Mostly because of who recommended it, I just finished up The Economy of Cities by Jane Jacobs. It seeks to explain the role that cities play in the growth and development of an economy. And Jacobs’ answer seems to be that they are the engines.
In making the case, she points out that cities actually precede rural development in the timeline of economic expansion, as they function as an aggregation of people, skills, and creativity, resulting in the innovations that lead to progress. They are laboratories for development work, and that is why they are the birthplace of new ideas and technologies.
It starts out that cities have a base commodity or skill that generates exports, such that the city can buy imports. Eventually, as wealth continues to grow (as well as population and jobs to support the varied business areas), innovation and experimentation lead to import substitution (thereby removing the need to buy certain externally-generated goods), creating demand for a new set of goods. At the same time, exports are growing from the newly burgeoning businesses internal to the city, all of which leads to explosive growth. It is a virtuous cycle that encourages a sustainable cycle of growth and continued development. Of great importance is that new work is always building off of older work and that there is not any dependence on a single industry. All of this is contrasted with cities where efficiency comes to dominate, and the entrepreneurial trial-and-error spirit is seemingly lost, and thus stagnation sets in (think of any company town in the United States or elsewhere).
Overall, when placing the book in the context of my day job, the author’s line of reasoning gives me something else to think about when contemplating markets.
