End the Fed?
The first chapter of Cities and the Wealth of Nations is titled "Fool's Paradise." Jane Jacobs takes aim at the economic elite and pulls no punches. It starts as follows:
For a little while in the middle of this century it seemed that the wild, intractable, dismal science of economics had yielded up something we all want: instructions for getting or keeping prosperity. Economists and the rulers they advise had thought up so many ideas for ridding national and international economies of chanciness and disaster, and the ideas had such an air of rationality, predictability and informed statistical analysis, that governments took to supposing they need only muster up a commitment, expertise and money to make economic life do their bidding.
She then proceeds to eviscerate macroeconomic practice as thoroughly as any modern critic of the Federal Reserve. And this in 1984, before the sharp relief brought about by Black Monday, the S&L bailout, the Long Term Capital Management bailout, the bailout of the Mexican peso, the dot.com bubble, the housing bubble, the subprime crisis and the current period of asset inflation, interest rate suppression and quantitative easing. This was the first Jane Jacobs book I had read. I was astounded.
Why were my liberal, big government friends asking me to read Jane Jacobs?
Macro-economics -- large scale economics -- is the branch of learning entrusted with the theory and practice of understanding and fostering national and international economies. It is a shambles. It's undoing was the good fortune of having been believed in and acted upon in a big way.
We think of the experiments of particle physicists and space explorers as being extraordinarily expensive, and so they are. But the costs are nothing compared with the incomprehensively huge resources that banks, industries, governments and international institutions like the World Bank, the International Monetary Foundation and the United Nations have poured into tests of macro-economic theory.
Never has a science, or supposed science, been so generously indulged. And never have experiments left in their wakes more wreckage, unpleasant surprises, blasted hopes and confusion, to the point that the question seriously arises whether the wreckage is reparable; if it is, certainly not with more of the same.
Boom. Mic drop.
Of course, she had to endure the critics who felt she was too uneducated, too naive and too....well....female to speak so forcefully on subjects she should know little about. Wikipedia notes that she did not have a college degree and was criticized for being unscholarly and imprecise (read: non academic). Her obituary in the New York Times quotes a Harvard professor as saying that Jacobs has "transparent gaps and blind spots, such as her blasé misunderstandings of theory." That one made me laugh. "Misunderstandings of theory" is a euphemism the elite use in condescension when a more accurate description, especially in Jacobs' case, would be: theories understood and wholly rejected.
“She was a courageous intellectual wanderer who truly knew no limits. The world needs more like her.”
As a man with initials indicating bestowed credentials behind my name, I've largely been immune from such shallow treatment, yet I've experienced some of it when I've wandered outside my lane. Over the years, many in the Strong Towns audience have been critical of my thoughts on macroeconomic policy and derisively called on me to "read some Krugman," as if I hadn't already. What I see in Jane Jacobs, and what inspires me so much about her, is the rigorous approach she brings to thinking about complex issues. She was a courageous intellectual wanderer who truly knew no limits. The world needs more like her.
In trying to explain the world she observed, she would ask a question and then follow the answers wherever they might lead. As one goes through her books, a truly scientific mind is exposed, one whose thought process is both linear -- ask a question, seek an answer, ponder the implications -- yet arrayed through a vast number of dimensions. Genius may come with credentials, but it doesn't require them.
Cities and the Wealth of Nations skewers dogma in a relentless march towards one of Jane Jacobs' most important insights: that cities, not nations, are the central organizing geography around which economies are structured. The implications of that insight are staggering, yet we seem even further from organizing our economy along these lines than when her thoughts on the matter were written decades ago.
Several centuries of hard, ingenious thought about supply and demand chasing each other around, tails in their mouths, have told us nothing about the rise and decline of wealth. We must find more realistic and fruitful lines of observation and thought than we have tried to use so far. Choosing among the existing schools of thought is bootless. We are on our own.
Correction: She was on her own. We have Jane Jacobs to learn from.
Charles Marohn (known as “Chuck” to friends and colleagues) is the founder and president of Strong Towns and the bestselling author of “Escaping the Housing Trap: The Strong Towns Response to the Housing Crisis.” With decades of experience as a land use planner and civil engineer, Marohn is on a mission to help cities and towns become stronger and more prosperous. He spreads the Strong Towns message through in-person presentations, the Strong Towns Podcast, and his books and articles. In recognition of his efforts and impact, Planetizen named him one of the 15 Most Influential Urbanists of all time in 2017 and 2023.