City Of Wealth And Nations

Cities and Wealth of Nations:

Principles of Economic Life

By: Jane Jacobs

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The key to understanding the behaviors of economics is being able to observe past and present activities and give a logical explanation of why the outcomes are what they are. In a sense, all people are economists when they decide where to send their kids to school, how they plan their financial future, where they plan to work. It's all about using what you have seen, analyzing it, and attempting to position yourself in the best spot possible. A true professional economic advisor is someone puts more time into analyzing what has happened and then advising groups of people, as in countries or cities or businesses, to the best position possible to take advantage of future happenings. These are the advisors that Jane Jacobs seems to mistrust the most in her book Cities and Wealth of Nations: Principles of Economic Life. Jacobs doesn't dislike past economists that have advised countries, she merely states that they are making decisions off of the wrong observations in activities of nations. Jacobs believes the place we should be observing is cities, a smaller model in which correct analysis can be taken. Jacobs does a meticulous job presenting her point, providing examples of actual cities and their actions in attempting to develop or maintain their economic situation. In this paper we will analyze the basic points Jacobs illustrates, by posing questions and attempting to answer them. By the end of this report we will understand the main aspects of understanding national economics by examining city economics.

The first chapter in the book is called Fools Paradise. Basically, Jacobs points out with many examples of times when wrong calls were made in maintaining, rebuilding, and creating a strong economy. And in Jacobs's bombardment of info, her point comes through. Something is missing. Why is it that policies singled out as the key to success in successful economies has also been cause for failures in others (6). To explain this contradiction, economists will fall on the default excuse of cultural causes (6). There is obviously something at work here that is not being accounted for. It's much like when scientists wanted to understand electricity, they had to eventually break it down to electrons and protons, the smallest part, yet it controlled the outcomes of electricity. The same with nations, they are the grand scale that we see outcomes, but there is a smaller part at work that must be understood to fuller predict and nurture our economy to health while keeping it in control. Cities are the little electrons and protons of this world that must be understood to foster a prosperous economy.

According to Jacobs', economic life develops by grace of innovating; it expands by grace of import-replacing (39). These are the two main aspects of creating and maintaining a strong economic atmosphere in a city. Innovation is simply improving efficiency of production (40). There is always a better way to produce and distribute goods, and money follows the best way to do this. So in order for cities, or a birthing settlement, to flourish, it must stop unbalanced imports into their area. What happens when cities merely buy everything is that they are giving up the very thing they have to prosper. Their capital is sent away from their area to the producers and labor is left unused. In this, you have the beginning stages of economic decline. So in order to keep money "in town," the settlement must bring the production to them, but in order for it to work there must be an improvement in the production, usually improvements in cheaper production costs.

This concept sounds correct, and the question arises, should all areas produce their own goods, and if not, what is correct amount of imports, exports, and self produced goods. Obviously, we all know the benefits of trade and being able to match our weaknesses with others strengths and our strengths with others weaknesses. Another question arises, is it truly possible for all cities to be at the top of the economic pinnacle. For every area to be wealthy, or does this model only tell us how to shift wealth around. Is this an attempt to bring all cities, countries, nations, all to the same level of prosperity? If this is true, one must be lead to the assumption that if all are to have the same amount of wealth, and all of it eventually spread evenly over the whole earth, then the outcome will be Jacob's worst fear described in Chapter 9.

In chapter 9, we find the reason for the book and also Jacobs' worst fear, the possibility of a global decline ending up in complete poverty and all people losing the vision and hope of a prosperous economy (134). If the world's wealth is spread evenly, we fall right in line with communism and one government control. So with that generalization being said, the model set up by Jacobs' in essence is how to keep wealth where you want it to be kept, and also the way to shift wealth, not spread it. With the state the U.S. is in now, one must consider how much we are importing and is it to much. The lesson learned from this book is how we maintain the great nation we are in and if wealth must be shifted, make sure it shifts inside our borders.

In Chapter 4, Jacobs writes of Uruguay and comes close to answering one of questions of how much should be exported. In the early 1950s, Uruguay was a very prosperous place with much of their success to be attributed to exports (61). Then it happened, Uruguay became dependent

on this market and sure enough, their biggest markets, which included Australia, France, and other long distance markets, began producing and supplying themselves, leaving Uruguay stranded. They had become sole exporters, and when it was gone, their economy went down. A wealth shift had occurred. So what should have happened to protect Uruguay and solidify their wealth? This is not explained by Jacobs, but an assumed answer is found in Chapter 10, when she explains why backward cities need each other. Uruguay obviously became dependent upon long distant markets and yet forsook their local markets which prove themselves as a steady foundation for growth. They basically grew too fast trying to skip the basic truths of building a lasting, prosperous economy. Venice proves to be a better example in showing how a strong foundation is built (141). Venice did well in developing a healthy economic system, with their assets being utilized. These consists of natural resources to sell, solvent distant cities to buy them, and earning city made imports from highly advanced

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