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The Nature of Economies

Nearly forty years after The Death and Life of Great American Cities forever changed the field of urban studies, Jane Jacobs--one of the few contemporary thinkers whose works will remain in print for generations--brings us a modern classic on economies and ecology. Original and eloquent, this new book looks at the connection between the economy and nature, arguing that the principles of development, common to both systems, are the proper subject of economic study.
        
The Nature of Economies is written in the form of a Platonic dialogue, a conversation over coffee among five contemporary New Yorkers. The question they discuss is: Does economic life obey the same rules as those governing the systems in nature? For example, can the way fields and forests maximize their intakes and uses of sunlight teach us something about how economies expand wealth and jobs and can do this in environmentally beneficial ways? The underlying question is both simple and profound, and the answers that emerge will shape the way people think about how economies really work.
        
The New York Times described Jane Jacobs's The Death and Life of Great American Cities as "first of all a work of literature." The accessibility of her prose--The New Criterion called it "majestic"--stands as Jacobs's hallmark. She is the rarest of analytic thinkers, both an economic visionary and an artist. Examining complex systems with the wit, style, and clear eye of the masterly essayist, in The Nature of Economies Jacobs once again accomplishes the near impossible: She fundamentally challenges some of the established principles of economics while writing in a style that enthralls the general reader.
Excerpt
From Chapter One: Damn, Another Ecologist

"Hortense and Ben have broken up," said Armbruster, waving a fax at Kate as she slid into the booth, balancing her cup of coffee.
"I'm sorry but not surprised," said Kate. "Remember how Ben used to gloat over industrial disasters? He thought everything industrial or technological was unnatural and that everything unnatural was bad."
"He meant well," Armbruster said. "We need Jeremiahs, but it must have been depressing for Hortense to live with one. It seems the breakup happened some time ago and she's gotten over it. She's interested in a new man. Mind if I finish this fax? I only got it as I was leaving the house."
In late morning they were sitting in an almost-empty coffee shop on lower Fifth Avenue, not far from Armbruster's Gramercy Square apartment. It was an unappealing restaurant in a stretch of New York rapidly going upscale. Armbruster liked it as his morning hangout because its well-deserved unpopularity guaranteed seats for acquaintances dropping by. He lived alone, and since his retirement from a small book publishing company, he missed his work and its daily give-and-take with colleagues.
"Damn, Hortense has found another ecologist," Armbruster grumbled as he continued reading the fax.
"That's not surprising, either," said Kate. "She's an environmental lawyer, so those are the people she talks to, consorts with. Those and other lawyers."
"But listen to this: His name is Hiram Murray IV. The Fourth! What an affectation."
"He's not to blame if his family ran out of names."
"You drop off the numbers when they die. I dropped off my Junior when my father died. Only kings and popes hang on to numbers."
"Maybe the other three are still alive--you don't know."
"Let's see," Armbruster mused aloud. "Number two would be his grandfather, and number one--" His eyes widened, exaggerating his customary owlish expression. "Good heavens, Hortense is fifty. You don't suppose--"
"No, I don't think Hortense is running around with a kid. Read on."
"Well, well, she's planning to come back from California," Armbruster read on. "He has a house in Hoboken. What's an ecologist doing in Hoboken? She says I'll like him and she's bringing him over a week from Thursday unless she hears otherwise, and so on."
"May I come too?" Kate asked. "It'll be wonderful to see Hortense again. And remember, Armbruster, I'm a fringe ecologist myself."
When Kate was denied tenure a few years previously in the biology department of the Long Island university where she taught and did neurobiological research, she found a job on a prospering science newsweekly, partly on the strength of her editing experience on Systems of Survival, a dialogue she and Armbruster had put together from conversations and reports by a little group Armbruster had got up to explore the different moral systems appropriate to different kinds of workers--such as police, legislators, clergy, and others holding positions of public trust, on the one hand, and manufacturers, bankers, merchants, and others in commercial pursuits, on the other. Hortense, who was Armbruster's niece, had been one of the group. During her first several months in her unfamiliar work on the weekly, Kate had frequently asked Armbruster for help and advice with her editing. After she no longer needed his guidance, she continued to drop in on him from time to time out of friendship.
