20th century. She got the importance of cities correctly, but didn't address the importance of nations. The Roman Empire might only have dominated for a millennium and a few centuries beyond, but that empire did have a good long run. Cities don't function alone. You could take her taxonomy of rural areas and do a similar taxonomy of cities. You have to understand cities in the context of larger entities like nations and empires.
An organic model can help. Cells are a basic unit of biology. Each cell can perform a broad variety of functions. Each cell has a metabolism with inputs, outputs and the ability to reproduce. Understanding how individual cells work is important, but cells live in ecological niches where the work with other organisms and modify the world around them. One of those niches is as part of a multicellular organism.
A cell may survive on its own, but it serves a cell well to join a biofilm when attacked or to join with other cells to disperse spores. In multicellular organisms, cells specialize. Outer cells may suppress the reproduction of inner cells, but the resulting organism is more effective than any of its cells. They all do better. Your liver cells accept their role as the toxic waste dump of your body and your brain cells call dibs on your body's sugar supply. Your muscles accept commands even if they have to dip into anaerobic reserves.
A city often does better as a tributary within a powerful nation than as an independent entity. Interstate anarchy, you and what army, can be expensive. When the Egyptian branch of Alexander's broken empire neared collapse around 200BC, Rome was called and effectively took over. This had a cost to the cities of the Eastern Mediterranean, but they still did better under Roman rule than in constant warfare. It isn't always about armies. The EU with its euro provides an export moat for Germany. Germany alone would have an expensive currency, but sharing its currency with the rest of Europe puts a lid on euro exchange rates making it hard to undercut Germany with a cheap currency.
Jacobs focused on cities and did a lot of important and original thinking. Still, her focus was limited. Look at what I call the Crystalization of Europe. For a long time after the Roman collapse, it was effectively a continent of city states each with a backwater. Then, after the Black Death, Western Europe began to crystalize with powerful cities accumulating empires. It started in Spain and Portugal, but then spread east to England and France and finally to Italy and Germany. Each crystalization built a nation, imposed a national culture and language, and then built an external empire. Given the forces involved, I would not be surprised if this happened elsewhere as well.
Like General Relativity, Jacobs theory of cities was a breakthrough but incomplete. So much of economics starts with a political theory (h/t to Joan Robinson) and tries to wedge the real world into it often ignoring basic accounting that is obvious to even a street vendor. Jacobs started with observations and came up with a theory that lined up with experience and simple concepts of accounting.
It's interesting that you use the word ecology. The main impression I get when I read Cities and the Wealth of Nations is that the economy of a city is akin to an ecosystem. What is described as an import-replacing city is merely a healthy system resilient enough such that the loss of any species does not significantly affect the whole, or where the resulting void can be quickly filled. A transplant region is a food web which is artificial and top-heavy, while a supply region lacks diversity and therefore cannot be built upon. Imports are really dead animals brought in from outside. Regional cities are sparse ecosystems with vulnerable keystone species.
You bring up the point that cities declined with the fall of the Roman Empire and recovered with the rise of nation states. Viewed from the ecological lens, it's clear that the economy of each city can be made more resilient through increased interaction between them, using the analogy of species which cross ecosystems. But the actual main issue is that it is impossible for any single city to be fully self-reliant. They require armies for self defense, roads for inter-city trade, and growth will always require more food and people. However, the items mentioned above are all commodities, as whether the food or person comes from one nation or another is really irrelevant. So I don't think it's correct to say that Jacobs understates the importance of nations. A stable nation minimizes disturbances to the ecosystems within it, which is certainly helpful. But the city is the actual goal, the complicated ecology which is rare and difficult to form. That's what really matters.
That's fair. I probably shouldn't have said that Jacobs understates the importance of nations, but rather that her book was about cities not nations. A city doesn't absolutely need a nation. Look at the Hanseatic League which organized intercity trade. On the other hand, cities do better when there is some higher level organization such as an empire, nation or trading league to provide stability and a framework for trade.
P.S. The term ecology comes from "oikos" which means household. Economics comes from the same root.
Question: if Japan is so overwhelmingly doninated by Tokyo that there’s a good case to be made for rough parity between Tokyo-centric concerns and Japan-wide ones, why did Jacobs make a prediction of decline in the 1990s? Seems hard to chalk that up to the kind of principal-agent type problem that characterizes her viewpoint.
First, I found the book review engaging and compelling throughout, so thank you for this! As I am digesting it, I find myself convinced by the economic arguments, though frustrated that's the only lens brought to viewing development.
It seems so obvious that there are other necessary criteria for economic development that are not touched on, primarily security. City-states had this phenomenon (let's say it's correlated but maybe it's causation) where warrior societies would spawn that decide simply let's take their stuff. That has all sorts of implications for coordination between cities, security investments, and insider/outsider views of who a city might feel comfortable paying tribute/taxes to.
Similarly, currency and state-sanctioned violence are downstream of the legal system, which in turn is downstream of cultural values. I struggle just remembering state-level legal distinctions when driving across borders, and I have to imagine city-state level distinctions were constant sources of misunderstandings, frustrations, and abuse (think: Ohio targeting out-of-state speeders for tickets on steroids). I would imagine that to regulate city-states to certain sizes, only to be out-competed by regions that could provide more consistency over more domains where security and some culturally-shared view of fairness was sufficient for commerce to proceed.
This is one of those books that I would file under 1970s weirdness. (Yes, I know, technically it was published in 1980, but it was written in the 1970s.) You could write some crazy stuff back then and still be published and respectable.
The idea that nations should be broken up into city-states is just so deligtfully kooky, I don't even really want to dunk on it. It's like dunking on a clown. Plus, if we could get SF into its own nation and build a wall around it, it might be worth crashing the economy and plunging society into a dark age.
