Small thought: Diet, Intelligence, and Ashkenazim

Confounding factors aside, people who eat according to the rules of a traditional food culture are generally much healthier than people eating a contemporary Western diet. This goes for the Japanese and other Asian diets as well as the traditional diets of Mexico, India, and the Mediterranean region, including France, Italy, and Greece. There may be exceptions to this rule—you do have to wonder about the Eastern European Jewish diet of my ancestors. Though who knows?

-Michael Pollan, In Defense Of Food

But a mutation load/purifying selection balance was one of the more elegant theories for why intelligence variants haven’t reached fixation given their apparent obvious utility, so this raises that question even more. Why are there genetic intelligence differences? Especially when the phenome studies (only some of which Yvain cited) show pervasive genetic overlap between genes which increase intelligence and genes which increase all sorts of other desirable traits like less schizophrenia risk? Right now I think probably the best theory is a resources or developmental one: a high quality brain, and body, are extremely metabolically demanding (did you know that in childhood, your brain and body have to take turns growing, because it’s metabolically impossible to do both?), and so any pro-intelligence variants runs into the risk of increasing vulnerability to famine and infection and injury; so you get selection for intelligence variants only up to the point where diminishing returns kick in hard, and then it’s better to have a more robust immune system or to stop growing early on and adopt more of a r-selected strategy, and then in the modern context where calories are abundant, education & intellectual pursuits apparently have been consistently dysgenic, so that eliminates any recent chance for driving pro-intelligence variants to fixation or even increasing their frequencies noticeably.

-Gwern, here

Unsourced but commonly known fact: We observe higher IQ consistently in Ashkenazi Jews (just Ashkenazim, not Sephardim or any other strain, nor their non-Jewish neighbors).

Crackpot theory: the traditional diet of Ashkenazi Jews is very rich because it reflects higher caloric needs than gentiles. Probably wrong; it’s not that different from the traditional diet of my Catholic ancestors from the same general area, and the ‘blubber’ theory probably explains this better.

(I’ll be back to Jane Jacobs soonish; I have a couple posts drafted but may read through the whole book before posting this time, since I’m chunking chapters together.)

The Economy of Cities: Plainly-Delivered Verdict

And with that last post, I’ve reached the end of The Economy of Cities. It’s not Jacobs’s last word on economics – by the time you read this I’ll have started Cities and the Wealth of Nations, which she published 16 years later (1984) – but it outlined the first thoughts she had, and before I move on I want to summarize my impressions and what takeaways I found valuable.

The basic Jacobsean framework of city growth is interesting, consistent with common sense judgments about which towns and cities are energetic and which ones are depressed, and seems to have a fair amount of predictive power. It provides pretty clear prescriptions about how to best encourage growth; get out of the way of new businesses and strive to keep the government on the side of enabling change and the regulatory environment open. Regulatory capture has become even more of a concern since the first writing here, which seems to bear this out.

When she extrapolates, her thoughts get more fragmented, and hit-or-miss in value. Her theory of very early city development blatantly contradicted the best evidence at the time, and other than a speculative, headline-grabbing, and therefore probably incorrect finding of a drowned city from early on, there has been no support for her theories found since. When she extrapolated forward, her general sense of trends was not bad, but nearly all the specific examples were outright wrong, and only some of them because she missed specific technological developments that were coming.

The general trend prediction was quite good. Both her explanation of why their is higher demand for products from rural areas whenever a country grows and her suggestions about the stagnation of cities were good retrodictions. Her predictions about the trend of manufacturing toward diversified production, and the trend of control shifting from manufacturers toward service-providers were ahead of her time and spot-on. (She missed the possibility of software, but then it was 1968.)

However, her examples and trends both suffered for being parochial. This was somewhat affected by missing the rise of containerization, but even still, not grasping that cities outside the Western world could take work formerly done by the most advanced cities, rather than it moving to rural areas, was a serious error not justified by her position in time. Many other predictions she made, like the decline of New York City, show the same parochialism and political bias. This emphasized that, even a decade after she’d begun her urban development research, she still lacked skill in academic methods.

Additionally, she seemed fuzzy on some terms. City/’city region’ was used in contrasting ways in different places, and coupled with the general parochialism I have misgivings about her conceptual structure. If this fairly central term is in conflict in her own usage, what else has more subtle flaws?

Overall: The theory is good and worthy of further study, which I’m disappointed mostly hasn’t happened. It makes some neat predictions and provides a lot of food for thought, but has big shortcomings in rigor. Some directed data-gathering to test her specific assertions would go a long way toward giving me confidence that it is actually a general theory. Especially to check that it has still applied as we’ve moved to an information economy.

Outside Context Economics

The Economy of Cities, chapter 8: Observations about the natural progressions of the economy with (decently accurate) extrapolation to the future. Focused on manufacturing, because the non-manufacturing-based economies we’ve had since the late 80s are a historical anomaly she didn’t see coming.

The first trend she observes is that there has been a progression in manufacturing from craft production (small run, by hand) to mass production (factories turning out many of the same thing) to differentiated production. By differentiated production she means things made using the factory line style, but in smaller runs configured for more variety of products. Her main example of differentiated production in action is the diversity of clothing available, in contrast to all previous eras. (I hadn’t even noticed this was a 20th century development, though it seems obvious in retrospect.)

