Emergent Order in Cities and Markets

Last week at The Atlantic Cities, Allison Arieff posted a Q&A with Alex Marshall about what Marshall asserts are Jane Jacobs misunderstanding of how cities work. Marshall says:

Human interaction takes place, but it shouldn’t obscure what makes it possible, which is government. As much as I admire Jacobs, I suspect her experiences fighting Robert Moses, the master builder and destroyer of New York City, turned her off to government. So much so that I suspect she began to ignore it. Jacobs described how urban economies, such as say the computer ecosystem in the Silicon Valley, emerge in an organic way. I argue that these business ecologies emerge only within the containers that government builds. Both cities and economies emerge as overt political acts. They are constructed things.

Here Marshall completely eschews the historical evolution of both cities and markets in making his assertions. Both cities and markets are vehicles for human exchange, but neither is built by a person or a government. Populations, not infrastructure, are cities’ most important assets. Population changes, much like prices in a market, are a product of human action but not of human design. Historians have found evidence that the emergence of cities was not the result of ancient leaders’ direction but was rather the result of individuals acting in their own best interests. Likewise, we see both historical and current examples of trade emerging without government. States have much more power to limit trade or initiate plunder than they do to facilitate successful trade. Jacobs identified that the spontaneous order that allows prices to direct trade likewise leads city streets to serve their residents’ commercial and civic needs when they are not restricted from doing so.

Marshall asserts that Silicon Valley didn’t emerge organically because it came about within the legal and infrastructure ”containers” that government provides. While it’s true that government provides infrastructure and rule of law in Silicon Valley, it’s impossible to point to a person or group who created this tech cluster from the top down. Rather many individuals pursuing their own plans created this tech center. We can see a clear difference between unplanned clusters like Silicon Valley and top down attempts to create similar economic centers. As Gert-Jan Hospers, Pierre Desrochers, and my former colleague Frédéric Sautet explain, governments are not equipped to create successful clusters:

There are no fundamental reasons to believe why policy makers are better informed than entrepreneurs in assessing the future economic potential of particular ventures (including clusters). Due to the inherent uncertain character of new technologies such government failure is likely to occur especially when it comes to high-tech clustering. As Schmookler (1966, p. 199) argues, almost all instances of innovative activities that he studied were not stimulated by policy-pushed scientific research but by the realization that a costly  problem had to be solved or that a profit opportunity could be seized. According to Miller and Côté (1985), this is one of the main reasons why ‘innovation centers’ and other greenhouses in innovation parks opened in the USA and Canada in the 1970s and 1980s have failed without exception. Also French high-tech policy in the 1980s shows the risks of a strategy of picking winners. After five years of subsidizing the micro-electronics sector the French had to admit that they backed the wrong horse.

The dispersed knowledge that prevents governments from creating economic clusters likewise leads to countless failures in government efforts to build or rebuild cities. While Jacobs recognized that both urban and economic development must be driven from the bottom up to succeed in the face of these knowledge problems, she was not anti-government as Marshall claims.  Benjamin Hemric, a regular Market Urbanism commenter, commented on the post to point out that Jacobs did not in fact disregard the importance of government. In fact while libertarian writers have often pointed out the free market themes in her writings with her appreciation of emergent orders, Jacobs herself rejected the libertarian label and instead spent the end of her life promoting the role of good government in both cities and economic development.