THE NATURE OF ECONOMIES

Jacobs burst on the scene in 1961 with The Death and Life of Great American Cities, a book that helped prevent the destruction of Manhattan’s SoHo manufacturing district by highway builders. Before moving to Canada in 1969, she was deeply engaged in stopping Westway, another monster highway project in New York. She arrived in Toronto only to find the Spadina Expressway bearing down on her home. She stopped that, too.

Death and Life and its successors, The Economy of Cities (1969) and Cities and the Wealth of Nations (1984), were works of economics by a journalist. The community of technical economists, accustomed to writing in highly mathematical language, ignored her (with the honorable exception of Robert Lucas at the University of Chicago). So, giving up on them, Jacobs switched to a different form.

Systems of Survival (1992) and, now, The Nature of Economies are Platonic dialogues among a handful of imagined citizens who inhabit a civilized New York quite like the city Jacobs left: Armbruster, the retired publisher; Kate, the science writer; Hortense, the lawyer; Hiram, the fundraiser for students of "biomimicry" (which is really Jacobs’s topic); and Murray, Hiram’s economist father. These books are amusing to write, fun to read, but perhaps also confusing to, say, people flustered by the fictional narrator of Edmund Morris’s memoir of Ronald Reagan, Dutch.

Though it is a short book, The Nature of Economies is intended as a summa, an attempt to state three overriding principles of economics in terms of ecological and evolutionary processes. First, economic development is differentiation emerging from generality (the log used as roller becomes a wheel). Second, successful differentiations ordinarily are not final; they become generalities from which further differentiations emerge (the cart wheel becomes a spoked wheel, a waterwheel, a windmill, a propeller, a food processor). And, third, all differentiation depends on codevelopment in the ubiquitous competition for resources (the wheel becomes a gear and then a hundred different types of gear). Illustrations drawn from history and nature spin out like kittens chasing their tails.

The idea that economics and ecology have much in common is not new. The great Victorian economist Alfred Marshall was famous for his opinion that "the Mecca of the economist lies in economic biology rather than in economic dynamics." But biological analogies were complex and little understood, while one could say something concrete using dynamic models, such as three balls in a bowl to demonstrate equilibrium.

Jacobs hasn’t solved the technical problem of developing biological models either, but she does succeed in explaining her view of economics with astounding clarity, probably because she never acquired the carefully wrought blinders of the professional economist. To the well-known "law of diminishing returns" she opposes the "law of responsive substitution," meaning that people contrive substitutes for resources that have become too expensive. In contrast to the ordinary postulate of universal self-seeking, she observes that the oldest economic generality of all may be the practice of sharing. One of our sharpest observers for the past 40 years, Jacobs is more acute than ever.

—David Warsh