Paul's Reviews > Cities and the Wealth of Nations

Cities and the Wealth of Nations by Jane Jacobs
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's review
Sep 11, 2011

it was amazing
bookshelves: landmark-books, economics
I own a copy

The first I heard of Jane Jacobs was in 1986, while I was working as a user test analyst at the Insurance Corporation of B.C. I had coffee one day with a coworker who, it turned out, had a degree in economics. We got talking about economic issues and he mentioned Jane Jacobs.

"She's really good," he said. "Cities and the Wealth of Nations. You should read that."

I picked up a copy of the Vintage paperback, read it, and loved it. I admired everything about it: the simple, practical, and persuasive way she developed her points; her lack of attachment to any theoretical school or point of view; her fearlessness in junking whole continents of sacred-cow economic theory; her passionate interest in the subject she was writing about, in this case, the economies of cities and how these are the real agents behind the purely artificial construct we call national economies; her admiration for human ingenuity; her brevity; and her exemplary writing style. She was and is everything I think a writer of nonfiction should be.

In chapter 1, "Fool's Paradise", 25 pages long, she demolishes all of economic theory, at least in its efforts to explain the twin phenomena of inflation and unemployment. In simple, insightful, nonrancorous prose she demonstrates the embarrassing failure of the most revered economists—from Adam Smith to Karl Marx to John Maynard Keynes to Milton Friedman—to account for these unwanted conditions, especially when, as in the 1970s, they happen simultaneously (I remember terms like "stagflation" and "slumpcession" being coined during the Ford administration to describe the economic malaise gripping the U.S. at that time).

Having demolished the previous explanations for inflation and unemployment, she goes on to propose her own. The pith of it is that, first, there is no such thing as a "national economy". The U.S. economy, for example, is actually an agglomeration of many different economies, and different parts of the country are in vastly different economic condition, and earn their living in vastly different ways. The real, organic generator of human wealth is the city, and vital cities undergo bursts of wealth-generation through one basic process: the replacement of imports. This means that a city—not a country—stops importing certain goods and services, and replaces these with things that are made (or done) locally. Money or goods that formerly left the city to buy imports now stays within it, creating jobs, buildings, and new businesses—wealth.

Classical economic theory, which holds that inflation and unemployment are reciprocal, that if one is high the other must be low, is wrong. Jacobs holds that the two of them have always in fact appeared together, and that they are symptoms of economic decline. She gives the example of Ethiopia as a country that, in the centuries before Christ, had been a vital, wealthy empire, but now is a poor. Aside from subsistence agriculture, there is very little work there (high unemployment), and even though prices for most things are very low by our standards, they have slipped out of reach of most of the population (high inflation).

I became a kind of Jacobsian. I read all of her other books—each one is excellent. If you start by reading the first, The Death and Life of Great American Cities, you can follow the progress of her thinking from book to book: how her interests gradually spread from the question of how and why slums appeared in American cities to, finally, how the world economy functions with respect to the environment.

She was an example of a brilliant and nonacademic thinker. She held no teaching post and had no university degree. To me, fussy, picky, and critical as I am, she is one of the very few writers whose work, in its entirety, I truly admire.
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