You know. Pros and cons.
I do feel compelled to point out, though, that the story of the 20th century is to a large extent the story of cities becoming less and less relevant. It used to be that factories and industry were located in cities. But as transportation networks matured and environmental concerns proliferated, the idea of having heavy industry in cities became a bit silly. Now the triple whammy of increasing crime rates, skyrocketing costs of living, and the COVID-era forced work-from-home orders are starting to do the same for commercial activity in cities.
There are increasingly few economic reasons to live in a city. Increasingly it is just a lifestyle choice.
"If any of these separatists got their way, we can be sure that the new nation of Quebec, Scotland, or Catalonia would then oppose further separatism in the strongest terms."
One of the funniest things about the recent Catalan push for separatism is "Tabarnia", a satirical mirror of the Catalan independence movement which demands independence for the Tabarnian region *of* Catalonia from the larger polity. The independence activists went *insane with rage* at the demands and claims of the Tabarnienses even though these were deliberately exactly identical to the activists' own claims visavi Spain.
A quick google tells me that the region is fictional. Catalan independence, like all independence movements, depends on the separatists having actual historical cultural affinity within the separatist region and differences from the state they are now in. Not unlike Scotland and Britain.
Of course it's fictional, it's a satire. The point of Tabarnia is that it's a subregion which A, is against independence (i.e. its culture has an affinity with Spain rather than some obsolete twelfth-century horseshit), and B, contains most of the actual rich/productive/populous parts of Catalonia, making it analogous to Catalonia's position as a rich part of Spain.
Another thing: as for her political/ideological affiliation, Jane Jacobs was evidently an advanced Taoist master. Consider for example:
Small countries with few people are best.
Give them all of the things they want,
and they will see that they do not need them.
Teach them that death is a serious thing,
and to be content to never leave their homes.
Even though they have plenty
of horses, wagons and boats,
they won’t feel that they need to use them.
Even if they have weapons and shields,
they will keep them out of sight.
Let people enjoy the simple technologies,
let them enjoy their food,
let them make their own clothes,
let them be content with their own homes,
and delight in the customs that they cherish.
Although the next country is close enough
that they can hear their roosters crowing and dogs barking,
they are content never to visit each other
all of the days of their life.
and
Why is it so hard to rule?
Because people are so clever.
Rulers who try to use cleverness
Cheat the country.
Those who rule without cleverness
Are a blessing to the land.
These are the two alternatives.
And lots more where that came from.
Excellent review of a non excellent book.
The argument is that the Tokyo based central government is unproductively subsidizing the rest of the country thus both spending its own economic surplus and undermining the growth of other regions that themselves could be more robust regional city economies. Or the Tokyo metro area’s integration is good, but the national reliance on Tokyo is bad.
This was meant to be a reply to another thread on the seeming contradiction on my Tokyo was both praised and criticized.
Is it that impossible to induce "import replacement" for cities that are within larger nations? Why can't Montreal do import replacement today, and why would it be able to if Quebec separated from Canada? Is it just the currency feedback loops? In that case what if Quebec stayed within Canada, but was given its own currency?
"It is why nations and empires always centralize everything into one large city, whether that’s Paris, London, Tokyo, or Toronto, or ancient Rome: that city, being the largest, is simply the only one for which national-level currency feedback works fine."
Which is why Washington D.C. is the largest city in the US.
I mean, it could be that one of the reasons why the US has become so economically dysfunctional is that the national-level currency feedback doesn't work for anywhere. The government is centralized in DC, while the financial sector is centralized in NYC.
`So economically dysfunctional' needs to be justified. The US is both the largest rich country and the richest large country, and almost uniquely among the developed world it is still growing...
I probably should have phrased this as 'financially dysfunctional'. News stories about the financial mess the US is currently in are all over the place. US household debt is also at record levels.
I see many people are arguing about the failings of her theory in regards to "import replacement", "stagflation", whether a city really is the best unit to analyse wealth, and on the "currency feed back loop" thing.
All of those things are outside my expertise, so I'm grateful people are pointing out those problems. But what *really* caught my attention here is her model in regards to economic forces radiating from a city and the rural regions affected by it. No one seems to be talking about it, and I find myself curious if there is any validity to it, and would be grateful if someone with the apropriate expertise could comment on it.
What if, instead of the model being worded as "economic forces radiate from the city to the rural areas", it's the obvious "people vote with their feet and are attracted by more attractive living conditions"? With the examples she gave, it seems like two sides of the same coin.
I mean, I feel like that only the "jobs force" and "places people abandon" falls under that. I don't necessarily think any of the individual parts of the model is that revolutionary or anything. "Introducing a new technology in a region might displace workers there" and "a region dependent on exports to a single city will be sensitive to economic pertubations on that city" aren't exactly novel insights either, but I find the framework as whole interesting nonetheless.
I don't read any of her insights as particularly novel or revolutionary, but her insights (and the insights of James C. Scott's (of Seeing Like a State) and maybe those of David Graeber) are useful for pointing out the pitfalls of high modernist central plans, or planned economies - which continue to appeal, even to arm chair planners, because who can resist dreaming up plans?
I guess that their tl;dr would be that society is messy and dynamic, and flexibility and small-ness will continue to have merit next to the relatively slow and rigid central state planning.
>But it is not the process of a few weeks.
I was being sarcastic.
This is my first time reading about import replacement, and I gather that it's largely known as a bad theory. I'd like to know if there's a similar theory that's more specific, which is more well respected?
As I understand, import replacement is an argument in favor of specialization within the city (relatively to the rural surroundings), but for generalization within the nation.
But on the national level, there's a balance to be struck between extreme specialization, and extreme generalization. With extreme specialization the country gets a globally competitive product to base their economy on, so they can import everything else - but it's fragile to put all eggs in one basket (not to mention that you miss the synergistic effects of having many industries).
