Drift as a city’s economic driver

Some years ago, Jane Jacobs published a series of books that take up the issue of how cities contribute to regional and national economies. In particular, Jacobs argued that a particular kind of city behavior was crucial for a regional economy to thrive. That city was one that pursues two systems of production, exporting, importing, and import replacement that leads to new exports. Here are two diagrams from The Economy of Cities. The first diagram identifies a system by which produced goods “P” are exported, resulting in new income for the city, which it then can use to increase its imports of whatever it wants–raw materials, manufactured goods, and the like:

The second system then feeds on the financial resources and opportunities made available by the first system:

 

In the second system, a city replaces imports with goods that it produces for itself. These goods then create opportunities for new exports. In some cases, imported goods are of high quality, and when these imports are replaced, it is not necessarily the case that these replacements are of the same high quality–but they don’t have to be, at least not at the outset. Instead, they just have to be good enough to be useful and affordable in the city, and useful and affordable to those in other cities that don’t want (or cannot) pay a premium price for the highest quality goods otherwise available for export from the cities that specialize in these goods. In other situations, a city’s new exports may be better than the imports that the city replaces, the result of better raw materials, better workmanship, more efficient production or shipping, innovation in design.

In this second system, imports are replaced with new exports, generating more income available to keep the system going–producing new goods that replace imports, expanding those new goods to create new exports, using the income from the new export to acquire new and interesting imports.

Jacobs works through the implications of adding new work to existing work–branching out from a basic product to produce new products. Jacobs gives numerous examples from history, such as a New York dressmaker adding new work to make brassieres–eventually starting Maidenform. Similarly, 3M started by selling sand and gravel products. They branched out into sandpaper, but to get the sandpaper to perform well, they had to figure out adhesives. Each new piece of added work brought with it new subtasks, new capabilities.

Jacobs illustrates this process:

 

A given production process D consists of a set of “divisions of labor” that collectively produce a product. When new work is added, A, that new work in turn creates new divisions of labor, and some of those divisions of labor in turn may create additional added work. In this way, a producer of goods may add new products, may shift to a primary focus on the new products, or may spin off (or employees leave to spin off, or suppliers of raw materials shift) to make new products, creating new work.

Jacobs makes it clear that in the historical record she doesn’t find that these systems are ones mandated by city or national governments. A government does not decree that there will be new work and so obtain it, or when such things happen, the cities involved do not include such work in the economic systems that make them vital. Instead, they go through the required motions for as long as the government is willing to support the required new work.

As Jacobs argues in the last chapter of Cities and the Wealth of Nations, these systems of production, export, import, and import replacing new work, creating new exports is one of drift. This idea proposes something entirely alien to the claims of economic management by governments. Stuff happens because capable, creative, clever, motivated people drift into opportunities:

In its very nature, successful economic development has to be open-ended rather than goal-oriented, and has to make itself up expediently and empirically as it goes along.

That is, the driver for economic change–new products leading to exports that create the wealth to acquire new imports, and then replacing those imports with new products that create new work, leading to opportunities for further exports–is not management but drift.

Jacobs’s argument is that cities–and especially cities that exhibit an ability to cultivate this driver, this ability to see new products and create new work, are the engines of economic prosperity. Everything else revolves around and depends on these cities. Some cities have a great flowering of industry, produce a product, and then never produce anything but that product–efficiently, prosperously, obsessively–until other cities replace that product with their own products or markets shift and the original product is no longer in demand, and all the city’s production capacity and expertise and regulatory environment has little to do with the new work that would have to be undertaken to change things. Cities that cannot create new work and new exports decline. It may take years, but they rarely are able to come back with something new once their primary export fades.

If we want to consider a university’s research programs as participating in a city’s economic life, we might do well to spend some time considering how research findings support a city’s ability to drift.

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