Other things she notices had started to be differentiated included newspapers (weekly local papers over mass-market dailies), farming equipment, and (in a dig at New York’s urban planners) trees planted in large cities. As far as these go, they seem accurate. She also notices that electronics production inherently cannot be mass-produced and was stuck in the craft paradigm until jumping straight to differentiated; this goes double for computers and became massively more true of software. In general, this prediction of a trend is insightful and correct.

However, when she tries to add specific predictions, she misses entirely. She projected that transportation would soon start to be replace by differentiated, specialized vehicles including water-based transport. None of this has materialized. She specifically suggests that the replacement for the car will not be mass-produced; since to the extent it appears likely to happen it will be the Tesla, this is also wrong. And I don’t think she’d really consider that a successful prediction. I suppose the Hyperloop might qualify, if that happens? (Good job Elon, you’ve single-handedly made her only 90% wrong instead of 100%.)

Then there are the predictions I’m not sure whether to judge as true or false. Her view of economic development stayed pretty firmly parochial; after early civilizations, it covered very little outside of the United States and Europe. With that in mind, how should we evaluate her prediction that mass production manufacturing would leave cities and differentiated manufacturing would remain? In practice, manufacturing of both kinds has moved to cities in less developed countries like China and Thailand; cities in the US today produce software and services and design products, and export teaching and techniques, but do not manufacture beyond the prototype scale. However, in developing countries this is still a city activity.

I would say overall that her picture of the progression is broadly correct. However, she failed to anticipate the rise of containerization or the development of the information economy,  and so her picture of where things could move and how much this would flow through to distant cities was wildly off. Standard prognostication expeects that in time, Chinese cities will move on from manufacturing and look more like American cities as the manufacturing moves to other parts of Asia and eventually Africa. The idea that when this process has shaken out the manufacturing will be in rural areas seems plausible, except that I doubt it will run to completion before the next big economic restructuring.

Another long-term trend she outlines is which companies dominate economic decisions. In medieval times, merchants called the shots. They decided what would be made and handled distribution. In the industrial era, manufacturers were in charge. (Jacobs points out that no Detroit car manufacturer would want to become a dealer, but the medieval equivalents absolutely would.) She predicts that in the future the providers of services would be running the show.

And that is exactly what we see. Software, even before the ‘SaaS’ web businesses, is a useful tool provided to accomplish a service. Microsoft did not sell hardware; it specified the types of hardware it’s tool could use and shipped it packaged with those tools. Apple does not sell hardware so much as a user experience; they commission the hardware to fit. Google provides a service and then sells access to it. Amazon initially took their cut out of the convenience their shopping service provides; more recently they sell the service of server space properly managed, and then commission the hardware to support it.

I give her serious prediction points for this in particular.

The last prediction she makes is more an observation about the natural process of economies when not modified. It is this: The basic struggle for power is between those who benefit from the current structure of the economy and those who benefit from new things happening. Inherently, the older faction is more powerful; for a country to thrive, it must set up its government so that it is always counterbalancing established interests and pushing for the young faction. The old faction’s excess of power can be used to influence the government, though, so this is hard to implement.

Regulatory capture is a recurring problem, and as The Economist observed recently, it’s a bigger one now than ever. So good prediction points for Jane Jacobs here as well. As far as how to solve it, localizing government further so that the economic and political units coincide seems helpful. Worldwide profits are good at bribing smaller governments, but many more small governments seem better at resisting capture than fewer larger ones. One company’s lobbied exception is less likely to help other companies keep their hold, and it’s less likely that a single industry will sit in the same regulatory environment for long enough to take it over completely. But honestly this seems like wishful thinking.

In any case: Jacobs gets bogged down in parochialism, politics, and wishful thinking when it comes to specifics, but her high-level predictions and insights continue to be pretty damn good.

Invest In Something Modern, Maybe?

The Economy of Cities, chapter 7: Thoughts Jane Jacobs Has About Capital.

Did I say that Chapter 6 was the least relevant to today? This one might beat it. Because this is about how capital moves and assists (or doesn’t) in city economies and their growth. And while it highlights the operations of American Research and Development, now known as the first modern venture capital firm, it did not predict the massive shift toward VC-fueled creation of new work that characterizes the modern small business ecosystem.

And because it doesn’t touch on that, it doesn’t address in any way the main problems of the small business ecosystem today, which are all about the failure and shrinkage of the  humdrum and repetitive. Small businesses that aren’t intending to become big businesses have a hard time, so American small business numbers have been dropping despite the growth of venture capital. I don’t see how any ideas here can be extended to address that problem, either.

Instead, it talks about the problems of government and institutional investment, and how they want only sure things with solid returns, exactly the wrong emphasis if you want to encourage economic diversity and proliferate new work. They also are usually very bad at finding speculative investments that are likely to succeed. Notably, in the wake of the 2008 crisis, part of the Obama stimulus package tried to do exactly that, mimicking Silicon Valley’s model, and… he got yelled at because some of them failed. Yeah, I think there are reasons why big organizations are risk-averse.

She also asserts that anywhere a city is generating capital and exporting it, that city is systematically neglecting local opportunities. The examples of anti-black and anti-immigrant (Irish) prejudice are illustrative, but not particularly suggestive of a broader pattern. As in some earlier pieces of the work, there is a strong sense of Jacobs’s politics leaking through into her theory in a way that suggests that these things are self-evident. I find it to be a pretty strong claim, so I’m not satisfied with this treatment. From an economic standpoint it’s obvious that racism/sexism/general prejudice are dumb and counterproductive, but that’s the converse of the claim she’s making.