With extreme generalization, the country imports nothing and might as well have closed borders, and thus it's a sure recipe to fall behind globally, which will bite your ass eventually (is North Korea a fair example?).
I don't know what "import replacement" is most often criticised for, but I'd guess it's that when it's taken to its extreme, the country (or the city) misses out on the positive effects of specialization and trade outside the city? In other words, when a country does it, it misses out on the positive effects of globalisation?
In conclusion: replace half the imports!
Am I missing it completely?
Would separation even be necessary? If we can somehow figure out which area belongs to a city area like she claims with scotland and london, we must have some certain metrics to determine this. Couldnt these be used to figure out which areas would need to switch it up? Using metrics instead of currencies as a guide.
"They were making the classic mistake of treating poverty as a mystery and wealth as a given, when in fact poverty is the normal order of things and wealth, when it does occur, is what warrants an explanation."
I recently heard an argument going much the opposite way, that up until 'The Wealth of Nations' everyone took *poverty* as the given, and its fresh perspective was to suggest that sustainably increased wealth was in fact possible. Malthus and Ricardo, after all, saw poverty as the natural state of mankind. Adam Smith meanwhile needed to investigate this new weird thing, increasing wealth.
> the answer is obviously going to be cities.
>
> Jacobs doesn’t actually give a clear argument why. Maybe that was in her previous book, The Economy of Cities. So far as I can see, her reasoning is, ironically, a bit tautological: “all developing economic life depends on city economies; it depends on them by definition because, wherever economic life is developing, the very process itself creates cities and has probably always done so.
If you want a non-tautological argument for or against this, you should look to "The Dawn of Everything: A New History of Humanity" by David Graeber and David Wengrow. You can have a high population density without any centralized power. You can have highly organized bureaucracy without high population density. The universal use of "city" hides a bunch of wrong assumptions about what's necessary for social organization.
What is your definition of "city", and what happens to your argument if you taboo "city"? Something like, "economic activity is going to be concentrated in the regions of highest population density, and economic activity drives increased population densities"? I agree with this in broad strokes, but it doesn't seem strictly true. In most cases, in fact, on small enough scales, it seems like the local maxima of population density don't overlap with the local maxima of economic activity? You have apartment buildings in some neighborhoods and office buildings / marketplaces/ stores in other neighborhoods.
The point I was making, though, was that the argument probably becomes more clear when you pull apart the different components of "city", rather than treating "city" as a homogenous category. For example, Wikipedia says
> A city is a human settlement of a notable size.[1][2][a] It can be defined as a permanent and densely settled place with administratively defined boundaries whose members work primarily on non-agricultural tasks.
For the purposes of this argument, it seems like "densely settled place" is absolutely essential, "permanent" is maybe important, but "administratively defined boundaries" is absolutely not essential, for example.
What I've read about Graeber and Wengrow's work makes me wary of looking to them for any answers at all.
What have you read?
Lots of different things spread out over different sources, generally implying that they play fast and loose with citations, but you can see some discussions in the comments here https://astralcodexten.substack.com/p/your-book-review-the-dawn-of-everything
Maybe the book itself is different, but after reading this review, I don't feel like I have a nuts-and-bolts understanding how growth works in Jacobs' view. A standard introductory economics textbook will talk about things like specialization and division of labor, gains from trade, and savings and investment. These factors explain where the things that are necessary for growth come from. Here it sounds like people just decide to make factories, and so they do.
> All empires eventually collapse. This is not what we would expect if empires were a good economic arrangement. If they only ever got wealthier and wealthier, they wouldn’t disintegrate into various separatist factions or end in foreign conquest.
This seems a bit simplistic... empire collapse is related to an enormous array of factors. Sometimes they're economic, but related to very empire-specific factors, like the accumulation of wealth in religious temples in Bagan. But they may also be related to climate, as happened to the Maya, as well as with the Bronze Age collapse. Or there might be new technological development which shifts the balance of power (Bronze Age collapse again). Or there's a succession crisis, or plague, or some other factor. None of these tell you much about what the optimal area for a single connected economic area is.
edit: Forgot to mention, that free trade is generally considered an incredible economic boon to all entities involved. The fact that the US Constitution forbids states from passing tariffs means that the entire US can freely move goods and services around (well, mostly) and probably contributed to is developing into such a rich and powerful country. (On the other hand, its size is probably also contributing to its current political disfunction, but that's not an economic problem).
As an Atlantic Canadian with a father who grew up in suburban Montreal in the 50s through 70s, I feel like this review is targeted at me in some ways.
Two things are notable about Atlantic Canada that line up very nicely with the theories Jacobs describes - it has one decent urban center (Halifax, in Nova Scotia) when it really should have two (PEI is too small to really have one for the purposes of this discussion). Why? Because in New Brunswick, there are three cities - Saint John, Fredericton, and Moncton. Moncton exists to be a railroad crossroads and with government funding, Fredericton exists entirely to be the capital, and Saint John has actual industry etc. But the government has never liked Saint John, so instead of one big city and two small ones there are three cities of roughly similar scales. It is very dumb.
Second, Atlantic Canada used to be the economic heartland of Canada. But the various local industries got bought out or expanded west. And once the Atlantic Canadian operations were branch plants, they were more vulnerable to being shut down. Basically, Atlantic Canada transitioned from being a network of its own cities and industry to being the outsourced industries of cities outside Atlantic Canada. And then, unsurprisingly, those eventually went away.
(To be fair, Atlantic Canada has also just been hurt by the passage of time. PEI, for example, used to have a very solid industrial base in brickmaking and wooden ship-building. It is fair to say demand for both has declined, even locally, and transitioning to other industries is not necessarily straightforward. Though, really, the bit where it is economically viable to buy bricks from China vs locally also explains a lot).
