Eclectic Curiosity

Posted on September 2nd, 2002, by Steve Hardy in Archives, Uncategorized. No Comments

Diversity generates economic expansion. This is the central premise to a great book called The Nature of Economies by Jane Jacobs. Written as a platonic discussion amongst five friends in New York and New Jersey, the book is all about looking at economics as an ecosystem.

Jacobs argues that economic expansion relies on capturing, using and then re-using transient energy. The more successful systems are particularly adept at recycling this energy before it is discharged because they have more diverse ways of identifying it, passing it around and recycling it. This rich, diverse environment in turn grows even larger from within because of its excellent self-refueling capabilities. So for example a lush forest is a much more robust ecosystem than a semi-barren desert because of how well it processes energy received from the sun. In the forest it is absorbed and traded around while much of it bounces right back out of a desert. Likewise, large economically diverse cities tend to grow much better than single-export cities do because of their comparatively stronger internal dynamics (eg. Los Angeles’s success during the difficult exporting period of the 1940s and, conversely, Detroit’s demise as a city despite strong auto exports). “When [imports] go into settlements that are good at stretching imports, they carry with them a potential of being economic expanders. If they merely go to other simple settlements, whether domestic, foreign, or both, they lack that potential.” Her overall point is that imports, and particularly how well they are “stretched” while within the conduit, are much more significant than exports (as many economists would argue).

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