Thursday, July 5, 2012

Econ 101 (According to Jane Jacobs)

Jeff Riggenbach called Jane Jacobs the "ultimate libertarian outsider" while Thomas Schmidt, writing for, called Jacobs, Ludwig von Mises' Leibniz.

As Schmidt summarizes, 

Where Mises' theory begins with the axiomatic "Man acts," (just try and disprove that without acting!) and elaborates a whole coherent approach to economics from it, Jacobs seems to say "Cities live," and builds theory upon those observations. Her corpus of seven books shows few if any "Austrian" sources in her bibliographies, and yet the conclusions she draws often seem merely a different way of stating the same descriptions as Mises.

In The Economy of Cities, American-born Canadian Jane Jacobs presents her case for how cities originate, grow, stagnate and decline. Cities, claims Jacobs, are the centre of economic activity - not national economies. All economic growth is a result of spontaneous order in cities. The city, according to Jacobs, is the basis of civilization.

For the sake of brevity, I won't outline Jacob's entire argument in The Economy of Cities; instead suggesting that readers, particularly Austro-libertarians, go out and find Jacob's work for a first-hand appreciation of her insights. I highly recommend the first chapter. This post summarizes Jacob's explanation of how cities grow and decline

A city exports goods. A city grows because local suppliers of goods to the original exports become exporters themselves. For example, a city may export steel. Local entrepreneurs may aid steal production with one of their inventions. This invention may be exported and make money despite how well the city's steel industry is doing. Whereas the city was once dependent on its original export, specialization arising from the export industry has earned the city imports no longer dependent on the original export. This process repeats itself as entrepreneurs build upon the new export industries.

As a city increases its imports, entrepreneurs can replace these imports, which may become exports themselves. Jacobs uses the bicycle industry in Japan as a good example. The city still earns as many imports as it would have, but after this replacement process, a city can import different goods in place of those now locally produced.

A city begins to decline when its exports decline. Or, as in the case of most Canadian cities, if entrepreneurs fail to "add new work" to existing work, stagnation develops. Although Jane doesn't directly cite Canadian cities in her book, most Canadian manufacturing industries fall under this principle. While the government promotes "branch plant" development (as a result of Canada's high tariffs), local entrepreneurs can't serve their purpose of adding new work to existing work, thereby creating goods that can be exported independent of the original export.

Although Jane Jacobs criticized libertarianism as too "individualistic", as Riggenbach put it,

By her own account, Jane Jacobs was not a libertarian. By his own account, Ludwig von Mises was not an anarchist. Yet, as Murray Rothbard and others have argued, the logic of Mises's work leads the reader inexorably to conclude that there is no legitimate place for coercive government — the state — in a society of private property and free exchange.
Similarly, the basic logic of Jane Jacobs's work must lead an attentive reader inexorably to a libertarian view of human social relations. Jane Jacobs never realized that a libertarian was exactly what she was, however reluctant or half-hearted her commitment to it may have seemed to her. She was perhaps the ultimate libertarian outsider.

She was also a Canadian citizen. For those who still subscribe to the civic religion, having a Canadian author whose insights support the Austrian School without actually being an Austrian.... it helps.

No comments:

Post a Comment