The Nature of Economies (Vintage) [Englisch] [Taschenbuch]

Jacobs have been driving the profession nuts, hammering them on their core blindspot, the economic unit of cities. At least she was contained within this geography but now she has breathlessly broken free of being the city person and with "Nature", and with great ease, dismissed Keynes in about 3 paragraphs and Ricardo in two and gives only minor kudos to Smith. Wow. And as far as I can figure out she is right, but what a pithy couple of paragraphs it was done with! I think I understood.

I use to take it for granted that Keynes was the "correct" economist, for Keynes traded from his bed just before breakfast and was an awesome ly successful speculator. (One cannot say the same about Markowitz.) Therefore any economist who could translate his view to hard cash - well that economic thought has to be right. So I thought.

But then Jacobs comes along and calmly in the mid 80's, when the Soviet Union was being called a total equal to the US by the CIA, dismisses the Russian bear as an obvious house of cards not worth a lick. In fact, she came close in "Cities and the Wealth of Nations" in even predicting where the true USSR GDP was as shown where that countries national accounts are now - close to wheer Jacobs suggested they would be with their massive 'transactions of declines" and the absence of any "feedback" mechanism from currency to help show them where they were. Jacobs in a few paragraphs in "Cities" easily replaced about 2000 brilliant hard working folks at the CIA who had "studied the USSR for decades. Then, in the same book, with hardly a pause, she turned this model onto Japan and calmly said that what went for the former USSR went for Japan; and this was a few years before the 1989 Japanese stock market peak, and she wrote this when all the true "economists" were predicting the Japanese world domination that was to come. I then remember when a professor wrote a "revolutionary" essay on Japan in a 1994 Foreign Affairs which , from the "guild's" point of view daringly compared Stalinist Russia to Japan! Now this was 5 years after the Japanese stock market had collapsed and about 8 years after Jacobs had printed her "Cities and the Wealth of Nations". I never heard a peep about Jacobs, for Jacobs has no doctorate and it was as if her groundbreaking work had never occurred, Safe to pillage.

So though never mentioned, I am sure the Jacobs books are hidden in all those professors' bottom drawers. Jacobs' "Cities" was, perhaps, one of the most incredible tour de force in economic analysis since Keynes - and everyone in the "guild" felt quite comfortable in ignoring her.

So with this new book, Jacobs once more seizes the initiative and, or at least I think she did, completely revolutionizes and "fixes" economics. Not bad in a book that is thinner than some of my first year essays. Given the last predictive and precise power of "Cities and the Wealth of Nations", "The Nature of Economics" will likely be correctly seen as the turning point in economic analysis and the profession's rescue of itself. But I suspect this wont be for a few more years and will occur when someone feels there is enough distance to plagiarize her work and reword it within the official halls of MIT or Stanford.

Why doesn't U of T do the right thing and award her not an honorary degree, but an actual doctorate in economics. Surely if Frost could get such a deal from Harvard, or Einstein from Princeton, some school will show integrity and award such official recognition.

I think, or better, I suspect that it is crucial to read "Nature" if you have any concerns of curiousities about our current political process and economic policies. In short, everyone should read this book. You wont hear a peep about it from anyone in the "guild" for at least 3 to 5 years down the road.

Jacobs challenges economists as well as ecologists. Modern economics is derived from the mechanics of 18th and 19th century physics and as such is largely divorced both from humanity as well as from nature. Jacobs argues here for an economics based on an understanding of nature. According to Jacobs, this natural-based economics implies that economic diversity and not specialization is an important key to prosperity.

Jacobs expounds her ideas in a series of philisophical discussions among contemporary urban dwellers, a devise that works splendedly because her prose is excellent. This little book is highly recommended for those interested in a fresh perspective both on economics and on the place of humans in the natural environment.

She also does something original; she actively examines the topics she writes about, instead of relying upon the mere observations of others. When you use a chunk of granite, a bar of steel or the speed of light, it's worth knowing that inanimate objects don't change much. But, Jacobs and all other social scientists deal with people; and people are continually changing. One of her central themes is that since Adam Smith in 1776, economists have tended to ignore the real world.

"Smith himself was partly responsible for that blind spot," Jacobs writes. "He led himself and others astray by declaring that economic specialization of regions and nations was more efficient than economic diversification.

"The theorists after Smith retreated into their own heads instead of engaging ever more deeply with the real world," Jacobs writes. "Plenty of observable, germane facts were lying around in plain sight, ready and waiting to lead Smith's insights, straight as directional arrows, into the subjects of development and bifurcations."

Adam Smith overturned centuries of thinking when he wrote, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own interest." Until then, there was a general feeling that God, or Nature, or other supernatural force provided our sustenance; Smith said personal interest is the key to economic life.

Smith takes that idea the next step: Yes, natural products exist, but we can wipe them out by overuse. Every system in nature is harmed by over-indulgence; nothing can be exploited without some collateral cost. Excess carries the seeds of its own destruction; humans are a part of nature, and thus subject to similar limitations. Thus, the book's title -- "The Nature of Economies." Every society is a part of nature; people are always subject to the inevitable laws of nature.

This isn't tree-hugging ecology or a 'Save a Whale for Jesus' fad; it's the fundamental rules by which nature, and thus our communities, live on a day-to-day basis.

Consider a real example: Phoenix literally "paves the desert." Twenty years ago, climatologists knew this raised night temperatures, because asphalt soaks up heat during the day and radiates at night. Night temperatures have risen by almost 10 degrees -- which adds immensely to air conditioning bills, and greatly reduces livability. Yet, city officials steadfastly ignore this feedback to pursue a policy of unlimited growth. Is this unusual? Think of Los Angeles traffic, Las Vegas, Albuquerque, El Paso, and Tucson -- each with its own growing problems.

Jacobs argues the "nature of economies" means being aware of feedback, and facing issues before they become a crisis. Despite her living in Toronto, do Canadians do it? No, Canadians ignored overfishing of the Grand Banks -- once the richest fishing area in the world -- until the area was fished out which caused the economy of Newfoundland to collapse.

In brief, that's her lesson. Ignore feedback, ignore the evidence in front of our eyes, and we'll have economic and social collapse. Nature never offers "Get out of Jail Free" cards.

Unlike many ecologists, Jacobs doesn't offer simplistic "get rid of the automobile" solutions. She says problems will arise whatever we do; the solution is in recognizing the feedback, then responding to the problem. In other words, "Look around." Then ask, "What can we do different?" She doesn't offer solutions; she offers thought processes to enable intelligent people to find solutions.

Does she have a valid point? Well, Toronto officials listen to her, and have one of the best cities in North America. It's time her audience was expanded.