A week from the following Thursday, at Armbruster's small apartment--crowded with books and signed photographs of authors on walls and tabletops--Hortense and Kate greeted each other affectionately and Hortense introduced Hiram. At tedious faculty meetings, Kate had learned to pass the time by imagining childhood versions of her colleagues' faces. Now, in Hiram, she saw a well-brought-up, thin-faced, eager boy grown into a good tweed suit and a receding hairline, his eagerness still intact.
As Hortense sat down on the sofa, Hiram remained standing, distractedly patting his jacket pockets. Kate glanced around the room in puzzlement. "Did you lose something, or mislay it?" she asked him.
"No, why--oh." He dropped his hands and smiled sheepishly. "I quit smoking five weeks and four days ago, and I still keep hunting for a cigarette." Hortense, Armbruster, and Kate, reformed smokers all, smiled sympathetically and Hortense patted his hand as he sat down beside her.
Knowing that Armbruster would be itching to deal with Hiram's dynastic pretensions, as soon as they were settled with drinks Kate remarked offhandedly to Hiram, "That Four after your name is unusual. Not unheard-of, of course, but unusual."
Hiram made room between a book and a photograph on an end table and set down his drink. "My father's a splendid old man, but he insists on being Three, so I have to be Four. He's an economist and he would've liked me to be an economist, too, but after a try I dropped it for environmental studies. Most people I knew--this was thirty years ago--thought that it was like majoring in canoeing or bird-watching, but Pop took what I was doing seriously. I just mention this to show how minor his crotchet about the numbers is. 'Live and let live' runs both ways. But I did draw a line. My own son is named Joel."
"What do you do as an ecologist?" asked Armbruster. "Rally people around to save the woods and punish polluters?" Hortense and Kate exchanged glances, as if to
acknowledge Armbruster's implicit, not very kindly, reference to Ben.
"No, although saving forests and reducing pollution are important. I'm a fund-raiser and facilitator. Specifically, I give organizational advice and help find grants for people-- scientists--most of whom are trying to develop products and production methods learned from nature. Biomimicry, that approach is called. There's a book about it by that name. I'll get you a copy if you're interested. Two copies," he added, turning to Kate.

"Oh, I have it. I reviewed it," said Kate. "It's a good book, Armbruster. Broadly speaking, the aims are to make better materials than we manufacture now, but to make them at life-friendly temperatures and without toxic ingredients, like the filaments spiders make or the shell material abalones construct, for instance. Ideally, by imitating the chemistry of nature, we should be able to make materials and products by methods that are benign and, at the end of their lives as products, return them to earth or sea to degrade benignly."
"So many other possibilities are being explored," said Hortense. "Think of the energy, soil, artificial fertilizer, and chemicals such as weed killers that could be saved if grain fields didn't require annual plowing or planting--if wheat or rye could grow like perennial grasses in prairies. All green plants capture sunlight, but it's a puzzle and wonder how duckweed captures sunlight so effectively and uses it so efficiently. That's worth learning from. You get the idea, Armbruster?"
"Interesting," Armbruster replied, "but it sounds like just another way for us to exploit nature--trying to get out of technological messes with more technological messes."
Kate suppressed a snicker at Armbruster's mischievous adoption of Ben's persona and glanced at Hortense to catch her reaction. Hortense, who usually remained cool and elegant under provocation, uncharacteristically bristled. "No! This isn't exploiting nature! It's learning from nature, with the object of undoing damage and getting along with nature more harmoniously. Biomimics are the last people deserving thoughtless dismissal, Armbruster. You have no idea how difficult these puzzles are, how hard and complicated it is to learn the way prairies manage to replenish themselves year after year. What's gotten into you? You didn't use to be so negative and glib. You sound like Ben!"
"Just curious. You've put me in my place. But if these endeavors are so difficult, they may not be practical."
When neither Hortense nor Kate replied, Hiram spoke up again, rubbing his forehead thoughtfully. "Biomimicry is a form of economic development. So caring about biomimicry requires caring about economic development--hoping it continues vigorously. Otherwise, we can't hope for better products and safer methods. How else can we get them? Thinking about development has made me realize how similar economies and ecosystems are. That's to say, principles at work in the two are identical. I don't expect you to believe this just because I say so, but I'm convinced that universal natural principles limit what we can do economically and how we can do it. Trying to evade overriding principles of development is economically futile. But those principles are solid foundations for economies. My personal biomimicry project is to learn economics from nature."
