Eyes on the Street: The Life of Jane Jacobs (54 page)

Or, again referring to Uruguay and its superficially prosperous economy: “
The difference between a rich backward economy and a poor backward economy is not all that great.”

Like all of her books,
Cities and the Wealth of Nations
was thickly stocked with ideas, insights, anecdotes, and argument— and also with a flavor of science. “I am going to argue,” Jane wrote in a long chapter called “
Faulty Feedback to Cities,” that national currencies “give faulty and destructive feedback to city economies and that this in turn leads to profound structural economic flaws.” Feedback: You’re keeping to the 60 mph speed limit, you look to the speedometer, which tells you you’re
doing 65, so you take your foot off the gas; the speedometer supplies feedback that lets you correct the error of your ways. Likewise the thermostat in your air-conditioning or heating system, which senses the actual temperature, compares it to the desired and turns the system on or off to make things right. Similarly, Jane pointed out now, economies. The rise and fall of a nation’s currency in international markets supplies essential feedback, the information that helps “correct” or reset the economy: the dollar weakens, American goods are cheaper in world markets, spurring production here at home.

In principle, very pretty.
But
, said Jane, much too coarse. A nation is an “economic grab bag,” with different parts of its economy—Illinois farms and big-city Chicago—needing precisely tailored feedback corrections of their own. But, since all are tied to the same national currency, swinging back and forth in response to broad geopolitical and economic forces, they don’t get the fine-tuned signals they need to slow down or speed up. They get feedback not useful and pertinent but “faulty.”

“Jane Jacobs has
done a great service with her new book,” wrote Bernard Levin in an
Economist
review. “She has slain many dangerous myths, exposed many ruinous follies, demonstrated beyond argument that many eagerly-embraced remedies for our economic difficulties are certain to make those difficulties worse.” For Richard J. Barnet, in
The New York Times
, the book was a “
learned, iconoclastic and exciting study of the causes of economic stagnation and decline [that challenges]…ideas, schemes and pieties all across the political spectrum.” One economist objected to Jane’s take on stagflation, saying it
wasn’t high prices that typified it but
rising
prices, which was not the same thing. Generally, though, the book was lauded. In 1984, as we’ve noted, it received the Los Angeles Times Book Prize. At the 1987 Boston College conference on Jane’s work, it was studied respectfully along with her two previous books. So long in the making,
Cities and the Wealth of Nations
largely lived up to its promise, passing into the Jane Jacobs canon.

—

But in the mind’s eye of almost everyone, Jane remained an urban visionary; she was still, primarily, the author of
Death and Life
—no matter that her last two books were about economics. Writing to a friend, Roberta Brandes Gratz, soon after publication, Jane reported that her book was
“hated” by economists; “ignored” might be the better word. But that was in 1984. And in 1988 things began to change.

It seems that professional economists, in their own ways and using their own methods, had come to take an interest in problems broadly similar to those so interesting to Jane: Why were some places more prosperous than others? Why were some able to break out from their subsistence past and grow wealthy while others remained economically backward?

Malthus had grimly seen population growth, with its swelling tide of hungry bellies, always outpacing economic growth; to Malthus we owe economics’ epithet as “the dismal science.” Adam Smith, more optimistic, found clues in his pin factory for how economic wealth emerged from the factory floor. Karl Marx fretted less about the production of wealth than its distribution, gross inequities between worker and capitalist leading unavoidably to crisis. Among more recent economists, economic growth, as a distinct subject, had begun to work its way into their thinking. And as David Warsh writes in his captivating intellectual adventure story,
Knowledge and the Wealth of Nations: A Story of Economic Discovery
, they were talking about something they’d not much talked about before,
knowledge.
And along the way they stumbled on Jane.

Traditionally, when economists spoke of the “factors of production,” they meant capital, labor, and land; making automobiles might require a billion-dollar capital investment, put three thousand people to work, in a factory erected on a hundred acres wrested from former farmland. Of course, as any reasoning mind could see, other factors besides capital, labor, and land figured in industrial success or failure. One of them was the knowledge that led to the design of new machinery, or new materials, or new ways of putting them together. In 1890, Alfred Marshall, of Cambridge University in England, described as necessary for understanding economic growth “the general development of the industry.” By this he meant brain work. In an industry benefiting from it,

the mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously. Good work is rightly appreciated, inventions and improvements in machinery, in processes and the general organization of the business have their merits promptly discussed: if one man starts a new idea, it is taken up with others and combined with suggestions of their own; and thus it becomes the source of further new ideas.

Knowledge spills over to the benefit of all.

But, as Warsh writes, “Marshall
didn’t inquire too deeply into exactly
how this spillover process might work.” Nor, for a long time, did anyone else. Somehow, knowledge and its workings seemed to lie outside the realm of economic study: knowledge increased, principles were discovered, processes were improved, inventions were devised—all as simply the product of “noneconomic background forces” that you could pretty much take for granted, like the air you breathed. What, after all, was there to study?

After World War II, however, the sources and diffusion of knowledge
itself
fell under the economist’s gaze. It was no longer something “out there” that no one could influence or affect, but a key element of any economic system, amenable to study like anything else. Where did the new products and processes that fueled economic growth come from? What was the role of entrepreneurs and universities? Or of think tanks and private research labs? Or of trade secrets? Could government do anything to foster the growth of such knowledge, and should it?

