perjantaina, heinäkuuta 04, 2008

Kaupunkilaisten vallankumous

Edwards Glaser kertoo kaupungistumisen tärkeydestä demokratian levittäjänä (via Economists View).

Demokratian suuri ongelma diktatuuria vastaan on vapaamatkustajan ongelma.
Demokratian hyödyt jakaantuvat suuren väkijoukon kesken, kun taas
diktatuuri jakaa ne pienen joukon kesken. Tällä pienellä joukolla on
paljon suurempi syy taistella etujensa puolesta kuin yksittäisellä
demokratian kannattajalla, joka voi aina toivoa, että joku muu kantaa
riskit.

Kaupungistuminen on tärkeä tekijä tämän ongelman muuttumisessa.
Kaupunkilaiset kommunikoivat keskenään enemmän ja voivat helpommin
koordinoida itsensä yhteiseen veneeseen, jossa kaikki hukkuvat tai
pelastuvat - ja päästä näin koordinaatoratkaisuun tässä vaikeassa
ongelmassa. Siksi kaupungistuminen onkin tärkeä osatekijä, ei pelkästään
ihmisten ja maan vaurastumiselle, vaan myös demokraattiselle kehitykselle.

torstaina, heinäkuuta 03, 2008

Economy of Cities

I just finished reading Jane Jacobs "Economy of Cities". In my opinion, it is a landmark work on (macro) economics, which deserves more regocnition than it gets. I would write an article on why it is such an important work, but someone already did (and I don't wish to repeat job already done).

Shortly, cities, not nations, are the right and natural unit for macroeconomic analysis.

To clarify a little: a city, in Jacobs analysis differs from a town, not by size, but by having an internal working market and division of labour, which allows new work to be done with relative ease. It means that there are suppliers for a beginner of a new work, and that an innovator can begin doing the new thing.

Thus, a company town of a hundred thousand people is not a city, because it does not have the necessary ingredients for new work, but London of few thousand people in the medieval times was, for the same reason.

Edit: As an additional example. If economies grow mainly through addition of new things into economy instead of producing more of the same, it is easier to understand stagflation. Firstly, consider that established banks typically fund existing ways of doing business and consumption (i.e. established business, home sales, car sales, and other existing things) and are much tighter in funding new speculative ventures (e.g. startups).

Secondly, the main vehicle of policy for central banks is modifying the interest rates in the banking system. Thus, lowering interest rates mainly increases investment in the old well tried industries. More of the same instead of more variety, new things, and different ideas. At the same time, creating more money is a tax on everyone who owns money. This means that those who have money, may have less to invest in speculative ventures than they would otherwise have. Thus, lowering interest rates may actually transfer investment from new things to more of the same. Continue this long enough and stagflation is what you get. Maybe.