The Economy of Cities

Jane Jacobs argues that cities, not farms, are the origin of economic development, and that economic growth happens in cities through a specific process she calls adding new work to old.

Her opening claim reverses the standard account. The conventional story holds that agricultural surplus permitted the growth of towns. Jacobs argues that agriculture developed in settlements engaged in trade, and that cities came first, using a hypothetical reconstruction she calls New Obsidian to make the argument. The historical evidence for this was thin when she wrote and remains contested, and readers should note that.

The more durable argument concerns how city economies grow. Jacobs describes import replacement: a city imports goods, then begins producing some of them locally, which frees its earnings to import different things, which are then also replaced, in a repeating cycle that expands and diversifies the local economy. She argues that new work emerges as an addition to existing work, when someone doing one thing develops a variation, and that this requires a dense and varied local economy with many small enterprises rather than a few large ones. She is consequently critical of economic development policy that pursues large employers, of company towns, and of efficiency achieved through specialisation, arguing that inefficient variety is the condition for future growth. The framework anticipated much of the later economics of agglomeration and remains influential in urban economics.