Anyway, it’s a short and lackluster chapter.

Definitely Not the Jungle

The Economy of Cities, chapter 6: How new export work was created in 1968.

This is maybe the least relevant chapter of the book to the modern economy, because the internet (mainly Amazon and Google) have made it almost totally obsolete. It’s divided into two parts: how and why export work gets started in cities de novo, and how and why intraport work  expands into export work.

New Export Work

The discussion about why a new business might start up in a city is extremely dated. There were perfectly good reasons at the time; cities contain many useful goods, like various parts you can use for prototyping and supplies of them in bulk when you want to start production, and many useful services like traveling salesmen who will find you markets, people who will print catalogs for you, and temps to help when your work takes off.

Other than the temps, those are all services available easily and cheaply on the internet; if I was starting up an artisanal widget distribution company in Bethlehem, New Hampshire, I could still get my catalog and website created by a contractor in Topeka whose manager is in Boston and whose software suite is hosted on a server in Mountain View and principally maintained by a programmer in Dubai. You can sell them on Amazon or Etsy! You can find customers through Google Adwords! Why bother being in a city for this?

(Well, I prefer to live in a city, as do many others, and if you think you’ll want more staff soon you might want to start it somewhere that appeals. But that’s not even everyone.)

She provides a list of technical parts, purchased from various suppliers in New York City by a physicist of her acquaintance over the course of a month-long contract project. Then, it looked like this:

From an electronics supply store: one voltage reference diode, five precision  resistors of three different sizes, ten alligator clips, one ordinary resistor, a published collection of electronic industrial circuits, a quantity of insulated copper wire, a dry cell, a small potentiometer,

From a store selling surplus electronics equipment: two precision resistors of still other sizes and a double-pole, double-throw switch,

From a laboratory supplier: a quantity of aluminum sulphate, a specimen jar for crystal growing, glass rod, glass capillary tubing, vacuum grease, epoxy glue,

From a surplus tool store: a screw-threading die,

From a hardware store: two drill bits, a quantity of braided steel wire, silicone sealing cement, screw eyes, two dry cells,

From another hardware store: brass bolts and turn-buckles,

From an industrial hardware store: a drill bit, a hacksaw blade, two fine-threaded large steel bolts and a stainless-steel machinist’s rule,

From a plastics supply house: plexiglass sheets of two different thicknesses,

From the factory of a small manufacturer of specialty wire: a two-foot length of extra-fine stainless-steel wire,

From a machine shop: a soft-iron cone, made to order,

And from outside the city, apparently at great expense in time and effort:

From a scientific supply house: two first-surface mirrors and a special lens,

From an aircraft supply house: rubber O rings of three different sizes

Today? It’s a matter of whether I can get these all on Amazon and how many I need to get from McMaster-Carr instead. In either case, I can have all of these, with the possible exception of the soft-iron cone, delivered to my door within 48 hours if I’m willing to pay for rush shipping. If you have a 3D model of what you want, the cone could be 3D printed and shipped to you in about a week.

So a lot of this is thoroughly outdated. Other parts are not, though. For example, Jacobs observes that the mere fact of local work growing, when the market is big enough, results in extremely thorough specialization. The bigger the market, the better every useful enterprise can subdivide and become uniquely suited to its specific niche.

We see today with the ‘gig economy’ that services are specializing more than previously imaginable; remote food ordering and delivery is spun out into Eat24 and the various competitors, point-to-point driving is spun out into Uber, previously universal chores become TaskRabbit, etc. This is viable only because there are large city populations that can supply work of these kinds pretty much constantly.

Expanding Work to Exports

There are two ways intraports can lead to exports presented; either intraport work can be used as a base to diversify into other work which is exported, or the same goods being sold locally could begin to be sold elsewhere. In the former case, it could be inspired as a logical extension (like the invention of the bra) or just happen to use some of the same expertise or organization; in the latter, it might be a deliberate action by the business or just be customers coming from further afield and buying from them. In either case local intraport work is needed.

Together, these specify three ways of creating export work in a large, diverse city. Jacobs is keen to point out that all depend on existing local work and therefore export growth must necessarily grow from a thriving local economy. This seems true, but doesn’t entirely make the case that it must grow from import replacement, which she seemed to imply earlier. It does suggest by itself that export growth will be sluggish when not preceded by import replacement bursts, which seems to describe reality well.

Sterile Growth

She introduces the caveat that while all import replacement leads to growth,  some is not lastingly useful. As an example, the period of San Francisco’s growth that created Oakland was almost all existing companies bringing branch plants to SF or Oakland, and this was sterile. It created no new local work besides that which had been imported, and because it was all things which were provided to the global economy from elsewhere, it did not provide the capacity for expanding exports in the future and enabled no future bursts of import replacement.