I am almost certain that she is wrong about separation being the answer - separation does not preclude poverty. People and capital are still perfectly capable of abandoning one region for another, even across borders.
On the currency side, I think there's a bit of a trap in that having a smaller currency could usually be helpful but having the most important currency is even more helpful. Like, Italy would be better off with it's own currency than with using the Euro, but would be even better off if the Euro some day replaced the dollar as the worlds reserve currency. That would create incentive to plow on hoping to eventually take the number one spot.
Interesting stuff, and I love TDALOGAC, but doesn't the city economics thing fail empirically in a pretty obvious way? In the US, New York, Los Angeles, Phoenix, Miami, the San Francisco metropolis, Atlanta, and various other cities all seem to be doing very well. And cities do specialize in different industries to some extent and trade with each other, much more than countries trade internationally. This all basically seems to work well, which Jacobs' theory would predict is impossible.
Similarly, in Germany, to my limited knowledge, Berlin, Hamburg, Munich, Frankfurt, and so on all seem fine.
So, I think it's an interesting lens. Yes, cities should be a more important unit of economic analysis, and they need to produce something valuable to prosper. But in fact they do prosper, and Jacobs' analysis ultimately fails pretty badly.
I don't think it's just a few. I think the average US city is doing at least as well as the US overall (with rural areas doing worse). Jacobs' theory just doesn't fit the data very well, especially the part which claims each nation has to reduce itself to a single city. If the theory says unicorns don't exist, but there are lots of unicorns running around, you basically have to drop the theory. Disproof by counterexample.
I'd agree with Breaker and ignore hand wavey data people have not looked as as 'evidence' of anything. The small and medium cities are doing quite badly across most of the US outside of the large cities and even many of those are doing quite terribly for the common person. Looking at stock markets or rental costs going up as a 'good thing' is an elite's point of view pushed by billionaire owned media whose millionaire talking mouths tell us those things are good. Rent going up is in fact bad for a commoner.
If one looks at the real data of the various counties which have gone bankrupt in various ways and blue collar jobs which pay well having gone the way of the dodo, then they can see how these places are struggling. More than half of the US is desperately poor, unable to endure a $500 unexpected bill and living paycheck to paycheck. The 'richest nation on the planet' is filled with almost nothing but poor people and this is somehow not obvious or not something the lites care about as it doesn't' bother them where they live in isolated rich enclaves.
The recent bruhaha about the decline of San Fransisco and LA are only catching attention or surprise from the elites because they can actually observe this as they drive into their silicon valley offices and broadcast their message through the loud channels reserved for their voices for everyone else to hear what they think, want, and fell about any given topic. Meanwhile Any rotting midwestern town fallen into ruin and drug addiction could have told you about what it is like to see so much homelessness, crime, addiction, and poverty decades ago.
Your two examples can be explained by the fact that the USA and Germany have good federal constitutions. There may be a lesson on fractal government structure lurking behind all of this. Maybe a country should have a federal structure only if it has a set of specialized cities as described by Jacobs.
Thanks - this is great! I still have somehow never read Jacob’s, despite being a huge fan of urbanism generally. I’ve seen her ideology as being most closely tied to that of Friedrich Hayek, who is usually thought of as a libertarian of sorts. I hadn’t heard as much about the rest of the economic and political work of hers that makes this even more clear than Death and Life.
I always think that cities are an underappreciated unit of analysis, and nations are an overemphasized one. I would have thought there are better ways to make unions work (and that the EU has an interesting mix of unity and laxity that avoids some of the problems she mentions).
In this view and in realty, the endless outsourcing and neoliberal pyramid scheme style capitalism has indeed impoverished and hollowed out the economies of western nations where these ideas were applied. A growing National economy with a rising gdp does nothing and tells us nothing useful about the direction a nation is going.
I’d rather be richer in a flat economy than poorer in a richer gdp. Wealth concentration is extreme and wages have been flat in a permanent recession for workers in almost all places in the USA for over 50 years. Forget gdp as your city and your job prospects crumble. Who cares of so,e billionaire gets minted from your old job which was outsourced to China. or mexico? Some rich guy got richer in New York or London, and we should what? Celebrate from our impoverished hovels as all the wealth is extracted into the stock exchange? No thanks. Any economist priest will be happy to tell me ‘it doesn’t work that way according to my religion’ but it doesn’t matter what those dog mouths of the elite say or think, people know their lives are much much worse and getting worse still as their cities crumble due to outsourcing.
Things which are objectively bad for common peope such as National disasters, wars, and financialisation where wealth is hyper concentrated into non productive Wall Street hands into soaring stock markets divorced from reality…are all in fact very very good for the gdp numbers. This false image and the ideology and cult of economists with their high priests in the central banks who issue decrees out of one side of their mouth and praise the non existent free markets out of the other side of their mouths are nothing but a self serving ideology and cult of kleptocracy and plutocracy to take from everyone and give to themselves.
The rise or fall of gdp can mean many things with a lot of them being bad things for regular people. While a cities focus is seemingly far superior, it is not fool proof either, but is a far better indicator of true prosperity for the common people. Sentiment, scale, interconnectedness, and the concept of feedback in general works better at a smaller scale. You don’t need a think tank to run polls which are framed to support their ideology to run a city, the sentiment and state of affairs is clear enough. One can only be so out of touch and blind to the streets they live on.
I’d say the failure of modern cities has to do with the extraction and the isolationist practices of the elites who run them from afar. No longer do the elites run businesses locally, go to school or university locally, or even live locally except in extremely isolated elite enclaves. Funny that…the poor in ghettoes and the rich in enclaves. When you cut off true feedback, you ruin everything.