"Bravo!" said Armbruster, sensing a book in the making. His eyes shifted to the tape recorder on a shelf.
"Uh-uh, Armbruster," said Hortense. "No symposium; no reports. Not again. Can't we have a conversation without that recorder?
Can't we just talk? Can't you forget about trying to produce a book? There are so many other interesting things you could do, now that you have time." Kate caught Hortense's eye and, waggling her eyebrows, signaled to Hortense to pipe down.
"Producing a book never crossed my mind," Armbruster lied. "But it did cross my mind that I'd like a tape. Economic development interests me, too. What harm?"
"I don't mind if Kate and Hortense don't," said Hiram. He finished the last of his drink and set down his glass, with a questioning smile directed first to Hortense, then to Kate.
Hortense shrugged and Kate grinned while Armbruster moved his machine to the coffee table, pushed the record button, nodded to Hiram, and said, "What did you mean about learning economics from nature? Economies are human, not natural. They're artificial, with the possible exception of primitive foraging."
"A common assumption, and one can see why," said Hiram. "After all, only human beings employ smart, educated border collies to herd sheep. Only human beings build hospitals and operate on cleft palates, or wrap snacks in plastic, or issue credit cards and send monthly bills. We differ from other creatures in the ways we make our living, but different doesn't necessarily mean artificial. We don't call bees' activities artificial because they manufacture honey, nor beavers' because they log and build dams, nor seahorses' because the males hatch and nurture the young. We don't call sunflowers artificial because they're so much taller than daisies. Our own manual dexterity and brains are created by nature. What we can do with those assets comes to us as naturally as the ability to spin webs and to sting netted prey comes to spiders."
"Not so fast," said Armbruster. "I didn't mean we're biologically artificial but that we create artificial things and impose them on the world of nature. We make artificial leather, artificial turf for stadiums, artificial teeth, artificial ice, and so on. How can you say human beings don't have artificial economies?"
"Armbruster, that's like accusing spiders of artificiality because they're spinning something other than cotton, flax, silk, wool, or hemp fibers," said Kate. "Please relax and let's listen before we argue."
"If we stop focusing on things," said Hiram, "and shift attention to the processes that generate the things, distinctions between nature and economy blur. That's not a new idea. Early ecologists were quick to see--"
"Who were the early ecologists?" asked Armbruster.
"Botanists who became interested in plant communities--groups of plant species whose interdependence seemed so similar to economic relationships that the naturalists coined a new word for natural communities of organisms and based it directly on the word economy. That was late in the nineteenth century."
"Wait!" said Armbruster, darting to his unabridged dictionary. "Aha, economy is derived from two Greek roots--oiko, meaning 'house,' and nomy, meaning 'management': house management. Ecology comes from the same root for 'house,' plus the root logy for 'logic' or 'knowledge.' So ecology literally means 'house knowledge.' Now, that's strange, isn't it? Bio, meaning 'life,' and nomy, 'management'--bionomy, 'life management,' would have been more to the point. Victorian scholars were well grounded in Greek. Odd that they embraced jargon as imprecise as ecology."
"Not odd when you realize they thought of ecology as 'the economy of nature,' " said Hiram, "a definition still in currency. The very sound of their new word tagged it as the twin of economy. That was their point, regardless of literal meaning. They were studying the economy of nature. I'm studying the nature of economy. Same affinity, glimpsed from an opposite angle.
"Natural processes obviously aren't founded on human behavior," Hiram continued. "Instead, nature affords foundations for human life and sets its possibilities and limits. Economists seem not to have grasped this reality yet. But many people engaged in various economic activities do realize it's important to learn from nature and apply the knowledge to what they do. For instance, modern metallurgists can observe the changes that take place in lattices of metallic crystals owing to temperature variations and alloy combinations--information old smiths had no access to, because they didn't have X-ray crystallography. Architects and engineers accept the reality of natural forces
of tension and compression and the help of tables of properties of construction materials. Wine makers, cheese makers, and bakers grasp and value their cooperative relationships with yeasts and bacteria; sanitary engineers, physicians, and organic farmers have learned to do the same and are still learning.
