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In this book Jane Jacobs claims that cities are the basic unit of productive economic activity. Only in cities and city regions do we see sustainable economic growth. The way this works is that cities produce products which they export, which allows them to import other products. The important thing is that they must then replace these imports with products they make themselves, in the process innovating and improving their own means of production. As they replace imports with their own production, they export these new products, which generates revenue which they use to import new and different things from other places, which serves as fodder for further import replacing.

Thus these import replacing cities are constantly changing/improving what they do to keep up with other cities which are doing the same thing. Because they have to be very versatile to keep replacing the imports that other cities are exporting to them, they provide a lot of diverse opportunities to their residents.

This is in contrast to other types of regions, such as supply regions, which provide cities with basically one product in large quantities (anything from silk to salt). Transplant regions receive a big transplanted factory from a city, but do not have the versatility of a city. When the factory dies, the region goes back to being the way it was. Subsistence regions are regions in which the people are living by subsistence farming, and is basically the base state.

(Question: Jacobs claims that in order for a city to develop into an import replacing city, it has to have some contact with another more advanced city. The basic process depends more on trade with other less advanced cities (because those imports can be more easily replaced, being at the same level), but to start it all off, there must be trade with an advanced city to provide the first imports. This is fine if one assumes that history has been going on for an infinite amount of time, but if one doesn't assume this, then how did it all start? This question makes her nightmare of all the cities declining at the same time and the whole world falling into subsistence forever a little less compelling.)

As long as the import replacing cities keep innovating and replacing imports, they keep growing. If they stop innovating, they start declining. If they put too many of their resources into things other than the "city work" of replacing imports, such as military, subsidies, or investing elsewhere, they start declining.

One theme of the book is that with cities as the basic economic unit, national currencies are a problem. If there was a currency for each city, then when the city was doing poorly economically, the currency would be worth less, which would cause other people to want to buy the city's cheap goods, which would help them recover. To some extent, national currencies do this, but since all the cities in a nation won't be behaving in exactly the same way, the feedback provided by a national currency is deceptive and unhelpful, and basically it keeps the rich cities rich and the poor areas poor, with the added disadvantage that if a rich city falters, it's likely to decline because it doesn't get the right feedback to allow it to recover.

(This book was written in 1984. One wonders what the author would think about the Euro. Actually, as I read the book I was wondering what the author would think about a lot of things. The end of the Soviet Union, the internet boom and bust, and so on. I can guess, but not being an economist nor knowing all that much about the subject, it's not a very satisfying guess.)

National governments try to correct this unstable situation by subsidies from wealthy cities to poor regions, military spending, and investing city money outside of cities. This causes the cities to decline, as so many of their resources are being taken outside of the intercity trade import replacing process which allows them to remain healthy.

The (purely theoretical) solution the author sees to this problem is that when two parts of a country are pulling in different directions, the country should split up into two countries. That way they could have separate currencies, they could impose tariffs if necessary, etc. They wouldn't have to be pulled in two different directions. This is, of course, only theoretical because no one would ever do it. People are much too attached to their countries.

(Question: Why can't one have city currencies, internal tariffs, whatever, and a national government? I suppose economics might be too intertwined with everything else...what responsibilities would you assign to the national government if everything economic must be handled at a lower level? Taxation is problematic in such a situation, and without revenue, what could the government do?)

Which leaves us with our inevitably declining cities. Not a cheerful book.

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Aryllian

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