What we have now is rampant cannibalism and the war of cities and powers. Forget National horses, nyc is at war with Detroit and it won the war. The most corrupt places such as New York wield National taxes and power to steal, and extract from other cities. Nyc is a vampire city which has consumed other cities and disrupted the virtuous prosperity loop of import replacement. Now we see cities like Detroit were taken over by stock markers, a most vile creation, and the wealth from Detroit was extracted.
Your well paid blue collar job and rich import reducing economy was stolen and turned into a long forgotten bonus or stock bump for some uncaring fsr away elite in nyc who have a great reason and academy of ideas to explain to you why you should be happy they stole from you and accept it was a ‘law of economical thst they take your prosperity and you suffer. The moment a cheaper mine to strip became an option, it was taken. Far away from the city minded elite of Ford who realised the simple idea that he wanted his own workers to be able to afford the cars produced locally.
Globalism is a worse cancer than nationalism and has destroyed the foundation of prosperity. Jacobs may not have out it in such blunt terms, but this is the simple and easy to observe truth. Prosperity is based on your local relationships. The jobs you can get around you, price of the house down the street or the cost of groceries or the crime rate in your neighbourhood are what makes life good or bad. Not the far flung idiotic data on National rental price trends which mean nothing as your city and suburban can be doing something else entirely.
So, the reason the "conurbation" became Toronto instead of Montreal is like this.
Before the war, Canada had been conceived as basically a British empire resource extraction zone. It did undergo fits and starts of independent industrial and commercial development, but Canadian elites generally preferred the resource extraction model and extensive rather than intensive growth. Economic development lagged and Canada, while it continued to experience mass immigration, actually needed the immigrants just to maintain the existing population levels given outflows to, mostly, the United States.
After the war, and especially after the Suez Crisis, it was obvious to everyone that the extractive development model was at an end. (Note that it was NOT extractive in terms of extractive institutions, except of course in our apartheid-like Indian Act ghettoes. We had a relatively clean system, but it was like that of Montana or Alaska today, only kept clean from the outside pressure.) So we had to restructure our economy, which meant a lot of stuff closed, a lot of stuff opened, and there was just a need to do big reshuffles of corporate structures anyway, including of physical corporate office spaces.
Simultaneously, Quebec was undergoing a revolutionary transformation akin in many ways to the American Black struggle that was occurring, including in the bad ways, such as inner city disorder and corresponding "English flight." Even down to Jewish businesses being driven out or boycotted as oppressors, that kind of thing. People were looking around at New York City, at Paris. The world political system as a whole just seemed very unstable. Decamping a few hundred miles up the St Lawrence Seaway to the shores of Lake Ontario just made every kind of sense in the world. Actually, the corporate headquarters that are even left in Montreal are mainly state-owned enterprises; quasi-state-owned-enterprises; there under some sort of semi-corrupt regulatory deal; etc. Something like Ubisoft Montréal, pbuh, is much more the model for development in that city going forward.
"Optimum currency area" is a modern research field, and certainly doesn't seem to think that the city is the optimal currency area.
https://en.wikipedia.org/wiki/Optimum_currency_area
As far as I know (both from reading Cities and the Wealth of Nations and from reading the review here) Jacobs never discussed the economic literature on optimal currency areas. That's probably one reason why her work hasn't received a lot of attention from mainstream economists. To convincingly argue that each major city should be it's own currency area, you have to understand the case for believing that optimal currency areas are larger than that. If Jacobs never even tried to understand the counterarguments to her position, it probably made sense for mainstream economists to ignore her.
Something about the idea of moving towards the city state seemed wrong to me and it's borders. The problem is borders. The US has several cities that are fairly equivalently nice places to live and you can fluidly move between them without worrying about immigration and work visas. That's great for wotkers. What if you're not born in LA but you want to make movies? What if you're born in LA but want to do Biotech? Mobility is great for talented people with specific passions.
Your own country can be clever about allowing the immigration you need to get access to passionate, talented people from elsewhere, but that can't guarantee your own people will be accepted elsewhere on similar terms. This is why Brexit felt like such a loss for people in the UK: they lost access to vast swaths of opportunity.
Worse, immigration is hard for democracies because so much of what makes democracies functional depends on the collective power of voters, but non-voters don't have power. As someone who dealt with marriage-based immigration in the US I can confidently say that most of the harm is not maliciousness but rather simple bureaucratic bitrot thanks to a structurally-guaranteed lack of supervision by voters. The bias towards big countries or supernational entities like the EU could come from the tendency of democracies to let immigration get annoying.
Some sophisticated global treaty on the right to immigrate could make it easier to contemplate secession: it would allow the antifragility benefits of Brexit without the heartbreak.
This states that import substitution industrialization has "approximately nothing to do with" import replacement, due to the first being a policy and the second a (possible) phenomenon, that's fine, but it does seem to me that Jacob's argument lends some credence to the policy.
If "import replacement" is indeed such an indispensable path toward growth and we can expect it to be difficult for especially undeveloped places, it would seem like interventions to encourage it would be a natural step. Not "draining away funds" and separatism seem considerably more round-about methods.
And just fyi, the evidence against import substitution industrialization isn't nearly as strong as it may seem, it likely only coincided with the debt crisis and it's not as if rejecting it for completely free trade is the undisputed path toward growth, the story is much more complicated. For an actual economist, look to: https://rodrik.typepad.com/dani_rodriks_weblog/2007/08/does-import-sub.html
Full political separatism seems like a very dramatic solution for the problem she identifies. If the problem is having a shared currency, why not just stop having one? It wouldn't be that inconvenient either, in my experience modern payment networks can handle foreign currencies at low costs and with very little friction. By contrast full political separation introduces a myriad of costs and frictions that are worth a lot to avoid. And hard as it is to imagine every city (or state, or province) issuing its own currency, it's surely much easier than to imagine every city (or state, or province) becoming fully independent.
