Steve Reads

On the question of whether there’s still value in having tech centers (Silicon Valley, Boston’s Route 128, etc.), and specifically whether there’s value in moving your startup there, Paul Graham writes:

If the seed funding business turns out to be international, that could make it hard to start new silicon valleys. If startups are mobile, the best local talent will go to the real Silicon Valley, and all they’ll get at the local one will be the people who didn’t have the energy to move.

This is not a nationalistic idea, incidentally. It’s cities that compete, not countries. Atlanta is just as hosed as Munich.

(emphasis mine)

That’s straight out of Cities and the Wealth of Nations. I wonder whether Graham knows that. It would even cooler if he didn’t know it, and her ideas have just become so much a part of the mainstream that no one even realizes their source anymore.

Another possibility is that her idea is obvious. Which it may well be, but I’ve seen no one besides Graham and Jacobs enunciate it.

The scope of Jacobs’s book is simply breathtaking. Incorrectly viewing nations as the fundamental economic units, she says, has polluted everything. Even exchange rates turn out to be dangerous in largest part because they send the wrong signals to cities; they indicate the aggregate economic strength of a nation, but cover up its failings in auto parts, software, or agriculture. It thus takes years for Detroit, Silicon Valley, and the Midwest to pick up their individualized warning signs.

In Jacobs’s view, a city-state with its own currency is the ideal size. A city thrives when it is “import-replacing”: constantly learning how to produce the things it imports from other cities, creating new improvised versions of them, and exporting them to other areas — some of which go on to become cities of their own. A city is the basic unit of innovation. Cities of interlocking innovation are the only combined units that matter. These are the only economic units that have ever mattered, at least back to the Roman Empire. All this according to Jacobs. Import-replacing regions thrive and stay constantly alive; Jacobs says that all import-replacing regions become cities, so “import-replacing region” and “city” are basically synonyms. The natural partners of cities are other cities; these are the only other regions that can bring new knowledge and vitality to a city.

Those cities that engage in the “transactions of decline,” on the other hand, will eventually fail. Here a transaction of decline is a transaction that may on its face look like it brings some development to the city, but in reality is killing it. Perhaps surprisingly, Jacobs counts defense contracting as a transaction of decline: defense innovations do not help cities with their own internal needs, and they are never import-replaced. They count as dead weight, absorbing labor and capital that could be going to more productive uses. (I wonder whether the Internet would change her mind at all. Though the Internet doesn’t count as a defense contract in the sense that Jacobs cares about; the Internet was, rather, a civilian innovation paid for by the DoD. I don’t know if this is just senseless hairsplitting.)

Jacobs lumps defense and welfare payments together, along with most other transfer payments, into “transactions of decline.” In all these cases, she says, the money is going out and never coming back as new ideas. In large part all these transfer payments are political toys, meant to fund the declining suburbs and farmlands at the expense of the cities that generate real innovation. Still worse is that once transfer payments start, she says, they’re unlikely to stop.

It may be clear that she is not an optimist. Except in a few cases — she singles out Boston’s Route 128 “miracle,” apparently under the tutelage of a venture capitalist named Ralph Flanders — she finds a city’s decline unstoppable once it’s begun.

I can’t attest to the truth of it, but it does have some inherent plausibility. The whole argument rests on the single basic idea that import replacement is fundamental to the economic life of cities. If that’s true, then most of the rest of her argument follows. And she argues on the basis of an alarming breadth of knowledge, spanning every inhabited continent over several thousand years; if she’s not left out any relevant evidence, then it’s convincingly in her favor.

Of course it’s written throughout with the passion of someone who really, really loves cities and hates to see them die for no good reason; The Death and Life of Great American Cities, written before she moved to Toronto, is a paean to Boston’s North End, Philadelphia’s Rittenhouse Square, and her home of New York City. She loves seeing what innovative people can do when they’re packed together with lots of other innovative people. Contrariwise, the death of cities, and their misunderstanding by clueless but well-meaning bureaucrats, is an unending source of righteous indignation. You couldn’t hope to find more well-aimed intellectual firepower in anyone else’s books.