This explains some of the problems with Oakland’s economic history, but seems tailored to fit the evidence a bit. Also, it raises questions in my mind about what, exactly, makes up a ‘city region’. Clearly San Francisco has a city region, but if it does not stretch to Oakland, where does it stretch? Is the Peninsula ‘rural’? Is there a fuzzy dividing line between where SF’s region ends and San Jose’s begins? Near Boston, which is surrounded by a succession of independent cities, are there dozens of very small city regions, or does Boston’s region stretch to New Hampshire, as mentioned earlier in the book? How is this different from Oakland and San Francisco? I am confused. [EDIT: It was pointed out to me that commuting was rarer at this time, and for around half of Oakland’s history up to 1968 the Bay Bridge didn’t exist. (It was completed in 1936.) This goes about halfway to explaining why Oakland should be considered separate; perhaps the next import replacement incident in San Francisco unified them into a single city region, and none had yet happened. I am less confused but still confused. ]

 

Projecting To Today

For the most part, these descriptions aren’t terribly relevant. These days, other than legal boundaries at the state/country level, there’s rarely a reason to move anywhere for proximity to suppliers. Anyone who matters ships nationally and probably globally, and most new work in the modern economy is more dependent on availability of skilled workers than any specific resources.

You will still want to be physically near people you’ll consult with regularly, and near a pool of skilled workers you can hire later on. But desirable locations in the information economy are determined by where people want to be, and people are portable. If you can attract workers to your location, for many purposes it is better to be outside a city. Cities do have a larger existing population of people, and Paul Graham’s article about the ambitions valued by various cities could have been written as a 50-years-on follow-up about why cities are important.

So at a very high level, this isn’t obsolete. But in terms of the specifics? Pretty much all of it is. These will not be insights I’m sharing at a cocktail party any time soon.

City FOOM

The Economy of Cities, chapter 5: What’s so good about import replacement anyway? Also,  evidence from confusing patterns of national growth which become less confusing under this theory.

So immediately after talking about the ways in which export multipliers grow a city, Jacobs immediately launches into a chapter about why that multiplier isn’t actually important. Though she circles back to them toward the end. Fundamentally, the problem is that some of the export multiplier goes to local end products, but most just goes to steps in the exports’s supply chain. This increases economic activity and employs people, but does not usually generate opportunities for the city to branch out.

Some basic background that isn’t explained here, and ought to be common sense but often isn’t: Total Imports = Total Exports. In order to import goods, you must export an equal value of goods, but also the other way around. This can sometimes get lost in the abstraction of ‘money’, because it’s easy to not think of money as an import or an export. But at the end of the day, in goods or investment capital you’re importing a dollar of value for every dollar of value you export.

Alright, now that that’s explicit: elaboration on Import replacement. Writers before Jacobs, and most mainstream writers after, call it ‘import substitution’ instead; she changes her terms because ‘substitutes for imports’ is much more awkward than ‘replaces imports’, which is kind of a silly change but which I will stick with here.

Import replacement is the process by which a city starts creating from less-processed materials what it had previously imported as a finished product. Jacobs asserts that this will happen whenever the capacity to do so exists efficiently, every time. If local companies use thingamabobs, there is a set of skills that can make them locally from thingies and jobbies, and the city can import or otherwise supply thingies and jobbies, then it will happen unless the imports are cheaper than the local production.

This seems to me to bake in a few extra assumptions without acknowledging them, but as long as you include ‘ability to conceive of the potential process’ and ‘ability to find your market and sell to it’ in the set of necessary skills, it is reasonable. I’m sure that if this theory was developed more, we’d find systematic market failures in the same way as we currently find violations of the Efficient Markets Hypothesis, but like the EMH it ought to remain a good approximation.

 

So what are the effects of import replacement? Well, there is now more value that is being added in the city itself, without changing the exports being produced. But because imports=exports,  unless exports are dropping (and usually they aren’t) the total value of imports can’t drop. The new work requires new workers and new equipment (or, in older times, new livestock), so there is now higher demand for food, fuel, transit, and housing construction, but this is not going to match the total gap in value; some new imports will have to arrive to pick up the slack. 

(If the value gap isn’t greater than the cost of food, fuel, and other inputs needed for the replaced work, the importer’s price will remain better and the attempted import replacement will fail.)

So this shifts the import balance, adding more diversity of supplies coming in, without changing exports. And the city now has access to the old import, now being made locally, and the new imports, for an even bigger increase of diversity and a significant jump in economic activity; everything stays local. This might then lead to higher exports, if the new intraports also find external markets, but since it’s merely replacing existing supply chains, it can’t possibly reduce them.

Conscious of the big claim she’s making and the need to demonstrate that city growth really can happen without an increase in exports, Jacobs finally branches out her anecdotes and brings out a really solid example: Los Angeles in the late 1940s, from the waning war machine through the early postwar period.

Starting in 1945, the aircraft and ship-building industries, which had been the major employers in LA, shrank massively; by the end of the decade, ship-building had almost entirely ceased. Until 1946, LA had exported petroleum; afterwards it was net importing gasoline. It had previously gathered and shipped away nuts and fruit from Orange County; by the early 50s this had also dried up as suburbs replaced the farms. Even Hollywood was shrinking; the Golden Age of film was ending. It’s unclear what the total drop was, but something like 80% of export jobs vanished. Unsurprisingly, many people had predicted that LA might dry up and blow away when the war ended.

But instead, these years were when LA took firm possession of the title of “America’s Second City”. In 1949, LA exported less than ever before, but also employed more workers than ever before. 1/8th of all new businesses in the USA from 1945 to 1950 were started in Greater Los Angeles; there was a massive manufacturing boom, and LA was importing almost strictly raw materials, food, and fuel. This is important because, in her words:

From the point of view of the world outside, Los Angeles was buying as large a quantity of imports as it could have bought in any case. But without the replacement and shift of imports there would have been many idle people in the city, at a much lower standard of living. The replacement work had not only expanded the total of economic activity in Los Angeles, but in the United States and in the world as a whole.

