It's the cities, stupid – Jane Jacobs' macroeconomics (2005) | Hacker News Reader

It's the cities, stupid – Jane Jacobs' macroeconomics (2005)

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95 pointsjedharris26 comments

Jacobs was one of my University discoveries, in the late 1980s. Her views on urban currencies led me to suspe t that the Euro wouldn't succeed. Her and Margaret Thatcher's critiques are disconcertingly similar.

There are modern academics who've continued in a similar vein including a chap from, if I recall, Harvard, who has a great lecture given in New Zealand on urban vitality and innovation. Edward Glaeser: http://fixyt.com/watch?v=r3Mvz-Mg2_A

https://plus.google.com/104092656004159577193/posts/3uGHCweF...

And sadly, Jacobs is no longer with us, she passed a few years ago. But her books and thinking remain powerfully vibrant and original.

> The Shah thought he was buying development, making Iran into an advanced nation. But all he was buying was a factory, though an immense one. What he needed in order to actually be developed was what he couldn't buy: the web of thousands of companies that together enabled to US to build that factory.

This brings to mind the economic development of southern Korea under the Syngman Rhee and Park Chung-hee dictatorships. Rather than buying just a factory with their available capital they used it to fund the expansion of what are known as chaebols, Korean firms involved in a wide range of enterprises. You'll have heard of Samsung, Hyundai, LG, Daewoo, to name a few. Those are examples of chaebols. To be clear, that system can have problems, but it is an amazing contrast to courting transplants [0] or buying factories.

[0] http://www.rgj.com/story/news/2014/09/04/nevada-strikes-bill...

The missing process-- the engine Jacobs finds for all economic life-- is import replacement.

What does it mean for the US, when we can't keep up with our demand to import qualified employees?

EDIT: "A city region is used to change, is constantly innovating; a supply region is not. It treats its resources as God's gift, a presumably eternal windfall; it prepares only half-heartedly for the end of the boom, and when it comes it's caught short."

Substitute "city region" and "supply region" for something and "worker" and maybe we have something that relates to another article about how workers rent their resources for pay. (Which I can't find right now.) In other words, is being a conventional worker like being a "supply region?"

Perhaps people are the opposite of cities? When people start to prosper, they seem to be outsourcing tasks.

> What does it mean for the US, when we can't keep up with our demand to import qualified employees?

Fix our educational system and train our own citizens? Seems pretty straightforward.

Yes. People are generally so focused on lowering their taxes that they forget what they pay for.

A simplified tax code, where it's still progressive, i.e. tiered, but no deductions would get rid of the feeling that we're paying more than our fair share because there would be fewer ways for people to game the system. It would also potentially recuperate the waste on the tax preparation economy.

And for people who don't think taxes/money is the solution to the education issues in the US, look at the difference between California's performance before prop 13 and after prop 13 passed. Prop 13 capped the amount that taxes could be raised on property for both individuals AND corporations, strangling the educational systems main revenue stream.

Here's Milton Friedman explaining why the first is politically unfeasible: https://www.youtube.com/watch?v=TruCIPy79w8

>"People are generally so focused on lowering their taxes that they forget what they pay for."

I disagree quite a bit on taxation. But, what I will say is that by making taxes a mandatory (and often-argued about thing), we have put ourselves in a position where people will probably never come to see that with no "money", nothing that they want will get done/bought.

And allow more immigration, and streamline the immigration process to reduce costs for employers.

Because citizens are more important than employers.

> What does it mean for the US, when we can't keep up with our demand to import qualified employees?

Is that really what's happening? If so, why are wages stagnant? The "importing" is not because of a true lack, but because it's a way to seek a lower price-point than they could get domestically. (If not in H1-B land, then at least in agriculture.)

Also, "demand to import" seems a little weird. It's like saying "the demand to recycle aluminum". What's actually demanded is aluminum as a good. Recycling simply happens to be one possible way that it can be supplied.

"The "importing" is not because of a true lack, but because it's a way to seek a lower price-point than they could get domestically."

Isn't this what a lack is? There are very few situations in which a needed thing doesn't exist at all.

I think "we need a X gallons of oil to run the factory" is a demand in the supply-vs-demand sense.

In contrast, "our profit is low because oil is expensive, let's lobby the government to build a new oil pipeline" is somehow different.

I live in a region whose wealth largely derives from oil. Everyone's answer to the low price of oil is to double down on oil (despite the fact we're one of the highest cost producers in the world, and most firms are losing money on every barrel at these prices). It would be comical if we weren't in the worst local recession in 30 years...

> What does it mean for the US, when we can't keep up with our demand to import qualified employees?

Import replacement would be finding ways to supply the same needs using domestic employees.

Also, the whole point of the analysis is that nations like the US are the wrong units to look at. It's not a question of whether the US can keep up with the demand for various kinds of workers; it's whether individual cities or city regions can. The Bay area, for example, seems to have no problem making use of qualified employees from anywhere in the world.

> is being a conventional worker like being a "supply region?"

Not necessarily. I think the key question would be, does the worker do anything to develop their "resources" (their skills and knowledge) so they can respond to changes in supply and demand by changing what they do or how they do it? Or do they just expect to keep being paid for doing the same thing forever, even if it is no longer economically viable?

> Or do they just expect to keep being paid for doing the same thing forever, even if it is no longer economically viable?

I agree with your point that it is incumbent upon every individual to continually improve themselves. However, I like point out whenever this sentiment is brought up (including by myself) that while individuals must continuously improve, it does not necessarily follow that organizations will improve. Even if those very organizations are crammed with lots of those continuously-improving individuals. Especially large, monopolistic or duopolistic organizations with a lot of staying power over long periods of time.

>What does it mean for the US, when we can't keep up with our demand to import qualified employees?

It means you're missing the root reason why people want to import qualified employees: Because they're more exploitable. If they (the employee) is dependent on their employer to not be deported, then they don't have the employment mobility to negotiate a better salary with.

More recent research on networks of producers (for example Birmingham, northern Italian textile firms, and silicon valley) supports her analysis in many respects.

The San Francisco Bay Area is a huge economic engine, however, there is a severe housing shortage which could potentially disrupt this.

What would Jane Jacobs recommend in this situation?

She would likely correctly identify restrictive zoning as the culprit, and recommend its elimination.

Unclear.

Jane Jacobs has a section in her seminal book on American cities about "gradual" and "cataclysmic" money, which can wipe out a delicate neighborhood ecosystem.

>Cities can stab themselves in the back, too:

>They can restrict enterprise. The haves like to keep the have-nots out of business, apparently under the belief that prosperity is a zero-sum game; the result is at best lost opportunities for growth, and at worst stagnation and decline.

I think this describes the SF housing market pretty well.

The way I understood it: transaction costs matter much more than most people think they do.

City is efficient because transaction costs (transport and communication distance for workers and suppliers) are low. However, that's a function of technology. The cost of communication is getting more and more independent of distance; with full vr, it's going to be zero. Price of transport as function of distance would get to zero with teleportation technology.

Unless I missed something, it seems weird that several books were written on such a simple observation.

An excellent summary of her best work, which is unfortunately not very well known. It is great to have the whole of her argument in one short post.

Anybody who has played Civilization understands this intuitively.

So where did she stand on IP and copyright?

This was an awesome article. Great post

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