Jane Jacobs, Austrian?
By Arnold Kling
I just finished reading The Economy of Cities, a book written in 1969 by Jane Jacobs. An excerpt from her conclusion:
The primary economic conflict, I think, is between people whose interests are with already well-established economic activities, and those whose interests are with the emergence of new economic activities. This is a conflict that can never be put to rest except by economic stagnation…other things being equal, the well-established activities and those whose interests are attached to them, must win…The only possible way to keep open the economic opportunities for new activities is for a “third force” to protect their weak and still incipient interests. Only governments can play this economic role. And sometimes, for pitifully brief interludes, they do. But because development subverts the status quo, the status quo soon subverts governments. When development has proceeded for a bit, and has cast up strong new activities, governments come to derive their power from those already well-established interest, and not from still incipient organizations, activities and interests.
As the foregoing passage suggests, Jacobs offers a distinctive view of government’s role in economic dynamics. She is very Austrian in describing the “basic conflict” between established processes and innovation. However, she sees a need for government to protect the innovators. At the same time, she recognizes the tendency for government to be captured by established interests.
I find it interesting to note that Jacobs was writing about the significance of unplanned, decentralized innovation at almost the same time that intellectuals were absorbed in John Kenneth Galbraith’s theory that placed planning at the centerpiece of the modern industrial economy.
For Discussion. Is there a way to resolve Jacobs’ paradox that government is needed to protect small innovators but is subject to capture by established interests?