She also provides the example of Shakespearean London. It was limited in its ability to export, for European political reasons, but was still growing at an impressive clip, and importing foreigners to make previously foreign goods locally. (Shakespeare lived over the shop of a French Huguenot, who made French-style headdresses for Londoners.)

As illustrated by Los Angeles (and possibly by London), import replacement creates new work, and grows the city’s ‘domestic’ GDP without any change in import/export volume, and so increases the ratio of local to import/export activity.

Jacobs goes even further here and claims that literally all new work created is generated in periods of import replacement in growing cities. Recognizing that this is a strong claim demanding strong evidence, she attempts to provide statistics to back it up, but as this had not previously been recognized as an important measure, she has to approximate.

The statistics that do exist classify work as ‘basic’ and ‘non-basic’. Basic work is exporters and work that feeds into exporters; in theory, the exporters and their supply chain, and only that, is the basic work. Non-basic is everything else. These measures are not exactly what we’re concerned with, and in practice they’re very lossy measures that miscategorize a lot of work, but they were the best available at the time. Judging on this, we find, as predicted, that the larger the city, the higher the non-basic/basic ratio; in descending order by population: NYC was 2.1, Detroit 1.2, Cincinnati 1.7, Albuquerque 1.0, Madison 0.8, and Oshkosh 0.6. I tried to find updated data but did not find it accessible.

 

Explaining Mysteries

Prior to Jacobs, there was a fairly long-standing puzzle about national economic growth. In a big success for her theory, it ties together several pieces of this puzzle with a neat city-level explanation.

It had previously been noticed that whenever a country grows, demand increases mainly for rural goods, but the many jobs created are mainly in cities. Explanations   were somewhat lacking, the prevailing one focusing on increases in rural efficiency freeing up people to move to the cities. It’s easy to see that this is insufficient, though: workers just as skilled exist in massive surpluses already in many parts of the developing world, and they have no massive growth spike nor increased demand for food and other rural goods.

Jacobs’s theory predicts (well, retrodicts) this better. If, as she claims, all country growth is city growth, mainly by import replacement, then all growth would be accompanied by a surge of jobs in cities, doing the import-replacing. (check!) Also, they would bring a shift in imports toward things that the city cannot make itself. Things previously imported from other cities would cancel out and not be seen, but also we should expect that goods mainly made in cities are easier to make in a different city. Goods that are predominantly rural in origin (food, coal, iron, etc.) are going to be, on average, much harder to replace in a growing city. This explains the import bias toward rural demand. (and again, check!)

This is fairly impressive; despite the repeated failures to predict correctly in prior chapters, this (and rumored good explanations of the mechanism of stagflation in her second book) give me more confidence that the theory has real validity.

Alright, Back to Exports

The tail end of the chapter talks about two things: the importance of exports in the growth of cities, and how new cities acquire exports and begin their growth.

To demonstrate export’s key role, Jacobs uses her native city of Scranton. While import replacement does a lot of work, it can’t bring in new imports. For that, you need your export industries to grow (probably not under your control), or your intraport industries to expand to export markets. When a city like Scranton replaces its imports and grows, but fails to diversify and create new export work, it will stagnate. Cities which successfully grow large, do so by repeating cycles of export creation and import replacement where the replaced industries create exports, the exports bring in more imports, and the imports get replaced in turn.

Which brings us to the start-up question. If cities exclusively grow by this two-part cycle, how does any city get on the bike? Your initial exports have to come from somewhere. The natural place is as suppliers for the growth of other cities; when London was replacing imports in the Elizabethan era, someone was supplying lumber and tobacco to them; the lumber came from Plymouth and Boston, the tobacco from depot cities in the southern American colonies. In these cases, they could not quickly begin import replacement because mercantilist restrictions prevented them from creating locally what England wanted to supply to them. But otherwise, they could use these initial exports to jumpstart growth.

She generalizes this and expands the claim to all cities. The first uses the justification of triangular trade to say that even cities like Detroit, which started out shipping flour to the undeveloped West Indies, grow from the expansion of other cities. She asserts that in this example, the demand for flour in was based on a demand for limes, rum, and turpentine, produced in the Caribbean and consumed in English cities; the flour would not be shipped if there was not a ‘spare’ leg to ship it on. I’m amenable to this conceptually, but I think a better argument is needed to really make the case.

The other extension is to early cities. There’s a neat aside ending the chapter, tracing the history of cities to the older cities whose growth created their first exports, and then tracing the chain back, through Rome and Alexandria to the very first cities. But in grounding it she claims again that the export/import-replacement cycle is the only way for cities to grow strongly, and that therefore there must have been a group of relatively strong protocities engaging in trade with each other and slowly generating exports before they started their first import-replacement spree and grew into cities proper.

Given the track record of extrapolating her other predictions backward and forward, I’m skeptical. It sounds plausible, but so did the first-city origin story and the speculation about recycling. So I’m inclined to want more evidence, even though this is a weaker claim and less contradictory of established consensus.

Extending The Logic

One interesting thought I had while reading this was ‘Why Cities?’ Most of this is conceptually general; it applies to the development of nations as well as to towns. Or to counties. Or in principle planets, not that we have others to trade with.