In 1985, the University of Chicago’s Robert Lucas, at forty-eight one of the most respected theoreticians of economics in the world, gave that year’s Marshall Lecture, named for Alfred Marshall, in Cambridge, England.
His subject was economic growth, or, more specifically, “On the Mechanics of Economic Development.” Not far into his lecture, he directed his audience to some arresting statistics of wildly unequal growth. Japan had recently been growing at 7.1 percent a year, the United States at 2.3 percent, India 1.4 percent. These were numbers, but not
just
numbers: behind their cold face, they represented human happiness and human suffering. For they meant prosperity, possibility, and choice for some; demeaning poverty for others. And this brought Lucas to the next big question: “Is there some action a government of India could take that would lead the Indian economy to grow” as fast as countries then enjoying robust growth? And, “if so,
what
exactly?”

That is, what could you do, in real life, to lead India’s desperately poor hundreds of millions to fuller, more prosperous lives? Or if, sadly, nothing, why not? “
The consequences for human welfare involved in questions like these are simply staggering. Once one starts to think about them, it is hard to think about anything else.”

Lucas was trying to pin down why the rich get richer and the poor stay poor, why the split had widened rather than, as some had expected, shrunk, and how knowledge and ideas figured in the answers. And toward the end of his Marshall Lecture—which, wandering a bit, had not always followed the clearest of paths—he turned to the ideas of Jane Jacobs.

Lucas,
as he’d later tell the story, had long admired Jane’s work—if not, it seems, through the usual gateway: he was perhaps the only person in the world, he’d say, who’d read
The
Economy of Cities
before
Death and Life.
Jane’s imagined city, New Obsidian, which some critics wrote off as fabulist fantasy, he saw as the work of a sound and sober intellect; here was a natural theorist at work, keeping her theoretical vision and her well of evidence scrupulously separate and distinct. “She’s crystal clear as to what she’s making up and what she’s getting from archaeological data.” And at some point while struggling to understand growth discrepancies around the world, Lucas said, he landed back in Jane’s second book.

Ideas
—knowledge, science, technology, innovation, invention—were responsible for much of the West’s growth since the earliest days of the Industrial Revolution; that much was plain enough by now. “So,” Lucas would recount, “you might think that economists interested in growth theory would put ideas at the centre of their work. How do ideas get produced? Where do they get generated? How do they get diffused and passed on to other people?” Yet growth theory had largely neglected such questions. Ideas were simply in the air? That just wouldn’t do.

“What I found exciting about Jacobs’s work was that this question is at the centre of everything. What are cities good for? They’re good for ideas. Ideas get put into use, they arise from different cultures and bodies of knowledge meeting each other.” In 1993, responding to a Columbia University economist interested in her ideas, Jane would wonder why most economists scanted the study of innovation. “
Is it because innovations are so unpredictable?” True, specific innovations
are
unpredictable. But “the conditions that permit them are not.” The conditions that encouraged innovation, incited it, practically pulled it out of people, said Jane, bubbled up from close-packed, diverse cities.

To switch back now to the language of Lucas’s Marshall Lecture, Jane was seeing deeply into the “external” effects of human capital. Go to school, work beside an expert or inspiring mentor, develop intimate knowledge of an exciting new industrial process, and you gain “human capital.” Your productivity shoots up, your income likely climbs, maybe you start a new company and make a million bucks. These are “internal” effects; they benefit
you
, possessor of that human capital. But human capital also benefits your company, university, think tank, city, or country; your hard-won body of expertise, your new product, idea, or method, profits your employer, which hires workers, maybe soon stands
at the nexus of a cluster of new companies; these are “external” effects, or—spillovers.
Win-win
, big-time.

In pursuing how this powerful economic driver worked, Lucas said in Cambridge,

I will be following very closely the lead of Jane Jacobs, whose remarkable book
The Economy of Cities
seems to me mainly and convincingly concerned (though she does not use this terminology) with the external effects of human capital…[As Jacobs had illustrated] with hundreds of concrete examples, much of economic life is “creative” in much the same way as is “art” and “science.” New York City’s garment district, financial district, diamond district, advertising district and many more are as much intellectual centers as is Columbia or New York University. The specific ideas exchanged in these centers differ, of course, from those exchanged in academic circles, but the process is much the same.

And wasn’t there, Lucas added, an implicit “proof” of all this? Land was normally cheaper outside cities than within them. So why don’t companies invariably set up shop there for the cheaper rents? Many times they do, especially for their “back office,” or more routine functions. But often they do not, because they are
getting
something from it—a creative human environment that nurtures new ideas and practices. “What can people be paying Manhattan or downtown Chicago rents
for
,” asked Lucas, “if not for being near other people?”

Jane, her son Ned reports, was “gratified” by the acceptance Lucas’s talk brought her, which was only underlined when Lucas won the Nobel Prize
in Economics in 1995. In succeeding years the attention grew. People started talking about “Jacobs singularities,” economist-speak for innovative leaps occurring not within, but
across
, industries in close physical proximity. One research group
compared Jane’s predictions about growth and innovation to those of two other, more mainstream lines of economic thinking and found hers more predictive. Another went looking for “Jacobs Spillovers” among
Canadian inventors. As a newspaper headline put it in the 1990s, Jane was now something of an “economic guru.”

But not really an economist, not in the narrow, professional sense, anyway. Lucas himself would say how you could never turn to Jane’s work and pull out an equation. Her work was astonishingly fertile and
fruitful. But that didn’t make her an economist, either. When, in 1997, the University of Toronto economist David Nowlan reviewed Jane’s contribution, he titled his essay “
Jane Jacobs Among the Economists,” which gets it about right—Jane usefully
among
them but not
of
their particular species.