For people who like this sort of thing, ie books that care more about intellectual rigor than reaching the “correct” conclusion, read Bertrand Russell’s _The Practice and Theory of Bolshevism_ (1920).
It’s kinda amazing how much he got right so early — and the reasons he got it right are especially important given the double-think one is expected to engage in as part of Woke.
"But Detroit exports might not go down in the first place if their currency is not being inflated by being part of a larger currency that's highly in demand, right? Like what happened to manufacturing in the UK after finance got big."
Right, that's Dutch Disease. Norway parked their oil profits in a sovereign wealth fund, which has stocks and bonds and other financial assets that are supposed to increase in value over time, and their currency stayed relatively stable and they didn't have this problem. In your proposed UK situation, the countryside and small cities have a different currency than London, and the value of the London Pound increases when their financial services become more in demand, and this is deflation ( because prices are going down). Deflation is what happened to bitcoin, and everybody goes nuts about the London Pound, saying to buy and hold. Londoners don't want to spend their LPs, because the price will probably go up, so they start to treat the LP like a financial asset, and use something else, perhaps British Pounds, as their day to day currency for transactions. Eventually the bubble pops, etc etc.
Alternatively, London could implement a massive stimulus plan while the London central bank eases quantitatively. This would counter deflation and hold the currency value steady. Entrepeneurs will borrow money in London and start businesses there, attracting employees from the countryside, and hollowing out manufacturing, which is the same result as with a unified currency.
The main point is: currencies should fluctuate as little as possible, while financial assets can vary. If you achieve stability, then the differences between currencies are mostly fictive and they're just different denominations of the same thing.
"Internal devaluation is a lot harder than an exchange rate that automatically adjusts." From psychological and political perspectives, you're right that there's a huge difference, because if your nominal wages are steady then you can pretend nothing is happening. From an economic perspective, your real wages have decreased either way.
"But might it not be better if the pain is diluted among all of Detroit rather than concentrated into one specific industry?"
... maybe? ? It's not obvious to me either way. I guess high interest rates would hit construction, and domestic car sales, and decrease entrepreneurship, and impose austerity. The effects of high interest rates are not spread evenly. Are they better or worse? I don't know. Maybe you could say that a Detroit Dollar with high interest rates would keep Detroit together but stagnant, while the US dollar with low interest rates would disperse Detroitians to areas with more opportunity. That sounds more like a tradeoff and matter of preference, rather than the Detroit Dollar being a win-win.
This reminds me of an essay by a contributor to Palladium Mag who argued that a federal government only works for nations with powerful cities (which in Jacobs terms, would be cities with regions), citing that for example New York attracts finance, Seattle attracts some high tech, and so on. The same happens in Germany, especially with Frankfurt on finance and the south with automobile industry.
Maybe nations should periodically redraw regional borders according to city regions and get separate statistics on them.
Tangentially relevant video about how the gravity-well of hyper-productive cities can hamper nationwide growth long-term
https://youtu.be/QaL-ocOtooM
People get extremely defensive about this when you want to apply it to the United States, even non-US people are convinced that the only thing preventing the outbreak of world war 3 is the metaphorical boot on the throat of the the rest of the world that the US has. I contend that it is in fact the other way around: if the US broke up then wars and military spending would decrease around the world.
Pretty much the only reason Quebec and indeed other regions on Canada like BC and Alberta stay together is because of the threat that the United States presents. If the US broke up then Quebec would be independent within a decade at the latest. Sure, maybe the US launching a hot war against Canada is unrealistic but if Canada was split up into its Provinces then it's likely that they will be slowly absorbed into the US. Some might say that this has already happened. It's a matter of degrees really, but Canada staying united slows down and limits that process.
There is an optimal size for countries, very roughly more 5 to 50 million people (but it depends a lot on local conditions, like density and natural borders). Every town having its own currency isn't optimal and I'm sceptical of every city too. There is a trade-off between the inefficiency of a sprawling bureaucratic empire and a small town that isn't able to generate sufficient specialisation of its population.
It's hard to say what the optimal size for a state should be but it's clearly neither one world government nor Pitcairn Island (pop. ~50). It's somewhere in the middle, and for my money I'd say 25 million people. Plus or minus to fit into existing geographic and demographic zones.
One thing is for absolute sure though: the existing system is very sub-optimal and it's hard not to think that everyone who supports it (which is most people) are hopelessly biased, somehow thinking that society has reached perfection even though there are new countries forming every decade.
One only needs to look at Iberia to see the absurdities. It contains four sovereign states: Spain, Portugal, Andorra, and Great Britain and Northern Ireland (Gibraltar). A large section of Spain speaks Portuguese (Galicia), somehow everyone thinks Andorra being independent is okay and perfectly viable but Catalonia is not okay. Spain protests British control of Gibraltar mightily while brazenly defending its two colony cities in Morocco.
Redrawing the world's borders into better sized, better optimised states (absorbing some, like Monaco and Djibouti, breaking up others like the US and China) is the single best thing that can be done to improve the world. It would get every sovereign state on an even footing and end (almost all) wars. And most of all it would massively increase trust levels around the world, greatly boosting efficiency (lawyers—AKA trust-substitutes—are expensive).
Interesting ideas. I have added her books on my list. I am not persuaded she is correct, however. It appears you can explain the decline of cities by IQ and how agglomeration effects appear to snowball up to a certain level.
Absent agglomeration benefits, I am skeptical the relative prosperity of today would be possible.
What a banger. Reminds me of Conrad Bastable's type of stuff, though maybe with some of the color toned down to try to be more anonymous 😅
Why would you need seperatism? Sub-national currency regions should enable feedback for the import replacement system she wants.