In The Death and Life of American Cities, Jane Jacobs demonstrated with clarity, intelligence and righteous indignation that city planners had for decades — going on a century, in fact — misunderstood the virtues that cities possessed, and hadn’t understood why people wanted to live in them. According to Jacobs, all of orthodox city planning was built around the belief that what city dwellers most wanted was to leave the city and live in a suburb or on a farm. So they bulldozed blighted neighborhood after blighted neighborhood and replaced them with parks. When many of those parks themselves became blighted, filled with the familiar sight of the homeless and drug users, orthodox city planners could only scratch their heads; that simply wasn’t supposed to happen. If anything, this only confirmed cities’ incorrigibility. So they wiped out sizable sections of major American cities and built freeways out; clearly people would prefer to be elsewhere. The millions who continued to live in American cities were an inconvenient datum.

In Boston, the West End was demolished in the Fifties and replaced with architecture of stunning banality. The North End, which is now one of the most desirable and expensive neighborhoods in the city, was cut off from the rest of Boston by the highway at the same time. As Jacobs detailed it in Death and Life, the North End only began to thrive because its own residents lent each other money to improve their properties. Fast-forward fifty years: the highway has moved underground (aka the Big Dig), which finally re-integrates the North End, and Mayor Menino admits that leveling the West End wasn’t the best idea. (I’ll provide a cite later today.) Either we learned what Jacobs was trying to teach us accidentally, or we learned directly from her. I’m inclined to believe the latter.

In Cities and the Wealth of Nations, Jacobs claims that national governments repeat the same misunderstandings of their cities on a larger — and possibly more tragic — scale. At this larger level, they believe that they can produce economic activity just anywhere. Struggling farmland? Dam up their rivers, build schools, give them tax breaks, and invite foreign companies to build factories there. Wait a few years and watch a million economic flowers bloom.

City planners believed — and maybe still do believe — that a city was just a defective pasture. According to Jacobs, national planners likewise believe that a city could thrive anywhere. So they build cargo-cult cities [*] and pray that the same thing which animates their real cities will turn their farmland into the next New York.

But of course that normally fails. A real city has a good reason for being there; a cargo-cult city does not. People aren’t fooled. They want real cities.

Jacobs wants to recast all of macroeconomics using these insights and others, and has the rhetorical skills to convince at least one non-economist that she’s on to something. All the dynamism in a national economy, says Jacobs, comes from its cities. Even the vaunted “heartland” of the United States only survives because cities have brought industrial technologies to their farms. If you want to understand why a nation succeeds or fails, says Jacobs, look to its cities. The title of her book is no accident: she wants to yank economics off the track that it’s been on ever since Adam Smith. At the very least, counting cities as the fundamental macroeconomic units increases the amount of available data: there are only a couple hundred nations, versus a few thousand cities.

Jacobs started thinking about Cities and the Wealth of Nations in the late Seventies, when stagflation had left orthodox macroeconomists scratching their heads. Unemployment and inflation were not supposed to rise in tandem; higher prices were supposed to lead to lower unemployment. (Prices rise, so companies produce more, so they need more workers, so unemployment goes down.) But that wasn’t happening, and in varying degrees hadn’t been happening for a decade. This led Jacobs to wonder whether economists hadn’t been looking at their world in entirely the wrong way.

Her argument makes intuitive sense. I wonder whether economists, by and large, have come to agree with her.

[*] — I will never tire of using “cargo-cult” as a metaphor.

I am intriguèd:

A recent rant of mine mentioned cities, which led to a meandering discussion about cities and rural areas on my board, and led me to realize that not enough people have read Jane Jacobs.

Many have; her The Death and Life of Great American Cities (1961), a celebration of city neighborhoods and a warning that they were being destroyed by the czars of urban renewal, has gone in forty years from iconoclasm to curriculum.

But even better are the less read The Economy of Cities (1970) and Cities and the Wealth of Nations (1984), twin volumes which do nothing less than demolish and rebuild macroeconomics. Economics went wrong, she explains, with the work her titles allude to, Adam Smith’s The Wealth of Nations. Nations aren’t the proper unit of macroeconomic analysis; cities are.

I kind of don’t know if I should read any further than that. I loved Death and Life of Great American Cities, and I’ve just been waiting for the appropriate recommendation to drive me on to her other work. Mark Rosenfelder’s Zompist site is erudite, eclectic and articulate (witness “What’s Wrong With Libertarianism” and “The last century — what went wrong”), so his recommendations carry a lot of weight with me.