But most importantly, why not go smaller than cities? Why not the household? Sure, households have more lag-time increasing the labor supply to create new work, but there is a labor pool, frequently somewhat slack, and multiple sources of imports and exports. So why not?

It’s The CIIIIIRCLE of Growwwwth!

The Economy of Cities, chapter 4: The basics of a growing city’s economic system.

The fundamental process here is building up a “reciprocating economic system”. This is one in which work that acquires resources (imports) and work that turns them into strength of the local economy (jobs and diverse work) feed into one another, so that acquiring resources now creates even more resources acquired later and the strength of the local economy creates more strength. The two pieces are the export market (trade outputs for imports) and what I’ve named the intraport market (moving resources aroun in the local economy).

The need for exports is obvious; you must have some products that the outside world values and wants to import, or else no one will buy anything from you. This work also imports things of equal value in exchange, whether that is capital, raw materials, or consumer goods being bought with the profits.

The need for intraports is less obvious, and this is one of Jacobs’s new contributions.She observed that in order to make a local economy robust, it must have a diverse array of work that is used and re-used by different parts of the system; there must be local trade or the city cannot concentrate resources and attract people and new work.

Cities Starting Out

The processes in this chapter are those that dominate the early growth of a small city, and Jacobs sees these as coming in two types; those that start as manufacturing and those that start as trade depots. By the time they are large they contain a variety of both, and not necessarily the same specialty they began with, but these categories shape the early development. (As she mentions, Venice started as a village of salt sellers, and Chicago, a big manufacturing hub in 1968, had been primarily a trading city not long before, so the change of focus is well-supported.)

Young manufacturing cities export, but do not necessarily export much. They create, but initially not primarily for export, or in large quantities. But as they start to export, they look different from pure-export ‘company towns’ by quickly building intraport businesses to supply the inputs or partial products the exporters need. For example, at one stage in Detroit’s early development steamships were a primary export, and dedicated makers of engines sprang up.

Young depot cities are primarily focused on trading goods neither made nor used locally (we could call them ‘circumports’), being bases for traders, good ports for transferring from land to sea, or similar. Here, they look different from doomed trading fairs by the independent support industry that builds up alongside the traders; horse breeders, sailmakers, or railway repairmen, depending on the era. They are more likely to start with services than are manufacturing cities, and then later build up processing and manufacturing that piggybacks on the supplies concentrated locally, like weaving or canning.

Either way, cities that will stick around and grow should, by this analysis, show early on a diversity of export and intraport work; those lacking this should be expected to stagnate and fail to grow, not having achieved the city’s…

circle of life.

Some things can screw up this process, however. For example, if a city’s main export is cars and it starts building its own engines, but the car-making companies own all the engine manufacturers, they will probably not have an interest in finding alternate customers for the engines, and so the engine making won’t contribute properly to the strength an growth of the city. (This may seem to be a familiar example: this is not a coincidence. By this chapter, Jacobs has started to seriously hammer at her basic points and standard library of example cities.)  If the engine-makers are independently controlling their marketing and distribution – even if their main customer start and remain as the local car-makers – they have much more ability to sell to diverse purposes, be an input for new types of local work, and possibly become part of the export sector.

The circle of growth works like this: Any amount of exports is exchanged for a fixed and equal quantity of imports, which are presumed useful to local industry. High intraport industry in an area means that a higher proportion of these imports will be re-used an cycled through the local economy in various forms; this is the standard economic concept of the multiplier effect. A large intraport sector drives growth by employing more people as the money and goods cycle through locally, and also increases the diversity of goods and services available to base a new business or new work on.

Jacobs calls out this specific type of multiplier effect  the ‘export multiplier’, and promises to introduce other similar multipliers later in the book.

The chapter finishes with a short digression on cities not being dependent on geography for success. She notes that many strong cities are in suboptimal locations, and better-sited cities nearby are unsuccessful; particularly amusing given my audience is Alexander Hamilton’s strongly-held belief that Jersey City, not New York City, was the city of the future, as its port was better situated.

Closing Notes

In addition to the repeated wrong predictions of chapter 3, I am starting to get annoyed by the repeated appeal to anecdotes used in this book. It is true that at the time of writing, no one had been attempting to measure the things this theory considers important, so lack of strong statistics can be forgiven somewhat. But the anecdotes themselves are using the same handful of ‘case studies’ over and over, and that makes me suspicious that they will generalize.

A Beautiful Mess

The Economy of Cities, chapter 3: Aren’t big cities terribly inefficient and messy? What’s up with that?

Answer: Yes, but efficiency is incompatible with strong growth [citation needed].

The Good

Also, the largest cities are always inefficient messes until they solve the problems that hold them back, at which point their previous size becomes normal and the new largest cities are even bigger, constrained by other problems. She notes water supplies, storage of food, proliferation of draft animals without sufficient fodder crops, and disease as problems that have held back city growth at one time or another (in roughly chronological order).

Her theory for explaining why efficiency and strong growth never go hand in hand is proliferation of ‘breakaways’. This is a British term for when a team leaves a larger company and goes into business on their own, sometimes to try new markets or products but other times just to compete with the larger business. Breakaways are much better than large companies at discovering/creating new work while taking advantage of the expertise the large companies produce, but are terrible for efficiency.

There is also the important note that efficient, focused cities are vulnerable to an economic shift; the massive textile mills of Manchester were turned into vast empty buildings when the developing world acquired textile mills and ran them cheaper, and Detroit’s current terrible situation is obviously connected to the fortunes of the big US auto companies.