It’s weird she would be pro-Brexit when the UK already has its own currency separate to the EU’s Euro
Some thoughts on Jacobs generally. In terms of "urban planning" she has a real bad case of "metropolis brain".
Her work is full of ideas and thoughts on urban development that are great for Manhattan Island, and stupid for Atlanta or Denver, much less Green Bay.
It seems like this has also bled over into her reading of economics. Even my wife who is generally all in for her sort of woo, doesn't find it particularly compelling.
In particular I find her contrast between "planned areas" and "organic growth" pretty disingenuous. Almost everyone there is "organic growth" was once a "planned area". It is just not a distinction that cuts of lot of ice in reality. Most places are initially developed according to some specific plan.
And the lovely organic neighborhood you love in 2010 or 1950 was once a planned development 50-100 years before.
Additionally, the hatred of the big urban renewal "projects' she helped spearhead, sort of just completely ignores that they were a solution (and an effective one) to the issue of favellas/shantytowns which were absolutely a feature of the 1930s US.
So you have these housing projects built to solve a problem. They solve it. And then they get trashed because they didn't solve a bunch of other issues (which were serious problems, but just weren't part of the initial scope).
You mean to tell me this giant warren of apartments we built to replace the favellas and provide better more stable housing for their residents isn't as functional and healthy as a 50 year old neighborhood? Who knew!?!?!
The case for separation of Norway/Sweden seems a bit thin to me. Maybe it was a good idea for them politically or socially, but the economic case doesn't hold - at least as presented. Here's an expansion of that OurWorldInData graph, adding in Finland and Denmark to give us an idea of what else was happening regionally:
https://ourworldindata.org/grapher/gdp-per-capita-maddison-2020?tab=chart&time=1875..1975&country=NOR~DNK~SWE~FIN
Everyone experiences the same drops for the world wars. Everyone seems to rebound about the same way. (Except Finland in WWII, oddly, which was directly invaded by Russia and a major source of fighting, but whatever.) Nothing exciting happens in 1905, nothing is different for two countries that doesn't happen to the others. If you're seeing a signal in the noise on this graph, it's because you're squinting hard enough to fool yourself.
When I read the description of Jane Jacobs, erudite, no higher education, engaging writing style, I was reminded of Gershon Legman (although they differ in many other aspects). It appears they were high school classmates in Scranton.
I find this compelling, but I also find it tough to square with the clear existence of the Northeast corridor/megaregion/acela region. If nationhood is imposed from the top by military and political concerns, the Northeast Corridor's status above it's constituent cities, but below it's nation suggests that there is more to the wealth of nations than just cities.
I'm getting to this very late, and only have undergrad econ courses for expertise. But I was left pretty confused on the whole "stagflation as default" and "stagflation as mystery" thing.
What I learned (this was just undergrad!) is that the correlation between inflation and unemployment is dependent on the *cause*. This wasn't obvious in the 70s, but is pretty straightforward now, and fits with the theory.
If the demand curve shifts, inflation and unemployment are inversely correlated. This is hard to do without pictures, but if you know the econ 101 supply/demand curves, imagine the demand one moving to the right (this would represent some kind of stimulus). More people want the same amount of stuff, so producers can charge more (inflation goes up). But also they're producing more, so they hire more (unemployment goes down). And eventually they hit full employment or whatever, so they just need to raise wages, and you end up in roughly the same place for purchasing power -- the costs all went up, but the wages went up roughly in proportion. In the inverse case (the stock market crashes, people lose their savings, so demand shifts left), costs go down, but you're producing less so unemployment goes up, yada yada yada.
But if the *supply* curve shifts left (let's say, by oil shocks in the 70s), the correlation is reversed. There's less to sell, but demand is static, so prices go up (inflation). At the new equilibrium, less is sold, so you need fewer employees, so unemployment also goes up. And the labor market hits a new equilibrium where wages stay the same or go down (stagnation). Ergo, stagflation.
This is obviously the idealized econ model and obviously these things don't respond exactly this way in practice, but my point is the theory holds up, there isn't some stagflation mystery.
On top of that, stagflation means that overall purchasing power goes *down*. It can't decline forever; old society can't be in a perpetual state of stagflation. Old society is just plain old poor -- purchasing power isn't going down, it's just not very high.
What's confusing to me is like...I assume Jane Jacobs knows a lot more about this than I do? So I'm not sure if I'm misunderstanding, or if the terms meant something different than how I learned, or if the modern understanding of what causes this is last-20-years recent and this was a big mystery then that's mostly been debunked.
Contra Jacobs: She says "So Detroit doesn’t get the signal that it should buy less stuff from other cities and replace the missing imports with local production. Instead, it just declines." But that's not true, Detroit *gets less money*, and as a consequence it imports less, which is called decline. And in default, labor becomes cheaper making it profitable to transfer some production from elsewhere to Detroit.
Also, during most of history, really until Nixon took the U.S. off the gold standard, most currencies were pegged to precious metals, so the fact that different cities used different coinage was not significant. (The currencies that were unpegged usually became inflated very quicly and ceased being the basis of trade.)
I think a good example is the euro. It was widely understood at the time that the euro meant that different countries had to have the same monetary policy. And during the European debt crisis, the problem with that became manifest.
In the United States we deal with this via "fiscal transfers"; the parts of the country doing well subsidize the parts doing poorly via the federal budget. There is no official fiscal transfer mechanism in the EU. But I recall during that crisis commentators noting that the Greek government debt was small enough that it could be bailed out without problems, and that there were strangely large and growing balances between the ECB and the national central banks that *could* be interpreted as the Bundesbank financing the Greek government, despite Merkel sternly insisting that the Greeks had to pay their own way.
And the euro hasn't broken up. I suspect that in practice, the costs of differing currencies are greater than the costs of straitjacketing multiple economies into one monetary policy.
