The Nature of Economies
Jane Jacobs


The Nature of Economiesdraws a parallel between ecological systems and economic systems. It describes the functional similarities inherent in the ways they grow, the natural laws they obey, the behaviors they exhibit, and the types of resources they use for evading collapse. Jacobs proposes that since humans are part of the web of life, we can not separate ourselves from the natural world – from that creates it, guides its behavior and eventually changes it. We are a product of and players in the same environment in which all types of economic systems exist.

The principles and processes that apply to all natural systems include:

Critical Comments

This book makes a strong statement about human behavior being part of nature and human activity participating in sustainable natural patterns and relationships. While useful for individuals, this book may also be ideal for book clubs or discussion groups, especially where group members have divergent backgrounds because the author touches on everything under the sun, even the sun itself.

By using an imaginary dialogue as didactic, the author helps the audiences to better understand the systemic aspects of the economies by giving examples in context, ecological and otherwise.

““Here’s a common economic example,” said Murray. “Feedback reports that operating income isn’t sufficient to cover operating expenses. Suppose the response is to obtain a loan to make up the discrepancy. The loan itself adds interest costs t operating expenses. That increases the discrepancy. Therefore, still more money is borrowed. That increases the discrepancy further, and so on. This vicious circle is called deficit financing, and finally it becomes financially unsupportable.”” (Jacobs, 2000, p.96)

The preceding quote is an example of a vicious cycle that many of us recognize. It is an example of a natural feedback loop that reinforces its behavior until it finally destroys itself.

Understanding Systemic Thinking

Understanding the idea that living systems and economic systems are related means that designers can reflect on the strengths of design in the ecological world for use in the human world. Economic systems can be designed like living systems in which there is no waste, but rather every output becomes a nutrient to another subsystem. This allows system designers to avoid critical mistakes. One example of this is the idea that development comes through a process that yields things and not through the things themselves. (Jacobs, 2000, p.32) For instance, attempting to develop a community’s economy by building factories for fabricating things which have not arisen from that community’s process of development will likely not be successful. One could equate that idea to planting a cactus in a tropical rainforest – it has no place in the ecosystem and has not been a part of the way the ecosystem has developed.

Recognizing the functional similarities between economies and ecologies allows system designers to develop models which enable them to leverage the sustainability and dynamic stability of living systems in human endeavors. Working with these living sustainable models, rather than disregarding them, will make us more successful in establishing economically sustainable systems.

Import-stretching” is one of the novel and new ideas presented in the book and it will give readers, especially those with an interest in management, expanded boundaries of the traditional systems of economy and development. ”In the conduit, human labor and human capital transform imports-take them apart, recombine them, pass them around, recycle them, and by all these means stretch imports received into the conduit.” (Jacobs, 2000, p.56)

An awareness of the ways in which economies are part of natural and living systems is a helpful start to discussions on what is or is not community. The systemic aspect of economic activity is a launching point to an examination of world-systems and brings political and global economic issues into the discussions of local community and environment. If the artifice of human endeavor is an element of natural habitat and economic activity is a functional aspect of a living system, then there are ways in which human activity can be examined systemically. The patterns and fractals of other living systems can be used to discuss ways to create leverage toward change in human systems.

This book gives living examples of the concepts of systems thinking. The author provides relevant and thought-provoking insights for anyone wishing to gain a better understanding of systems thinking, economics, and ecology and their interrelationships and parallels.

Group: Amy Barker, John Bell, Gail Cheney, Elaine Kohrman,
Elisabeth Martin, Jesse Schubert, Arnar Steinn Valdimarsson.

Works cited: Jacobs, J. (2000). The nature of economies. New York. Vintage.

Systemic Thinking May 16, 2004