The Bad

Jacobs presents a number of predictions about the future, nearly all of which are totally wrong. Many of them are about what she saw as the problems holding cities back in her day and how they would be solved; most of these solutions involve productive recycling and green development, and many of them are familiar because they’re still being predicted to arrive any year now, fifty years later.

She also predicts that New York City’s economy was going to go to pot and that England’s attempt to drain off the energy of London and Birmingham to energize new towns and cities would inevitably fail; neither was true. It is true, though, that New York became more of a monoculture than it had been; it is more of a company town for finance than it was in her day, it just didn’t go as far as she expected in terms of wrecking the economy. I suspect strong personal bias on her part; development efforts she bitterly opposed were reshaping the city while she wrote this, and I think she was reaching for arguments to say that would go poorly.

Overall I am somewhat losing confidence in Jacobs as a thinker; even if the strongest version of the arguments for city-based economics has been written, I’m increasingly doubting it will be her books.

Working Is What We’re Busy Doing

The Economy of Cities, chapter 2: where does this all come from, anyway?

In this chapter, Jacobs presents a number of examples – some based on the fictional example city but most from modern industrial economies – of how old work creates new work, and discusses some ways that the structure of businesses can encourage or discourage this process. In short: if you want your economy to stay energized and develop in new directions, big companies are your enemy.

The core dynamic is that every task someone is working on persistently will produce byproducts, inefficiencies, and useful subtasks, some of which can be developed into entirely new useful tasks. The inventor of the bra was a dressmaker who wanted to improve the way her dresses fit. 3M started out trying to make sandpaper from their sand mining business, and in the process of making it, they created new adhesives and then a wide variety of novel and useful types of tape.

Jacobs’s insight is that the further work is subdivided, the more tasks there are where someone is spending their time focused on that task and how it could be improved; the inputs changed, the outputs made better, or the byproducts and side effects used for other purposes. Specialization leads to more opportunities, and also to more domain knowledge; someone who just sorts sand might have the idea to turn the different grains into sandpaper where someone who oversaw the entire digging, crushing, and sorting process might not have the same focused expertise.

(Yes, it seems a little silly to talk about sand-sorting expertise. But hey, you could be a connoisseur of Joe Biden eating sandwiches, why not sand?)

This ties back to Jacobs’s earlier work in zoning  briefly; she points out that when new work splinters off old work, it rarely will be confined to the same industrial category. Heavy industrial manufacturing might lead to ideas about a better lubricant (chemical manufacturing) or retail sales can lead to making more of the product you sell (light manufacturing). This is also a problem with guild systems and credentialing; there is a historical example where silver-plated knives and forks were created in the London guild of knife-makers and fought bitterly by the goldsmiths, who had historic rights to all silversmithing. New work arises unpredictably, so regulating what companies are allowed to do risks preventing them from exploring new ideas.

Her most famous example, the Japanese bicycle industry, also shows up here; surprisingly, it goes along with the origins of Ford Motor Company. Both manufacturing processes started with an ecosystem of parts suppliers; in Japan this was bicycle repair shops, for Ford it was the machine shops of Detroit. They both then began building new vehicles from the parts purchased elsewhere, then gradually moved their suppliers to dedicated manufacturing for their own products; Ford expanded his facility and hired more workers to create parts in-house, while in Japan it became the zaibatsu system of vertical monopoly, where the former repair shops were now dedicated suppliers of specific parts for the bicycle manufacturers.

nintendocards
Then

(In another example of new work drifting far from old: A Japanese playing card manufacturer eventually moved into electronic games, and then arcade games and home video game consoles. They are now known as the creators of Mario.)

mario_and_luigi
Now

Critically, large companies are structurally opposed to this process. Even when operations are split into small teams, for the sake of avoiding chaos a large company can’t let each of them investigate every fruitful-looking side project they see. For one thing, this would give any marketing or branding team headaches; for another, bookkeeping would be a nightmare. For certain, most of the benefits of scale would be lost.

At one point the University of California system attempted to engage in this, letting all of its departments and professors contract directly with different agencies and companies to do whatever research they needed or whatever specific tasks they might want that an academic lab might do. (Dr. Clark Kerr’s ‘multi-versity’ concept.) Predictably, it was a mess, and eventually abandoned. Before it was, one suggestion was that they farm out the independent research teams to separate institutions (like Caltech does with the JPL or Stanford did with the Stanford Research Institute). This is what is known in the UK business world as a ‘breakaway’.

Jacobs is very fond of breakaways as a means for large companies to create productive work, though this does not seem to be particularly fruitful in terms of implications. Clearly she would be very much in favor of Stanford and the SRI producing Silicon Valley and similar phenomena around other universities, but as far as finding benefits for the company that allows the breakaway or observations on what environments encourage them, she is silent. It suggests to me that if you want to have a developing country benefit from importing a factory, the right thing to do is to insist on it training its employees in ways that encourage and allow breakaways, but there are a lot of natural obstacles for that going anywhere.

She has further bad things to say about bigness; it is a fairly easy observation that large companies grow now, as then, almost exclusively by buying smaller companies and merging with other large ones; they do not create new markets or products. (Since she wrote, expanding existing brands into foreign markets has become popular, probably because it is much easier for a brand to carry perceived value after decades of global television and a decade of global internet; her point remains.) R&D divisions, as is increasingly recognized since then, are not only artificial but also frequently ineffective or even counterproductive.