This is a great review of two great books. To this contrarian observer, however, a few counterexamples occur, possibly undermining some of Jacobs’ argument.
The reviewer brings up Germany under the Holy Roman Empire (which, as we recall, was neither holy, Roman, nor an empire). It makes a great case study. The entire region was a poor backwater for most of its history, despite being fragmented into a multitude of little states. Its rise only began after the Bismarckian unification, and what a rise it was - Germany went from being one of the poorest regions of Europe to one of the richest in under 30 years. Furthermore, wealth did not become concentrated in the capital city - instead a significant number of regional centers was created, each making large contributions to the imperial economy. Now, it is true that these cities predate the empire - they were the capitals of predecessor states - but given Jacobs’ argument as I understand it, they should have atrophied in favor of Berlin. This obviously did not happen - in fact, Berlin never even became the wealthiest city of the Reich. This structure continues to this day, and while Germany is certainly draining wealth from the rest of the EU, benefits are distributed rather widely in the country.
Germany is not the only example of a multi-city polity. The United States, for one, has several regional conurbation centers, and a capital that is not only relatively economically unimportant but is mostly a receiver of transfers from the rest of the nation. For a time, New York did threaten to become the sole economic center, but the threat was not fulfilled. For this we can perhaps thank old George and his insistence on a Southern capital, but not solely. Just as significantly, the rise first of Chicago and then Los Angeles and the Bay Area appear to fly in the face of Jacobs’ line of argument. Similarly, China, despite being a unified empire for most of the past 2000 years, posesses a number of regional urban centers, some of which, like Shenzhen, are of very recent origin. Once again, the capital is far from the richest city in the country.
Another quibble has to do with Jacobs’ thesis regarding automatic exchange-rate-based economic stabilization is that it only functions if the currencies are commodity-based. Fiat currency disrupts the relationship between surpluses, deficits, and rates because governments gain the ability and the irresistible temptation to create money out of thin air, distorting the feedback mechanism. Furthermore, resulting inflation only enriches asset owners, mostly at the expense of producers who are thereby impoverished. It is such an important factor, as It seems to me, that money-printing ought to be included among Jacobs’ transactions of decline. In point of fact, a significant plurality of empire dissolutions, barring defeat in major wars, did result from significant currency debasements.
Finally, it should be mentioned that a multitude of regions does not necessarily imply diversity of currencies. Today’s global economy is essentially a dollar zone with other currencies struggling for relevance. This, according to Jacobs, should create one-way wealth flow to the issuer, the United States, which is clearly not occurring. In fact, the opposite seems to have been the case - the USA first became wealthy in a much more multi-polar world.
All in all, Jacobs’ argument is mostly convincing but the above issues would have to be taken into account to elevate it to a coherent theory.
Re. this:
"Small size also allows more diversity in cultural and economic matters, and here Jacobs waxes philosophical, pointing out that favoring diversity over uniformity is a recent, post-Enlightenment idea that has not yet been fully embraced in politics.
"We can see analogs everywhere. Europe, split into numerous small countries from the Middle Ages onward, became far more advanced than China, which has been unified more often than not. The city-states of ancient Greece and Renaissance Italy are seen as golden ages of Western civilization, even if they weren’t part of larger political units and therefore constantly went to war with one another."
The kind of diversity that is good in these examples isn't multi-cultural, local diversity. It's basically the opposite: regional isolation, preventing the free mixing of people / tech / arts / languages from different regions. Essentially, segregation. It's an evolutionary phenomenon, displayed by the law of island biogeography, and by the rapid rate of change in dialects in mountainous regions, and in earlier times when transportation was slow. This isolation leads to faster evolution because it prevents the fittest organisms or technologies or music or whatever is evolving from taking over everywhere, which is called premature convergence, and is a huge problem in genetic algorithms. I don't have time to explain what that is; presumably you can google it.
Thank you for this extremely interesting discussion of valuable insights from Jane Jacobs, which tend to be overlooked. One of my own complaints about economic data for years now has been "USA" aggregate data, which is about as helpful as "EU" aggregate data. For example, when discussing property price booms and busts, the USA has 3 distinct types of urban area (identified by Glaeser and others) with widely differing responses to demand inputs for housing. Highly elastic housing supply in many cities, leads to a boom in construction without excessive price inflation. Unfortunately, the urban areas with inelastic housing supply and hence price volatility, are also significant. It is much too complex to discuss the range of implications here, but they are many. This would be a very good example to study, of the differences between cities that evolve their own policy directions and achieve outcomes that are beneficial to them and could be emulated by others.
Just one more point I would like to make, that you might think worth considering, is the difference between positive-sum wealth creation, and zero-sum wealth transfers / economic rent. This is an important factor in the big picture you are discussing. "CITIES" can actually be generators of "primary economic income" from actual positive-sum wealth creation like manufacturing, but the attitudes of elites considering "urban planning" tends to despise these kinds of cities, and regard rent-seeking, wealth-transfer benefitting cities like Global Finance epicenters and Capital cities as the model "because they generate wealth". The tall buildings, apartment living, subways etc are mistaken for "the way to urban success" in a kind of Cargo-cult mentality, while the "urban sprawl" of "urban" economies that actually create wealth, positive-sum, and provide a wide range of opportunities for wealth-creating small entrepreneurs to make a modest start, is despised. Ultimately, it is the latter kind of urban economy that has driven the process of wealth creation that has been spun off into the havens of the economic rent-accumulating sectors in places like New York and London. These latter successes owe a lot to an increased share of wealth in the overall economy, having been captured by banking and finance, for example; or by an ever-bloating administrative State - none of which is good for the common interest.
Germany is an interesting exception in that it has a "system of cities" none of which is the dominant economic rent-seeker from the rest.