"In sum," he went on, "all kinds of people now understand that their success depends on working knowledgeably along with natural processes and principles, and respecting those processes and principles. That's very different from supposing that success depends on lore handed down from supernatural sources or on blind trial and error--and diametrically different from supposing that human beings are exempt from nature's dictates or that they are masters of nature.
"To repeat, I'm convinced that economic life is ruled by processes and principles we didn't invent and can't transcend, whether we like that or not, and that the more we learn of these processes and the better we respect them, the better our economies will get along."
"That sounds pretty pessimistic," said Armbruster. "Here we are, already loaded up withgovernment regulations. And now you want to compile still more lists of economic rules and regulations decreed by nature?"

"Limits are part of it," replied Hiram. "Awareness of them can prevent futility. Alchemists did better after they gave up trying to turn base metals into gold and to discover a universal solvent and instead applied themselves to studying chemistry. But here's what interests me most: Natural principles of chemistry, mechanics, and biology are not merely limits. They're invitations to work along with them.
"I think it's the same with economics. Working along with natural principles of development, expansion, sustainability, and correction, people can create economies that are more reliably prosperous than those we have now and that are also more harmonious with the rest of nature."
"I'm glad to hear you say 'the rest of nature,' " said Kate. "If it's actually true that natural processes rule human economic life--or could if we'd let them--it follows that we're an integral part of the natural world instead of its mere disturbers and destroyers."
"That's not necessarily a reassuring thought," said Hortense. "Plenty of other animal species have naturally gone extinct, along with their practices, whatever they were--you know that, Kate. Nothing is more unforgiving of error than nature. If we poison our own water and air with hormone-mimicking chemicals that we don't understand, it isn't reassuring to realize that nature's solution for maladaptations is extinction."
Armbruster cut short the potentially interesting point Hortense had raised. "Before we move on to anything else," he said, "I'd like to mention a few subjects that I consider economic fundamentals. You haven't said one word about money. But economics is first and foremost about money. What does nature say about money?"
"Nature says money is a feedback-carrying medium," Hiram replied. "Money is useful to economic self-regulation in the process we've come to call negative-feedback control. But the usefulness of money is far from enough to explain how economies work."
"What about the law of diminishing returns?" asked Armbruster. "First you cream off what's easiest and cheapest to exploit, then getting more is increasingly hard and expensive. That's certainly fundamental to economic life."
"The law of diminishing returns is truthful and harsh," said Hiram, "but it explains little about economic life in the absence of the converse law, which we might call the law of responsive substitution, meaning that people seek or cotrive substitutes for resources that have become too expensive. Obvious examples have been domesticated animals in place of wild game; petroleum in place of whale oil and, later, coal; plastics in place of tortoiseshell and ivory. But that raises questions about development which demand some analysis of development in the rest of nature."
"What are you going to do with your project of economic biomimicry?" asked Armbruster.
"Write a book, I suppose," said Hiram. "Or put it on the Web. Or make practical use of it, advising clients. But that's premature. I've only partly formulated it. This isn't my work, just my hobby, a sideline. My main work is finding funds to keep other biomimics going--even though they're a frugal lot."
"I don't want to pry," said Armbruster, "but what do you live on? Commissions from grants you help to find?"
"No, I get paid for my time as a consultant. And I
do some lecturing. Fortunately, I inherited my Hoboken house from my mother. It's enough room for my office and two apartments that I rent out, as well as my own apartment. I drifted into consulting after my father and I provided a little capital to a group in New Jersey working with novel and promising ways of treating sewage. I soon saw that development work of that sort needed more research and experimental capital than we could dream of affording, so I began hunting for more and turned out to be good at it. You could say I found a niche in the environment. I can't imagine doing anything more interesting, because of the amazing people and ideas I get involved with, but it doesn't leave me much uninterrupted time."
"Which reminds me how late it is," said Hortense,
rising.
"Wait," said Armbruster. "All you've told us is why you think learning economics from nature isn't outlandish. You haven't told us what you've learned. Can't you go a bit
further?"
"Better not tonight. But we can arrange a time for me to bring you that book I promised and to talk some more." As Kate, Hortense, and Hiram were putting on their coats, Armbruster jubilantly stuck a Post-it note on his refrigerator door, reminding himself to stock up on blank cassettes.