One example of what it takes for a large organization to create new work, which serves as a  rule-proving exception, is IBM. (A little less inspiring these days, sure, but still relevant.) It grew when small by buying a patent on electric typewriters existing companies didn’t want, and then stagnated. When it added an early computer to its lineup, it had to restructure radically to provide training, programmers, and places to rent mainframe time, none of which matched its original skillset. That done, it grew rapidly and then stagnated, staying basically the same through to the present day and losing ground to newer innovators.

There are two main conclusions here:
One, divisions of labor is not inherently a good thing. It is useful to some degree for creating jumping-off points for new work, and specializing can make an existing process more efficient, but it’s not good in its own right, and splitting it up for its own sake is more likely to be harmful than helpful.
Two, growth is an explore/exploit tradeoff. It is useful to grow to do old work faster, but inhibits the discovery and creation of new work and new techniques.

Also, one semi-prescient direct quote:

When large organizations actively try to add new goods or services to those they already produce, they create, like special reproductive organs, special divisions of labor for that purpose called research and development departments. These are substitutes, or surrogates, for the great body of sterile divisions of labor. But by definition, the parent work on which R & D can build, in comparison with the organization’s total work, is exceedingly limited. And even within these limitations, the new work that the researchers find it logical to develop frequently turns out to be irrelevant or hostile to the interests of the organization as a whole. Hence we have the paradox of useful inventions neglected by the very organizations that have “taken the trouble” to develop them.

Cities Aren’t Just Best, They’re First

Alright, let’s start this off. The Economy of Cities, chapter one: right at the most controversial part of Jacobs’ thesis (and, it seems like, the most separable part): She claims that the first cities predated agriculture.

Her argument is a just-so story, together with arguing that the mainstream view is also a just-so story. Her view of the mainstream, paraphrased:

Adam Smith, in the Wealth of Nations, observed that (circa 1770) countries with the least industry also had the least productive agriculture, and even in industrial countries the most productive agriculture was nearest the cities. He nonetheless asserted that agriculture preceded cities, and that only food surpluses from successful agriculture enabled specialization and the formation of cities. (Jacobs says he makes this claim largely due to taking the Bible, specifically the creation of Adam and the Garden of Eden, as gospel, and points out that this was significantly before Darwin and before the first findings that established that the world was very old, and so this kind of unquestioned assumption was not unusual.) Marx questioned and re-evaluated many of Smith’s positions, but not this, and since then both economists and anthropologists have taken it as given and cited the other group’s findings as the reason we are sure of it.


 

Though archaeologists are frustratingly vague about how they are so certain*, they were aware of her ideas pretty quickly and did not consider them worthy of comment. This paper much later summarized (badly) the evidence against the cities-first theory; the upshot is that animal domestication and plant crossing began before villages in some cases, and the latest they can be placed is cooccurring with the development of the earliest large-scale settlements, like the example Çatalhöyük. The differences are multiple millenia, using carbon dating times which are +/- a decade or two and strata-based relative dates with error bars measured in centuries at most, so unless the field collectively has its head stuck in the sand it’s a strong case.

EDIT: A recent survey accidentally discovered what appears to be the remains of a 9000-year-old city. If true, this derails conventional wisdom about city formation enough to bring Jacobs back to viability.

The general outline of Jacobs’s just-so story is refuted, but not all the details, so I’ll sketch it for you. A trading post for a tribe that harvests obsidian from volcanic deposits and their neighbors develops, and many tribes come from distant places to trade for obsidian, bringing nonperishable food (live animals, seeds and nuts) and useful trade goods. The permanent population start being a good trading site for disparate things, not just the original obsidian. The excess live animals and seeds lead to good conditions for developing planned agriculture and domestication. Eventually they have excess food from their own production and spin out herding and farming to their environment and along the trade routes, becoming a properly specialized city.

As noted, the story by which this is the (or even an) origin of agriculture is unsupported. But it does show how Jacobs’s core idea of import replacement could function for early cities and for agricultural technologies, which lead into the important and not discarded piece of this theory: medieval Europe. Medieval Europe (circa 1000 CE) had lost all the tools and methods of Roman agriculture; even the institutionalized monastery farms still kept mostly trappings despite their size. Romans alternated two crops between their two fields; medieval farmers reused fields for several years until they grew unfruitful and were left to lie fallow for several years until they burned it and retilled the ashes. When the three-field system of grain farming was invented (a three year rotation, wheat -> oats -> empty), it was first used in the interior farms of walled towns and cities and spread along trade routes. Roughly 600 years later, the innovation of planting alfalfa as grazing fodder in the third year, which was a massive increase, spread the same way, starting in city gardens in France. This has continued to the modern day.


 

My general takeaway: as far as the claim that most technological innovations start in cities and that this applies robustly to agricultural technology, it seems pretty solid. These examples are well documented, and others, in modern America (corn-fed beef and the machine hoe) and older (experimentation with animal domestication in ancient Egypt) provide reason to believe this is robust. But it did not extend back to the origins of cities, so possibly more investigation, which Jacobs probably did not do, would be needed to determine what regimes it holds over.


*As far as I can tell, it is ‘radiocarbon dating handwave handwave these are serious archaeological techniques handwave therefore agriculture is older’