The Nature of Economies [Paperback]

Jane Jacobs is a distinguished author but she has let down her readers with this book. The book means to explain how economies work. One major analogy is used, the analogy with a biomass. Jacobs says the biomass in an area gets larger by recycling the energy it gets from the sun. For example, if trees grow and then burn, the biomass in that area is small. But if bugs eat the trees and birds eat the bugs and monkeys eat the birds' eggs and so on, the biomass is large. She says that an economy's imports are analogous to energy, and an economy is more successful the more it recycles its imports. She calls this "import-stretching", which is an example of her often deft use of words. For example, if an economy imports drilling rigs and exports crude oil, it will be smaller than if it imports drilling rigs and processes the crude oil at home to make plastic and uses the plastic to make toys and then exports the toys. She says "... such an economy can be accounted for quantitatively as a result of dilatory and digressive uses of imports that have entered the conduit - exactly as biomass expansion in the forest can be accounted for as a result of dilatory and digressive uses of energy from the sun that has entered the conduit." (This is not an example of her usually deft usage, but it is the key point.)
Two minor points: First, the presentation is in the form of a conversation and this form becomes very irritating. Second, the parallel between economic activity (a flow) and biomass (a stockpile) is awkward.
Four major points: First, Jacobs says nothing at all about the standard of living in an economy. "Import-stretching" may create jobs, but we want jobs that pay well and support a good standard of living.
Second, while she is in general keenly aware of the complexity of causation in both nature and human society, she offers us this single-cause explanation of economic growth. "Import-stretching" can indeed be one source of growth, but growth is surely one of the most multi-caused processes in economics.
Third, this "import-stretching", as presented, turns out not to be an explanation but only a description of growth. Most of the discussion merely describes the appearance of an economy that has more diversity without explanation of why this might or might not happen.
Fourth, the brief bits of discussion of what individuals or companies or governments can do to encourage growth, while they make sense, do not depend on the concept of import-stretching. Her brief suggestions about what causes growth and how to encourage it arise from her optimistic view that people "come by creativity naturally", and therefore, given the chance, will act in ways that bring about economic growth, usually more successfully if governments keep out of it except to prevent monopoly. We didn't need the biomass, etc., for this.

A number of the other reviews critiscise the conversational form of this book. And one reviewer (who is clearly an investment analyst) critiscises one tiny sentence which makes a rather erroneous analogy between corporate and national behaviour.

But the central theme of the book, that economies must be defined by natural principles since they are the product of human beings, themselves merely a succesful product of nature, is crucial. Its enlightening and must be debated and fleshed out. It gets beyond the "hack" economics that suggests economies need to make exports in order to earn their keep. Instead, Jacobs says that exports are the output of economic systems, not the inputs. The real inputs are basic resources - e.g. weather, location, human skills & the depth and breadth of the existing economic system.

As an amateur economist I find the argument to be a strong one. Serious critiscisms of this book should be based on critiscisms of the central argument and its substantiveness, rather than of the formn of the book. I'd enjoy seeing such critiscism from professional economists.

Although I have the deepest admiration for Jane Jacobs, a national treasure (of two countries!) and the author of an all-time classic book -- "The Death and Life of Great American Cities" -- I have to say that I found "The Nature of Economies" to be a real mixed bag...actually kind of a letdown.

First, I have to agree with other reviewers who found the "dialogue" in this book to be almost laughably bad. I mean, obviously no human being would possibly speak this way ("in sum," "to repeat," "to be sure") with friends -- or anyone else, I would hope! Second, the whole Socratic dialogue, pedantic monologue format here can get very tiresome at times. In fact, it's so bad that even its own characters keep nodding off! Third, most of these ideas, although interesting, are nothing original (as Jacobs' extensive endnotes prove), although obviously Jacobs has done a great deal of reading, and has synthesized or at least summarized other peoples' ideas fairly well, and that is nothing to sneeze at. Fourth, and more problematic in my opinion, is the high degree of abstraction, and apparent lack of practical utility, with much of Jacobs' ideas. I mean, it's fascinating and all that human economies are part of nature, but what are the real-life policy implications here? OK, so central planning is bad, but does that mean that Jacobs is in favor of an extreme laissez-faire capitalist approach by government? (I doubt it) Is Jacobs so optimistic to believe that if we just let things run their natural course, that everything will just all work out for the best? If she does believe this, is it naiveté or brilliance? Or is this just a bunch of Panglossian nonsense? After reading this book, I have to say that in many ways I have no idea exactly WHAT Jacobs is getting at here. Worst of all, "The Nature of Economies" begs the most important question, namely, WHAT ARE ECONOMIES FOR (Jacobs' unsatisfying answer - economies are for everything and everybody...huh?!?)?

Having said all of this, I still think the book is worth reading, mainly because it is filled with interesting, thought-provoking ideas - whoever came up with them - two of the biggest ones being that humans (and their economies) are part of nature, and that the more they "biomimic" (imitate nature) the better off we will all be. Of course, the counterargument to mimicking nature is that nature isn't just a bed of roses, so to speak! As the curmudgeon character Armbruster puts it, all this happy talk of "cooperation, symbiosis, interdependence" seems to ignore the fact that nature is very much "red in tooth and claw." Instead, it ends up sounding "like a barn raising," not the nasty survival of the fittest ("and the devil take the hindmost" in Armbrusters' words) that is part and parcel of nature, as much as we try to romanticize or ignore it. I DO very much like Jacob's emphasis on the benefits of a complex web of interrelationships, and also on the importance of working ALONG with natural principles, not against them. In general, Jacobs' view that life at its best is a hustling beehive (or tropical rainforest) of activity and diversity, as in the crooked streets and serendipitous mixings of a thriving city, is strong and positive. I also agree with her that non-serendipitous, sterile suburbia, with its de facto separation of different kinds of people - rich/ poor, white/black/hispanic, gay/straight, etc. (see the 2000 US Census for proof of this), its often de jure separation of commercial (and cultural) activities from residential areas, and its monocultures of identical houses in subdivisions surround by wide, fast, straight roads (which serve to reduce pedestrian traffic, force utter dependence on automobiles, and prevent healthy development of community), is not good at all, and simply maintained by massive government subsidies (of roads, gasoline, utilities, etc.).

So, the bottom line is that - even in her 80s -- Jane Jacobs still has a lot to say and contribute, even though she said it far better 40 years ago. So, sure, read "The Nature of Economies," but even better, go back and read (or reread) the Jacobs' classic work - "The Death and Life of Great American Cities!"