I realized today that the recommendations of near-strangers on the Internet carry outsize weight with me. E.g., a dude recommending that I get “Tehillim / The Desert Music” by Steve Reich. I think it’s the other entries on that blog (as well as Chicken Chicken and the corresponding video) that convince me the guy is cool, which then gives his recommendations the same weight I might attach to any cool person I meet at a party. I’d be interested in seeing studies on

1. How people attach reputation to strangers on the net.
2. What support they need from other sources before they’ll attach that reputation.
3. How closely Google’s PageRank approximates that reputation.
4. Which of the real-life mechanisms for reputation-attachment carry over onto the Net.

Relatedly, I don’t feel much of a pull to buy stuff on Amazon based on Amazon recommenders, perhaps because I’m normally not reading the recommenders’ other suggestions; if someone recommends a particular novel on Amazon, I know no other background about the reviewer that would encourage me to follow his recommendation. If I’m right, it seems like Amazon could make more money by treating their users’ recommendations like they treat their books — i.e., “Joe Smith’s tastes are a lot like yours; why don’t you take a look at his reviews?” In effect, they’d be turning individual reviewers into brands — “microbrands,” if you will.

In the final chapter of The Death and Life of American Cities — which would be a better book if it ended 50 pages sooner, but is certainly still a good read at the end — Jane Jacobs lays out her belief that city planning has been fundamentally misunderstood. She quotes at length from Warren Weaver’s essay on science and complexity from the 1958 Annual Report of the Rockfeller Foundation, which lays out his belief that science progresses through three stages: approaching problems that are mere simple phenomena (changing one variable explains most of the variability in another variable); through problems of disorganized complexity (e.g., thermodynamics), where we can get traction on the problem by studying it statistically as the interaction of many fungible units; through those of organized complexity, where the units aren’t fungible and in which statistical knowledge isn’t sufficient. Jacobs counts urban design as a good example of this last category: changing the dimensions or positioning of a park changes the area around it in a way that’s highly dependent on many other variables.

I’m not sure whether this map of the history of science is accurate. I’m not even sure if there’s a good empirical way to categorize problems by which of the three modeling approaches will work for them; maybe the only way to categorize them is to try out each modeling approach and see whether it fails. Jacobs’s point is that the first two approaches have manifestly failed to model urban development, but that planners don’t realize its failure. Instead, they continue (or at least continued, as of 1961) to use the same failed approaches, believing that the problem they’re trying to solve is just fundamentally mysterious, rather than that their own approach is the problem.

Again, I’m not sure whether any of this is true, but Jacobs makes a good case that it is true for urban planning. And in any case, the piece by Weaver is worth reading; you can read it using Amazon’s Search-Inside-The-Book feature, which is a seriously handy tool. Search within the book for ‘organized complexity.’

The great joy in Jacobs’s book is that it’s rabidly empirical, which makes it empowering. Naïve change-the-world types like me tend to get stuck on the size of the world they want to change. For instance: thinking about the problems Jacobs is addressing, I’m likely to go like so: “We need to reduce the number of cars in cities. So let’s tax people who drive into cities, like London does, and boost mass-transit spending. But that would cost a lot, and we don’t have the political strength for that. Man, city problems are hard.”

Jacobs is altogether more productive. Her approach is: let’s look at sidewalks. What purpose to they serve? How do we make sidewalks better? Then let’s look at parks. What constitutes a good park? Why do some parks thrive and others turn into weedy, abandoned messes? Then let’s look at streets. Then at slums. Then at districts. Then finally look at cities. At each level, let’s ask some really specific questions, and look at which approaches work for different cities to solve each of those problems.

This makes her a) empirical, b) productive, c) encouraging and d) a good engineer. We need more of her. I can quibble with some of her specific details, but her program and her ideologial orientation are so spot on that I can only recommend you go out and read her book. It’ll make you appreciate the particular problems of cities (they are not just larger suburbs, and much of urban planning, according to her, stems from the belief that they are), will make you understand the mistakes that urban planners have made, and will get you inspired to be a local activist.