I'll Take Urban, Please.

I was reading Jacob's Cities and the Wealth of Nations tonight and decided to google her idea of "import replacement" being the vehicle of urban development. As per usual, I got a little side tracked along the way and found these images and ideas at City Comforts. Nice, no?











Back to Import Replacement:

At the same time, Jacobs makes it clear that development can only happen in one way: import replacement. A city develops by having entrepreneurs and inventors take apart imported goods and learn how they work and how to produce parts for them until they can produce them more cheaply than they can be imported. The example she keeps referring to is Tokyo's bicycle industry, which replaced American imports with
local production. Once a city replaces an import, it can use the extra money it gets to import other, typically more expensive goods, triggering further import replacement. This process is coupled to the full cycle of division of labor, in which division of labor involves adding new work, which in turn triggers more division of labor, and so on.

Now this bit about division of labor seems to be in the air lately. Over on the Kanbandev yahoo group we are talking about division of labor, the craft development model, and lean as it applies to software development. Then, during lunch, I was listening to the econtalk
podcast with Ed Leamer and it came up again -- no surprise for an academic econmics podcast, but still.

This was a great podcast and I look forward to listening to it again:

Ricardian model doesn't apply to everywhere (neither does
Heckscher-Ohlin). Economies of scale idea is implicit in Adam Smith. James Buchanan, earlier podcast (Mike Munger, Division of Labor): Two reasons for specialization: we're different, and extent of the market. Leamer: It's not really economies of scale, but rather keeping the human capital operating for long periods of time during the day.
Building a pin requires two tasks, building the shaft and building the head. When done by one person, most of the person's capital sits idle, as opposed to at a factory, which minimizes the capital costs. Market
creates specialized activities, legal system is now highly specialized, deployed for long hours during the day. Multitasking helps a little, but the brain is physically constrained by being in separate people.

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