I'm currently behind on reviews, so don't be surprised if the recent reviews are a bit sparse.

The Economy of Cities

Cover of The Economy of Cities.

This classic (pub. 1969) on city development was extremely accessible to read, particularly considering the ugh field that surrounds economics for me. Jacobs’ main premise is that cities don’t arise as a consequence of agricultural settlements – cities are there first, and develop their hinterland to support themselves.

One central thesis is that cities are the main driver of progress – including and especially agricultural progress. Improvements in agriculture as well as improvements in rural life typically come from the city. Food production is more efficient in urbanised societies, and the most agricultural societies also have the poorest agriculture. This also extends to the keeping of old knowledge – anything that is not in active use in agricultural rural areas tends to be forgotten, unless cities retain the knowledge.

For example, after the Roman reign over Europe ended, diet reverted from bread to gruel and porridge. We see malnourishment in peasants around the year 1000, before cities were making a comeback. When medieval cities sprung up, they started agricultural practices like the three-field-system, which only slowly penetrated to more remote areas.

Industries that we see as rural, like weaving and all adjacent jobs, started out as city industries at first, and were relegated to the countryside when space became an issue.

Her theory of really ancient city beginnings goes like this: They start out as a trading point for a nearby (but not central!) resource, like precious stones. People start living at the trading point, and live from trade yields and supports of their clans. They are the ones who can regularly plant and cross plants (especially with trade good imports) – inner-city fields were a common practice in cities until medieval times. They are also the ones who can breed and domesticate (traded) animals. All this can be seen in the ruins of Γ‡atalhΓΆyΓΌk. Cities don’t grow by trading with their hinterland, that’s only support (“rural production is literally the creation of city consumption”) – they grow by trading with other cities, and by innovating based on that trade.

Innovation is a corner stone in Jacobs’ theory. Innovation, she explains, is driven by skills or materials already in use, or by problems encountered while using those skills or material (or an overlap, of course). For example, unfired clay baskets were probably used to carry fire, which introduced fired clay baskets, naturally emerging from the material in use. Whereas the brassiere (one of her favourite examples) emerged from a particular problem in the dressmaking industry – notably not the undergarments industry. Innovations often don’t come from the industry they belong to, because there they’d have to go through more resistance, while cross-industry adaptation is creative and fruitful. Wine presses being used for Gutenberg’s first book press are another example of this mechanism.

This also explains one possible source of stagnation: When cross-industry innovation is prohibited, as by the rigid medieval guild system, you stifle any creative growth that naturally arises when incurably creative humans use tools and encounter problems. Similarly, large organisations are less given to innovation (and, indeed, tend to acquire smaller organisations to make up for it!) due to the same inertia.

Another source of stagnation, though not in her words, is a lack of slack. When innovation mostly arises from humans at work creatively using their tools and solving their problems, this can only happen when those humans have slack and agency. So bad economic conditions can lead to a stop of innovation, because you’re not going to event the next hot tech when you avoid starvation. Similarly, the Roman empire didn’t do a lot of inventoring, and being a rigid society on the back of an enslaved population will have had something to do with it.

Related to that is her observation that division of labour (which in its extremes, often comes with an oppressive lack of slack and freedom), in itself, creates no innovation at all. It may make it easier to iterate on a small problem when that problem is your speciality, but generally, increasingly fine divisions of labour do not advance innovation, nor do they even typically advance efficiency beyond some upper boundary. Jacobs has a fairly dim view of efficiency – cities are notoriously inefficient, and this inefficiency seems critical to innovation. When a city locks in on one industry, it is likely to become stagnant and sooner or later it will decline, since it can’t react to the changing world. Industrialisation-era Manchester is a favourite example, as are the ancient cities of Harappa and Mohenjo-daro that were extremely efficient at producing clay cups – until they died of stagnation (though I looked up her primary source and it sounded much less clear than she suggests).

In a fairly neo-liberal-adjacent fashion, she insists that once a problem is introduced to an economy (no matter how), only adding new goods or services can fix it. Thus, many problems attributed to progress (because they are caused by new elements) are really problems of stagnation (because no new solutions arise).

I paged through some later parts of the book that expanded on the economic theories of growth and the necessary interplay between imports and exports – too close to my ugh field, not enough interest. Similarly, I mostly skipped past her views on poverty and prosperity and how they are related to population growth (not) and to innovation.

One of the most interesting asides, to me, was the thought that the city is fundamentally different from the small town, due to its position with regards to trade, innovation and change – so that even given two places with the same amount of inhabitants, one can be clearly seen as a small town, and the other as a city on the rise (though not for long of the same size – city growth tends to be explosive).

Finally, here’s a nice list of object-level examples that I enjoyed:

  • Denmark and Copenhagen were poor and stagnant into the early 19th century. London’s explosive growth created a market for Danish produce, which resulted in significant growth and development in Copenhagen.
  • Venice is the prototypical example of a trade city, and particularly seized on the markets for raw materials in the North and West of Europe.
  • Rome, in its very beginning, traded in cattle and cattle hides. The Latin word for money, pecunia, is derived from pecus, cattle.

Oh, and seeing as the book is from 1969, her prediction “Manufacturing work will, I think, no longer be the chief activity around which other economic activities are organized, as it is today and as the work of merchants once was. Instead, services will become the predominant organizational work, the instigators of other economic activities, including manufacturing.” was spot on.